CSAR Subsidiary Regulations: China Drafts the First Regulation on the Supervision for Cosmetics’ Online Operation

Background

According to the "Social E-commerce—Beauty Industry Report" jointly issued by Youzan Research and Tencent Ads in 2019, the market share of e-commerce channels accounted for 27.4% in 2018, surpassing key account sales and department stores to become the largest sales channel in China's cosmetics industry. ¹ Affected by the pandemic in the past two years, the role of e-commerce for consumers of beauty products has become more prominent. Therefore, domestic and foreign brands are turning to take online market as their key channel layout.

However, the rapid growth of e-commerce has not been matched with greater regulatory scrutiny. According to the cosmetic adverse reaction reports published by multiple provinces and cities, online shopping is still the most problematic area, with frequent occurrences of irregularities such as the manufacture and sale of counterfeit or substandard products, and the illegal or exaggerated publicity of product efficacy.

New Regulation Targeting Cosmetics’ Online Operation

Given the chaos in the online market, China NMPA drafted the first regulation specifically for the online operation of cosmetics, "Supervision and Administration Measures on Online Operation of Cosmetics (Draft for Comments),” and released it for public comments on August 17, 2022. The public consultation will be open until September 6, 2022. ²

The draft, consisting of 5 chapters and 34 articles, comprehensively and systematically stipulates the management requirements on cosmetics e-commerce platforms, cosmetics operators on the platforms, and supervision and administration departments.

Highlights of the draft include:

1. Stakeholders of online marketplaces within the territory of China are all under the oversight of the draft, except for cross-border e-commerce. Specifically, the objects involved are cosmetics e-commerce platform operators, cosmetics operators running business on the platforms, and e-commerce operators operating cosmetics through self-established websites or other online services.

Cosmetics e-commerce platform operators: e-commerce platforms such as Taobao, Tmall, JD.com, etc.;
Cosmetics operators on the platforms: the main body that deals directly with consumers, such as Taobao merchants, stores on JD.com, etc.;
Other e-commerce operators operating cosmetics through self-established websites or other online services: the main body operating cosmetics through NetEase, brands’ official websites, WeChat Mini-Programs, etc.

2. The management responsibilities of cosmetics e-commerce platforms are detailed, with the supervision focus on product compliance and advertising claims.

The draft reiterates and further refines the provisions pertain to e-commerce platforms’ quality and safety management system, including real-name registration, daily inspection, suppression and reporting of illegal acts, handling of complaints and reports, and adverse reaction monitoring, which have already been specified in higher-level laws such as the E-commerce Law, the Cosmetic Supervision and Administration Regulation, and the Supervision and Administration Measures on Cosmetics Manufacture and Operation. The specific responsibilities of cosmetic e-commerce platforms include:

Pre-market supervision

Strengthening the check and control of the entry link of merchants and products:

When merchants apply to enter the platform, they should be required to submit their identity, address, contact information and other authentic information, and shall verify and update such information at least every six months;
When merchants list products on the platform, they should verify whether their product name, special cosmetics registration license number, product executive standard number and other information are consistent with the corresponding product information published by NMPA.

In-market supervision

Regularly checking whether the daily operations of operators on the platform are standardized, especially in terms of product qualification and label compliance.

Whether the cosmetics on sale have the situations that they are unregistered or unnotified, or the cosmetic registration license number or the notification number, etc. is fraudulently used;
Whether the information on cosmetic labels, etc. displayed on the product page is consistent with the corresponding information published by NMPA;
Whether the information on cosmetic labels, etc. displayed on the product page contains any content that are prohibited to be displayed because of explicitly or impliedly indicating the medical effect, being false or misleading, and/or violating against the public order, good customs, etc.

Disposal of illegal acts

If the operators on the platform are found to be suspected of illegally operating cosmetics, the e-commerce platform should take necessary measures such as deleting, blocking and disconnecting links, etc., to stop their operations in a timely manner, save the supporting materials for being suspected of illegal operation, and report the violations to the local regulatory authorities.

3. The management responsibilities of cosmetic operators on the e-commerce platforms are clarified, especially in terms of the supervision for the purchase inspection of the products and the display of product information.

Purchase Inspection	Cosmetics operators on the platform shall establish and implement the purchase inspection and recording system, check the market entity registration license of the direct supplier, the registration license of special cosmetics or the notification information of general cosmetics, as well as the product quality inspection certificate, and properly keep the relevant certificates. They shall record the cosmetic name, the registration license number of special cosmetics or the notification number of general cosmetics, the durability, the net content, the purchased quantity, the supplier’s name, the address, the contact information, the purchase date, etc. For children's cosmetics, they shall verify the compliance of their product information to the information published on NMPA for the corresponding products.
Information Display	Cosmetic operators on the platform shall fulfill the obligation of cosmetic information disclosure, disclosing cosmetics labels and other information consistent with the registration or notification dossiers in a comprehensive, true, accurate, clear and timely manner on their home pages. The disclosed cosmetic label information shall include all contents on the label of their operated cosmetics. The product name and executive standard number shall be displayed in text in the prominent position on their home pages. Other disclosed information about product safety and efficacy claims shall be consistent with the relevant content on the labels of their operated cosmetics. Meanwhile, operators are encouraged to display the registration license of special cosmetics or the notification information of general cosmetics.
Risk Control	Cosmetic operators on the platform should actively cooperate with the platform in daily inspections and regular self-inspections. For specific batches of cosmetics that are non-compliant, they should immediately stop operating this batch of products and recall them in time. In addition, special attention should be paid to the fact that the draft for the first time specifies that for other batches of products of the same variety, if the medical products administration department does not require the suspension of operation or take other risk control measures, and the operators on the platform continue to operate such products, they shall, in the prominent position of the home page for their operation activities, display the regulatory publicity information that such cosmetics are considered non-compliant during the sampling inspection of this year for consumers’ reference when purchasing.

ChemLinked Comments

To sum up, for both ecommerce platforms or the merchants, the focus of the draft regulation is "inspection". Whether the product information on the platform is "consistent" with the official information published by NMPA is the top priority.
The introduction of the draft not only helps to solve the previous situation that cosmetic supervision rules vary in different e-commerce platforms, providing the industry with a standardized and unified guidance, but also reflects the changes in the policy orientation of the cosmetics industry at the regulatory level:
● First, the supervision and regulation of cosmetics has expanded from the upstream production end to the downstream sales end;
● Second, the supervision for both online and offline operators have been tightened.
Once the regulation is implemented, the industry will be reshuffled. Enterprises failing to comply with the requirements will gradually be sifted out. Therefore, ChemLinked suggests that online cosmetics operators should improve their own standards when selecting and purchasing products and increase self-inspection and traceability in their daily operations according to the draft, thereby avoiding the possibility of illegal activities and inadvertently participating in illegal acts.