transparency – Dickinson Law's Inside Entrepreneurship Law Blog

by Sarah Donley

Consumers Care!

Today, many consumers, especially young ones, care about the environment and sustainability. Consumers strongly consider ingredients when deciding whether to purchase products. NielsenIQ, a global information services company, recognized consumers’ concerns about the ingredients in their food and personal care products and whether the products comply with sustainability practices. Specifically, the company found 60 percent of consumers have been making more “environmentally friendly, sustainable, or ethical purchases” since the beginning of the pandemic. Customers engaged in this “mindful consumption” are demanding transparency from companies. NielsenIQ reported 81 percent of shoppers surveyed said transparency is “important or extremely important” when shopping in-store and online. NielsenIQ also explained that products focusing on health and wellness will be assets for the growth of companies. Thus, these consumer preferences are essential when preparing to open or continue operating your small business.

The Yuka App

With the power of social media, as well as apps, consumers are able to expand their knowledge of the ingredients that are in the products they purchase. Yuka, a French app developed in 2017, has become increasingly popular thanks to social media. The app simplifies the long and confusing list of ingredients on product labels. Consumers simply scan the barcode of the food or personal care product, and the app will then develop a score out of 100 to reflect whether the product is healthful for consumers or harmful to the environment. Once a score is developed, Yuka provides explanations and risks of the ingredients found in the product. The app further provides alternative, “healthier” recommendations. Even if Yuka does not recognize the barcode of a product, the app allows users to take a picture of the ingredients, then Yuka will develop a score in approximately two hours and email the users the results. Currently, the app has approximately 36 million users in 12 countries, including the United States.

Should Businesses Care About Yuka?

Yuka has received mixed responses from entrepreneurs. The app has sparked some entrepreneurs selling beauty products, including Mathilde Thomas, the founder of Caudalie, to remove harmful ingredients in their products, such as silicones and polyethylene glycols. However, some business owners disagree with Yuka’s explanations of the risks that certain ingredients pose. In 2021, the French Meat Industry, specifically Les Entreprises Françaises de Charcuterie Traiteur (FICT), sued Yuka for defamation and unfair commercial practices, arguing that Yuka disparaged its members by giving their products low scores because of nitrites and nitrates. The administrative court of Paris found in favor of the FICT; however, the appellate court reversed the lower court’s decision because Yuka is a “tool” designed “to help consumers make better choices for their health.”

The question then remains, how can businesses respond to consumer preferences and the Yuka app? As mentioned in the first section of this blog post, Yuka and its 36 million users prove consumers are concerned about the ingredients in their products. Specifically, consumers are concerned about whether the ingredients are harmful to their health or the environment. One user stated, “I was alarmed to find the handwash I regularly purchase got a 0/100 score from Yuka because of the presence of benzophenone-1, an endocrine disruptor ‘that easily crosses the skin barrier and then behaves like female hormones.’ As I began to read about this and the many other potentially hazardous chemicals that Yuka flagged in almost all of our family cosmetics, I felt increasingly anxious.”

If entrepreneurs do not wish to change the ingredients in their products as Thomas did, increasing transparency may pose significant benefits. For example, Heineken has been advertising the sustainability of the apples that go into its cider. If global companies like Heineken can increase transparency, so can small businesses. In fact, small businesses have the advantage of shorter supply chains and local sourcing, which makes transparency regarding product ingredients easier.

Potential Legal Claims Against Small Businesses

Yuka may result in consumers taking businesses to court. As Yuka provides transparency and knowledge to consumers, businesses should be cognizant of how they advertise their products. Specifically, entrepreneurs should be cautious when labeling their products as “all-natural” or “organic” when the ingredients say otherwise. Companies in the cosmetic industry have faced settlements because they marketed their products as “all-natural” or “100% natural” when their products really contained synthetic ingredients. It is also important that businesses understand state law on false advertising. For example, California prohibits spreading information about products or services that is “untrue and misleading,” with civil and criminal enforcement.

Businesses also need to be aware of the Federal, Food, Drug, and Cosmetic Act’s (FFDCA) labeling rules. One may think, “I own a small business, and I am, therefore, exempt from the FFDCA, right?” Wrong! The U.S. Food and Drug Administration provided guidance to small businesses stating, “If any nutrient content claim (e.g., “sugar free”), health claim, or other nutrition information is provided on the label, or in labeling or advertising, the small business exemption is not applicable for a product.” Regarding cosmetics, the FFDCA requires that cosmetics not be adulterated or misbranded, meaning they must be safe for consumers and properly labeled. Further, if small businesses market cosmetics on a retail basis, such as in stores, online, or by personal sales representatives, they must also comply with the ingredient labeling requirements under the Fair Packaging and Labeling Act.

So, what should entrepreneurs take from all this? It is better to be safe than sorry. Consumers care about what goes into products, and so should you!

This post has been reproduced and updated with the author’s permission. It was originally authored on February 2, 2023 and can be found here.

Sarah Donley, at the time of this post, is a recent graduate of Penn State Dickinson Law. She has a BBA in Economics & Finance with minors in Entrepreneurship and Psychology from Shenandoah University. Sarah served as an Articles Editor for the Dickinson Law Review. Sarah has also earned her LL.M. in European Business Law from Radboud University.