Several Beauty Giants were Fined by Governments
BY Ye ChenAug 24, 2021
From May to August this year, several big international cosmetic companies were involved in 9 administrative penalty cases, such as Estee Lauder, L’ Oreal, Sephora, etc. The top1 reason for penalty is false or misleading publicity.

On August 23, a topic #P&G is fined 200,000 yuan for false publicity (宝洁因虚假宣传被罚20万) was trending on Weibo (Equivalent to Twitter). The topic is related to a recent administrative penalty case for one of P&G’s brands, Safeguard. Safeguard has promoted its products with one well-known advertising word, “remove 99% of germs,” for many years. However, this advertising content didn’t have solid scientific support, which is why this brand was fined recently.

P&G was not the only big beauty company fined by the government recently. In August, Shanghai Municipal Administration for Market Regulation stated that Coty Trading (Shanghai) Co. Ltd. (hereinafter referred to as Coty) was fined 30,000 yuan for “making false or misleading publicity about goods or services.”

Coty (China) was founded in November 2007 and had several brands. This administration penalty was for one of Coty’s brands, Philosophy. In Philosophy Tmall flagship store, the brand claimed one of its products had the efficacy of “repairing skin damage and smoothing skin” while failing to provide scientific evidence to support this claim. Therefore, this claim was suspected of false advertising and misleading consumers.

At present, Philosophy Tmall flagship store has removed all products, leaving only one membership link.


Philosophy’s Tmall Store

Another cosmetic company, Shanghai Frost Cabin Biotechnology Co. Ltd, (hereinafter referred to as Frost Cabin) was fined 50,000 yuan for the inaccurate and unclear descriptions of two products’ efficacies.

Founded in December 2011, Frost Cabin Biotechnology has one ace namesake brand Frost Cabin. This penalty was for two products, Frost Cabin Camellia Time Repairing Cleansing (120g) and Frost Cabin Repair Brightening Essence (30ml). Frost Cabin claimed that both products contained camellia seed oil, camellia flower, and camellia leaf extract, so they had the efficacy of repairing skin. According to the efficacy test report provided by Frost Cabin, these extracts can repair the skin barrier under certain conditions. However, the skin barrier refers to the epidermal part of the outermost layer of the skin, which isn’t equivalent to the skin. Therefore, the claim “repair skin” is inaccurate and unclear.

For now, Frost Cabin has recalled these two products from all of its stores and destroyed all packaging of recalled products.


Frost Cabin’s Store

More Strict Regulation

According to incomplete statistics, from May to August this year, there were 9 administrative penalty cases related to cosmetic companies involving several big international cosmetic companies, such as Estee Lauder, L’ Oreal, Sephora, etc. This figure is higher than the annual number of fine tickets these beauty giants received in 2019 and 2020.

Among these fine tickets, “false/misleading publicity” was the top1 reason these cosmetic companies were fined. For example, the two products of Estee Lauder (Shanghai) Trading Co., Ltd. have demonstrated promotional content such as "4weeks to improve acne marks" and "accelerate wound healing" on the product pages on Tmall, which were considered as misleading publicity. A product sold by Sephora (Shanghai) Cosmetics Sales Co., Ltd. on Tmall also was fined for a similar reason. Its SPF and ingredients shown in the promotion were identified as "inconsistent with the actual SPF and the actual ingredient.”

On August 17, the State Administration for Market Regulation issued the "Regulations on Prohibition of Unfair Competition on the Internet (Draft)" to solicit opinions from society. The document again emphasized that merchants must not make false or misleading publicity.

Reasons for the phenomenon

Why did more beauty giants receive more fine tickets than before? The reasons may be as follows:

First, with the implementation of the new cosmetic regulations, the government has strengthened its supervision of the cosmetics industry. “In the past, the government had loosely regulated the illegal acts of beauty companies, but now, once illegal activities are discovered, they will be severely cracked down.” A cosmetic import agent said.

Second, well-known beauty giants are key supervision targets. Their misconduct is a warning for the industry. “Beauty giants usually have various brands and relatively higher consumer attention, so they will become the key regulatory targets of governments.” A senior industry insider mentioned.

It is worth noting that many people believe that the small amount of penalties before is also one of the reasons why beauty giants frequently broke the rules.

With the increasing consumer awareness, consumers pay more and more attention to the brand's reputation. Although the fines are relatively small, they will still affect a brand’s reputation if there is too much negative news about the brand being fined. Amidst such a competitive market environment, brands need to be more cautious about publicity in the future.

Ye Chen
ChemLinked Research Analyst
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