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US consumer products giant P&G Company's A Matter of Confidence

Foreign brand beauty products have taken a beating in the China market since sales of SK-II skincare products were halted in September, but the damage to foreign brands may be more than skin deep, and the scandal may affect more than skincare products.

The Chinese consumers’ confidence in foreign products has been severely shaken.

The decision to suspend the sale of SK-II skincare products was reportedly made by their maker Procter & Gamble Far East Incorporated of Japan (P&G Japan). The products were distributed in China by US P&G wholly owned subsidiary P&G Guangzhou Limited (P&G China). It came after China’s General Administration of Quality Supervision, Inspection and Quarantine found chromium and neodymium in nine SK-II products.

The company at first denied knowledge that the metals were in the products, then asserted the metals, if there, were present in trace amounts that met World Health Organization (WHO) standards. But Chinese law prohibits any chromium or neodymium content in beauty products. P&G followed saying it was investigating how its products were “contaminated” during production in Japan. The metals were found in SK-II products in Guangzhou, Shanghai and Hong Kong.

In a statement, P&G China said, “SK-II is taking this action until its compliance with the regulations pertaining to trace levels of chromium and neodymium in cosmetic products sold in China is fully clarified.”

SK-II customers responded with shock, anger and confusion and expressed an overall concern for the safety of cosmetics. P&G closed 96 sales counters selling the beauty line in China in the wake of the scandal, but many consumers raised the question: Who should be responsible for our loss? Consumer anger grew when the brand suspended all refunds. There were also reports that P&G’s Chinese Web site was hacked and clashes broke out at some of its stores. A woman in South China’s Jiangxi Province even filed a lawsuit against Carina Lau, a Hong Kong star, who appeared in advertising for SK-II. The plaintiff claimed that Lau should pay for cheating customers with false advertising.

The scandals have definitely reduced the popularity of the foreign brands. An ongoing poll by Sina.com, one of the country’s most popular Web sites, showed that 98.8 percent of 143,774 respondents said they would never buy SK-II products again.

Quality authorities in South China’s Guangdong Province the presence of 4.5 milligrams (mg)/kilogram (kg) of neodymium and 0.77 mg/kg to 2 mg/kg of chromium in SK-II products. According to China’s Regulations on Hygienic Standards for Cosmetics, cosmetics should not contain any chromium or neodymium.

Experts said chromium could cause skin diseases such as allergic dermatitis and eczema, which is very hard to cure. Neodymium can cause irritation of the eyes and mucosa. If inhaled, the substance can damage lungs and livers.

With the controversy over unsafe SK-II cosmetics heating up, faith in foreign brands is put at risk. Public anger has become a public relations headache for P&G, underlining the challenges foreign firms face as they contend with increasingly discriminating consumers.

Four of 13 major department stores in Beijing and some shops in Hong Kong removed SK-II skincare products after the detection of banned heavy metals in the nine Japanese beauty products. The four major department stores selling SK-II products in Beijing were the Zhongyou store, SOGO, Wangfujing Store and SCITEC Plaza.

Two Hong Kong media organizations separately sampled other brands of popular foundation and powder products and took them to Hong Kong Standards and Testing Centre. Surprisingly, chromium was allegedly found in samples of Clinique, Estee Lauder, Christian Dior, Max Factor, Lancome and Shiseido. The level of chromium in some samples was even higher than SK-II.

The scandals have confronted several commercial giants with crises of confidence from consumers. The case echoed a row last June, when Swiss food giant Nestle had to recall all milk powders with high iodine content after Beijing’s food safety office said its infant milk powder 1+ contained more iodine than permitted.

Yum Brands Incorporation’s KFC restaurants were also scrutinized early last year after a possibly carcinogenic food dye was found in some of its chicken products. Yum apologized swiftly and promised that the chemical had been removed from all its food processing.

Indeed, this is a major issue for the premium brands, not only for SK-II itself. Previously, almost all Chinese consumers thought that the higher the price of foreign brands was acceptable, because they stood for higher quality. Now, consumers are starting to question the quality of other premium brands. Qiu Baochang, a senior lawyer in consumer rights with the Beijing-based Huijia Law firm, told China Daily that the controversy reflects loopholes in the country’s Law on the Protection of Consumer Rights.

“The current law states that the producer should be responsible for consumers once the products have been proved harmful to their physical health,” But more ambiguous cases, which have not caused obvious harm to customers, the law doesn’t state clearly whether the producer should be responsible for a refund.

Skin-whitening cosmetics are popular throughout Asia, where many women apply creams hoping to achieve gleaming light porcelain skin tones. With China’s economy booming, giving consumers more spending power and the ability to test and use foreign brands, multinationals are thriving in a developing market. SK-II, which made its debut on the Chinese mainland in 1998, is one of the many brands that P&G sells on the Chinese consumer market. Over the years, the Japanese products have established an extensive presence, despite their high price, with 26 products and their variants available.