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Senate Bill Could Cripple Sales of Artisan Sellers

Producers of small-batch cosmetic products, many of whom work out of their homes, are fearful that a bill recently introduced in the U.S. Senate could wipe out the industry with new fees and regulatory requirements.

The Personal Care Products Safety Act would require cosmetics manufacturers to register with the Food and Drug Administration, file reports listing the ingredients in their products, and pay an annual fee to help cover the cost of the enhanced oversight, among other measures.

Debbie May, president and CEO of Wholesale Supplies Plus, warned that those requirements would have a ruinous effect on the industry.

“It would be decimated. Absolutely decimated,” said May, who is also the vice president of the Handmade Cosmetic Alliance, an advocacy group formed in 2012 in response to earlier legislative efforts to tighten regulations over the industry.

Supporters of the bill, which enjoys the backing of several large consumer goods manufacturers like Procter & Gamble and Unilever, say that new rules are needed to keep harmful chemicals out of cosmetics products, which are regulated under rules dating back more than 70 years. Several consumer advocacy groups have also indicated support of the legislation.

Sen. Diane Feinstein (D-Calif.), the author of the bill, has said that the FDA needs new tools to evaluate potentially dangerous ingredients, and that registration and ingredient reviews would bring the U.S. regulatory environment closer in line with Europe.

May says that is fine and good for large, multinational companies, which would also benefit from measures that would preempt various state laws, but that small sellers would be swamped by the compliance burdens.

“We feel as though it’s unfair and anti-competitive to write legislation or to create a bill that would put small businesses that aren’t competing in that landscape out of business,” she said.

Feinstein’s office counters that the bill includes several protections for small businesses, including a complete exemption from the registration, reporting and user fees for cosmetics makers with less than $100,000 in gross annual sales.

That’s where the fight is. To May, the $100,000 exemption threshold is hopelessly low.

“A hundred-thousand (dollar) business doesn’t produce enough net income to live off of – you’re still a second job or a hobbyist,” she said.

So what would be an acceptable figure?

“Our feeling is $2 million is no longer a small, handmade, home-based business,” May said.

“After 2 million you’re starting to automate,” she added. “You’re beginning to move into a warehouse, starting to enjoy a salary. Capital equipment’s purchased, you’re starting to hire people.”

May argues that the reporting requirements could be particularly burdensome for homemade cosmetics producers who often make small batches of customized products. Substituting shea oil for almond oil, say, would require the producer to file a new ingredients list with the FDA, even though Feinstein’s office notes that simple changes like new colors or fragrances would not trigger the reporting requirement. May also pointed out that most handmade cosmetics makers overwhelmingly rely on ingredients that can be readily purchased at the grocery store, rather than the complex chemicals like lead acetate and diazolidinyl urea that might show up in the hair dyes and shampoos produced by the large manufacturers.

Feinstein’s office maintains that the $100,000 figure is a reasonable cut-off, and points to other provisions in the legislation aimed at providing relief for small firms. The bill would give the FDA the option to provide a simplified registration process for shops grossing less than $500,000 per year, for instance. Additionally, companies with fewer than 500 employees would have two extra years to begin complying with the new regulations, and would continue to enjoy a longer grace period for registering new products and reporting ingredients changes.

Her office also downplays the burden of the user fees that the bill would entail. Businesses with less than $500,000 in gross annual revenue would be exempt from the fees, and those with gross sales ranging from $500,000 to $2.5 million would pay a fee of $250 in the first year.

Then, in the following six years, companies in the lowest tier of the fee schedule (capped at $2.5 million in sales) would together be responsible for 2.4 percent of the portion of the FDA’s budget dedicated to enforcing the cosmetics law, but no single registrant would pay more than $250 a year.

Feinstein’s office is still devising a strategy for advancing the bill. One option includes trying to push it through the Health, Education, Labor and Pensions Committee, on which Sen. Susan Collins (R-Maine), the bill’s co-sponsor, sits. It could also get folded into a larger FDA bill.

May, for her part, intends to keep fighting the bill, at least in its current form, and trying to raise awareness among the small businesses that her group represents through efforts like letter-writing campaigns. Already, she said, her organization has succeeded in delivering more than 11,000 letters through its website to members of Congress.

“Frankly, I hope the bill dies,” she said.

An Etsy spokesperson declined to comment on the bill or potential impact.

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Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.