Customised cosmetics have recently grown in popularity, with customers increasingly appreciating the value of personalised rather than off-the-shelf products. Customers often prefer to pick ingredients which suit their skin/ hair characteristics, and associate such unique products with greater effectiveness and functionality. Several cosmetics manufacturers and retailers are already in the race to capture this growing demand in India. However, little attention has been paid to the legal implications and regulatory risks which arise from the import, production, storage, mixing and/ or retail of such customised cosmetics. It is therefore essential for players in this emerging market to be mindful of certain important legal questions and considerations to ensure proper compliance. This is especially in light of the new regulatory landscape, which has been laid down through the Cosmetics Rules, 2020 (“Cosmetics Rules” / “Rules”) and has been rapidly evolving over the past few years.
At the outset, it is pertinent to note that the Drugs and Cosmetics Act, 1940 (“D&C Act” / “Act”) and the Cosmetics Rules do not explicitly mention customised cosmetics. However, if a product qualifies as a ‘cosmetic’, the product is required to comply with the said regulations. In terms of the D&C Act, cosmetic is defined as “any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.”[1] Evidently, it is not only the final customised product, but also each of its component ingredients which will qualify as a ‘cosmetic’ under law. This poses several challenges for manufacturers and importers of customised cosmetics (or any of its ingredients), who will have to ensure full compliance with all requirements under the Act and Rules.
Additionally, there is a misconception surrounding entities that would qualify as ‘manufacturers’ under the D&C Act and hence would be liable to obtain the requisite licenses and ensure compliance with the applicable regulations. Under the law, ‘manufacture’ is “any process or part of a process for making, altering, ornamenting, finishing, packing, labelling, breaking up or otherwise treating or adopting any drug or cosmetic with a view to its sale or distribution”.[2] Therefore, mixing of ingredients or altering the composition of any cosmetic in order to personalise the same to suit the requirements of customers, would squarely constitute ‘manufacture’ under law. This is crucial especially for retailers offering customisation of cosmetics on-the-spot in offline stores. While traditionally not considered ‘manufacturers’, such entities may need to apply for manufacturing licences under the Cosmetics Rules,[3] and may be liable to comply with all applicable cosmetics regulations.
In this context, it would be helpful to shed light on some important legal questions, which must be considered by any entity engaged in the production, mixing, storage, import and/ or retail of customised cosmetics (or any of its ingredients):
1. Good Manufacturing Practices (“GMP”)
The D&C Act read with the Cosmetics Rules requires the licensee (i.e. the manufacturer) to ensure compliance with GMP standards.[4] Adherence to GMP is crucial in cases where the customer purchases personalised products online and the product is thereafter manufactured/ formulated in traditional factories or manufacturing facilities. Several challenges may also arise where the customised cosmetic product is prepared on-the-spot at the retail store, or where the ingredients are delivered to the customer’s residence in the form of a DIY kit. In such cases, compliances under the Cosmetics Rules require all equipment to be serviced and calibrated regularly to ensure consistency and standardisation. It also requires the presence of “competent technical staff” at the site of production/ mixing,[5] and further requires relevant personnel to have adequate training and experience to undertake the requisite function (e.g. mixing of ingredients or operating relevant equipment to formulate the customised product). Further, hygienic conditions must be maintained within the manufacturing premises as per the Act and Rules. This requirement may also extend to retail stores where cosmetics are mixed/ formulated.
2. Safety & Testing
The Cosmetics Rules read with the specifications laid down by the Bureau of Indian Standards (“BIS”) prescribe certain safety and quality standards, which must be met to obtain a licence and to place the cosmetics product in the market.[6] In cases where customers order customised cosmetics online, manufacturers often have sufficient time to conduct safety assessment prior to delivery. However, in cases where customised cosmetics are formulated in retail stores on-the-spot, there may not be enough time to conduct adequate safety assessments in accordance with the Rules and the BIS specifications, since the specific combination of ingredients will not be known in advance. This problem is worth considering, since cosmetic companies may need to conduct safety assessments of all possible combinations of ingredients, so that any customisation chosen by customers has already been foreseen and approved. This should encompass all the required tests, including stability testing, toxicology testing, microbiological testing, and compatibility testing (testing for corrosive or other effects between the product formulation and packaging material).
Further, microbiological testing (checking whether the formulation is free from harmful microorganisms’ growth) is an essential component of the safety assessment under applicable law. It is noteworthy that due to practical reasons, it may not be possible to check whether a customised cosmetic which is mixed/ blended at the retail store is of the required microbiological quality. This is especially concerning since studies have found customised cosmetics to be particularly susceptible to safety risks, including microbial contamination during the production process as well as cross-contamination during transfer of ingredients to new containers.[7] Thus, cosmetics companies must be mindful of whether safety inspectors would consider such customised cosmetics to be of the required standard under applicable law.
3. Labelling
The Cosmetics Rules require the original label of proposed products (including customised cosmetic products) to specify information including expiry date, directions for safe use, list of ingredients, identity of the manufacturer, etc.[8] Further, the Cosmetics Rules explicitly clarify that all cosmetics must be packed and labelled in conformity with the Rules and BIS standards.[9] When considering labelling of customised cosmetics specifically, questions may arise on factors such as composition of ingredients and expiry date of the customised product. Since these factors will not be known until the final stage (especially in cases where the cosmetic is formulated at the retail store), cosmetics companies may have to consider how this information may be accurately presented on the packaging in such short notice. Further, the licensee may need to predict the safety standard of each possible combination of ingredients, so that if any safety or health risk arises with a particular mixture, the directions for safe use are explicitly instructed on the label.
Additional complications may arise in cases where the ingredients are sourced from separate factories/ manufacturing facilities. In such cases, the identity of the manufacturer may not be straightforward, thus raising compliance risks in specifying this information on the label. For instance, the licensee may need to consider whether the label must include details of only the entity which mixes the ingredients (which constitutes ‘manufacture’ under the Act), or of only the primary ‘traditional’ manufacturer, or of each manufacturer involved in the production of the final product (and each of its ingredients). Non-compliance with any of these labelling requirements could invite penalties, extending to both imprisonment and fine.[10] Therefore, it is crucial for market players to be mindful of these compliances and safely navigate through the grey areas.
4. ‘New’ Cosmetics
The concept of “new cosmetic” has been newly introduced by the Cosmetics Rules. This broadly refers to any cosmetic containing a novel ingredient, which has not been used anywhere in the world and is not recognised for use in cosmetics by any national or international literature.[11] If a ‘new cosmetic’ has been used, even in the production of a customised cosmetic product, prior permission will have to be obtained from the Central Licensing Authority. Further, data about the products’ safety and efficacy will have to be submitted prior to manufacturing or importing the ‘new cosmetic’. The Rules read with the BIS specifications also prescribe independent standards for safety and testing, which have to be satisfied when manufacturing/ importing the ‘new cosmetic’.[12] Market players in the customised cosmetics sector will have to be mindful of whether such ‘new cosmetics’ are being utilised in the production/ formulation of these products, and if so, they will have to ensure that the new regulations and standards are duly complied with.
5. Prohibited Materials
The “Classification of Cosmetic Raw Materials and Adjuncts” issued by BIS classifies ingredients used in cosmetics products into two broad categories: Generally Recognized As Safe (“GRAS”) and Generally Not Recognized As Safe (“GNRAS”). For instance, a positive list of dyes, colours and pigments has been categorised as GRAS ingredients. On the other hand, the negative list of raw materials – such as hexachlorophene, lead and arsenic – lists products that are prohibited from use in cosmetic products, along with substances that are subject to restrictions and conditions. Further, the Cosmetics Rules explicitly ban the usage of animals for testing of cosmetics.[13] Market players in the customised cosmetics sector will have to be mindful of such restrictions when producing/ sourcing/ mixing the required ingredients, and will have to remain cognizant of any updates or amendments to such restrictions made by the BIS. These amendments often occur without prior notice and may be implemented with immediate effect, thus magnifying the need for agile diligence. Especially in cases where ingredients are sourced from a series of factories/ suppliers, the licensee should ensure that all such entities have complied with the restrictions on materials, ban on animal testing, etc., in order to avoid penalties under the applicable law.
6. Other Considerations
The new Cosmetics Rules have streamlined the process of applications and registration certificates for importing certain cosmetics. Specifically, the Rules state that the importer may file a single application and seek a single registration certificate to import one or more cosmetics manufactured by the same manufacturer, which also encompasses multiple factories functioning conjointly.[14] Thus, in cases where the ingredients for the customised cosmetic product are sourced from a single manufacturing facility, the importer may obtain a single registration certificate as permitted under the new regulations.
Further, customised cosmetics involve the use of proprietary software and algorithms to create unique formulations based on consumer data. This can raise intellectual property concerns, particularly around trade secrets and confidential information. Manufacturers and market players must be mindful of these considerations and tread carefully when engaging in confidentiality agreements, trademark registrations, etc. Customised cosmetics also involve the collection and use of personal data from consumers, which can raise data privacy concerns. Thus, market players must ensure compliance with data privacy laws, including obtaining consent from consumers and ensuring security of the data.
Therefore, while the market for customised cosmetics is gaining ground, it is important to keep an eye out for the accompanying legal and regulatory challenges. Issues such as GMP, safety & testing, labelling/ packaging, ‘new’ cosmetics, restricted/ prohibited materials, data privacy, Intellectual Property, and import registrations, albeit relatively unexplored in this sector, are extremely crucial and may invite harsh penalties if not properly complied with. It is recommended that market players in the customised cosmetics sector stay ahead of the curve and manoeuvre these regulatory obstacles before an adverse situation arises.
For further information, please contact:
Biplab Lenin, Partner, Cyril Amarchand Mangaldas
biplab.lenin@cyrilshroff.com
[1] Section 3(aaa) of the Drugs and Cosmetics Act, 1940.
[2] Section 3(f) of the Drugs and Cosmetics Act, 1940.
[3] Rule 23(1) of the Cosmetics Rules, 2020 requires “any person who intends to manufacture cosmetics” to apply for grant of a license to manufacture.
[4] Rule 23(4) read with Seventh Schedule of the Cosmetics Rules, 2020.
[5] Rule 26(a) of the Cosmetics Rules, 2020.
[6] Rule 39 read with Ninth Schedule of the Cosmetics Rules, 2020.
[7] https://www.nature.com/articles/s41598-020-57978-9; https://pubmed.ncbi.nlm.nih.gov/34197870/.
[8] Rule 34 of the Cosmetics Rules, 2020
[9] Rules 34(8) and 34(9) of the Cosmetics Rules, 2020.
[10] Section 27A of the Drugs and Cosmetics Act, 1940.
[11] Rule 3(r) of the Cosmetics Rules, 2020.
[12] Rule 32 of the Cosmetics Rules, 2020.
[13] Rule 39(7) of the Cosmetics Rules, 2020.
[14] Rule 13(4) of the Cosmetics Rules, 2020.
