Manufacturers, Suppliers and Resellers Must Plan for California’s New Cruelty Free Cosmetics Act

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Almost no one favors animal testing for cosmetics.  The beauty market trend has been strongly away from animal testing, as demonstrated by the recent announcement of Coty, Inc.’s CoverGirl brand being certified cruelty free.  That’s why the personal care products industry supported California’s new Cruelty Free Cosmetics Act, SB 1249, which was unanimously passed by the California State Assembly and signed into law by Governor Brown on September 28, 2018.  The new Act does not take effect until January 1, 2020, but compliance will require cosmetics businesses to plan ahead.  The new Act may present some thorny and perhaps unexpected issues and risks for importers, manufacturers, distributors and resellers of beauty products and ingredients in California.

The new Act is found at Section 1834.9.5 of the California Civil Code, immediately following the existing animal testing law that has been in effect since 2000.   That existing law, Section 1834.9, continues to prohibit manufacturers and testing facilities from using animal testing when alternative methods have been scientifically validated and recommended by responsible agencies.  But the existing law has limited application, and the new Act significantly expands on the prohibitions of animal testing for cosmetics and their ingredients.

Generally, the Act prohibits a manufacturer from importing, offering or selling in California any cosmetic that “was developed or manufactured using an animal test that was conducted or contracted by the manufacturer, or any supplier of the manufacturer, on or after January 1, 2020,” with specified exceptions.  The first observation must be that the new Act will not apply to any manufacturer’s cosmetic or ingredient that was previously subject to animal tests.  The natural effect is that the Act generally does not apply to a manufacturer’s existing cosmetic ingredients and product formulations, even if the cosmetic or ingredient is manufactured after January 1, 2020.

However, manufacturers and importers need to note that the Act certainly can affect development of new cosmetic formulations, and so it will have a strong impact on use of innovative cosmetic ingredients in new or reformulated products.  This can impede participants in the personal care products industry who strive to develop new ingredients to improve and differentiate their products.  Scientifically-reliable alternative non-animal test methods can be slow to develop and receive approval by regulatory agencies, so the inability to conduct animal testing could inhibit the introduction of new cosmetic ingredients, particularly potentially complex ingredients such as new surfactants or polymers.

There are some exceptions to application of the new Act, but they may defy easy workaround solutions.  The first major exception is a multi-step assessment that exempts application of the Act if the manufacturer can establish all of these elements:

  1. An animal test is required by a U.S. federal or state regulatory authority, and no non-animal alternative testing method is acceptable;
  2. The ingredient tested is in wide use and cannot be replaced by another ingredient with similar function; and
  3. The need to conduct animal tests is justified to address a specific substantiated human health problem and supported with a detailed research protocol.

The multiple elements required for this exception are so demanding that its practical utility is doubtful.  But there are two additional exceptions that on first blush appear deceptively simple to apply:  First, if animal testing is required by a foreign regulatory authority for export to that country, the animal-tested product does not for that reason violate the new Act.  This was an important exception favored by the industry, because without it cosmetic products could not be readily exported to foreign markets, like China, that require animal testing.  The second exception applies if animal tests were required to be performed on an ingredient for non-cosmetic purposes.  In other words, if some animal testing was done on the ingredient for non-cosmetic purposes, or was required for exporting the product, that animal testing in itself will not preclude use of that ingredient in a cosmetic product.

On their face, these last two exceptions seem like they create large loopholes in the Act.  But looks can be deceptive.  Both of these exceptions are narrowed by an additional term that prohibits the manufacturer from relying on evidence of the animal testing to substantiate the safety of cosmetics sold in California.  California and the FDA require that “Each ingredient used in a cosmetic product and each finished cosmetic product shall be adequately substantiated for safety prior to marketing.”  (21 CFR 740.10(a))  There are few meaningful guidelines about what “adequate substantiation” of safety means, or exactly what records are required to be maintained to show such substantiation, but it is clear such substantiation must exist “prior to marketing.”

So the effect of the new Act is to prohibit manufacturers offering products in California from relying on animal testing as part of their “adequate substantiation of safety” before selling their products, even though the animal testing itself did not violate the Act due to the noted exceptions.  This limitation effectively requires manufacturers to somehow show separate, non-animal testing to have adequate substantiation of the safety of their ingredients and products prior to marketing.  That in turn renders the animal testing that was permitted under the exceptions useless to support the safety of cosmetic sales in the California market.

The safety substantiation requirement has yet another twist that may present a significant risk to manufacturers selling cosmetics in California after the new Act becomes effective:  Although no federal or California state law specifies how or what documentation of safety must be maintained, the new Act both permits and motivates district attorneys and city attorneys, upon their determination of “a reasonable likelihood of a violation,” to “review the testing data upon which a cosmetic manufacturer has relied in the development or manufacturing” of the product sold in California.  Given that violators can be fined $5,000 initially plus $1,000 per each day that a violation continues, which fines are payable directly to the city or county attorney’s office, district attorneys and city attorneys have powerful motivation to aggressively pursue possible violations.

It seems the legislature was sufficiently concerned about this “adequate substantiation” issue that it was felt necessary to specify in the Act that a manufacturer “is not prohibited from reviewing, assessing or retaining evidence from an animal test conducted” for non-cosmetic purposes (though, oddly, the Act says nothing about that for the separate “foreign regulatory” exception).  So just having an animal test in the manufacturer’s file may not violate the Act, but the manufacturer still cannot rely on those tests when a DA or city attorney comes calling.  Manufacturers must determine how they will maintain records to show adequate substantiation of the safety of all of their ingredients and product formulations, prior to marketing, without running afoul of the Cruelty-Free Cosmetics Act.

The new Act does not itself create a new private legal claim, which means that (unlike some other California consumer protection statutes like Proposition 65) bounty-hunter plaintiff lawyers will not have direct motivation to pursue claims under the Act.  However, that has not stopped creative plaintiffs’ attorneys from bootstrapping other consumer product regulatory violations as bases for civil lawsuits, such as “Unfair Business Practices” claims under Business & Professions Code Section 17200 et seq., and even class actions under the Consumer Legal Remedies Act (CLRA), California Civil Code Section 1750.  It is also not difficult to imagine competitors making claims of unfair competition based on allegations that a competing cosmetics brand violated California’s animal testing laws, perhaps including false advertising claims for good measure.

Cosmetics manufacturers and their suppliers have a little over a year to ensure that their cosmetics and ingredients made, imported or sold in California will be compliant with the Cruelty Free Cosmetics Act.  More challenging still, manufacturers, importers and ingredient suppliers will have to plan for development of new cosmetics and ingredients, with adequate substantiation of their safety that does not depend on animal testing results. Conkle Kremer & Engel attorneys stay up to date on important regulatory developments affecting their clients in the manufacturing and resale industries, and are ready to help clients navigate California’s fast-changing regulatory landscape.  If you have questions in this or other consumer product regulatory areas, contact CK&E at [email protected] or 310 998-9100.

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At Critical Juncture, CK&E Defeats Consumer Class Action Against Charity

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On October 13, 2016 Conkle, Kremer & Engel attorneys Eric S. Engel and Zachary Page successfully defended a charitable organization faced with an attempted consumer class action.  In Delgado v. Cars 4 Causes, a charity that accepted donations of vehicles was charged with fraud, false advertising, unfair competition and violation of the California Consumer Legal Remedies Act (CLRA).  Plaintiff Delgado had donated a boat and trailer to Cars 4 Causes, and later complained that Cars 4 Causes did not adequately disclose its fees before providing a portion of the net proceeds from sale of the donation to Delgado’s designated third party charity.

In a class action, a critical juncture is reached when the plaintiff files a motion to ask the court to certify a class.  Without a class certification, the action is just an individual claim, often with little value on its own.  In Delgado v. Cars 4 Causes, CK&E was able to present compelling evidence and legal arguments that the claims of the prospective class members did not have sufficient common issues of fact, and that the proposed class members were not sufficiently ascertainable, to permit class certification.  When class certification is denied, courts often allow the plaintiff a second or third chance to modify his class definition or otherwise amend his claims in order to meet the class certification requirements.  But in Delgado v. Cars 4 Causes, CK&E was able to present such solid evidence and legal argument that the court was convinced of the futility of any such additional chances for the plaintiff.  As a result, the court denied Delgado’s motion for class certification
“with prejudice.”  This permanent denial of class certification ended the plaintiff’s effort to pursue a class action against Cars 4 Causes.

CK&E attorneys have substantial experience and success in defending class actions ranging from consumer unfair competition, false advertising and CLRA claims, to employment wage and hour claims.

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Labels Matter: Consumer Class Actions are Available for Organic Labeling Violations

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The California Supreme Court has affirmed that “labels matter” to both buyers and sellers of consumer products. “They serve as markers for a host of tangible and intangible qualities consumers may come to associate with a particular source or method of production.” California protects consumers from mislabeling through a number of laws, including possible class action lawsuits under the Consumers Legal Remedies Act (Civil Code §§ 1750 et seq.), unfair competition laws (Bus. & Prof. Code §§ 17200 et seq.) and false advertising laws (Bus. & Prof. Code §§ 17500 et seq.)

Aside from California’s general false labeling laws, there are specific laws and regulations regarding organic product labeling. The California Organic Products Act (COPA), generally requires that multi-ingredient cosmetics labeled or sold as organic contain at least 70% organically produced ingredients. But COPA is designed to work in concert with Federal regulations that direct baseline standards for production, labeling and sale of organic products. The California Supreme Court recently addressed whether the Federal regulations of organic products in some manner preempt or supersede California’s consumer protection laws, so that only the very limited Federal remedies can be pursued when there are alleged violations of organic labeling laws.

In Quesada v. Herb Thyme Farms, Inc., the California Supreme Court determined that California’s general laws prohibiting labeling misrepresentation do not conflict with the Federal laws concerning organic production, labeling and sale, but rather complement those Federal laws by allowing additional remedies to be pursued when those laws are broken by fraudulent organic product labeling. The Supreme Court observed that “permitting state consumer fraud actions would advance, not impair” the goals of providing “a level playing field” to manufacturers of organic products and “enhance consumer confidence in meaningful labels and reduce the distribution network’s reluctance to carry organic products.” From this perspective, where products are fraudulently mislabeled as organic, “the prosecution of such fraud, whether by public prosecutors where resources and state laws permit, or through civil suits by individuals or groups of consumers, can only serve to deter mislabeling and enhance consumer confidence.”

The result for manufacturers, distributors and resellers is that organic product labeling can create concerns at multiple levels, including federal and state regulatory liability, and class actions under strong state consumer protection laws. All those involved in the chain of manufacturing and distribution of products labeled as organic should consult with experienced counsel to protect themselves from potential adverse outcomes that can come from several directions. Conkle, Kremer & Engel attorneys are well versed in helping their clients proactively avoid and resolve such problems.

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The Conkle Firm Presents Hot California Regulatory Compliance Issues in New York

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Conkle, Kremer & Engel attorney John A. Conkle was the featured speaker at a special presentation given on February 11, 2014 in New York, New York to business executives and lawyers.

The presentation, entitled “Are Your Products California-Bound?  Dealing With California’s Unique Regulatory Schemes,” provided valuable information about and insight into such California regulatory laws and initiatives as:

  • Proposition 65 (California’s Safe Drinking Water and Toxic Enforcement Act of 1986)
  • California Safe Cosmetics Act
  • California Green Chemistry Initiative (the Safer Consumer Products Regulations)
  • California Volatile Organic Compounds (VOC) Regulations
  • California Organic Products Act (COPA)
  • California Consumer Legal Remedies Act (CLRA)

California’s vast and ever-changing regulations pose a challenge for businesses no matter where they may be located.  Any business manufacturing, distributing or selling products into California needs to comply with California’s regulatory schemes to stay out of difficulty with the California Attorney General, regulatory agencies, non-governmental organizations (NGOs), bounty hunters, putative class action plaintiffs and even competitors.

CK&E was honored to team with the New York-based law firm Gottlieb, Rackman & Reisman, P.C., which specializes in intellectual property, to provide this presentation. CK&E has worked with the Gottlieb firm for nearly 25 years on matters of common interest to our clients. CK&E’s active regulatory compliance practice has helped clients in numerous industries – including  such diverse areas as personal care products, alcoholic beverages, construction and recreational equipment.

 

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Closing the Door to Class Actions for False Advertising Claims

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Advertising claims are often the subject of lawsuits in California. Ads, slogans, packaging or even product images are claimed to be “false or misleading.” Plaintiffs make claims under a variety of consumer protection laws, such as California’s Unfair Competition Law (UCL), Business and Professions Code section 17200; False Advertising Law (FAL), Business and Professions Code section 17500; and the Consumer Legal Remedies Act (CLRA), Civil Code section 1750.

But an individual who wants to sue has a problem, because a single person who claims to have been misled into purchasing a product will usually only have purchased one product and therefore has just a few dollars (or sometimes only pennies) of “out of pocket” money damages. It’s usually not realistic for a lawsuit to be pursued for just a few dollars. As a result, plaintiffs’ lawyers sometimes try to make a “class action” claim to join together many people who can each claim a few dollars of damages, which can add up to a great deal of money. In a class action, the plaintiff can assert that similar injuries happened under similar circumstances to a large number of people, and the plaintiff should be allowed to make a claim for all of the damages to that group of people. Further, the lawyers for the class action can make claims for attorneys’ fees that are much larger than they would otherwise be permitted for representing an individual claimant.

To proceed with a class action lawsuit, the plaintiff must show the court that the proposed “class” meets the rules for “certification.” That is a big hurdle in many cases, because it requires that the plaintiff show that all of the proposed class members have similar claims and issues. A recent ruling from the United States District Court, Central District of California shows how hard it can be to prove that there are such common claims and issues. In Mara Chow v. Neutrogena Corp., Case No. CV 12-04624, the plaintiff claimed that Neutrogena had made false and misleading labels and advertising for its “anti-aging” skincare products, including that the products are “clinically proven,” can cause a person to look younger, and can prevent and repair signs of aging within one week. The plaintiff tried to show that she had a proper class action because all of the class members had similar claims. But District Judge Manuel L. Real refused to certify a class.

Judge Real found that too many individual questions existed as to whether the Neutrogena product had worked as advertised for each individual class member. In other words, each member would have to individually show whether the claims were false as to that member. Further, some of the claims required that each class member would have to show that she “relied” on the false advertising when she purchased the Neutrogena product, which also could only be proved individually and not on a class-wide basis. But the news wasn’t all bad for plaintiff – the individual plaintiff was allowed to continue asserting her own individual claim for a few dollars in damages. No one will be surprised when the case is dismissed, because it isn’t worth pursuing.

CK&E’s lawyers have experience handling all aspects of claims of false or misleading advertising under the UCL, FAL and CLRA. CK&E’s lawyers are particularly well-versed in developing methods to reduce the risk of such lawsuits before they are filed. If a claim does arise, it often comes first to a business in the form of a demand letter, and CK&E attorneys are skilled at responding to such demand letters in ways that eliminate or minimize the claim and can lead to a quick and cost-effective resolution.

Update:  The plaintiff filed a petition for permission to appeal the District Court’s Order denying class certification.  On April 23, 2013, the Ninth Circuit Court of Appeals denied the petition for permission to appeal.  The lawsuit was subsequently settled and dismissed with prejudice on June 10, 2013.

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