Getting Your Products on the Shelves: Demystifying ... · 8/2/2016 · •“A product’s...

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ACI’s 3rd Annual Legal, Regulatory, and Compliance Forum on Cosmetics & Personal Care Products

Maureen F. Gorsen

Partner

Alston & Bird LLP (Sacramento, CA)

Getting Your Products on the Shelves: Demystifying Retailer Requirements

Jeffrey Margulies

Partner

Norton Rose Fulbright US LLP (Los Angeles, CA)

Peggy Otum

Partner

Arnold & Porter LLP

(San Francisco, CA)

March 7-9, 2016

Tweeting about this conference?

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Target’s Requirements

Target Sustainable Product Index

• Initiated in 2013 with personal care, beauty, household cleaning, and baby care products

• In 2015, feminine care products added

• Purpose: “[A]ssess products on ingredients, transparency, minimal environmental impact, certification and key issues”

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• Products are awarded points on a scale of 0 to 115

• Products assessed on three overall categories:• Better Ingredients

• Minimal Environmental Impact

• Certifications

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• Better Ingredients• Ingredients – 50 points

• Transparency – 20 points

• Minimal Environmental Impact• Packaging – 20 points

• Water Quality – 5 points

• Animal Testing – 5 points

• Certifications• Product – 10 points

• Feedstock Materials – 3 points

• Packaging – 2 points

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Target’s RequirementsBetter Ingredients - Ingredients

• “A product contains no ingredients with high level health concerns. Ingredients with high level of health concern are recognized as carcinogenic, developmental or reproductive toxicants, endocrine disruptors, or have other serious adverse health effects.”

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Target’s RequirementsBetter Ingredients - Ingredients

• “Ingredients with high level health concerns” = chemicals appearing on following “authoritative regulatory lists”• Proposition 65

• Substance of Very High Concern (European Chemicals Agency, Candidate List of Substances of Very High Concern for Authorization)

• Endocrine Disruptor (European Commission, Community Strategy for Endocrine Disrupters: Priority List)

• Persistent Bioaccumulative Toxic Chemical (US EPA, TRI Persistent Bioaccumulative Toxic Chemicals)

• Chemical of High Concern to Children (Washington Dept. of Ecology, Reporting List of Chemicals of High Concern to Children)

• Cosmetic Ingredient Hotlist (Health Canada, Cosmetic Ingredient Hotlist – Prohibited for Use in Cosmetics)

• Triclosan Prohibition (Minnesota State Legislature, SF 2192 – Section 8: Certain Sales of Cleaning Products Prohibited)

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Target’s RequirementsBetter Ingredients - Transparency

• “A product’s complete ingredient list must be publicly available and disclosed in a way that allows each chemical’s health and environmental impacts to be assessed.”

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Target’s RequirementsMinimal Environmental Impact - Packaging

• “A product’s packaging sends minimal, if not zero, waste to landfill. The product’s labeling empowers guests on how to recycle packaging and close the loop. The company responsible for a product has public-facing sustainable packaging goals.”

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Target’s RequirementsMinimal Environmental Impact – Water Quality

• “A product contains no ingredients that are labeled as hazardous to the aquatic environment.”

• “Chemicals labeled as hazardous to the aquatic environments” appear on the European Chemicals Agency, List of chemicals classified under the Globally Harmonized System of Classification and Labeling of Chemicals as exhibiting acute (short term) aquatic toxicity and/or chronic (long term) aquatic toxicity

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Target’s RequirementsMinimal Environmental Impact – Animal Testing

• “A product was not tested on animals during its development or production.”

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Target’s RequirementsCertifications - Product

• “A product has been certified as safe for human health and/or the environment.”

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Target’s RequirementsCertifications – Feedstock Materials

• “Material inputs to a product have been certified as having environmental or social benefits by a third-party.”

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Target’s RequirementsCertifications - Packaging

• “Material inputs to the packaging of a product have been certified as having environmental benefits by a third-party.”

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• Target uses Purview/GoodGuide to assess products

• GoodGuide helped establish sustainability standards

• PurView is a system for manufacturers and retailers that allows data collection and scorecards for products, compared against GoodGuide’s standards, or the retailer’s standards.

• Target requests a vendor enter product data

• Vendor enters product data

• Assessment of product against Target’s standards

• Decision support to determine next steps

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Target’s Requirements GoodGuide Involvement

• “GoodGuide is a comprehensive, authoritative resource for information about the health, environmental and social performance of consumer products and companies. Our goal is to help consumers make informed purchasing decisions that reflect their preferences and values. We believe that as more consumers buy better products, retailers and manufacturers face compelling incentives to make products that are safe, environmentally sustainable and produced using ethical sourcing of raw materials and labor.”

• Source: http://www.goodguide.com/about

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Target’s Requirements PurView Platform

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Target’s RequirementsPurView Platform

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• Focus is transparency and incentives

• “We know that sometimes it’s challenging to pick the sustainable, good-for-you products you’re looking for. That’s why Target is taking an important step toward greater transparency, which we hope will lead to more sustainable and innovative products.”

• Top scorers are marketed under Target’s “Made To Matter” banner

• Target’s vendor contract still appears to require only legal compliance

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Walmart’s Requirements

• Policy on Sustainable Chemistry(September 2013) • Applicable to household cleaning, personal care, beauty and

cosmetic products

• Beginning in January 2015, Walmart will require suppliers to provide online public ingredient disclosure for items sold at Walmart.

• Prioritized approximately ten (not publicly specified) “high priority chemicals” for continuous reduction, restriction, and elimination, using informed substitution principles

• Walmart will begin to label private brand cleaning products in accordance with the U.S. EPA’s Design for the Environment Safer Product Labeling program, to the extent possible, and will continue to assess the applicability of DfE as it expands to broader product areas.

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• Sustainable Chemistry Implementation Guide (February 2014) • Updates and expands the Policy on Sustainable Chemistry. The

Guide states the goal of reducing, restricting and eliminating use of “Walmart Priority Chemicals.” These priority chemicals are listed in Appendix A, and include by reference:

• Chemicals listed by California (Prop. 65);

• Other states (i.e. Washington’s Chemicals of High Concern to Children);

• Federal agency lists such as the EPA PBT list; and

• International substances of high concern (i.e. E.U. REACH SVHCs), among others.

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• Sustainable Chemistry Implementation Guide (February 2014) • Walmart will “monitor transparency and disclosure” of product

information, product ingredients and priority chemicals “through The Sustainability Index and The Wercs.”

• GreenWERCS allows Walmart to look at the ingredients of a product in a way that keeps the suppliers’ chemical formulations safe. According to the GreenWERCS website:

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• Sustainability Index• Walmart has implemented a supplier sustainability index asking

suppliers questions about their operations and supply chains. Suppliers answer a survey and receive a score.

• Walmart then ranks suppliers from best to worst. The rankings are shared with its buyers, who use the information during their meetings with suppliers. The buyers are compensated in part based on the sustainability performance of their category.

• Topics include:

• Energy and climate

• Material and efficiency

• Natural resources

• People and community

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Other Retailers

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Disney (licensed products)

•Product Testing Reports • Toxicology Risk Assessment

• Microbial testing, and

• Substantiation for any claims made on package.

•Good Manufacturing Practices audit conducted within last 12 months

•Company recall plan.

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Disney (licensed products)

• “Free from” claims• Analytical tests must verify and should reference recognized

industry standards.

• Suitable tests include spectrophotometry and chromatography.

•Hypoallergenic claims• Human Repeat Insult Patch Testing or Skin Sensitization Reduced

Local Lymph Node Assay testing

• Must reference Organization Economic Cooperation and Development test method No. 429 or equivalent

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Private Label Apparel Retailer

• Compliance Documents Required:• INCI Formula Sheet (International Nomenclature of Cosmetic

Ingredients)• Company Regulatory Compliance

Certifications/Statements/Declarations• Material Safety Data Sheet

• EU: 14 additional required documents, including:• Finished Product Specification Sheet

• Safety Testing Data (personal care products require antimicrobial effectiveness testing report)

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Private Label Apparel Retailer

•Compliance Certifications, etc.• Prop. 65 certification

• California Safe Cosmetics Act certification

•Disclosure of chemicals as necessary.

• EU: Same certifications, plus:

•VOC certification, REACH SVHC certification, nanomaterial certification, etc.

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Large Department Store

•Contract terms and conditions require compliance with all laws.

•Vendor Code of Conduct – nothing special for cosmetics. Tend to deal with top manufacturers whom they trust.

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Large Department Store

•Proposed co-branded advertisements:• Legal department reviews claims to ensure FTC/FDA

requirements

• Vendor counsel submits letter with claims as written, and backing them up.

• Sometimes provide medical testing. Reliance on vendor counsel’s conclusion.

• If retailer feels the letter doesn’t support the claim, will ask vendor to soften the claim.

•Don’t review labeling, except for sunscreen, which is reviewed for required FDA language.

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Saks – Hudson Bay Private Label

Cosmetic Regulatory Requirements

•US (and Canada) test protocol• Preservative effectiveness

• FDA Cosmetic Labeling Guide

• Toxicological Risk Assessment

• Cosmetic Ingredient Review

• FPLA

• TPCH

• Microbiological

• Prop 65

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CVS (2008 CSR Report)

•Required testing• Microbiological

• CVS Toxicological Risk Assessment

• Clinical testing for skin compatibility and claim substantiation

• Testing for lead, BPA, and phthalates

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Chain Drug Store

•Private Label products• Review labeling to ensure that FDA standards are met.

• Legal team will debate claims with manufacturers

• Set standards and expectations by product. Vendors required to conduct tests and provide testing results.

• Will review substantiation behind claims – some claims reviewed more closely depending on product and risk.

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Chain Drug Store

• For national brands, rely on terms and conditions.

•On high-risk products (high-risk of harm and highly scrutinized by FTC and FDA), retailer requires vendors to provide a letter from regulatory counsel that the product has been reviewed and approved and meets all FDA labeling requirements.

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Whole Foods – Whole Body Supplier Guidelines• Label Review

• No disease or drug claims are allowed on cosmetics

• All claims must be substantiated based on a standard of “competent and reliable scientific evidence” (and may need to submit substantiation for review)

• Full disclosure ingredient listing

• Suppliers must present an organic certificate to support organic claims

• Non-GMO claims on non-food products (body care) that are organic or Non-GMO Project Verified

• “Green”, “environmental” or “sustainability” claims must comply with FTC Green Guides

• Whole Food Quality Standards prohibit personal care products that have been tested on animals.

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“Natural” Labeling

1983: FTC abandons efforts to regulate

“natural” food labeling – move to case-by-case basis

48 Fed Reg 23270

1993: FDA notes that defining “natural” would abate the ambiguity around the term, but declines to define the

term, citing “resource limitations and other agency priorities”

Unofficial guidance: “nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.”

58 CFR 2302, 2407 (1993)

2006: The Sugar Association

petitioned the FDA to define “natural,” but FDA declined.

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“Natural” Labeling2012 FTC declines to define

“natural” in Proposed Revisions to the Green

Guides – insufficient data on consumer understanding of

“natural”

https://www.ftc.gov/news-events/press-releases/2012/10/ftc-

issues-revised-green-guides

2014 FDA refuses to define “natural” in response to referrals from 3 district

courts on primary jurisdiction grounds on suits arising from term “natural”

in food context

https://files.dlapiper.com/files/upload/FDA-Letter-to-Judges-

Declining-Natural-1-6-13.pdf

2015: FDA changes course, requests comments on proposed definition of

“natural” in light of requests from courts and from 3

citizens’ petitions. Focus seems to be use on foods

derived from biotechnology

80 CFR 69905

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• Lack of government guidance• FTC has declined to define “natural”

• 2010: Insufficient data on consumer understanding of term; meaning changes on context (16 CFR Part 260 (Oct. 6, 2010))

• Advertisers must substantiate the meaning of “natural” that their advertisements convey to consumers

• FDA likewise has not defined “natural” for cosmetics• In food context, FDA limits use only on foods that

include added color, synthetic substances and flavors (53 Fed. Reg. 2302, 2407 (Jan. 6, 1993)).

• In Nov. 2015, FDA requested public comment for definition of “natural” for food products in response to public petitions.

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• Astiana v. The Hain Celestial Group, Inc., et al. (N.D. Cal. Nov 19, 2012)• Held: Under primary jurisdiction doctrine, the FDA should get the

first crack at defining “natural”

• After dismissal, before appealing, Plaintiff wrote to FDA requesting definition of “natural” – FDA declined, noting that procedural requirements weren’t satisfied and that defining “natural” wasn’t a “priority” obligation

• Ninth Circuit agreed that FDA should have gotten priority, but given the response, district court had to determine in first instance whether request from agency was futile

• District Court stayed case on remand – currently in settlement process with Magistrate Judge

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• Litigation continues over the term “natural” on personal care products. Over two dozen cases have been filed since 2012. Examples:• Fagan v. Neutrogena Corp., No. 5:13-cv-01316-SVW-OP (CD Cal.

2014)• Challenge to “100% naturally sourced sunscreen ingredients” because

products include “unnatural synthetic ingredients”

• Motion to dismiss denied because determination whether statement was misleading can’t be resolved at MTD

• Morales v. Unilever U.S., Inc., No. 2:13-2213 WBS EFB (ED Cal. 2014)• Challenge to TRESemme Naturals line of hair care that products contain

“unnatural synthetic ingredients”

• Motion to dismiss denied because consumers’ perception of term “natural” can’t be resolved on MTD, rejecting arguments that consumers understand cosmetics can’t be “natural” or that ingredient list eliminates effect of misrepresentation.

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• Goldemberg v. Johnson & Johnson Consumer Co., Inc., 8 F. Supp. 3d 467 (SDNY 2014)

• Challenge to Aveeno “Active Naturals” products that they are mostly synthetic

• Denied motion to dismiss on grounds that whether labeling and advertising was misleading couldn’t be resolved on MTD; rejected primary jurisdiction and preemption arguments

• Martin v. Colgate-Palmolive Co., No. CV15-1214 (EDNY)

• Complaint filed alleging misleading advertising that toothpaste was “natural,” “naturally-sourced,” “natural flavor” because product contained glycerin and sodium lauryl sulfate

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• So, what to do?

• Make reference to third party standards

• Natural Products Association• “Under this program, products must follow strict guidelines set out by NPA to

merit the seal. The criteria include, but are not limited to:

• Product must be made up of at least 95 percent truly natural ingredients or ingredients that are derived from natural sources, excluding water

• No ingredients with any suspected human health risks

• No processes that significantly or adversely alter the natural ingredients

• Ingredients that come from a purposeful, natural source (flora, fauna, mineral)

• Processes that are minimal and don't use synthetic/harsh chemicals

• Non-natural ingredients only when no viable natural alternative ingredient are available and only when there are absolutely no suspected potential human health risks”

http://www.npainfo.org/NPA/NaturalSealCertification/NPANaturalStandardforHomeCareProducts.aspx

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“Natural” Labeling• BDIH

• Raw materials of plant origin• “Raw materials of plant origin must originate from certified organic raw material,

provided they consist of or are obtained from plants that are listed in Annex 1. The definitions and restrictions contained in Annex 1 are binding with regard to this.”

• Raw materials of animal origin and animal protection• “Raw materials of animal origin: It is allowed to use substances that are

produced by animals (e.g. milk or honey). It is not allowed to use raw materials obtained from dead vertebrates (e.g. emu oil, mink oil, marmot fat, animal fats, collagen or living cells).

• Animal testing and end products: It is prohibited to carry out or commission another party to carry out animal testing – not only when manufacturing products, but also when developing and controlling the end products.

• Animal testing and raw materials: Raw materials that were tested on animals after December 31, 1997 must not be used. Any animal testing carried out by third parties who acted neither on behalf of nor at the instigation of the raw material producer or supplier, or the manufacturer of the finished product, and who are not connected with the preceding parties under company law, are not taken into account here.”

• Raw materials of mineral origin• The use of inorganic and mineral salts, acids and bases (e.g. magnesium sulphate

or sodium chloride) is generally allowed, except for those listed under point 5..

http://www.kontrollierte-naturkosmetik.de/e/bdih.htm

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• Production processes allowed

• “Alongside physical processes – including extraction with water, vegetable alcohol, carbon dioxide, vegetable fats and oils, and glycerine obtained from these – enzymatic and microbiological processes as they occur in nature are also allowed for the production of natural cosmetics. In addition, substances may be obtained from natural substances such as fats, oils and waxes, sugar, starch, cellulose, proteins, polysaccharides and vitamins by means of hydrolysis, hydrogenation, oxidation, reduction, esterification or other methods of cleavage and condensation. Annex 2 contains an open-ended list of allowed substances (positive list). The restrictions specified in this list must be observed.”

• Substances not allowed

• Substances from the following groups are not allowed to be used:- Organic-synthetic dyes- Synthetic fragrances- Ethoxylated raw materials- Silicones- Paraffin and other petroleum derived products

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• Preservation

• “For the purpose of consumer protection, the following nature-identical preservatives may be used if required:- Benzoic acid and its salts- Salicylic acid and its salts- Sorbic acid and its salts- Benzyl alcohol- Dehydroacetic acid and its saltsIf these preservatives are used, the following addition is necessary: “preserved with... [name of the preservative]”.”

• Fragrances

• “Natural fragrances that comply with ISO 9235 are allowed. Fragrances of biotechnological origin may also be used.”

• Radioactive irradiation

• “It is not allowed to treat raw materials of plant and animal origin or end products with ionizing radiation.”

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• Define what “natural” means on the label• Explain source of ingredients or which ingredients are considered

“natural”

• But, in Fagan, Neutrogena claimed that “100% naturally sourced sunscreen ingredients” description applied only to sunscreen ingredients, which were natural. The district court rejected that the term could not be misleading, that, as alleged in complaint, the phrase could still mislead customers into thinking all of the ingredients were natural.

• Don’t use “natural” – Be more specific about the product or stick to terms that have definitions that can be shown, such as “organic”

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“Organic” Labeling

• “100% Organic”

• “Organic”

• “Made with Organic [specific ingredients]”

•OFPA (1990), 7 USC 6501 -6523; Title 7 CFR Part 205

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• 100% Organic• All ingredients certified

• Any processing aids certified

• Product label must state name of certifying agent

• Organic• 95% of product must be certified

• Remaining 5% must be allowed on National List

• Made with Organic• 70% of product must be certified

• Remaining 30% cannot use excluded processing methods

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•No GMO, ionizing radiation, sewage

•No substances on National List

•Certified per NOP• If not certified, no organic claim on package

• If not certified, may only list organic ingredients by %

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• 100% Organic• All ingredients certified

• Any processing aids certified

• Product label must state name of certifying agent

• Organic• 95% of product must be certified

• Remaining 5% must be allowed on National List

• Made with Organic• 70% of product must be certified

• Remaining 30% cannot use excluded processing methods

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Whole Foods “Organic” Label

• “Premium Body Care Quality Standards”• No use of 400+ ingredients on RSL – (triclosan, microbeads, cocamide

DEA, aluminum chlorohydrate)

• “Organic Body Care Standards”• “organic” – 95% and certified to USDA organic standard

• “made with organic x” – 70% and certified to USDA organic standard

• “contains organic x” – 70% and certified to NSF/ANSI 305 (private standard)

• Use CCOF (CA Certified Organic Farmers) as certifier

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Raley’s “Organic” Label

•Private Raley Brand only

•83 banned ingredients

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California “Organic” Standard

•COPA (CA Organic Products Act of 2003)

•Requires state registration to sell in CA

• Enforceable by citizen suit, County Ag Commrs

•Not preempted by OFPA (Brown v. Hain Celestial(2011))

Getting Your Products on the Shelves: Demystifying ... · 8/2/2016 · •“A product’s...

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