Following is an informative guest post from attorney Kevin Thompson about the tough balance skin care companies must address in distributor marketing and compliance.
By Kevin Thompson, Thompson Burton PLLC
Skincare has been a staple category in the network marketing industry for generations. In 2013, the DSA reported that over 20% of all revenue came via the “personal care” category. As the population continues to grow and people continue to age, these numbers are sure to increase. As my grandmother used to frequently say, “Getting old sucks.” People are willing to pay a premium to slow down the signs of aging. Selling products into this massive market just makes sense.
The challenge: if a product is not Food & Drug Administration (FDA) approved as a drug, the marketers (the company and its distributors) cannot imply that the product can be used to “affect the structure or any function of the body.” This puts sellers of skincare products in a serious predicament: how can they tell the story of their products without implying that the products enhance the structure of the skin? I field a lot of questions from both clients and distributors alike about this question. I figured it was time for a public analysis to help both distributors and companies get this right.
The FDA provides a good article on the subject, titled: Are Cosmetics Promising Too Much? Federal law defines a cosmetic as a product designed for “cleansing, beautifying, promoting attractiveness, or altering the appearance.” The law does not require FDA approval of cosmetics before they’re sold. Drugs, on the other hand, must be FDA approved before they reach the market. The word “Drug” is defined as a product “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease . . . or intended to affect the structure or any function of the body.” When a company implies that its product can alter the structure of the skin, the claim would be considered an illegal “drug claim.” See below for some real examples of drug claims made by skincare companies that got FDA attention
- “Clinically proven to change the anatomy of a wrinkle.”
- “This superb age-fighting serum is super charged with . . . potent elastin stimulating peptides.”
- “#1 selling neck cream. Now even more tightening.”
- “Beta Glucan: Helps stimulate collagen production for added strength to the dermal matrix.”
- “Spanish Lavender … inhibit muscle fibers from contracting … “
- “Stimulates the production of collagen . . ..” “TGF-b(1-3) (Transforming Growth Factor Beta) to help stimulate collagen, to help inhibit cellular breakdown…”
- “PDFG (Platelet Derived Growth Factor) to help activate wound healing fostering new skin growth, to help reduce scar tissue, and to help form stronger blood vessels.”
- “The at home answer to wrinkle filling injections. Start rebuilding collagen in just 48 hours.”
- “Stimulate elastin to help improve elasticity and resilience.”
- “Regenerate hydroproteins to help visibly minimize creasing.”
As you can see, when a seller implies that the product can change the underlying structure of the skin, it leads to trouble. When the infractions are serious, the FTC can get involved and sue the company for deceptive advertising. L’Oreal recently settled a matter with the FTC related to their marketing of a cosmetic product. They marketed their “Genifique” product as being able to “boost genes’ activity” that would cause “visibly younger skin in just 7 days.”
EXAMPLE OF PROPER CLAIMS:
- “Cleanses skin”
- “Enhances beauty”
- “Promotes attractiveness”
- “Protects collagen from breakdown”
- “Boosts the skin’s natural repair mechanisms”
- “Reduces visible signs of aging.”
It’s pretty boring, I know.
What does this mean?
Generally in the network marketing industry, the skincare products you see would be viewed by the FDA as “cosmetics.” In the vast majority of cases, sellers of cosmetics cannot make disease / structure-function claims. In rare cases, products containing very specific ingredients (i.e. benzoyl peroxide) in very specific quantities can market their products as Over The Counter drugs for purposes of treating specific problems (i.e. acne). With products in the “anti-aging” category, I have yet to find a network marketing sell a product that fits within an OTC exception.
This FDA rule puts a lot of direct sellers in a tough spot because in most cases, the cosmetic products actually work. And when they work, distributors want to tell the story i.e. “I no longer do botox injections,” “The wrinkles on my face are gone,” etc. Companies are required to strike a tough balance between giving distributors flexibility in telling their stories while ensuring those stories are compliant. Based on what I’m seeing, most companies in the industry are failing in this regard.
The FDA recently stated that they’re seeing a “proliferation of unlawful claims on the Internet and on product packaging.” In the defense of companies, it’s a tough job. And candidly, if I were to pick a poison between being labelled a pyramid scheme that sells products devoid of value or being labeled a company that’s aggressive with disease claims, I’d choose disease claims. The FTC shuts down pyramids while the FDA sends warning letters.
Kevin Thompson is an MLM attorney and a founding member of Thompson Burton PLLC.