Cosmetics Talks Turn Ugly; Industry Group Backs Off of Plan With FDA to Tighten Safety Regulations

Cosmetics Talks Turn Ugly

Industry Group Backs Off of Plan With FDA to Tighten Safety Regulations

THOMAS M. BURTON

Oct. 23, 2013 6:02 p.m. ET

Some of the world’s biggest cosmetics makers have backed out of a proposed plan to tighten U.S. regulation and increase safety tests, potentially jeopardizing the effort. Some cosmetics makers have pushed for a deal—which would affect things like hair dyes, shampoo, mascaras and skin creams—preferring a single national standard to patchwork regulation by 50 states. Proponents of tighter regulation hope to ease consumer concerns about chemicals found in cosmetics and hair-care products. But the Personal Care Products Council, an association of large cosmetics makers that participated in talks, told the Food and Drug Administration it couldn’t accept the deal being negotiated, according to a letter by FDA commissioner Margaret Hamburg dated Sept. 26.“PCPC’s change of heart is truly unfortunate,” Dr. Hamburg wrote to E. Scott Beattie, the council’s chairman. “Not only will the public not reap the benefits of an effective regulatory scheme, but your industry will not achieve the credible, national regulation that industry representatives declared was needed.”

The council and companies involved in the discussions said that they didn’t believe the talks were dead, and that they contacted the FDA to reopen negotiations.

According to people familiar with the events, L’Oréal SA OR.FR -0.23% ‘s U.S. unit and Revlon Inc.—two of the biggest industry participants—balked at the agreement forged over the summer.

Both companies disputed that description, and L’Oréal said it was “continuing to negotiate.”

“Let me personally assure you that our companies have not had a change of heart in their commitment to work with FDA, and we continue to operate in good faith,” Mr. Beattie said in a written response to Dr. Hamburg. “Our desire to find consensus and an agreement with the FDA is unwavering.”

There is skepticism about the industry’s commitment within the FDA, however, according to people familiar with the matter.

The market is enormous: Annual sales of personal care and beauty products in the U.S. are forecast to total just under $70 billion this year, according to Euromonitor International.

The FDA currently lacks the regulatory authority over cosmetics that it has over food and medical products. The agency generally doesn’t issue verdicts on whether particular ingredients used in cosmetic products are safe.

Amid mounting suspicion that chemicals like phthalates, lead and formaldehyde can lead to cancer or changes in human development, the FDA earlier this year began talks with industry and consumer groups about expanding its powers. Congress would have to codify any deal in law.

The agency in recent months had forged the outline of such legislation that would have given the FDA the power to test widely the safety of chemicals in cosmetics. Regulators would also have gained the ability to inspect facilities and require companies to file reports when they learned of consumers having adverse reactions to chemicals.

Some consumer groups and scientists have raised concerns about various chemicals in cosmetics and called for tighter FDA regulation. Phthalates, found in fragrances and some nail polish, have been shown to affect reproductive health in animals. High doses of phthalates have been shown in animals to change hormone levels and cause birth defects. Other chemicals called formaldehyde releasers, such as quaternium-15, are common in shampoos, conditioners, bubble baths and other products. They produce formaldehyde, classified as a suspected carcinogen by the Environmental Protection Agency.

A study by the Breast Cancer Fund in 2009 found many Halloween-type face paints for children contained lead. The Centers for Disease Control and Prevention has said that lead exposure isn’t safe at any level.

The cosmetics industry’s products council didn’t respond to several requests to discuss safety of the chemicals, but the industry in the past has said that amounts of any such ingredients in cosmetics are small.

“Extremely low levels of chemicals can cause a problem from long-term exposure,” said Linda S. Birnbaum, director of the National Institute of Environmental Health Sciences and the National Toxicology Program.

Before this year, Reps. Frank Pallone Jr. (D., N.J.), John Dingell (D., Mich.) and Leonard Lance (R., N.J.) sought unsuccessfully to get cosmetics legislation passed through Congress.

Unnatural Beauty

A few chemicals commonly found in cosmetics, and some of the concerns.

Phthalates: Found in fragrances and some nail polish. They have been shown to affect reproductive health in animals.

Formaldehyde releasers (such as quaternium-15): Found in shampoos, conditioners. They produce formaldehyde, a suspected carcinogen.

Lead: Found in some children’s face paints. The CDC has said lead exposure isn’t safe at any level.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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