Impact of European Regulation on the EU Cosmetics Industry

Final Report

Prepared (or European Commission Directorate General Enterprise and Industry

RPA
September <==>

Impact of European Regulation on the EU Cosmetics Industry

Final Report : September =>>7

prepared (or European Commission : Directorate General Enterprise and Industry by Risk A Policy Analysts LimitedD Farthing Green HouseD 1 Beccles RoadD LoddonD Nor(olkD NR14 LLTD UK Tel: +44 1R>8 R=84LR Fax: +44 1R>8 R=>7R8 Email: postUrpaltd.co.uk Web: www.rpaltd.co.uk RPA REPART C ASSURED EUALITG Project: Re(ZTitle Approach: Report Status: Report prepared by: JR74ZCosmetics In accordance with the Project Speci(icationD the Proposal and discussions at the Scoping Meeting Final Report Tobe A. NwaoguD Senior Consultant Jan VernonD Business Development Director Report approved (or issue by: Jan VernonD Business Development Director

Date:

=> September =>>7 I( printed by RPAD this report is printed on 1>>_ recycledD chlorine-(ree paper

While RPA considers that the information and opinions given in this report are sound, the report is based on assumptions and information that are subject to uncertainties. Due to such uncertainties and because events may not occur as expected, there is a possibility that the results presented in this report will be different from situations which occur in the future. This report has been prepared for the client in accordance with the associated contract and RPA will accept no liability for any loss or damage arising out of the provision of the report (and/or associated data) to third parties.

Risk & Policy Analysts

TABLE AF CANTENTS
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INTRADUCTIAN KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKJ
Background to the Study ..................................................................................................1 Objective o( the Study ......................................................................................................= Structure o( the Report .....................................................................................................=

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APPRAACH TA THE STUDG AND INFARMATIAN AN RESPANDENTS KKKKKKKKKKKKKN

Approach to Consultation.................................................................................................b In(ormation on Respondents ............................................................................................b

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IMPACTS AF THE EXISTING CASMETICS DIRECTIVE KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKR

Introduction ......................................................................................................................9 Costs o( Implementing Provisions on Health and Sa(ety.................................................9 Overall Costs and Bene(its o( Compliance with the Cosmetics Directive.....................=> The E((icacy o( Regulation (or Health and Sa(ety .........................................................=b The E((ects o( Regulation on Technological Change and Innovation ...........................=R

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4.1 4.= 4.b 4.4 4.R

PATENTIAL IMPACTS AF SUGGESTED CHANGES TA THE CASMETICS DIRECTIVE KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK<>

Introduction ....................................................................................................................=7 Changing the Directive to a Regulation .........................................................................=7 Speci(ying the Data Required in the Product In(ormation File......................................=8 Costs o( Complying with the Noti(ication Requirements ..............................................bb Introducing a Standardised System (or Cosmetovigilance.............................................bL

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FINDINGS AND CANCLUSIANSKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKN>

-i-

Impact of Regulation on the European Cosmetics Industry

- ii -

Risk & Policy Analysts

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INTRADUCTIAN
Background to the Study
The Cosmetics industry is a global industry within which the EU is a major player. The output o( EU cosmetics companies is around twice that o( Japanese companies and one third more than those in the USA. Over bR>D>>> Europeans are employed directly by cosmetics companies or indirectly in retailD distribution and transport. Although the EU market (or cosmetics is signi(icantD valued at around eL> billion in =>>R (retail sales prices) by COLIPA1D exports constitute a signi(icant proportion o( the market (or EU manu(acturers. The major non-EU markets are the USAD Japan and Canada but other marketsD such as RussiaD ChinaD South A(rica and Latin AmericaD are also growing in importance. The cosmetics sector is characterised by global brandsD with most multinational companies selling a high proportion o( their products across all key markets. HoweverD the majority o( the approximately 4D>>> EU cosmetics companies are SMEs. Over (ive billion cosmetics products (or units) are sold annually in the EUD with the major EU markets being FranceD GermanyD ItalyD Spain and the UK. Most cosmetics products have li(etimes below (ive yearsD with up to 4>_ o( products being re(ormulated or replaced each year. The exception is (ine (ragrancesD some o( which have remained on the market (or 1>> years. Cosmetics products are subject to regulatory controls in all marketsD in order to ensure the sa(ety o( products and avoid adverse impacts on the health o( users. In the EUD the regulatory (ramework is provided by the Cosmetics Directive=. The Directive ensures the sa(ety o( chemical products through controls over ingredientsD in the (orm o( positiveD prohibited and restricted lists and through requirements on manu(acturers concerning sa(ety testing and maintenance o( data (ilesD in(ormation provision and labelling. A study by RPA (=>>4)b (or the European Commission indicated that the EU regulatory (ramework had enabled innovation and enhanced the competitiveness o( the industryD compared to (rameworks in other markets. NeverthelessD regulations have the potential to impact on the competitiveness o( industry by imposing implementation costsD constraining technological change and innovation or imposing ine((ective sa(ety requirements. As part o( its review programme o( the impacts o( regulation on EU industry sectorsD the Commission launched a public consultation on the proposed simpli(ication o( the Cosmetics Directive. Be(ore proposing any changesD the Commission will carry out an

1 =

The European Cosmetics Toiletry and Per(umery Association (COLIPA) Council Directive 7LZ7L8ZEEC on the Approximation o( the Laws o( the Member States Relating to Cosmetics Products and its Subsequent Amendments. RPA (=>>4): Comparative Study on Cosmetics Legislation in the EU and Ather Principal Markets with Special Attention to so-called Borderline ProductsD Final ReportD prepared by Risk A Policy Analysts (RPA) Limited (or the European CommissionD DG EnterpriseD August =>>4.

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Impact of Regulation on the European Cosmetics Industry Extended Impact Assessment (or which in(ormation will be required on the economic impacts o( the current Directive on the business operations o( cosmetics companies and the competitiveness o( the European cosmetics industry. The European Commission (DG Enterprise and Industry) hasD there(oreD commissioned Risk A Policy Analysts (RPA) to collect and analyse data on the economic impact o( the Cosmetics Directive on the competitiveness o( the European cosmetics industry.

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Abjective of the Study

The objective o( this study is to analyse the impact o( the Cosmetics Directive on the everyday operation o( the cosmetics industry in EuropeD (ocusing on the costs incurred in complying with the Directive and the e((ects that these have on company operations. In particularD the study should cover:
!

the costs o( implementing provisions on health and sa(etyD including: ! total and relative costs (or changing labelsh ! total and relative costs (or adapting the composition o( products to comply with regulationh ! total and relative costs (or the registration o( product ingredients in line with the regulatory requirementsh ! the timescale (or implementation o( regulatory changesh the e((icacy o( regulation (or health and sa(ety: in particularD whether the present regulatory (ramework (or health and sa(ety e((ectively addresses current sa(ety risks and those related to newD innovative products in the (utureh and the e((ects o( regulation on technological change and innovationD (or example whether the regulation imposes a barrier to the introduction o( new iactivej substancesh and the impacts o( speci(ic possible changes to the Cosmetics Directive.

This Final Report presents the study (indings.

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Structure of the Report

The remaining sections o( this Report are organised as (ollows:
! ! ! !

Section = sets out the approach to the study and information on respondents to the consultation undertaken (or this studyh Section b sets out the impacts of the existing Cosmetics Directive on the business costs o( cosmetics companiesD as identi(ied (rom consultationh Section 4 assesses the impacts of a number of potential changes to the Cosmetics DirectiveD as set out in the public Commission Consultation Documenth and Section R sets out the findings and conclusions (or the study.

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Risk & Policy Analysts

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APPRAACH TA THE STUDG AND INFARMATIAN AN RESPANDENTS

Approach to Consultation
The main aim o( this study was to gather in(ormation on the impacts o( the existing Cosmetics Directive on the EU industry. In order to achieve this objectiveD a detailed questionnaire (which was agreed with the Commission services and industry representatives) was developed to obtain the views o( cosmetics companies and other industry stakeholders. The questionnaire (attached as Annex 1) was hosted on the RPA web site with a link (rom the Commission web site. The main industry associations o( relevance to the study were also provided with a copy o( the questionnaire (and the link) (or dissemination to their members. At the start o( the studyD it was made clear that the input o( the industry associationsD both at EU level and their national membersD would be crucial in encouraging a high response rate. The Commission set up a steering group comprising representatives o( the main EU sector associations (ColipaD EF(CI and EFFA) to (acilitate the participation o( industry in consultation and case studies.

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Information on Respondents
Responses Received Responses have been received (rom =1 companies in total:
! !

17 (rom cosmetics manu(acturersZcompaniesh and 4 (rom manu(acturers o( cosmetics ingredients.

Table =.1 provides an overview o( the size or scale o( operations o( companies which responded to the consultationD while Table =.= provides an indication o( the geographical locations o( the business operations o( the cosmetics companies.
Table <KJ[ NoK of Employees and Annual Turnover of Companies Responding to Consultation Si\e of Cosmetics Cosmetics Ingredients Enterprise Companies Manufacturers No. of Employees Small lR> 4 Medium l=R> R Large m=R> 8 = Annual Turnover Small !e1>m b Medium !eR>m 4 Large meR>m 8 = Not all of the companies responded to both the questions on employees and that on annual turnover. Some companies did not fall into the same category based on the number of employees and annual turnover.

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Impact of Regulation on the European Cosmetics Industry

Table <K<[ Geographical Location of Business Aperations of Responding Cosmetics Companies Countries Head]uarters Manufacturing Sales Austria > > R Bulgaria 1 1 L Belgium 1 > L Cyprus > 1 9 Czech Republic = 4 1> Denmark > > 7 Estonia > > 9 Finland > > L France 1 4 8 Germany = 4 8 Greece > 1 1> Ireland > > b Hungary > > 8 Italy L 7 8 Latvia > 1 R Lithuania > > 9 Luxembourg > > = Malta > > 4 Netherlands > > 7 Poland > = 9 Portugal > > 8 Romania > > 9 Spain > b 9 Slovakia > > 1> Slovenia > 1 7 Sweden > 1 7 United Kingdom = b 8 All EU-=7 > > = EFTAZEEA > > L Far East > 7 1= North America b L 8 Other Country > R 11 Total J^J TJ 1 One company indicated that it had headquarters both in North America and in Europe

Responses were received (rom cosmetics companies based in the countries with the largest cosmetics markets (FranceD GermanyD ItalyD Spain and the UK) and (rom those based in the new Member States. The small and medium-sized enterprises (SMEs) responding had their headquarters andZor manu(acturing (acilities in ItalyD Bulgaria and the Czech Republic. <K<K< Business Aperations of Respondents Companies were asked to indicate the percentage o( their sales that (all into the main cosmetics product categories. Table =.b provides an overview o( the product port(olios o( the cosmetics manu(acturing companies while Table =.4 summarises the responses to other key questions relating to the manu(acture o( cosmetics and ingredients.

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Risk & Policy Analysts

Table <KN[ Percentage of Annual Sales of Cosmetics Manufacturing Companies Accounted for by Different Product Categories _ Average Annual Sales Average Maximum Product Category Across all _ per Small Medium Large Companies Company Companies Companies Companies Skin caren RR_ =L_ bb_ bL_ 99_ Hair care =_ 4L_ 14_ =1_ 9R_ Toiletries R_ 1=_ =R_ 17_ 9>_ Per(umes and (ragrances =>_ >_ 1>_ 9_ 8>_ Sun care products 7_ 1b_ b_ 7_ R>_ Decorative cosmetics 11_ b_ 9_ 8_ 4>_ Other >_ >_ 7_ b_ b8_ J==_ J==_ `J==_ `J==_ n excluding sun care products Table <KS[ Information on Cosmetics Ingredients and Cosmetics Manufacturers Range of Responses Received Average Across Euestions asked in the ]uestionnaire[ Respondents Minimum Maximum Approximately what percentage o( your total sales is obtained (rom outside the EUo ! Small =>_ =4_ 1=_ ! Medium 1>_ =>_ 1R_ ! Large 1_ 7>_ =9_ ! ALL J_ >=_ <<_ Approximately how many different product formulations do you currently place on the market in the EUo ! Small 8> =>> 1L> ! Medium 1> 1>> R9 ! Large 1L> bD>>> 81> ! ALL J= Na=== S^= Approximately how many different ingredients do you currently use across your companyjs cosmetics products port(olioo ! Small =>> 4>> =88 ! Medium 1>> R>> b=R ! Large 4>> =D>>> 1D=98 ! ALL J== <a=== ^=< Approximately what percentage of the ingredients used across your companyjs cosmetics products port(olio is used solely or mainly in cosmetics productso ! Small L>_ 1>>_ 94_ ! Medium =>_ 1>>_ 9=_ ! Large 1_ 1>>_ L4_ ! ALL J_ J==_ ^J_ What percentage o( your product (ormulations do you replace or reformulate each yearo ! Small 1>_ =R_ 19_ ! Medium R_ L>_ =L_ ! Large 1>_ R>_ =R_ ! ALL T_ b=_ <S_ Approximately what proportion of ingredients will be changed when a product (ormulation is re(ormulatedo ! Small R_ 8>_1 4R_ ! Medium 1>_ =>_ 1R_ ! Large R_ b>_ 19_ ! ALL T_ ^=_ <T_ 1 Two small companies indicated that they re-(ormulated products in(requently butD when they didD a large percentage o( ingredients is changed

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Impact of Regulation on the European Cosmetics Industry The responses indicate that:
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skin care productsD hair care products and toiletries are the three most important cosmetics product groups (or the responding companiesD accounting (or around 7>_ o( the product types identi(ied by respondents as being o( relevance. This is broadly consistent with the market shares o( these product categories in Western EuropeD according to COLIPA statisticsh the responding cosmetics companies (ocus their activities on speci(ic product groups. HenceD hair care products and toiletries account (or over 9>_ o( the annual cosmetics sales (or two o( the companies (the (irst an SME and the second a large company) while per(umes and (ragrances account (or 8>_ o( the annual sales o( one small company. Skin care products account (or between L>_ and 7>_ o( annual turnover (or three companies and around 99_ (or another small company overallh over =>_ o( total annual sales o( cosmetics products per company are obtained (rom outside the EU. As would be expectedD the average (or SMEs is lower (at around 1=_) than that (or large companies (around =9_). The maximum sales outside the EU indicated by any company was 7>_D by a large companyh large companies place almost 1D>>> di((erent product (ormulations per company on the EU marketD compared with SMEs which place less than 1>> product (ormulations per company on the market. SimilarlyD large companies have on average over 1D>>> di((erent ingredients per company across their port(olioD while SMEs have less than bR> ingredients on averageh (or most cosmetics companiesD around 8>_ o( the ingredients in their port(olios are used solely or mainly in cosmetics productsh and most companies re(ormulate around =R_ o( their product (ormulations every yearD although the percentage is lower (or small companies. In the processD on average around =R_ o( ingredients in a product will be changed.

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Representativeness of Sample The aim o( the consultation was to obtain responses representative o( the EU cosmetics industry as a whole. In practice:
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the overall sample size (=1 companies) is very small when compared with the estimated 4D>>> cosmetics companies across the EU. HoweverD based on previous studies (or the cosmetics industry and discussions with industryD this is not an unusual response rate. In our experienceD large cosmetics companies and ingredient manu(acturers respond directly to these consultation exercises (with assistance (rom the EU-wide associations) while national associations collate and submit a joint response on behal( o( the SMEsh

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Risk & Policy Analysts eight out o( the seventeen questionnaires received (rom cosmetics companies were (rom large companies and multinationals. One large company also responded to the survey but did not complete the questionnaire. Around =R large companies participate in the European cosmetics marketh the respondents there(ore account (or nearly bb_ o( the total number andD as suchD the results o( this survey are likely to be representative (or the large companiesh nine out o( the seventeen questionnaires received (rom cosmetics companies were (rom small and medium-sized enterprises (SMEs) with (our (rom small companies. This is only a very small proportion o( the almost 4D>>> cosmetics companies across the EU which are SMEs. HoweverD SMEs account (or nearly 4>_ o( the total responses (rom cosmetics companiesD which is a high percentage (or surveys o( this type. On this basisD the responses received provide a use(ul counterbalance to the views o( large companies in assessing the total costs to the sector as well as providing some insight into the impacts o( the Cosmetics Directive on SMEs. NormallyD responses (rom national associations mostly representing SMEs (who were sent the questionnaire by COLIPA) would have been used to veri(y the impacts o( the Cosmetics Directive on SMEs. HoweverD the speci(ic nature o( the in(ormation required in the questionnaire meant that industry associations were unlikely to be in a position to provide a response. ThusD although one industry association response was receivedD this response was (or one large company which responded anonymously through its industry associationh the data provided hasD there(oreD been input as an individual company response.

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Impact of Regulation on the European Cosmetics Industry

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Risk & Policy Analysts

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IMPACTS AF THE EXISTING CASMETICS DIRECTIVE

Introduction
The EU approach to regulation o( cosmetics products is set out within the Cosmetics Directive (Directive 7LZ7L8ZEEC) and its subsequent amendments. The comparative study o( cosmetics regulations (RPAD =>>4) identi(ied this as the pre(erred model (rom an industry competitiveness viewpoint. HoweverD there were a number o( aspects o( the EU regulatory (ramework identi(ied by industry as having potential impacts on costs and overall competitiveness. This Section discusses these aspects in detailD in particular:
! ! ! !

the costs o( implementing the Cosmetics Directive provisions on health and sa(ety (Section b.=)h the overall costs and bene(its o( compliance with the existing Cosmetics Directive (Section b.b)h the e((ectiveness o( the Cosmetics Directive (or health and sa(ety (Section b.4)h and the e((ect o( the Cosmetics Directive on technological change and innovation (Section b.R).

In the (ollowing sectionsD the costs identi(ied by manu(acturers o( cosmetics are set out separately (rom those identi(ied by manu(acturers o( cosmetics ingredientsD except where no costs have been identi(ied by the latter or the questionsZissues are relevant (or cosmetics products only.

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Costs of Implementing Provisions on Health and Safety

Costs of Complying with the Labelling Re]uirements The Cosmetics Directive requires manu(acturers to include a range o( in(ormation on the labels o( cosmetics productsD including:
! ! !

the name and address o( the manu(acturer or person placing the product on the market and the address where the product sa(ety in(ormation is kept within the EUh the batch numberD nominal net content and (unction o( the producth the date o( minimum durability (i( up to b> months) or period a(ter opening within which the product can be used sa(elyD usage precautions and warnings (or regulated ingredientsh and a list o( ingredients in descending order (including any o( a list o( =L (ragrance allergens).

Ingredient listing is required only on the outer packages o( cosmetics productsD using the International Nomenclature o( Cosmetics Ingredients (INCI) which aims to establish a single name (or each cosmetics ingredient. Warning statements (on the outer and inner packages and in the respective national languages o( all Member States) are required (or products containing certain ingredients listed in the Annexes o( the Directive.

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Impact of Regulation on the European Cosmetics Industry Companies were asked to provide an indication o( the costs o( complying with changes to the in(ormation requirements o( the Cosmetics Directive as a result o( the 7th amendment (which introduced speci(ic requirements (or cosmetics companies to make available to the public a range o( product in(ormationD covering product composition and related adverse e((ectsD animal testingD durability and declaration o( the presence o( =L (ragrance allergens). Table b.1 shows respondentsj estimates o( the man-hours and costs required to make these changes.
Table NKJ[ Man-hours and Cost per Hour of Complying with Changes to Information Re]uirements Range of Average noK of Cost per Average cost Average Company man-hours man-hours hour per hour total costJ Small =>> : R>> bR> e7 - eb> e=> e7D>>> Medium = : 1D=>> L>> e17 - ebR e=L e1RDL>> Large =>> : LD1>> =D77R e=> - e1bR e8> e===D>>> All < C baJ== Jab<T c> - cJNT cT= c^Ja<T= 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents

The estimated number o( man-hours required to comply with changes to the in(ormation requirements ranged (rom = to LD1>> per company while the average cost per hour ranged (rom e7 to e1bR. The overall average cost across all respondents was around Jab<T manhours (around =1> man-days) per company per year at an average cost o( around cT= per hour (eb7R per day). This is roughly equivalent to one employee (at graduate or similar level) working (ull-time (or one year. It also exceeds the maximum number o( man-hours and cost per hour indicated by any o( the SMEs. One reason (or the di((erence in the costs o( complying with labelling changes between small and large companies is the number o( di((erent product (ormulations placed on the marketD as each (ormulation may have a separate label. As Table =.4 showsD the average number o( (ormulations varies (rom 1L> (or small and R9 (or medium companies to 81> (or large companies responding to the survey. Companies were also asked to indicate the average one-o(( cost per (ormulation incurred in complying with the latest changes to the labelling requirements. Table b.= summarises the responses.
Table NK<[ Average Ane-off Cost per Formulation of Complying with the Latest Changes to the Information Re]uirements NoK of Respondents Percentage of All Range of Costs Respondents Small Medium Large Below eR>> eR>> - e1D499 e1DR>> - e4D999 eRD>>> - e9D999 e1>D>>> - e=4D999 e=RD>>> - e99D999 Over e1>>D>>> Total 1 1 = > > > > S > 1 1 > b > > T > 1 = 1 1 > > T 7_ =1_ bL_ 7_ =9_ >_ >_ J==_

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Risk & Policy Analysts For most companiesD the one-o(( cost to comply with the latest changes to the labelling requirements was less than cTa=== per formulation. Four companies (three medium and one large) indicated costs per (ormulation o( e1>D>>> to e=RD>>>. This contrasts with the costs obtained by dividing the average total man-hour cost ((rom Table b.1) by the average number o( product (ormulations ((rom Table =.4). These are shown in Table b.b and average e1L9 per (ormulation. The di((erence may be due to the inclusion in Table b.= o( non-manpower costsD but this is not clear (rom the responses.
Table NKN[ Calculated Average Cost Per Formulation of Complying with Changes to Information Re]uirements Calculated Average average cost Average noK Average cost Average number of Company per of man-hours per hour total costJ formulations formulations< Small bR> e=> e7D>>> 1L> e44 Medium L>> e=L e1RDL>> R9 e=L4 Large =D77R e8> e===D>>> 81> e=74 All Jab<T cT= c^Ja<T= S^= cJbR 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents = Calculated by dividing the average total cost by the average number o( (ormulations

Companies were also asked to indicate the total annual cost to the company o( complying with changes in labelling requirements. Responses are shown in Table b.4.
Table NKS[ Total Annual Cost per Company of Complying with the Latest Changes to the Information Re]uirements NoK of Respondents Percentage of All Range of Costs Respondents Small Medium Large Below e1D>>> > > > >_ e1D>>> - e49D999 = > > 17_ eR>D>>> - e=49D999 > 4 = R>_ e=R>D>>> - e499D999 > > 1 8_ eR>>D>>> - e749D999 > > 1 8_ e7R>D>>> - e999D999 > > > >_ Over e1 million > > = 17_ Total < S b J==_

Small companies indicated annual costs o( less than eR>D>>> and medium companies less than e=R>D>>> to comply with changes in labelling requirements. Larger companies indicated costs o( above e=R>D>>>D with two large companies indicating costs o( over e1 million per company. This is again signi(icantly higher than the man-hour costs indicated in Table b.=D implying that (actors other than sta(( time account (or the majority o( costs. In explaining their high-end estimatesD the two large companies noted thatD to comply with the requirements to label the period a(ter openingD hundreds o( artworks had to be changed and new artwork developed (at a cost o( around e1 million)D old packaging had to be destroyedD equipmentZcomponents written o(( (at around e1 million) and new in(ormation generated. Further in(ormation is provided in the Case Study in Box b.1.

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Impact of Regulation on the European Cosmetics Industry Only one o( the manu(acturers o( cosmetics ingredients provided quantitative data on the cost o( complying with changes to the in(ormation requirements. The company noted that its total annual cost were between e1D>>> and e49D999D with man-hour costs o( e1RD>>>D based on 1>> man-hours per year at an average cost o( e1R> per hour. Other impacts identi(ied by respondents as resulting (rom changes in labelling requirements include:
!

impacts on export markets: where the company produces multilingual andZor multiregional packsD labelling changes to meet EU requirements result in labelling changes to products sold in non-EU markets. Consumers or regulators in these markets may not understand that labels on packs have changedD but the product has notD and this could raise concerns. Some impacts were also identi(ied in non-EU markets aligning with EU regulatory requirements. In some casesD authorities in these markets were not able to keep up with changes to the EU Cosmetics DirectiveD resulting in regulatory inconsistencies between the two marketsh adding greater complexity to warehousing and the supply chain and making higher demands on logistics to ensure (ull compliance with the changesh the need to brie( consumer care sta(( on product in(ormation changesD and updating the website which provides home and personal care product ingredient lists to consumersh and generating waste packaging materialsD especially where the time period (or change means that existing packaging cannot be re-used (see Section b.=.b).
Box NKJ[ Case Study J[ Example of Costs to Industry Resulting from Changes in Labelling Re]uirements - Large Company Company X is a large global manu(acturer o( consumer products with a turnover o( around e4 billion (or its range o( personal care products in Europe only. It has manu(acturing sites in (our EU countries and undertakes contract manu(acture in eight other EU countriesD as well as in the Far East and North America. It sells its products globally and manu(actures mainly antiperspirants and deodorantsD oral careD skin care and hair care products. Under the 7th AmendmentD the introduction o( period a(ter opening (PAO) and (ragrance allergen labelling required that every product variant label needed amending. Direct Costs Incurred: TypicallyD the cost to generate new label artwork is around e1D4>> per bottle labelD whilst new artwork (or aerosol cans is around e=D8>> per product variant. Similar costs are incurred when INCI lists need amending (ollowing changes to the Directive Annexes. Company X has around 1D>>> (ormulationsh based on the above costs and assuming R>_ o( (ormulations are in aerosol (ormatD the cost o( artwork generation alone was around e=.= million. (A second company had indicated costs relating to new artwork development o( e1 millionh howeverD this company has only around =>> (ormulations). Indirect Costs Incurred: These include: ! packaging write-o(( costsh ! component write-o(( costsD estimated at e1millionh ! product port(olio management activities (including man-hour costs o( generating in(ormation) to ensure compliance within the DirectiveD estimated at e=million.
! !

Key Factors Affecting Cost: These include: timescales (or complianceD including delays in implementing legislation and producing guidanceh and speci(ic company product port(olios and commercial arrangements (e.g. where the products are manu(actured contractually (or a brand name or in pre-determinedZagreed batches).

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Risk & Policy Analysts

Box NK<[ Case Study <[ Example of How Changes to the Labelling Re]uirements Under the Existing Cosmetics Directive Resulted in Costs to Industry C Small Company Due to the delay in agreeing guidance on the application o( the period a(ter opening provisionsD a signi(icant proportion o( stock will need over-labelling. The companyjs premium product range consists o( six di((erent products. Minimum production runs (or each product variant are =RD>>> units. On averageD 1bD89> units o( each variant will need over-labelling at an average cost o( =9 cents per unit. This is comprised o( the (ollowing elements:
! ! ! ! ! !

cost o( label including printing plates: 14 cents per unit cost o( unpacking stock and applying label and re-packing: 11 cents per unit transport (rom warehouse: >.8 cents per unit originating artwork: =.= cents per unit cost o( cutter tools used to cut out the labels: 1 cent per unit Total[ <R cents per unit dc<SaT== for all ^NaNS= units re]uiring re-labellinge

In additionD approximately 1>D>>> printed but un(illed cans will need to be written o(( (at a cost o( ebDL4>) or over-labelled (at a cost o( <NK^ cents per unita total cost c<aN^=) The total cost of re-labelling this product range is therefore c<ba^^= Source: UK Department of Trade and Industry (2004): Final Regulatory Impact Assessment, the Cosmetics Products (Safety) Regulations 20044.

NK<K<

Costs of Adapting the Composition of Products and Registration of Product Ingredients to Comply with Regulatory Re]uirements Cost of Including an Ingredient on a Positive List Certain product ingredients (colorantsD preservatives and UV-(ilters) are the subject o( positive lists under the Cosmetics DirectiveR. A new substance can only be added to a positive list (ollowing an evaluation o( the risk o( the substance by the Scienti(ic Committee on Consumer Products. The Committee may also review the positive (and the prohibitedZrestricted) lists in response to technical progress andZor concerns about the impacts o( particular ingredients on sa(ety. The (inal decision on addition (or removal) o( substances (rom the lists is taken by the Commission and the Member States. Companies were asked to provide an indication o( the average one-o(( cost per ingredient andZor the total annual cost per company o( listing an ingredient in the Cosmetics Directive. There was wide variation in the responses provided by the companiesD as shown in Table b.R. In explaining the wide range o( the cost estimates providedD respondents noted that the costs are substance-speci(ic. A number o( key (actors in(luence the costs per ingredient or companyD in particular the extent o( sa(ety testing required and whether the company acts as part o( a consortium or lists the ingredient alone.

4 R

These costs are currently being reviewed by the UK CTPA and will be updated i( necessary Annex IV is a positive list o( over 1R> cosmetics colourants permitted (or use in cosmetics products. Annex VI is a positive list o( over R> preservatives that are permitted in cosmetics products. Annex VII is a positive list o( over => ultraviolet (UV) (ilters that are permitted in cosmetics products.

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Impact of Regulation on the European Cosmetics Industry

Table NKT[ Indicative Costs of Listing an Ingredient in the Cosmetics Directive Percentage of All NoK of Respondents Range of Costs Respondents Small Medium Large Average One-off Cost per Formulation Below eR>> 1 1 1 =R_ eR>> - e1D499 > 1 > 8_ e1DR>> - e4D999 > > > >_ eRD>>> - e9D999 > 1 = =R_ e1>D>>> - e=4D999 > 1 > 8_ e=RD>>> - e99D999 1 > > 8_ Over e1>>D>>> > > b =R_ Total < S b J==_ Total Annual Cost per Company Below e1D>>> 1 > 1 =R_ e1D>>> - e49D999 > 1 > 1b_ eR>D>>> - e=49D999 > = 1 b8_ e=R>D>>> - e499D999 > > > >_ eR>>D>>> - e749D999 > 1 > 1b_ e7R>D>>> - e999D999 > > > >_ Over e1 million > > 1 1b_ Total J S N J==_

One respondent indicated that its estimate included only the manpower costs associated with listingD comprising literatureZin(ormation searchesD evaluation o( existing data and preparation o( the sa(ety dossier and risk assessment. It did not include any additional costs o( conducting toxicity studies to address potential data gaps. In the event that toxicity testing is necessary and a (ull testing package is requiredD the estimated one-o(( cost per ingredient could increase up to e1 million. This could help to explain the variation in responsesD with the high end o( the range including the costs o( additional studies whilst the lower end o( the range excludes such studies. The only company which indicated costs o( over e1 million speci(ies toxicity testingD repeat testing (or sa(etyD e((icacy and consumer acceptance and expert resource as key (actors driving the high costs. Two o( the (our responding cosmetics ingredient manu(acturers indicated that the total annual cost o( listing an ingredient in the Cosmetics Directive was in the range o( e=R>D>>> to eR>>D>>> per company. A one-o(( cost o( over e1>>D>>> per ingredient was also indicated. Costs to Companies When an Ingredient is Added to Restricted or Prohibited Lists The Cosmetics Directive also includes a list o( ingredients prohibited (or use in cosmetics (Annex II) and a list o( ingredients with restricted uses (Annex III)L. Companies were asked to provide an indication o( the average one-o(( cost per ingredient
L

Annex II lists over 1Db>> substances that are prohibited (or use in the composition o( cosmetics products (negative list). The 7th Amendment also prohibited the use o( substances with category 1 and = carcinogenicD mutagenic or reprotoxic (CMR) propertiesD with the potential (or risk assessment based exemption (or Category b CMRs. Annex III lists over 9> substances which cosmetics products may only contain subject to the restrictions and conditions laid down (restricted list).

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Risk & Policy Analysts andZor the total annual cost per company o( adapting the composition o( products when ingredients are added to the prohibited or restricted lists. Table b.L provides a summary o( the responses provided by cosmetics companies.
Table NKb[ Indicative Costs of Adapting the Composition of Products when an Ingredient is Added to the Prohibited or Restricted List NoK of Respondents Percentage of Range of Costs Respondents Small Medium Large Average One-off Cost per Formulation Below eR>> 1 1 > 1=_ eR>> - e1D499 1 = > 18_ e1DR>> - e4D999 > > = 1=_ eRD>>> - e9D999 > 1 = 18_ e1>D>>> - e=4D999 = 1 1 =4_ e=RD>>> - e99D999 > > = 1=_ Over e1>>D>>> > > 1 L_ Total S T ^ J==_ Total Annual Cost per Company Below e1D>>> > > > >_ e1D>>> - e9D999 1 > > 1>_ e1>D>>> - e99D999 1 = = R>_ e1>>D>>> - e=49D999 > = 1 b>R_ e=R>D>>> - e499D999 > > > >_ eR>>D>>> - e999D999 > > > >_ Over e1 million > > 1 1>_ Total < S S J==_

AgainD there was signi(icant variation in the responsesh one respondent noted that the ease o( substitutionD and thus the costsD will depend largely upon:
!

whether the ingredient to be replaced is a key (unctional component o( the product or included as the basis o( product claim. I( this is the caseD the costs o( substitution will increaseh and the availability o( suitable alternative ingredients with identical or similar per(ormanceZ(unction. I( such ingredients are availableD the costs o( substitution will decrease.

Five cosmetics manu(acturers indicated that the addition o( ingredients to the prohibited or restricted lists had caused them to withdraw products (rom the marketh 1> had not experienced such impacts. Only one large company had experienced such an impact while R>_ o( the responding SMEs had done so. This may be becauseD as noted by one respondentD large companies pay particular attention toD and have more resources (orD managing their products and public pro(iles and keeping up-to-date with regulatory developments. InterestinglyD 7R_ o( large companies had su((ered iother impactsj (see Box b.b) as a result o( the addition o( a substance to the prohibited or restricted listsD while only hal( o( the SMEs had su((ered iother impactsj beyond the withdrawal o( their product.

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Impact of Regulation on the European Cosmetics Industry Other (actors identi(ied by respondents which could signi(icantly a((ect the costs include:
! ! ! ! !

whether any changes in processing and manu(acturing are associated with handling the new ingredienth packaging or ingredient write-o(( costs and generation o( new label artwork to re(lect the change in ingredient labelling (see Section b.=.1)h potential loss o( salesD implications (or global supply and disruption to business (e.g. where resources are trans(erred (rom innovation)h the time available to implement an ingredient restrictionZban (ollowing Commission decisionh and di((iculties associated with the generation o( stability dataD testingD research and development and (ormulation development.

Costs to Companies from Product Formulation Changes Due to Changes in Ingredient Listing Companies were asked to provide an indication o( the average one-o(( cost per ingredient andZor the total annual cost per company to put on the market products with a new (or modi(ied) composition due to changes in ingredients (such as administrativeD marketing or labelling costs). AgainD there was signi(icant variation in the estimates provided by the cosmetics companiesD as shown in Table b.7.
Table NK>[ Indicative Costs to Put a Product on the Market with a New or Modified Composition Due to Changes in Ingredients Percentage of NoK of Respondents Range of Costs Respondents Small Medium Large Average One-off Cost per Formulation Below eR>> > > > >_ eR>> - e1D499 = 1 > =>_ e1DR>> - e4D999 1 = 1 =7_ eRD>>> - e9D999 > > b =>_ e1>D>>> - e=4D999 > = > 1b_ e=RD>>> - e99D999 1 > = =>_ Over e1>>D>>> > > > >_ Total S T b J==_ Total Annual Cost per Company Below e1D>>> > > > >_ e1D>>> - e49D999 = 1 > b>_ eR>D>>> - e=49D999 > 1 = b>_ e=R>D>>> - e499D999 > 1 1 =>_ eR>>D>>> - e749D999 > > > >_ e7R>D>>> - e999D999 > 1 > 1>_ Over e1 million > > 1 1>_ Total < S S J==_

One cosmetics ingredient manu(acturer indicated that the total annual cost to the company o( adapting the composition o( products when ingredients are added to the prohibited or restricted lists was over e1 millionD while a medium company indicated a cost range o( e7R>D>>> to e999D999.

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Risk & Policy Analysts Box b.b below provides some speci(ic examples o( costs incurred by companies associated with controls on ingredients.
Box NKN[ Specific Examples of Ather Costs Incurred by Companies Associated with Controls on Ingredients Under the Cosmetics Directive Company A lost annual sales o( around e1 million (or a skin whitening cream which contained hydroquinone. This product had to be withdrawn a(ter the listing o( hydroquinone in the Directive. Company B experienced some indirect impacts (rom the inclusion o( phthalates DEHP and DBP in Annex II as part o( the CMR ban under the 7th Amendment. Although not directly include in cosmetics (ormulationsD these two substances are present in sealing gaskets used in aerosol valves. In the presence o( alcoholic (ormulationsD the phthalates tend to leach out (rom the gaskets into the (inal product. Considerable di((iculty was experienced in obtaining suitable alternative valve gaskets that were phthalate-(reeD due to the need to ensure that sa(ety was not compromised by product leakage as a result o( ill-(itting valve seals. Company C incurred costs in the development o( a tooth whitening product containing hydrogen peroxide - the Cosmetics Directive currently limits the concentration permitted in oral care products. The costs incurred included the preparation o( a human sa(ety dossier (as part o( an industry consortium) and clinical trials to support a request to amend the hydrogen peroxide entry in Annex III. In order to continue selling the product until the Directive is amendedD the company has been obliged to register this product as a medical device in Europe which has also incurred costs. External costs associated with use o( consultantsD undertaking clinical studiesD medical device certi(ication and representation activities as part o( the industry consortium are around e44>D>>>. Internal costs which include the preparation o( several human sa(ety dossiers and subsequent reviews by expert toxicologistsD preparation and submission o( medical device registration documents are around e=7RD>>>. Company D incurred costs o( around eR>>D>>> as a result o( the sa(ety data required by the SCCP to add a UV-(ilter to the positive list. As there is no globally harmonised method (or UV-(ilter testingD (urther costs o( around eR>>D>>> were incurred in Australia and e1> million in the US. In the EUD (urther costs associated with the SCCP were incurredD resulting (rom:
!

delays in approval (e.g. (or zinc oxide). The dossier was submitted in September =>>R and to dateD no decision has been reached by the SCCP and consequently the substance has not been included in the positive list. This results in lost opportunities (or businessh lack o( clarity regarding the approval granted (or Diethylamino Hydroxybenzoyl Hexyl Benzoate which was given (or qmaximum 1>_ in sunscreen productsqD whereas (or other UV-(ilters in the positive list there is no such restriction regarding the application. This resulted in questions (rom cosmetics companies whether this UV-(ilter could not be used in non-sunscreen products such as daily care products or (or product protection. Upon addressing this issueD the applicant was in(ormed that this was a misunderstandingh and change o( SCCP Notes o( Guidance. As a result o( the above situationD the applicant submitted the dossier a second time to SCCPD this time (or other skin care applications (other than sunscreens). By this timeD the SCCP Notes o( Guidance had changed and additional testing became necessary. This had severe consequences with (inancial impactD even though these are di((icult to assessD (or instance:
! ! !

a delay (or approval o( skin care products (other than sunscreens)h a damaged reputation in the marketh and Diethylamino Hydroxybenzoyl Hexyl Benzoate being in a disadvantaged position compared with other UV-(ilters. This company is o( the opinion that cost savings could be achieved i( the manu(acturer o( a cosmetics ingredient (positive list) has the opportunity to discuss options (or sa(ety testing with the SCCP be(orehand in order to optimise and reduce the number o( testsZanimals. The TGA in Australia uses this approach. Company E: A skin cleansing product developed and manu(actured in the USAD to be introduced onto the European marketD was (ound to contain a dye whose purity did not meet the strict criteria laid down in

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Impact of Regulation on the European Cosmetics Industry

Box NKN[ Specific Examples of Ather Costs Incurred by Companies Associated with Controls on Ingredients Under the Cosmetics Directive Annex IV. Although satis(actory (or the USA marketD the level o( trace contamination indicated by the supplier was not deemed to meet the Cosmetics Directive Article 4.= iunavoidable trace contaminationj requirements. As a consequenceD the product was not launched in Europe. Similar di((iculties were also encountered with tooth whiteners. Company F: One cosmetics ingredient manu(acturer indicated that it had been (orced to withdraw a deodorant product (rom the market as a result o( the restrictions on 4-methylbenzylidene camphor.

Box NKS[ Case Study N[ Example of where Changes to the Ingredients Under the Existing Cosmetics Directive Resulted in Costs to Industry Company Y is a large manu(acturer o( consumer products with a turnover o( around eR>> million relating to cosmetics products only. It has manu(acturing sites in (our EU countries as well as the Far East and North America and specialises mainly in toiletries and skin care productsD to a (ar lesser extent. Regulatory Requirement: Companies are required to comply with positiveD prohibited and restricted lists o( substances under the Cosmetics Directive. Direct Costs Incurred: Option 1 (Product Withdrawal): Company Y decided to replace a UV-(ilter (included in skin care products) because its supplier had withdrawn it (rom the market rather than (und additional testing to support an SCCP dossier. 1= (ormulations were a((ected at a cost o( between eRD>>> and e1>D>>> per (ormulationD equivalent to between eL>D>>> and e1=>D>>>. Option = (Product Re(ormulation): Company Y decided to replace a thickening ingredient in 7> (ormulationsD b>_ o( which were produced by a contract manu(acturerD which increased the re(ormulation costs. The cost o( this was between e1DR>> and eRD>>> per (ormulationD equivalent to between e1>>D>>> and ebR>D>>>. Indirect Costs Incurred: These include: ! loss o( salesh ! manu(acturing or costs associated with any processing changes (including component write-o(( costs)h ! costs o( handling the new ingredient and old ingredient write-o(( costsh ! new packaging and packaging write-o(( costsh ! generation o( new label artwork to re(lect the change in ingredient labellingh and ! product port(olio management activities (including man-hour costs o( generating in(ormation) to ensure compliance within the Directive). Key Factors Affecting Cost: These include: ! timescales provided (or implementing changes (see next Section)h ! speci(ic company product port(olios and commercial arrangements (e.g. consortia).

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Risk & Policy Analysts NK<KN Impacts of the Timescale for Implementation of Regulatory Changes Changes to the Cosmetics Directive must be implemented within speci(ied time periods. Companies were asked whether they thought the timescale (or implementation o( changes was adequate. Five companies thought that the timescales were adequate while 1> companies disagreed. No speci(ic costs directly linked to timescales were identi(ied in response to this question. HoweverD responses to other questions indicated that the timescale could have a signi(icant impact on costs. For exampleD as noted in Section b.=.1D the costs o( re-labellingD in particular the extent to which waste packaging materials are generated will be in(luenced by the time period (or change. The (ollowing viewpoints were expressed by respondents:
!

a period o( =4 months is the minimum needed to manage company and market complexities. A longer timescale o( two to three years should be permitted (except (or provisions which are linked to critical consumer sa(ety issues) with no limitations (or selling to the consumerh a period o( =4 months should be included a(ter publication o( the restriction in the OJ to the point o( iplacing on the marketj to avoid companies spending a disproportionate amount o( resource re(ormulating products in anticipation o( possible (uture ingredient restrictions within the Directive. In the event o( a serious human sa(ety concern this timescale can be reducedh where a company does not hold all the required data but needs (urther data (rom suppliersD then additional time to comply may be required (e.g. obtaining in(ormation (rom suppliers on potential substance traces)h it would be help(ul to standardise the various en(orcement points in the Directive. With some changes to the AnnexesD the deadline re(ers to iplacing on the marketjD (a term that still needs de(ining)D whilst others talk o( isupply to the (inal consumerjh and where there is ambiguity andZor (urther clari(icationZguidance is required on interpretationD such as was the case (or PAOD then su((icient additional time should be allowed (or the development o( clear guidance and the clock should start (rom the availability o( that guidance. Box b.R provides (urther in(ormation on this point.
Box NKT[ Examples of the Impacts of Timing of the Availability of Guidance on the Costs of Relabelling Given su((icient timeD industry normally phases the i(aceli(tj o( its brands in rotationD so that they are not all done at once. Artwork is revised regularly over a two or three year cycle. As a result o( the 7th AmendmentD =>_ - b>_ o( brands will have had artwork changes outside o( this normal cycle : at signi(icant cost. Those companies that waited (or publication o( the guidance on period a(ter opening are worse o((D in that they have a very much shorter time in which to make the changes but at least they will not have to label certain product excluded by the guidance. ConverselyD those companies which decided to label period a(ter opening earlyD to minimise costsD will (ind that the guidance does not require certain o( these product to be labelled at all Source: UK Department of Trade and Industry (2004)

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Impact of Regulation on the European Cosmetics Industry One cosmetics ingredient manu(acturer noted that the timescale (or implementation o( changes to the Cosmetics Directive was not su((icientD as alternatives to the animal testing ban will not be in place in time to launch new ingredients once the animal test ban is e((ective (the Directive assumes that by =>>9Z=>1b adequate alternative test methods will be available). The respondent suggests that there are still not su((icient validated and recognized alternative test methods available and this situation is unlikely to change by the set deadlines. HenceD the deadlines set in the 7th amendment may have impacts on innovation.

NKN
NKNKJ

Averall Costs and Benefits of Compliance with the Cosmetics Directive

Costs In order to provide a robust assessment o( the costs o( compliance with the Cosmetics DirectiveD companies were asked to indicate the signi(icance o( a number o( (actors to the total cost o( placing a cosmetics product on the market. Companies were also asked to indicate which aspects o( these cost (actors were most a((ected by the requirements o( the Cosmetics Directive. The results are shown in Tables b.8 and b.9 below.
Table NK^[ Ranking of the Importance of Cost Factors for Placing a Cosmetics Product on the Market (in Descending Order o( Importance) Si\e of Company Cost Factor All Small Medium Large Product marketing 1 = 1 1 Research and development b 1 b = Product manu(acture = b = = Product sa(ety testing b 4 4 4 Product labelling = 4 R 4 1 indicates the most important cost (actor

It is interesting to note that small companies ranked product labelling as much more important in determining costs that medium or large companiesh medium companies rank the costs o( research and development more highly than small or large companies.
Table NKR[ Impact of the Cosmetics Directive on Specific Cost Factors _ of Respondents Impact Research f Safety testing Product Product development of product labelling manufacture Very High 47_ =9_ 18_ L_ High bR_ 47_ R9_ 19_ Moderate 18_ =4_ =4_ Lb_ Low >_ >_ >_ 1b_ Negligible >_ >_ >_ >_

Product marketing L_ =R_ 44_ 19_ L_

Table b.9 indicates that:

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Risk & Policy Analysts research and development, product labelling and safety testing of products appear to be the most highly a((ected by the Cosmetics DirectiveD with over three-quarters o( respondents indicating that the Directive has a very high or high impact on costsh product manufacture is impacted moderatelyD according to Lb_ o( respondentsh and there is least agreement on the impacts o( the Directive on product marketingD with =R_ o( respondents (all small companies) indicating that the Directive has a high or very high impact on costsD but =R_ (large companies) indicating that it has low or negligible impact.

! !

Companies were asked to indicate the total annual cost to their company o( complying with the current requirements o( the Cosmetics DirectiveD as a percentage o( their annual sales. As shown in Table b.1> belowD nearly 7>_ o( respondents indicated that the existing Cosmetics Directive resulted in costs o( between >.1_ and 1_ o( their annual sales (with nearly R>_ indicating costs o( >.R_ to 1_). Two large companies indicated that the cost was over 1_ o( their annual turnover while three companies (two large and one small) indicated that it was below >.1_.
Table NKJ=[ Indicative Total Costs Per Company of Complying with Re]uirements of the Cosmetics Directive as a Percentage of Annual Sales NoK of Respondents Percentage of As a _ of Total Annual Sales Respondents Small Medium Large Below >.>R_ > > > >_ Between >.>R_ and >.1_ > 1 = 19_ Between >.1_ and >.R_ = 1 1 =R_ Between >.R_ and 1_ = b 1 44_ Over 1_ (please speci(y) > > = 1=_ Total S T > J==_

Companies were asked to indicate the number o( man-hours required each year to ensure compliance with the Cosmetics Directive. Table b.11 provides a breakdown o( the responses by company size.
Table NKJJ[ Man-hours and Cost per Hour of Complying with the Cosmetics Directive Company Range of manAverage noK Range of cost Average cost Average total hours of man-hours per hour per hour costJ 1>> - R>> e7 - eb> Small b>> e19 eRD7>> b>> : 1DL>> eR - eb> Medium 9>> e17 e1RDb>> 14D>>> : LbD>>> e=> - e=>> Large b9D9>> e1>> ebD99>D>>> All J== C bNa=== <=aN== cT - c<== cb= cJa<J^a=== 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents

The number o( hours indicated by respondents ranged (rom b>> to LbD>>> per company per yearD at an average cost per hour ranging (rom eR per hour to e=>> per hour. OverallD the average across all respondents was around <=aN== hours dor nearly <a>== man-dayse per company per yearh this is equivalent to more than ten people working (ull time on ensuring compliance with the DirectiveD with the average cost o( around cb= per hour. The company which indicated the highest (igure o( LbD>>> man-hours manu(actures and sells mainly toiletries (9>_ o( annual sales).

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Impact of Regulation on the European Cosmetics Industry The respondent whose response was closest to the average (i.e. 14D>>> man-hoursZyear and eL>Zhour) indicated that its costs were based on the company having technical managers in 18 countriesD covering the cosmetics regulatory and technical activities in all =7 Member States. The respondent noted that the number o( hours per year varies between Member StatesD (rom b7 to 1D7>> hoursD with an average o( 4R> hoursZcountry technical manager. The data (rom the large companies signi(icantly skews the overall (igures. Small and medium-sized companies spend much less timeh on averageD b>> and 9>> man-hours respectively (equivalent to less than one man-day per week (or a small company and three man-days per week (or a medium-sized company) on ensuring compliance with the Cosmetics Directive. NKNK< Benefits Respondents were asked to rank the bene(its o( the Cosmetics Directive (or their company. Table b.1= provides a summary o( the responses.
Table NKJ<[ Ranking of Benefits Resulting from the Cosmetics Directive Rating on Scale of J C ^ dwhere J is most significante Types of Potential Benefits Maximum Minimum Average Rating Rating Rating 1 R =.4 Increased access to global markets 1 7 =.4 Increased customer trust Increased access to markets in EU 1 L =.7 Member States Sa(er products and reduction in incidents 1 8 b.1 involving cosmetics 1 7 b.b Increased customer satis(action Reduced competition (rom non-EU 1 8 4.= manu(acturers Increased competitiveness o( the EU 1 8 4.b cosmetics industry 1 9 4.R Increased sales and product exports 1 4 1.7 Other (please speci(y) _ dor NoKe of Respondents that ranked the benefit L4_ (7) 7b_ (8) 8=_ (9) L4_ (7) 7b_ (8) 8=_ (9) RR_ (L) RR_ (L) RR_ (L)

There was considerable variation in the ranking given to the di((erent types o( bene(its. HoweverD both SMEs and large companies agreed that the three key bene(its (rom the Cosmetics Directives are:
! ! !

increased access to global marketsh increased customer trust (although one SME disagreed)h and increased access to markets in EU Member States (although one large company disagreed).

Additional bene(its mentioned by companies which indicated iotherj include:

! !

a harmonised Directive across the EUh less complexity in dealings with the new EU Member Statesh

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Risk & Policy Analysts enhancing a common understanding across industry and a standard set o( ingredientsh and the removal o( misunderstandings between the original CE Directive and national transpositions.

! !

Most companies pre(erred to provide a qualitative rather than quantitative indication o( the annual value o( these bene(its (in the (orm o( additional revenue or reduced costs)D as shown in Table b.1b below. As a guideD the companies which indicated ilowj bene(its also indicated that the potential annual value o( these bene(its were between e1>D>>> and e1>>D>>> per year. SimilarlyD two o( the companies which indicated imediumj bene(its quanti(ied these at between e1>>D>>> and e=R>D>>> per yearD while another quanti(ied these imediumj bene(its at between eR>>D>>> and e7R>D>>> (the di((erence may re(lect the size o( operations o( the companies).
Table NKJN[ Annual Benefits to Cosmetics Companies Resulting from the Cosmetics Directive Si\e of Company Total NoK of Percentage of Respondents Respondents SMEs Large Annual Value to the Company l "1>>>> e1>>>> - e99999 e1>>>>> - e=49999 e=R>>>> - e499999 e=R>>>> - e499999 eR>>>>> - e749999 e7R>>>> - e999999 e1 million and above Total Indicative Value Very High High Medium Low Negligible Total 1 = = > > > > > T > > = = 4 ^ 1 1 > > > 1 > > N > 1 = 1 1 T = b = > > 1 > > ^ > 1 4 b R JN =R_ b8_ =R_ >_ >_ 1b_ >_ >_ J==_ >_ 8_ b1_ =b_ b8_ J==_

Over L>_ o( respondents indicated that the annual bene(its o( the Directive to the company were either low or negligible. This is not in line with the types o( bene(its identi(ied in Table b.1=D nor the comments made by industry in the previous comparative study on cosmetics regulation. It perhaps re(lects the length o( time the Directive has been in place and the consequent di((iculty in comparing with the situation be(ore it was introduced.

NKS

The Efficacy of Regulation for Health and Safety

None o( the respondents raised concerns about the ability or suitability o( the present regulatory (ramework to address both current sa(ety risks and those related to newD

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Impact of Regulation on the European Cosmetics Industry innovative products in the (uture. HoweverD they provided suggestions (or changes to the Cosmetics Directive which may improve its e((icacy and reduce costs. These included:
!

clearer de(initions and guidelines would reduce uncertainty and potentially reduce costs. This includes guidance on access to product in(ormation and de(inition o( placement o( product on the market. These guidelines should also be drawn in partnership with industryh ensure appropriate standards and harmonisation o( product sa(ety assessmentsD (or example through the Intelligent Testing Strategy (an integrated approachD recommended by one companyD comprising o( various evaluation methods including human exposure dataD data (rom other sourcesD and toxicological risk assessments)D which should be issued and training provided where appropriateh missing data should not automatically be interpreted as a lack o( sa(ety in(ormation. Sa(ety assessments should take into account historic data and data (rom other sources. There should not be a requirement (or increased technical documentation as this would increase costs and restrain innovationh national authorities should concentrate on ensuring compliance with the Cosmetics Directive as regards product sa(etyD recognising the validity o( di((erent types o( in(ormation on the products such as con(irmatory sa(ety studiesD experience (rom sa(e-use historiesh and cross re(erencing o( chemical names in annexes to the Directive to INCI namesD as this would help (acilitate tracking o( ingredient restrictions.

Other concerns centred on the international harmonisation o( labellingD product development and standardsD with speci(ic comments by respondents relating to:
!

the lack o( global harmonisation on standards (or ingredientsD in particular colours approved (or use in cosmeticsh duplication o( e((ort in product development between EU and US (or iglobalj (ormulationsD which increases development costs by =R_h labelling provisions on a global scale - product names that are understood internationally or by which the (unction o( the product is obvious (rom the presentation o( the product (e.g. Eau de Toilette)h and the REACH RegulationD which is seen as a threat to EU cosmetics industries as it will reduce the ingredients available (or cosmetics (ormulationsD and thus increase the cost (or research and re(ormulation.

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Risk & Policy Analysts

NKT

The Effects of Regulation on Technological Change and Innovation

Companies were asked whether the requirements o( the Cosmetics Directive prevented them (rom introducing any technological changes or innovations to their products ((or example whether the regulation imposes a barrier to the introduction o( new iactivej substances). Less than hal( o( the respondents thought that the Directive had hindered innovationD while the remaining respondents did not think so. HoweverD there was a di((erence between the responses o( companies o( di((erent sizesD with three out o( (ive large companies indicating that the Directive had hindered innovation but only three out o( nine SMEs thinking this was the case. Table b.14 shows the responses o( companies in attempting to quanti(y the impacts o( the Cosmetics Directive on innovation. The companies which indicted lost sales o( less than e1>>D>>> were SMEs and they quanti(ied these impacts as imediumj. Box b.L provides a speci(ic example (rom one respondent.
Table NKJS[ Estimated Loss of Sales as a Result of Technological Changes or Innovations Being Prevented NoK of Respondents Percentage of Annual costsglost sales Respondents to Company Small Medium Large m e1 million bb_ > > = eR>>D>>> - e999D999 17_ > > 1 e=R>D>>> - e499D999 > > > e1>>D>>> - e=49D999 17_ > 1 > e1>D>>> - e99D999 bb_ > = > l "1>D>>> > > > Total = N N J==_ NoK of Respondents Percentage of Indicative costs Respondents Small Medium Large Very High > > > High =>_ > > 1 Medium L>_ > b > Low > > > Negligible =>_ > > 1 Total = N < J==_

Box NKb[ The Cosmetics Directive and Innovation Company G: The Cosmetics Directive currently restricts the maximum concentration o( hydrogen peroxide in oral care products to >.>1_. Industry has made a number o( submissions to SCCP concerning the sa(ety o( products containing up to L_ hydrogen peroxide with a view to a (uture amendment to the Directive to allow the sale o( these products on the EU market as cosmetics. However taking into account the ambiguity in the SCCP opinionsD the commission has not been able to progress amendments to legislation. Development costs (lost): eL million Lost sales: e7> million over b years

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Impact of Regulation on the European Cosmetics Industry

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Risk & Policy Analysts

SK
SKJ

PATENTIAL IMPACTS AF SUGGESTED CHANGES TA THE CASMETICS DIRECTIVE

Introduction
In addition to providing a baseline o( the economic impacts o( the current Directive on the everyday business operations o( cosmetics companiesD this study is intended to assess the impacts o( a limited number o( (the most important) potential changes to the Directive set out in the public Commission Consultation Document (CCD). These changes are:
! ! ! !

changing the Directive to a regulation (consultation item b)h speci(ying data required in the product in(ormation (iles (consultation item 9)h introducing harmonised noti(ication requirements (consultation item 1=)h and introducing a standardised system (or cosmetovigilance (consultation item 11).

These changes are discussed (urther below.

SK<

Changing the Directive to a Regulation

As stated in the CCDD the Cosmetics Directive and the annexes to it are highly detailed and leave little room (or variation in transposition by Member States. HoweverD unnecessary costs may be incurred by businesses through the need to adapt product (ormulation and packaging to divergent rules i( an amending Directive has not (yet) been properly transposed in one or more Member States. Converting the Cosmetics Directive into a regulation would mean that EU-wide rules would apply directly without the current need (or transposition into the national laws o( =7 Member States. This should result in one identical legislative (ramework as a sole re(erence (or economic operators in the EU. Companies were asked what the potential implications o( this change would be. Seven out o( the 14 cosmetics companies which responded indicated that costs would be reducedD while the other seven companies disagreed ((ive o( the eight large companies thought costs would be reducedD whilst only two o( the six SMEs agreed). Three out o( the (our responding manu(acturers o( cosmetics ingredients also indicated that there would be reduced costs. Table 4.1 shows respondentsj estimates o( the man-hours and costs savings likely to be incurred as a result o( such a change.
Table SKJ[ Range of Man-hours and Cost Savings from Converting Directive to Regulation Company Range of Average noK Range of cost Average cost Average total man-hours of man-hours per hour per hour cost savingJ >-R> e17 SMEs =R e17 e4=R Large L - =>D>>> 7D=bR e1> - e1bR e98 e71>D>>> All = C <=a=== TaSS= cJ> - cJNT c>^ cS<Sa<T= 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents

Page 27

Impact of Regulation on the European Cosmetics Industry The number o( man-hours that may be saved as a result o( this changeD as indicated by cosmetics companiesD ranged (rom L to =>D>>> man-hours per yearD with the cost saving per hour ranging (rom e17 to e1bR per hour. The overall average cost saving across all respondents was around TaSS= man-hours d><T man-dayse per year at an average cost saving o( around c^= per hour. This is roughly equivalent to three to (our employees working (ull-time (or one year7. Respondents also noted that changing the legislative (ramework (rom a Directive to a regulation would:
!

ensure uni(ormity in implementation and interpretation o( requirements not only between Member StatesD but also between cosmetics manu(acturers. In theoryD such a change should eliminate mistakes in translationsD reduce divergences in implementation and allow (or a consistent interpretation in relation to content and timings o( the Directiveh imply that there is no longer a need to track the implementation o( changes to the Directive and potential divergences in Member States by Technical Managers (whose role involves holding discussions with national trade associations and Competent Authorities to review and ensure a harmonised approach to transposition)h and (rom a new product launch perspectiveD it should enable products to be simultaneously launched Europe-wide rather than the need to stagger launches to ensure regulatory compliance in speci(ic Member States.

SKN
SKNKJ

Specifying the Data Re]uired in the Product Information File

Introduction The existing Cosmetics Directive does not require in(ormation on the sa(ety o( cosmetics products to be submitted to Member State competent authorities be(ore a product is placed on the market. HoweverD manu(acturersZimporters must retain in(ormationD accessible to Member State competent authorities on request at all timesD which proves the sa(ety o( their products. Under the existing DirectiveD the product in(ormation (ile (PIF) should contain in(ormation on:
! ! ! ! ! !

the qualitative and quantitative composition o( the producth physicochemical or microbial speci(ications o( ingredients and (inished producth manu(acturing methodh sa(ety assessment by quali(ied personh existing data on any undesirable e((ectsh and proo( (or certain claims made.

As noted in Section b.b.1D more than ten (ull-time employees per company are currently required on average to ensure compliance with the Cosmetics Directive.

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Risk & Policy Analysts The Commission (as set out in the CCD) considers that stronger technical documentation may be needed to allow improved checks on products on the market. The Cosmetics Directive couldD there(oreD speci(y more clearly the in(ormation (including sa(ety data) to be made available in the PIF. In order to identi(y the potential impacts o( this changeD companies were asked to identi(y the current costs o( producing a PIF andD (ollowing thatD the potential impacts o( speci(ying the data requirements (urther. SKNK< Costs of Producing a Product Information File Table 4.= shows respondentsj estimates o( the man-hours and costs required to produce PIFsD or the sa(ety aspects o( PIFs.
Table SK<[ Man-hours and Cost per Hour of Producing PIFsa or the Safety Aspects Anly of PIFs Range of Average noK of Cost per Average cost Average Company man-hours man-hours hour per hour total costJ Cost of Producing PIFs Small =>> - =R> ==R e7 - eb> e=> e4DR>> Medium b>> - R>> 4>> eR - eb> e17 eLD8>> Large 1R> - =>D>>> 7D>>> e=> - e1L> e1>> e7>>D>>> All 1R> - =>D>>> 4D>>> eR - e1L> eL4 e=RLD>>> Cost of Producing the Safety Aspects Only of PIFs Small R> R> e1> - eR> eb> e1DR>> Medium =R> - b>> =7R e17 - eb> e=4 eLDL>> Large 7R - 1>D>>> bD87R e=> - e1L> e1>> eb87DR>> All R> - 1>D>>> =DR>> e1> - e1L> e7R e187DR>> 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents

Cosmetics companies estimate that the number o( man-hours currently required to prepare PIFs range (rom 1R> to =>D>>> man-hours per yearD at an average cost o( between eR and e1L> per hour. The sa(ety aspects included in the PIF were indicated to account (or between 7R and 1>D>>> man-hours per yearD at an average cost o( between e1> and e1L> per hour. OverallD the average number o( hours required to prepare PIFs was indicated to be around Sa=== man-hours dTN= man-dayse per company per yearD with the sa(ety aspects accounting (or around <aT== man-hours dor NN= man-dayse per company per yeara b<_ of the total man hours. The average cost per hour o( producing PIFs was cbS per houra or c>T per hour (or the sa(ety aspects only. These averages exceed the maximum number o( man-hours indicated by any o( the SMEsD o( R>> man-hours and eb> per hour. One reason (or the di((erence in the costs o( producing PIFs between small and large companies is the number o( di((erent products placed on the marketD which is likely to be higher (or large companies (similar to the number o( (ormulations) compared with SMEs. Companies were also asked to indicate the average one-o(( cost per (ormulation incurred to produce a PIFD or the sa(ety aspects only o( a PIF. Table 4.b summarises the responses.

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Impact of Regulation on the European Cosmetics Industry

Table SKN[ Average Ane-off Cost per Formulation of Preparing a PIFa or the Safety Aspects Anly of a PIF Number of Respondents Percentage of Range of Costs Respondents Small Medium Large Average One-off Cost per Formulation of Preparing a PIF Below eR>> 1 > > 7_ eR>> - e1D499 1 1 = =7_ e1DR>> - e4D999 1 1 b bb_ eRD>>> - e9D999 > 1 1 1b_ e1>D>>> - e=4D999 > 1 1 1b_ e=RD>>> - e99D999 > > > >_ Over e1>>D>>> (please speci(y) > > 1 7_ Total N S ^ J==_ Average One-off Cost per Formulation of Preparing the Safety Aspects Only of a PIF Below eR>> = > > 1b_ eR>> - e1D499 > = > 1b_ e1DR>> - e4D999 1 1 4 4>_ eRD>>> - e9D999 > > = 1b_ e1>D>>> - e=4D999 > 1 1 1b_ e=RD>>> - e99D999 > > 1 7_ Over e1>>D>>> (please speci(y) > > > =_ Total N S ^ `J==_

For most companiesD the average one-o(( cost incurred (or preparing a PIF was below cSaRRR per formulation. SMEsD in generalD indicated lower costs per (ormulationZPIF compared with large companiesh no reason was indicated (or this di((erence. The costs o( preparing only the sa(ety aspects were in the same range as the costs o( preparing a PIF (suggesting that this is the most signi(icant cost (actor in preparing a PIF). This contrasts with the costs obtained by dividing the average total man-hour cost ((rom Table 4.=) by the average number o( product (ormulations ((rom Table =.4). These are shown in Table 4.4 below and average eb91 per (ormulation. The di((erence may be due to the inclusion o( non-manpower costs in Table 4.bD but this is not clear (rom the responses.
Table SKS[ Calculated Average Cost Per Formulation of Preparing a PIFa or the Safety Aspects Anly of a PIF Preparing a PIF
Si\e of enterprise Average total costJ Average number of formulations Calculated average cost per formulation<

Preparing the Safety Aspects Anly

Average total costJ Average number of Formulations Calculated average cost per formulation<

Small e4DR>> 8> eRL e1DR>> 1L> e9 Medium eLD8>> 7> e97 eLDL>> R9 e11= Large e7>>D>>> 917 e7Lb eb87DR>> 81> e478 All c<Tba=== bJ= cS<= cJ^>aT== S^= cNRJ 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents = Calculated by dividing the average total cost by the average number o( (ormulations

Companies were also asked to indicate the total annual cost to the company to produce PIFsD or the sa(ety aspects only o( PIFs. Table 4.R summarises the responses

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Risk & Policy Analysts

Table SKT[ Total Annual Cost per Company of Preparing PIFsa or the Safety Aspects Anly of PIFs Number of Respondents Percentage of Range of Costs Respondents Small Medium Large Average One-off Cost per Formulation of Preparing PIFs Below e1D>>> > > > >_ e1D>>> - e49D999 = 1 1 bL_ eR>D>>> - e=49D999 > 1 1 18_ e=R>D>>> - e499D999 > = > 18_ eR>>D>>> - e749D999 > > 1 9_ e7R>D>>> - e999D999 > > > >_ Over e1 million > > = 18_ Total < S T `J==_ Total Annual Cost per Company of Preparing the Safety Aspects Only of PIFs Below e1D>>> > > > > e1D>>> - e49D999 = > > 18_ eR>D>>> - e=49D999 > b 1 bL_ e=R>D>>> - e499D999 > 1 1 18 eR>>D>>> - e749D999 > > > > e7R>D>>> - e999D999 > > > > Over e1 million > > b =7_ Total < S T `J==_

There was a large variation in the total annual cost indicated per company (or preparing PIFsD ranging (rom less than eR>D>>> (indicated by (our companies) to over e1 million (indicated by two companies)D possibly due to di((erences in the number o( (ormulations. Interestingly thoughD the maximum total annual cost indicated by small and medium companies were eR>D>>> and eR>>D>>> respectivelyD compared to large companies with costs o( over e1 million per company. This is again signi(icantly higher than the manhour costs indicated in Table 4.bD implying that (actors other than sta(( time account (or the majority o( costs. It was not possible to obtain (urther in(ormation (rom cosmetics companies to explore these (actors in detail. One manu(acturer o( cosmetics ingredients indicated that the number o( man-hours required per year was =>>D at an average cost o( e1R> per hour. The estimated total cost annual cost to the company was between eR>>D>>> and e7R>D>>>. SKNKN Costs of Suggested Change to the Directive Companies were asked to indicate whether they expected an increase or decrease in costs (rom speci(ying the data required in product in(ormation (iles (according to the SCCP guidelines (or sa(ety evaluation o( (inished cosmetics products8). Most companies pre(erred to provide a qualitative indication o( the potential costs o( this changeD as shown in Table 4.LD rather than quantitative data. As a guideD howeverD the companies which indicated a ivery highj cost also indicated that the potential annual
8

http:ZZec.europa.euZhealthZphsriskZcommitteesZ>4ssccpZdocsZsccpsos>bj.pd(h chapter LD page 84.

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Impact of Regulation on the European Cosmetics Industry value o( these costs was over e1millionD while two o( the companies which indicated a imediumj cost gave a cost range o( between e1>D>>> and e1>>D>>> per company.
Table SKb[ Potential Cost of Specifying the Information in the PIF Number of Respondents Indicative Value Small Medium Large Very high > 1 = High 1 > = Medium > 4 1 Low > > > Negligible > > > Total J T T

Number of Respondents =7_ =7_ 4R_ >_ >_ `J==_

Key points raised by most respondents are that:

!

the SCCP Guidelines relate to sa(ety evaluation o( ingredients and not o( (inished cosmetics productsh there also appears to be some misunderstanding between some regulatory authorities on the di((erence between the two sa(ety assessmentsD i.e. the sa(ety risk assessment (or placing a (inished product on the marketD conducted by the manu(acturerD and the (ull scienti(ic review o( the human sa(ety o( an individual ingredient by the SCCPD which involves data (rom both raw material suppliers and end users in the cosmetics industryh the SCCP Guideline requirements (or data (or ingredient dossiers (ar exceeds the data available to individual cosmetics companies and it is not entirely (easible (or companies to have access to sa(ety data (or each ingredient. Much o( this data is con(idential and lodged with the suppliersD who provide summaries o( relevant data (or company toxicologists to utilise as part o( their (inished product assessments. I( (ull data were requiredD this would restrict sourcing (lexibilityD increase costs and restrict import o( ingredientsh current practice (or undertaking a sa(ety evaluation o( (inished cosmetics products takes account o( sources o( in(ormation (including historic dataD actual use dataD etc) not currently recognised by the SCCP Guidelines. Sa(ety evaluators also determine on a case-by-case basisD taking into account their own experienceD which data are most important (or proving the sa(ety o( a given cosmetics product. I( more speci(ic in(ormation is requiredD this could result in unnecessary administrative data and costsD at the risk o( missing out important in(ormationh and while such detailed sa(ety assessment (e.g. con(irmatory skin testing in groups o( volunteers) may provide health bene(its (or consumersD it will increase costs (or a company be(ore the product is marketed and it will give rise to signi(icant time delay.

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Risk & Policy Analysts

SKS
SKSKJ

Costs of Complying with the Notification Re]uirements

Introduction There is currently no requirement under the EU Cosmetics Directive (or the registration o( cosmetics manu(acturers or importersD or (or pre-market approval (or cosmetics products imported into or manu(actured within the EU. Article 7 o( the Directive requires a simple noti(ication to the relevant Member State authority o( the place o( manu(acture or o( initial importation into the EU o( cosmetics products. This noti(ication requirement is meant to (acilitate e((icient checks on products on the market and could be a use(ul tool to combat import o( counter(eit goods. It is consideredD howeverD that the noti(ication procedures are unclear (particularly relating to what in(ormation has to be noti(ied and which Member State(s) need(s) to be noti(ied) and clari(ication o( the rules in a revision o( the cosmetics Directive could help to improve market surveillance.

SKSK<

Costs of Notification under the Existing Directive Table 4.7 shows respondentsj estimates o( the man-hours and costs required to comply with the noti(ication requirements.
Table SK>[ Man-hours and Cost per Hour of Complying with Notification Re]uirements Range of Average noK of Cost per Average cost Average Company man-hours man-hours hour per hour total costJ Small b> - R> =8 eR - eR> e4> e1D1=> Medium b>> - bD=>> 1D7R> e17 - e=R e=1 ebLD7R> Large 1>> - 1D7>> 1D>4= e=> - e1>> e7> e7=D94> All N= - Na<== Rb^ cT - cJ== cS> cSTaT== 1 Calculated by multiplying average number o( man-hours by average cost per hour across respondents

The number o( man-hours currently required to comply with the noti(ication requirementsD as indicated by respondentsD ranged (rom b> to bD=>> man-hours per yearD at an average cost o( between eR and e1>> per hour. The average was around Ja=T= man-hours dor JT= man-dayse per company per yearD at an average cost o( cS> per hour. The top-end (igure o( bD=>> man-hours per year was provided by an SMED manu(acturing and selling mainly hair care products (9R_ o( annual sales). Companies were also asked to indicate the average one-o(( cost per (ormulation incurred to comply with the noti(ication requirements. Table 4.8 summarises the responses.
Table SK^[ Average Ane-off Cost per Formulation of Complying with Notification Re]uirements Number of Respondents Percentage of Range of Costs Respondents Small Medium Large Below eR>> eR>> - e1D499 e1DR>> - e4D999 eRD>>> - e9D999 e1>D>>> - e=4D999 e=RD>>> - e99D999 Over e1>>D>>> Total 1 1 1 > > > > N > = 1 > 1 > > S 4 1 > > > > > T 4=_ bb_ 17_ >_ 8_ >_ >_ J==_

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Impact of Regulation on the European Cosmetics Industry The average one-o(( cost incurred by responding cosmetics companies to comply with the noti(ication requirements was less than cJaT== per formulation (or 7R_ o( the respondents. This contrasts with the costs obtained by dividing the average total manhour cost ((rom Table 4.7) by the average number o( product (ormulations ((rom Table =.4) as shown in Table 4.9 : resulting in an average o( cRT per formulation. The di((erence may be due to the inclusion o( non-manpower costsD but this is not clear (rom the responses.
Table SKR[ Calculated Average Cost Per Formulation of Complying with Notification Re]uirements Average number of Calculated average cost Company Average total costJ formulations per formulation< Small e1D1=> 1L> e7 Medium ebLD7R> R9 eL=b Large e7=D94> 81> e9> All cSTaT== S^= cRT 1 Calculated by multiplying average number o( man-hours by average cost per hour = Calculated by dividing the average total cost by the average number o( (ormulations

Companies were also asked to indicate the total annual cost to the company o( complying with the noti(ication requirements. Responses are shown in Table 4.1>.
Table SKJ=[ Total Annual Cost per Company of Complying with Notification Re]uirements Number of Respondents Percentage of Range of Costs Respondents Small Medium Large Below e1D>>> 1 > = =R_ e1D>>> - e49D999 > 1 = =R_ eR>D>>> - e=49D999 1 = = 4=_ e=R>D>>> - e499D999 > 1 > 8_ eR>>D>>> - e749D999 > > > >_ e7R>D>>> - e999D999 > > > >_ Over e1 million > > > >_ Total < S b J==_

The total annual cost per company to comply with the noti(ication requirements ranged (rom less than e1D>>> to e=R>D>>>. Respondents indicated total annual costs o( less than e=R>D>>> to comply with the noti(ication requirements. This can be considered to be consistent with the man-hour costs indicated in Table 4.7D as the total costs (or medium and large companies were between ebLD>>> and e7=D>>> and around e1D1>> (or the small companyh thereby implying that sta(( time accounts (or the majority o( costs. Companies were also asked whether they had incurred any costs associated with divergences in transposition or en(orcement o( the Cosmetics Directive by Member States. Although the question related to all aspects o( transposition and en(orcementD the responses mainly concerned the noti(ication requirements. Five respondents indicated they had incurred such costsD while nine had not.

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Risk & Policy Analysts In explaining the costs they had incurredD the respondents noted that:
!

di((erent systems and processes (or noti(ication require multiple entry and there(ore additional resources andD in some marketsD payments o( (ees (e.g. Belgium)h while some Member States (ollow the Cosmetics Directive and require noti(ication o( manu(acturing sites onlyD with no associated (eesD others require detailed product and ingredient in(ormation and levy a charge per productD which can vary (rom eR to ebL per product variant. In SwedenD the total per product noti(ication (ee (or =>>7 is 4RDb>>SEK (around e4D9>>). In BelgiumD the estimated noti(ication cost is around e1D>>>h and the di((erent and more bureaucratic noti(ication procedures in some Member States (e.g. PortugalD Hungary) result in additional costsD either directly in (ees or indirectly in administration.

SKSKN Costs of Proposed Clarification of Notification Re]uirements Companies were asked to indicate whether they expected an increase or decrease in costs (rom a harmonised approach to the noti(ication requirements being set out clearly in the Cosmetics Directive. Six companies believed that there would be an increase in costs while (our companies expected a decrease. Those respondents who believed there would be a decrease noted thatD with clearly set out noti(ication requirementsD producers would save a lot o( time and money (rom having to meet varying requirements across Member States. One respondent suggested that a single EU noti(ication system without any speci(ic product in(ormation should be su((icient to satis(y the requirements o( the Directive. This could be achieved through a simple secure on-line process indicating the EU countries where the product is marketed and the address where product in(ormation can be assessed. The current situation appears to be that some countries closely (ollow the requirements laid down in the Directive (or noti(ication o( manu(acturing site or site o( (irst importation. Others have more detailed noti(ication requirements. IndeedD in a (ew Member StatesD the product noti(ication also includes payment o( a noti(ication (ee per product. I( noti(ication were harmonised and restricted to the current requirementsD costs would decrease. According to one companyD the costs would certainly not increase even i( the current noti(ication requirements were extendedD but harmonised and included the creation o( an electronic tool to (acilitate noti(ication. HoweverD i( a (ee was introduced (or each product noti(icationD then costs would increase signi(icantly. The explanations provided by those anticipating a cost increase actually indicates that they expect a decrease in costs. It is likely that they did not (ully understand the question. One companyD howeverD noted that the actual impact would depend on the level o( harmonisation. Noti(ication o( speci(ic product in(ormation would signi(icantly increase the costsD compared to noti(ication o( place o( manu(acture only.

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Impact of Regulation on the European Cosmetics Industry

SKT

Introducing a Standardised System for Cosmetovigilance

Having an e((icient system o( checking cosmetics products placed on the market (or compliance with the Cosmetics DirectiveD as well as clear rules in cases o( noncomplianceD is important (or ensuring the sa(ety o( consumers. As set out in the CCDD the Commission considers that this aspect o( the cosmetics Directive may require strengtheningD (or instanceD by providing clear rules on product withdrawal i( a PIF does not contain su((icient in(ormationh actively encouraging cooperation between Member States competent authoritiesh and ensuring a (low o( in(ormation between dermatologistsZtoxicologistsD industry and the authorities on any observed adverse e((ects (cosmetovigilance). While en(orcing Community law is primarily the responsibility o( the Member StatesD the Commission can play a use(ul role in supporting and coordinating their e((orts. It is considered that the Cosmetics Directive could include a mandate (or the Commission to assist in coordinating cooperation between the Member States in the (ield o( icosmetovigilancej. Companies were asked to indicate whether they (elt that a harmonisation o( en(orcement and surveillance approach across the EU would reduce costs to businesses. Only two respondents indicated that such a change would reduce costs. One respondent noted that the savings would be signi(icant i( a harmonisation o( the approach to product withdrawalD cosmetovigilence and product noti(ication (particularly i( the latter included poison centres noti(ication) could be achieved. The company noted that there would be potential (or more signi(icant savings i( one European centralised electronic tool (or these activities were to be developedD with companies then adopting a similar centralised resource approach (or the various noti(ications. Twelve respondents did not anticipate any cost savingsD noting that:
! ! !

compliance with the COLIPA Guideline on Management o( Adverse Events should be su((icienth i( there was a requirement to hold a PIF in every Member State where the product is soldD there would be a signi(icant increase in costs (or industryh and national interpretation o( data and documents has always been possible.

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Risk & Policy Analysts

TK

FINDINGS AND CANCLUSIANS

The aim o( this study was to provide an in-depth analysis o( the ways in which regulatory requirements a((ect the competitiveness o( the cosmetics industry. By describing the actions required to achieve compliance with a particular aspect o( regulationD the study provides a better picture o( the relevance o( regulation in terms o( innovationD technological changeD pro(itability and competitiveness. Table R.1 gives a summary comparison o( the resource requirements (in man-hours and eZhour) associated with particular aspects o( the existing Cosmetics Directive. It should be noted that this table excludes the resource re]uirements associated with including ingredients on a positive list and adapting the composition of products when an ingredient is added to the prohibited or restricted lista as no data on resource re]uirements was provided for these aspectsK
Table TKJ[ Summary Comparison of Resource Re]uirements per Company din Man-hours and cghoure Associated with Various Aspects of the Existing Cosmetics Directive Si\e of Range of Average noK Cost per Average cost Average Cost Enterprise man-hours of man-hours hour per Hour per company Overall Cost of Compliance with the Cosmetics Directive ! Small 1>> - R>> b>> e7 - eb> e19 eRD7>> ! Medium b>> - 1DL>> 9>> eR - eb> e17 e1R.b>> 14D>>> ! Large b9D9>> e=> - e=>> e1>> ebD99>D>>> LbD>>> ! ALL J== - bNa=== <=aN== cT - c<== cb= cJa<J^a=== Compliance with Changes to Information/Labelling Requirements ! Small =>> - R>> bR> e7 - eb> e=> e7D>>> ! Medium = - 1D=>> L>> e17 - ebR e=L e1RDL>> ! Large =>> - LD1>> =D77R e=> - e1bR e8> e===D>>> ! ALL < - baJ== Jab<T c> - cJNT cT= c^Ja<T= Complying with the Notification Requirements ! Small b> - R> =8 eR - eR> e4> e1D1=> ! Medium b>> - bD=>> 1D7R> e17 - e=R e=1 ebLD7R> ! Large 1>> - 1D7>> 1D>4= e=> - e1>> e7> e7=D94> ! ALL N= - Na<== Rb^ cT - cJ== cS> cSTaS== Preparing Product Information Files ! Small =>> - =R> ==R e7 - eb> e=> e4DR>> ! Medium b>> - R>> 4>> eR - eb> e17 eLD8>> ! Large 1R> - =>D>>> 7D>>> e=> - e1L> e1>> e7>>D>>> ! ALL JT= - <=a=== Sa=== cT - cJb= cbS c<Tba=== Preparing the Safety Aspects only of Product Information Files ! Small R> R> e1> - eR> eb> e1DR>> ! Medium =R> - b>> =7R e17 - eb> e=4 eLDL>> ! Large 7R - 1>D>>> bD87R e=> - e1L> e1>> eb87DR>> ! ALL T= - J=a=== <aT== cJ= - cJb= c>T cJ^>aT==

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Impact of Regulation on the European Cosmetics Industry Table R.= summarises in(ormation on the total costs to companies calculated on the basis o( the cost ranges indicated by companies.
Table TK<[ Costs and Benefits per Company of the Cosmetics Directivea Based on Euestionnaire Responses Annual Costs of Compliance with Various Aspects of the Existing Cosmetics Directive Si\e of Enterprise Minimum Total Annual CostJ Maximum Total Annual Cost< Overall Cost of Compliance with the Cosmetics Directive ! Small eR>>D>>>b eR>D>>>b ! Medium e=DR>>D>>>b e=R>D>>>b b ! Large e1>D>>>D>>> e1D>>>D>>> Compliance with Changes to Information/Labelling Requirements ! Small e49D999 e1D>>> ! Medium e=R>D>>> eR>D>>> ! Large me1 million eR>D>>> Listing an ingredient in the Cosmetics Directive ! Small e1D>>> > ! Medium e749D999 e1D>>> ! Large me1 million e1D>>> Adapting the Composition of Products When an Ingredient is Added to the Prohibited or Restricted List ! Small e99D999 e1D>>> ! Medium e=49D999 e1>D>>> ! Large me1 million e99D999 Putting a Product on the Market with New or Modified Composition due to Changes in Ingredients ! Small e49D999 e1D>>> ! Medium e999D999 e49D999 ! Large me1 million eR>D>>> Complying with the Notification Requirements ! Small le1D>>> e1D1=> ! Medium le=R>D>>> ebLD7R> ! Large me=R>D>>> e7=D94> Preparing Product Information Files ! Small leR>D>>> e4DR>> ! Medium leR>>D>>> eLD8>> ! Large me1 million e7>>D>>> Preparing the Safety Aspects only of Product Information Files ! Small leR>D>>> e1DR>> ! Medium le=R>D>>> eLDL>> ! Large me1 million eb87DR>> Annual Benefits to Cosmetics Companies Resulting from the Cosmetics Directive Si\e of Enterprise Minimum Total Annual BenefitS Maximum Total Annual BenefitS ! Small e=49D999 le1>D>>> ! Medium e749D999 le1>D>>> ! Large e749D999 le1>D>>> 1 Based on the lower end o( the speci(ied range in Tables b.1>D b.4D b.RD b.L and b.7. = Based on the upper end o( the speci(ied range b Calculated by multiplying the >.1_ and 1_ ((rom Table b.1>) by total annual sales o( eR> million (or a small companyD e=R> million (or a medium company and e1 billion (or a large company 4 Based on the lower and upper ends o( the speci(ied range in Table b.1b

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Risk & Policy Analysts Because o( the small number o( responses on which Tables R.1 and R.= are basedD any estimate o( the overall cost o( the Cosmetics Directive will be subject to a great deal o( uncertainty. NeverthelessD in order to provide an indicative estimate o( the costs and bene(its to the cosmetics industry as a wholeD Table R.b presents lower and upper-bound estimatesD based on the (ollowing assumptions regarding the number o( smallD medium and large companiesD together with the costs derived (rom tables R.1 and R.=:
!

there are between =D>>> and bDR>> small companiesD the costs o( the Cosmetics Directive are between eRD7>> per year (based on Table R.1) and eR>D>>> per year (based on Table R.=)h there are between R>> and =D>>> medium-sized companies and the costs o( the Directive are between e1RDb>> (based on Table R.1) and e=DR>>D>>> per year (based on Table R.=)h and there are =R large companies and the costs o( the Directive are between ebD99>D>>> per year (based on Table R.1) and e1> million per year (based on Table R.=).
Table TKN[ Estimated Averall Annual Costs of the Cosmetics Directive Average Cost per Company Number of Companies Averall Cost Company Lower Bound Estimate Small eRD7>> bDR>> e19D9R> Medium e1RDb>> R>> e7DLR>D>>> Large ebD99>D>>> =R e99D7R>D>>> Total Sa=<T cJ<>aNT=a=== Upper Bound Estimate Small eR>D>>> =D>>> e1>>D>>>D>>> Medium e=DR>>D>>> =D>>> eRD>>>D>>>D>>> Large e1>D>>>D>>> =R e=R>D>>>D>>> Total Sa=<T cTaNT=a===a=== 1 Calculated by multiplying average number o( man-hours by average cost per hour = Calculated by dividing the average total cost by the average number o( (ormulations

The Table indicates that the total cost o( the Cosmetics Directive lies between e1=7 million and eR.4 billion per year. These costs are o((set by the bene(its o( the Directive. Table R.4 presents the overall bene(its o( the DirectiveD based on the (ollowing assumptions:
!

there are between =D>>> and bDR>> small companiesD the bene(its o( the Cosmetics Directive are between e1>D>>> per year and e=49D999 per year (based on Table R.=)h there are between R>> and =D>>> medium-sized companies and the bene(its o( the Directive are between e1>D>>> (based on Table R.1) and e749D999 per year (based on Table R.=)h and there are =R large companies and the bene(its o( the Directive are between e1>D>>> (based on Table R.1) and e749D999 per year (based on Table R.=).

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Impact of Regulation on the European Cosmetics Industry

Table TKS[ Estimated Averall Annual benefits of the Cosmetics Directive Average Benefit per Company Number of Companies Averall Benefit Company Lower Bound Estimate Small e1>D>>> bDR>> ebRD>>>D>>> Medium e1>.>>> R>> eRD>>>D>>> Large e1>D>>> =R e=R>D>>> Total Sa=<T cS=a<T=a=== Upper Bound Estimate Small e=49D999 =D>>> e499D998D>>> Medium e749D999 =D>>> e1D499D998D>>> Large e749D999 =R e18D749D97R Total Sa=<T c<a=J^a>STaR>T 1 Calculated by multiplying average number o( man-hours by average cost per hour = Calculated by dividing the average total cost by the average number o( (ormulations

The Table indicates that the bene(its o( the Directive to industry range (rom around e4> million per year to over e= billion per year. Given the uncertainties around the estimates o( both costs and bene(itsD this indicates in broad terms that the costs o( the Directive to industry are balanced by the bene(its.

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