FTC-L’Oreal Settlement Should Reverberate Across Industry – Attorneys

The recent action against L’Oreal sends a signal to industry that FTC is paying attention to their claims. In an interview with “The Rose Sheet,” attorneys from Edwards Wildman Palmer discuss the case’s implications and whether it heralds a new FTC focus on cosmetics.

The Federal Trade Commission likely will take a wait-and-see approach and gauge industry’s response to a proposed settlement with L'Oreal SA before additional enforcement on personal care and cosmetics claims would follow, according to Edwards Wildman Palmer attorneys.

The case marks the first time FTC has gone after a cosmetics company for a purely cosmetic claim in more than 20 years, attorneys Edward Glynn and Sharon Blinkoff said in a July 2 interview on the L’Oreal case and its implications for the cosmetics industry.

“The news here is the long hiatus and the fact that the industry has been ratcheting up the scientific-style claims for quite a long period of time,” explained Glynn, a partner in the firm’s Washington office.

“Is this a one-shot deal, where the commission fires a cannon across the bow of cosmetics companies and then goes away and doesn’t come back? Or, is this the beginning of a campaign?”

“What will be telling from my perspective is whether we see any other cases brought on the heels of this by the FTC,” said Blinkoff, who is based in the firm’s New York office. “If we see another case or two, I think it would be fair to speculate that the FTC is back in the business of reviewing advertising claims in the cosmetics arena.”

“Is this a one-shot deal, where the commission fires a cannon across the bow of cosmetics companies and then goes away and doesn’t come back, or is this the beginning of a campaign?” – Edward Glynn, partner with Edwards Wildman.

While there was not anything “terribly novel” in the FTC order, the absence of a monetary penalty and federal injunction may be the most telling for FTC’s future direction within cosmetics, Glynn said.

With the L’Oreal case, “the commission proceeded in the most polite way they can,” which is fairly “typical when the FTC starts in an area,” he added.

“They lay down a marker, and then if people ignore that and then keep going forward with the same kind of conduct that is condemned by the FTC in this case, you’re going to see some rougher action by the commission,” Glynn maintained.

Announced June 30, the proposed FTC settlement would ban L’Oreal from claiming that skin care products marketed under its Lancome and L’Oreal Paris brands target gene activity unless the firm can furnish adequate scientific evidence to support it (Also see "L’Oreal Settles With FTC Over Gene-Related Anti-Aging Skin Care Claims" - Pink Sheet, 7 Jul, 2014.).

Target Actions For Impact

As FTC is a comparatively small agency, it typically targets its resources to cases that impact public health and welfare or risky behavior.

However, L’Oreal offered a “pretty tempting” reason for FTC to take on a case outside those bounds, Glynn said.

The firm used “the magic words ‘clinically proven’ – which is a red flag to any advertising regulator,” talked “about working at the gene level” and reported questionable consumer satisfaction levels in a survey, he said.

But it is unclear how FTC will proceed on similar issues in the future.

“I think what they’re going to do is see if the major players in the industry get the point that when you combine ‘clinically proven’ and talking about effect on genes, that you better have some almost publishable peer-reviewed research” to back it up, Glynn said.

If industry does not see the L’Oreal case as guidance that should be followed, “the commission may be back.”

However, FTC has many other priorities, and if companies do heed its advice, the commission may step away from cosmetics, according to Glynn.

Blinkoff said that is essentially what happened the last time FTC took on a pure cosmetics case – FTC acted, then waited to see how industry reacted.

In that case, settled in 1993, FTC mandated that Revlon Inc. have scientific evidence to support claims for the effectiveness of cellulite treatments or sunscreen products and to state the SPF value in any ad making sun protection claims (Also see "Revlon consent order" - HBW Insight, 3 Jan, 1994.).

If FTC is looking to make a point, it usually will bring a number of different cases at the same time regarding the same kind of advertising, Glynn said.

For instance, in January FTC reached a $450,000 settlement with beauty firm [L'Occitane Inc.] for claims it made for two “slimming” body creams and settled with three marketers of weight-loss products while launching its “gut check” voluntary media partnership program to help prevent bogus claims (Also see "FTC Settles Big With Sensa, Other Weight-Loss Marketers" - Pink Sheet, 8 Jan, 2014.).

However, FTC enforced against L’Oreal alone, although other cosmetics firms are making similar claims in the marketplace.

“If I was a betting man, I’d say they’re probably going to sit back and see if people get the message,” Glynn predicted. “And if they do, that will be one thing; if they don’t you’re going to see them ratchet it up a little bit.”

The attorneys advised companies to avoid ruffling FTC feathers by ensuring they back up claims using standard methodologies.

“Back up your claim with the kind of evidence that you claim you have,” Glynn asserted. “And if you’re going to be saying ‘clinically proven at the gene level,’ you better have some pretty serious clinical quality studies that you would not mind taking to a professional journal and present for peer review. It better be pretty serious science.”

FDA, FTC Convergence

The FTC-L’Oreal proposed settlement should remind firms that a single course of conduct can grab the attention of both FTC and FDA.

While FTC regulates advertising claims and FDA has oversight of labeling and drug claims, the two agencies have “a longstanding relationship” and help each other when needed, Glynn explained.

“This is pure speculation on my part … but I think that FTC probably worked pretty closely with FDA in getting its thoughts about this advertising and the level of concern,” he said.

FTC’s proposed agreement with L’Oreal came almost two years after FDA issued a warning letter to the firm about the same gene-related anti-aging skin care claims (Also see "FDA Warns Lancome For Gene/Stem-Cell Claims: A Signal To Marketplace?" - Pink Sheet, 24 Sep, 2012.).

From FDA’s perspective, “if you’re clinically proven and working at the gene level, you are pretty much up there making drug-type claims,” Glynn said.

Blinkoff pointed out FDA’s warning letter to L’Oreal, along with a slew of others issued in the fall of 2012 for claims crossing into drug territory, “helped dampen industry’s claimology” and cosmetics firms have largely remained unscathed by FDA since then.