ALM Properties, Inc.
Page printed from: Corporate Counsel
Select 'Print' in your browser menu to print this document.
Call it "the global squeeze." And it's not the kind of squeeze a company takes kindly to. Caught between conflicting ethical and legal demands imposed by an increasingly global marketplace, companies may find that they are vilified in one country merely because they have conformed to the rules of another.
Consider the case of three leading cosmetics companies: Avon Products Inc., The Estée Lauder Companies Inc., and Mary Kay Inc. Back in the 1980s, they began advertising that they didn't use animals to test their products. They trained their sales staffs to promote their "cruelty-free" policies, and they were proudly listed by People for the Ethical Treatment of Animals (PETA) as companies that do not test on animals.
But this year the companies were tagged as hypocrites in a lawsuit. All three resumed testing on animals in the 1990s, despite their public relations campaigns, the plaintiffs alleged. And the reason boils down to one word: sales. China and a few smaller countries actually require companies to conduct tests using animals.
In February five women in consumer-friendly California filed a class action lawsuit against the companies in federal district court in Santa Ana demanding $1 million or more in compensatory and punitive damages for false advertising and marketing. "For years, defendants marketed and advertised their companies and their cosmetics products as not being tested on animals," the complaint stated, "when in fact defendants were testing their cosmetics products on animals so that they could sell products in China and other foreign countries, thereby reaping hundreds of millions of dollars in sales."
Their inclusion on PETA's do-not-test list won the companies the support of "millions of consumers who buy cosmetics only from companies that do not conduct animal testing," the complaint continued. The three were among the largest mainstream companies included on the list, it added. The companies were accused of fraudulent concealment, unfair business practices, false advertising, and violations of California's Consumers Legal Remedies Act, which prohibits "unfair methods of competition and unfair or deceptive acts or practices."
The companies have denied the charges. They also argue that they disclosed on their websites that animal testing occurs where required by law.
This issue is one facing all major cosmetics companies, Jeff Benjamin, Avon's general counsel and chief compliance officer, says through a spokesperson. Benjamin notes that Avon was the first major cosmetics company to end animal testing more than 20 years ago. "Avon does not test on animals to substantiate product safety," he says, but adds that a small number of countries do require additional safety testing and this may include animal testing.
Why don't cosmetics companies just refuse to sell in those countries? Benjamin says Avon is actively working to advance the use of alternatives to animal testing worldwide. But, he says, "if a compromise cannot be reached, we must comply with the requirement."
On its website, Avon states that in 2011 less than 0.3 percent of 9,000 products were tested on animals under legal directives in a few countries. "Our goal is to get that number to zero," the statement adds. "When faced with challenging situations around the world, our commitment is to remain in the countries affected and work to bring about change. . . . Abandoning a market does not help bring about a solution."
Other companies make similar statements on their websites. Sara Moss, general counsel of Estée Lauder, declined to comment, but her company's website states that it researches and funds alternatives to animal testing. "We do not conduct animal testing on our products or ingredients, nor ask others to test on our behalf, except when required by law," it adds.
Ditto on the Mary Kay website. It also points out that in December 2011 Mary Kay became a founding member of an international consortium to promote nonanimal safety testing. "This is a passionate issue for us," said Beth Lange, Mary Kay's chief scientific officer, in a statement at the time. "We are deeply committed to the elimination of animal testing." Nathan Moore, chief legal officer at Mary Kay, declined to comment for this story.
The plaintiffs, represented by the California law firms Eagan Avenatti and The X-Law Group, allege that the website disclosures were "wholly inadequate and deceptive."
PETA agrees. Kathy Guillermo, senior vice president of laboratory investigations at the animal rights organization, says PETA exposed the three companies after receiving leaked information that they were paying for tests in China. Guillermo, who headed a PETA campaign that targeted those same three companies in the 1980s and persuaded them to end animal tests then, says that the revelation was "personally painful." On the suit, she adds: "I completely understand the anger of the consumers about this. PETA felt betrayed right along with all of the consumers who purchased their products for the last two decades believing that no animals were harmed."
In recent months the lawsuit has been modified. U.S. District Judge Cormac Carney has split the three cases, and they are following slightly different paths. On November 15 the Mary Kay case was ordered into mandatory mediation. The company is represented by Gibson, Dunn & Crutcher and Skadden, Arps, Slate, Meagher & Flom.
In the case against Avon, the plaintiffs refiled and dropped the false advertising count. As of this writing, it was still in the pretrial motion stage. Avon is represented by Paul Hastings.
In the suit against Estée Lauder, Carney has dismissed parts of the complaint due to lack of specificity. But he denied two other arguments by the Skadden lawyers over nondefective products. He found that a product change that doesn't concern safety issues can still give rise to a duty to disclose. "A fact need only be material to trigger a duty to disclose," he wrote in his decision. And he ruled that purchasing a nondefective product could still constitute a sufficient injury for purposes of standing. As of this writing, the case was in discovery.
Animal testing has long been a hot issue in California. Twice in the 1990s its state legislature passed bills to eliminate animal testing, including at its medical centers. But two different governors vetoed the legislation, after they were lobbied by the National Institutes of Health, the Food and Drug Administration, and other federal agencies.
PETA's Guillermo says that her group understands the legal bind that companies are in. That's why it added a new listing category for corporations that are transparent about their testing and actively working for regulatory change. Avon, Estée Lauder, and Mary Kay, however, are not on that list. Why not? "They won't release information on what tests are being done, or on how many animals," she says. "These three companies have gone backwards."