Government discusses proposed amendments to the law with foreign chambers.

For cosmetics manufacturers, one of the frustrations of operating in the Taiwan market has been the strict control over the advertising of their products. Before any ad can be aired or published, it needs to receive approval from a government reviewer, usually within a local government, and the problem often arises of different interpretations by reviewers in different jurisdictions.

Under a proposed revision of the Statute for Control of Cosmetics Hygiene – usually referred to as the Cosmetics Act for short – the system would be altered to one of after-the-fact market surveillance. But the prospect of that change leaves some manufacturers even more uneasy. If the criteria for approving an ad remain at least somewhat subjective, companies run the risk of being penalized for a promotion deemed to be inappropriate – which could do incalculable damage to the public image of a major brand.

As a potential solution, leading cosmetics companies have been promoting the idea of replacing government controls with a system of industry self-regulation, which has worked very well in the United States and many other markets around the world. While protecting their own brand equity by maintaining high standards for truthfulness in advertising, members of the industry are at the same time protecting the interest of consumers.

The draft Cosmetics Act is currently undergoing review within the Executive Yuan (EY) and is expected to be forwarded to the legislature for deliberation early next year. In view of concerns raised by cosmetics companies about the regulation of advertising and some other aspects of the bill, the Executive Yuan’s National Development Council (NDC) last month invited representatives of member firms from AmCham Taipei, as well as from the European and Japanese chambers of commerce, to a forum to discuss those issues. The meeting was chaired by NDC Deputy Minister Lin Huan and attended by officials from the NDC, Taiwan Food and Drug Administration (TFDA), Fair Trade Commission, and the EY’s Consumer Protection Committee.

The handling of cosmetics advertising was the first item on the agenda, and needed the most time for discussion. In the end, the conclusion entered into the meeting minutes was that the idea of industry self-regulation is worth considering. The representatives of foreign chambers among the attendees were encouraged to work together with Taiwan’s domestic cosmetics industry associations to come up with a specific proposal to present to the authorities for consideration.

Four other issues were also discussed:

• Industry’s request that when the TFDA lists a certain cosmetic ingredient as prohibited or restricted, the regulator be required to cite specific scientific evidence as the basis for the decision. The officials asked the industry representatives to provide information on how other major countries deal with the matter, and AmCham is currently collecting such data.
• Whether there is a need for the actual manufacturer’s name and contact details to be printed on the product label, as would be required under the draft amendment. Industry has argued that in the case of an imported product, presentation of the importer’s name and contact information would be sufficient, as local consumers would be unlikely to take any question or complaint to an overseas entity. As the same issue arose earlier this year with regard to food-product labeling, and was resolved by waiving the requirement for listing the manufacturer, the TFDA agreed to consider adopting a similar approach for cosmetics.
• Whether foreign manufacturers in the future will have to qualify under Taiwan’s proposed new Good Manufacturing Practice (GMP) system for cosmetics. Although industry had been concerned that the TFDA intended to recognize only the unique Taiwan GMP standard, which could be a hardship for foreign producers, TFDA officials said that certification from other countries could also be accepted as long as the criteria employed are equivalent to Taiwan’s or higher. NDC reminded the TFDA to provide sufficient time for industry to comment and consult when regulations setting up the local criteria are devised following passage of the Cosmetics Act.
• Industry concern that even focus groups and other marketing surveys must undergo an onerous procedure under the Human Subjects Research Act for the proposed research protocol to be approved by an independent, third-party institutional review board (IRB). The TFDA said its intention is not to subject marketing surveys to that process unless the research involves taking a sample from the human body, such as a lock of hair. But the TFDA is reluctant to give a blanket exemption to cosmetics marketing surveys, raising the possibility that advertising reviewers may ask to see evidence of IRB approval when survey results are cited in advertising content. The issue was left unresolved.

“AmCham Taipei very much welcomes opportunities such as this meeting to discuss issues with the relevant government agencies in detail,” says Chamber President Andrea Wu. “We know that many issues are difficult to settle, but each time we communicate we may be able to come closer to finding a solution.”