TABLE OF CONTENTS

1........... Procedural issues............................................................................................................ 6

1.1........ First Phase of Stakeholder Consultation on the Evaluation of the Availability of Alternative Methods 6

1.2........ Second Phase of Stakeholder Consultation on the Impacts of the 2013 Deadline.............. 7

1.3........ Other contacts with stakeholders..................................................................................... 9

1.4........ Contacts with Third Countries......................................................................................... 9

1.5........ External studies............................................................................................................. 10

1.6........ Inter-Service steering group on the impact assessment................................................... 10

1.7........ Follow-up to Impact Assessment Board recommendations............................................ 10

2........... Problem Definition........................................................................................................ 11

2.1........ General Policy Context................................................................................................. 11

2.1.1..... Cosmetics sector.......................................................................................................... 11

2.1.2..... Cosmetics Regulatory Framework................................................................................ 14

2.1.3..... Previous Legislation in relation to the Marketing Ban...................................................... 15

2.1.4..... Implementation of the 2009 Testing and Marketing Ban and Impacts............................. 16

2.1.5..... Legal clarity in relation to the scope of the testing and marketing ban.............................. 17

2.1.6..... Provisions in relation to Animal Testing in other Union legislation.................................... 18

2.1.7..... Animal Testing Requirements for Cosmetics in non-EU Countries.................................. 19

2.2........ Problem Description..................................................................................................... 20

2.2.1..... Animal Welfare............................................................................................................. 20

2.2.2..... Research into Alternatives to Animal Testing.................................................................. 23

2.2.3..... Consumer Safety.......................................................................................................... 25

2.2.4..... Consumer Choice and Product Innovation..................................................................... 25

2.2.5..... The Competitiveness of the EU Cosmetics Industry....................................................... 29

2.2.6..... Regional and Sectorial Impacts..................................................................................... 30

2.2.7..... Trade Impacts.............................................................................................................. 30

2.2.8..... Employment................................................................................................................. 31

2.2.9..... Specific Impacts on SMEs and Micro-Enterprises......................................................... 32

2.3........ Subsidiarity................................................................................................................... 33

3........... Objectives.................................................................................................................... 34

3.1........ General objective.......................................................................................................... 34

3.2........ Specific objectives........................................................................................................ 34

3.2.1..... To maintain consumer safety and consumer choice (specific objective 1 – Consumer Safety and Choice) 34

3.2.2..... To maintain innovation and competitiveness of the European cosmetics industry (specific objective 2 – Innovation and competitiveness)..................................................................................................... 34

3.2.3..... To provide animals with a high level of protection and welfare (specific objective 3 - Animal Welfare) 35

3.2.4..... To maintain the incentive for continued research on alternative methods to animal testing (specific objective 4 – Research into alternatives)............................................................................................. 35

4........... Policy Options.............................................................................................................. 35

4.1........ Option 1: Baseline/No Action....................................................................................... 35

4.2........ Option 2: Postpone the 2013 deadline........................................................................... 35

4.2.1..... Option 2 (a): Postpone the 2013 deadline with fixed deadline........................................ 36

4.2.2..... Option 2 (b): Postpone the 2013 deadline in relation to certain endpoints only and maintain for others 36

4.2.3..... Option 2 (c): Postpone the 2013 deadline without fixed deadline.................................... 36

4.3........ Option 3: Maintain the deadline and introduce an additional derogation mechanism......... 36

5........... Analysis of Impacts....................................................................................................... 38

5.1........ Methodology and possible impacts identified................................................................. 38

5.1.1..... Impacts Policy Option 1 - Baseline/No Action.............................................................. 38

5.1.2..... Impacts Policy Options 2 (a), (b) and (c) – Postpone the 2013 deadline........................ 39

5.1.3..... Impacts Policy Option 3 - Maintain the deadline and introduce an additional derogation mechanism from the marketing ban............................................................................................................... 40

6........... Comparing the options.................................................................................................. 44

6.1........ Comparing the options on Effectiveness......................................................................... 44

6.2........ Comparing the options on Efficiency.............................................................................. 45

6.3........ Comparing the options on Coherence............................................................................ 45

6.4........ Preferred Option.......................................................................................................... 47

6.5........ Financing...................................................................................................................... 47

7........... Monitoring and evaluation............................................................................................. 47

Annex 1: Summary Second Phase Stakeholder Consultation........................................................ 49

Annex 2: Numbers of Animals used for Toxicological Testing....................................................... 52

Annex 3: The Need for Toxicological Data for the Cosmetics Safety Assessment......................... 55

Annex 4: Testing Data Sources.................................................................................................... 57

Annex 5: Cosmetic Products and their Life Cycle......................................................................... 59

Annex 6: Overview of Cosmetic Ingredients Portfolio and Changes.............................................. 60

Annex 7: Glossary....................................................................................................................... 65

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT ON THE ANIMAL TESTING PROVISIONS IN REGULATION (EC) 1223/2009 ON COSMETICS

Accompanying the document

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on the animal testing and marketing ban and on the state of play in relation to alternative methods in the field of cosmetics

Disclaimer:

This Impact Assessment report only commits the Commission's services involved in its preparation and does not prejudge the final form of any decision to be taken by the Commission.

1. Procedural issues

The Cosmetics Directive[1] foresees a phasing-out of animal testing for cosmetic products. A ban of animal testing of finished cosmetic products has been in force since September 2004 and a testing ban on ingredients or combinations of ingredients since March 2009. As from March 2009, it is also prohibited in the EU to market cosmetic products and their ingredients which have been tested on animals in order to meet the requirements of the Directive, irrespective of the origin of these products. This marketing ban applies to all but the most complex human health effects to be tested to demonstrate the safety of cosmetic products (repeated-dose toxicity including skin sensitisation and carcinogenicity, reproductive toxicity and toxicokinetics), for which the legislator extended the deadline to March 2013[2].

The assessment of the 2013 marketing ban is foreseen in the Cosmetics Directive itself. Article 4a (2.3) of the Cosmetics Directive obliges the Commission to study the progress and compliance with the implementation deadlines in relation to animal testing and to report to the European Parliament and the Council. In particular, the Directive provides that if alternatives to animal testing in relation to the endpoints covered by the 2013 marketing ban are not developed and validated by the 2013 implementation date, the Commission shall inform the European Parliament and the Council and put forward a legislative proposal.

The Commission has monitored the progress of the development of alternative methods to animal testing on a yearly basis and presented its final report to the European Parliament and the Council[3] on 13 September 2011. It concluded that alternatives to animal testing in relation to the endpoints in question will not yet be available by 2013.

1.1. First Phase of Stakeholder Consultation on the Evaluation of the Availability of Alternative Methods

The Commission services evaluated the availability of alternative methods between April 2010 and May 2011. The evaluation exercise aimed at gaining a broad and objective picture of the scientific and technical issues related to establishing alternative test methods for the human health-related effects falling under the 2013 deadline. To this end the Commission services selected scientific experts proposed by the various stakeholders. The work was carried out under the co-ordination of the European Centre for the Validation of Alternative Methods (ECVAM)[4], hosted by the Institute for Health and Consumer Protection of the European Commission's Joint Research Centre.

In total 39 experts contributed, nominated from amongst proposals received by Cosmetic Regulators (Member States as represented in the Standing Committee operating under the Cosmetics Directive), the Scientific Committee on Consumers Safety (SCCS), the European Cosmetics Association (Colipa[5]), the European Federation for Cosmetic Ingredients (EFfCI) and the European Coalition to End Animal Experiments (ECEAE).

The draft expert report was open to public consultation between 23 July and 15 October 2010. The consultation was accessible on the Commission's "Your Voice in Europe" as well as Directorate-General SANCO's cosmetics website[6]. Known stakeholders were in addition directly informed by e-mail and in stakeholder meetings. The consultation was carried out in accordance with the Directorate-General SANCO's "Code of Good Practice For Consultation of Stakeholders"[7]. The contributions of the stakeholders, a summary report of the consultation as well as the final report, are published on the Directorate-General SANCO's cosmetics website[8].

The large majority of stakeholders agreed with the draft reports findings. Some stakeholders from the animal welfare side considered the report as too conservative[9]. While they based themselves on the same alternative methods as those described in the expert report, they considered that these methods could already today be relied on for the safety assessment. However, the overall findings of the expert report and the consultation do not support this view. The findings of the expert report are also consistent with the findings of the SCCS[10] and with other evaluations in relation to the availability of alternative methods carried out within the Commission[11]. The expert report findings were overall also confirmed by an expert panel review[12].

This technical and scientific analysis was necessary in order for the Commission to be able to report to the European Parliament and the Council on the availability of alternative methods.

1.2. Second Phase of Stakeholder Consultation on the Impacts of the 2013 Deadline

In order to obtain information on the potential impacts of the entry into force of the 2013 deadline the Commission services consulted targeted stakeholders and cosmetic regulators (Member States as represented in the Standing Committee operating under the Cosmetics Directive) between December 2010 and April 2011. The list of stakeholders consulted included besides the cosmetic regulators the cosmetics industry, cosmetic ingredient manufacturers, animal welfare organisations, a consumer organisation, the Scientific Committee for Consumer Safety (SCCS), and trading partners. The consultation document, as well as a list of stakeholders consulted, is available on the Directorate-General SANCO's cosmetics website. The contributions of the stakeholders to the targeted stakeholder consultation are published on the same website[13]. The consultation was carried out in accordance with Directorate-General SANCO's "Code of Good Practice For Consultation of Stakeholders"[14]. A summary of the consultation is contained in Annex 1.

A targeted stakeholder consultation was chosen as it was considered to be the consultation at the most appropriate level to obtain the information required to assess the impacts of the 2013 deadline. This choice was confirmed by the large sample size on which the industry input was based. The Colipa submission was based on input from 24 large and 100 small companies, while in a public consultation carried out in 2007 in relation to the revision of the Cosmetics Directive[15] a total of 47 industry stakeholders replied.

The consultation document outlined the option to postpone the deadline (including sub-options, such as postponing for certain endpoints only, and the possibility to have no fixed cut-off date) and the option to maintain the deadline irrespective of availability of alternatives (thus not to make a proposal). It included a questionnaire that was aimed at obtaining data to allow the Commission services to assess the likely impacts of the 2013 marketing ban.

As a result of the input received an additional option was added to the considerations by the Commission, the introduction of a derogation mechanism. The targeted stakeholder consultation was therefore followed up and further detailed in relation to the derogation option (Option 3, below 4.3) through bilateral consultation with stakeholders and through detailed presentations in the Cosmetics Committee and Working Group on 9 November 2011 and 23 March 2012. In these meetings, as well as in several bilateral meetings, the details of the derogation option were described to stakeholders and discussed. All stakeholders that were part of the targeted consultation were provided with an outline of the derogation and had the opportunity to comment.

In the overall debate all stakeholders support the long term objective to replace animal testing for cosmetics. Animal testing is a tool to ensure consumer safety but has in itself no specific interest or value for the stakeholders involved. The question at stake is therefore how to deal with the situation until alternative methods become available. Here, the stakeholder consultation showed diverging views as to the expected impacts of the entry into force of the 2013 marketing ban and the best way forward. Industry, several Member State Competent Authorities (Czech Republic, Denmark, France, Germany, Greece, Italy and Poland) and the SCCS expected significant negative impacts on the availability of cosmetic ingredients and products, the competitiveness of the cosmetics industry and on employment. They considered an extension of the deadline the most logical way forward. Animal welfare organisations and some Member State Competent Authorities (Austria and Sweden) by contrast considered that the bans were based on an ethical decision, that possible negative economic and social impacts play no role in the decision-making and were clearly opposed to any change in the deadline. They considered that in any case such impacts were unlikely as manufacturers could rely on existing data and ingredients.

Some stakeholders, in particular Colipa, EFfCI and ECEAE, collected data from their members for a consolidated submission of their respective organisation to the consultation. When this data is relied on in the following impact assessment, reference is made to the respective data (Colipa data[16], EfFCI data, ECEAE data based on companies taking part in the Leaping Bunny[17]).

The input and data received in this consultation is one of the main pillars of the following assessment and reference is made to the received data throughout the assessment.

Stakeholders were in addition informed and consulted in the framework of regular meetings of the Standing Committee and the Working Group[18] on Cosmetics. Targeted meetings took place at senior level with representatives from industry associations and animal welfare organisations on various occasions.

1.3. Other contacts with stakeholders

Since the beginning of its assessment, the Commission services have received a large amount of e-mails, faxes and letters from citizens requesting it to maintain the 2013 deadline. A petition of one of the animal welfare organisations alone resulted in 350 000 signatures in favour of maintaining the ban[19]. The European Parliament's Intergroup on the Welfare & Conservation of Animals[20] also called for no extension to the deadline.

1.4. Contacts with Third Countries

The Commission services work actively with its counterparts from the United States, Japan and Canada in the framework of the "International Cooperation on Cosmetic Regulation" (“ICCR”). Animal testing has been a key issue for ICCR since its inception. In this context, the International Cooperation on Alternative Test Methods (ICATM) started in September 2008, was implemented in April 2009 and has in the meantime become well established. ICATM members cooperate actively on the validation of alternatives and provide regular reporting to the ICCR. The targeted stakeholder consultation document was sent to ICCR partners, however no input was received. This may have various reasons, from not having specific data to provide to political reasons. In the first phase of consultations a reaction from the United States Food and Drug Administration (FDA) was received.

The issue has also been raised in the framework of bilateral contacts by the Commission, such as with Chinese authorities, who submitted their support for a postponement of the 2013 deadline in the framework of the targeted stakeholder consultation. China has over the last years overhauled its cosmetics legislation and requires in many instances animal testing data for the cosmetics safety assessment.

1.5. External studies

For the preparation of this impact assessment no specific external studies have been mandated, as it was considered that an external contractor would not have had access to additional data and would have consulted the same stakeholders. In addition, the recent revision of the Cosmetics legislation, which led to the adoption of Regulation 1223/2009/EC[21], was preceded by an extensive impact assessment[22]. The Commission services took the data generated in that context and in particular the RPA study "Impact of European Regulation on the EU Cosmetics Industry" of September 2007[23] and the work done by Global Insight "Study of the European Cosmetics Industry" of October 2007[24] into account for this assessment. For some of the data in these two reports the targeted stakeholder consultation provided updated or more accurate data.

1.6. Inter-Service steering group on the impact assessment

Commission inter-service steering group meetings took place at the different stages of the assessment (20 July 2010, 21 September 2010, 23 June 2011 and 3 February 2012). The following Directorate-Generals were invited and regularly informed of the progress of the assessment: DG ENV, DG ENTR, DG RTD, DG TRADE, DG MARKT, SG, LS, BEPA and JRC.

1.7. Follow-up to Impact Assessment Board recommendations

The Impact Assessment Board issued its Opinion on 25 May 2012 (Reference 2011/SANCO/025). On the basis of this opinion the final report was adapted, in particular in line with the Board's recommendation to:

· Improve the presentation of the problem;

· Better explain the options;

· Strengthen the assessment of impacts;

· Improve the comparison of options;

· In relation to procedure and presentation, to better present the stakeholder's different views.

A number of more technical comments made by the Board were equally taken into account and the draft report was adapted accordingly.

2. Problem Definition 2.1. General Policy Context 2.1.1. Cosmetics sector

Cosmetics range from everyday hygiene products, such as soap, shampoo, deodorant and toothpaste to luxury beauty items including perfumes and decorative cosmetics.

The European Cosmetics and Toiletries industry recorded a total retail sales price of EUR 71.8 billion in 2010[25]. These figures are based on more recent Euromonitor data provided by the cosmetics industry than the one provided to the targeted stakeholder consultation. There the market was estimated at EUR 66.6 billion This represents almost half of the global market. The market is led by Germany and France, followed by the United Kingdom, Italy and Spain. These five Member States make up 69% of the total retails sales price, the remaining 31% are shared between two groups of Members States, those with a turnover ranging from EUR 800 to 999 and those between 1 000 to 3 000 billion.

The cosmetics industry is composed of five main sub-sectors and market segments that can be distinguished as follows:

The two main segments, i.e. the skin care and toiletries segment, account for around 52% of the total market. The segments hair care, fragrances and decorative cosmetics cover the remaining market share of 48%. Almost all segments, especially decorative cosmetics and toiletries products, recorded a positive growth over the past years.

The structural conditions of the European industry are on the one hand characterized by multinational conglomerates. There are a significant number of major international cosmetic firms in Europe, mainly in France and Germany. The leading companies are L'Oreal, Beiersdorf, Henkel, Procter & Gamble, Unilever, Johnson & Johnson, Sara Lee and Colgate. European leader is the French company L'Oréal, which is also the world's leading cosmetics manufacturer. Large companies are estimated to have a market share of about 70%. On the other hand the clear majority of companies in number in the cosmetics field are small- and medium-sized companies (SMEs), with several hundred of them in most Member States[26].

Overall, the EU cosmetics industry comprises approximately 4 576 companies, including over 4 072 SMEs[27]. It is estimated to directly employ more than 184 000 people, indirect employment of retail and beauty salons is estimated to about 1.7 million employees[28].

Many of the SME's in the Cosmetics and Toiletries industry have fewer than 10 employees and thus qualify as microenterprises. For example, there are an estimated 855 firms with fewer than 10 employees in France and Italy.

Extra community exports of cosmetic products from the EU totalled EUR 12.4 billion in 2010, with France and Germany being the largest exporters. Exports play a particularly important role for larger cosmetic manufacturers, as well as for cosmetic ingredient manufacturers. Exports clearly outweigh imports within the Cosmetics market.

The European Cosmetics & Toiletries market faces new challenges in the highly competitive global market. There is increased competition and simultaneously potential growth in the overall saturated global market from emerging markets. China's premium cosmetics market is for example expected to double by 2015 to reach $7 billion and Latin America’s industry value in 2015 is expected to be the third largest globally.

The innovation potential of Europe's Cosmetics and Toiletries market is highly important for trade and growth. Product innovation is a major driver for growth of the cosmetics industry in the EU; several thousand new or improved products are placed on the market each year with major companies, on average, reformulating or replacing around 25% of their cosmetics products annually[29].

Patent activity is one indicator for innovation. The cosmetics industry is responsible for a large part of the overall patent activity in the EU, with a total of 6 082 patents filed in 2011, compared to a volume of 6 438 inventions in 2010. While there was a growing demand for patent protection in relation to ingredients for cosmetics and perfumes, with a steep increase since 2000[30], there is a decline of 6% between 2011 and 2010.

The sectors with the highest patent volume remain, despite a general decline in all subsectors with the exception of antiperspirants, hair, make-up, skin antiperspirant and perfumes.

Ingredients play the key role in product and technology innovation in cosmetics and perfumes, and are consequently the focus of significant patent activity. Ingredients and extracts for cosmetics and perfumes may be drawn from a variety of sources, including synthetic compounds, botanicals or minerals, such as mica used to add sheen and glitter. Among the main European players for patent assignees for extracts and ingredients is L’Oreal, followed by Unilever, Henkel and Beiersdorf. As regards the range of materials and technologies involved in patent applications for the cosmetics and perfumes sectors peptides play an important role, but biochemistry and more recently emerging areas such as nanotechnology play a role as well. Often fields referenced in cosmetics patents are also referenced in the pharmaceutical field.

2.1.2. Cosmetics Regulatory Framework

The Cosmetics Directive 76/768/EEC is the regulatory framework for the placing on the market of cosmetic products. Its key objectives are to ensure consumer safety and to secure an internal market for cosmetic products. It is based on manufacturer responsibility for the safety of products. For certain ingredients - colorants, preservatives and UV-filters - only ingredients included in positive lists (Annexes IV, VI and VII to the Cosmetics Directive) can be used. Also, a large number of ingredients are either prohibited or restricted (Annexes II and III) and manufacturers need to take account of this in their product formulation. Inclusion in the Annexes is preceded by a scientific risk assessment by the Scientific Committee.

In order to ensure the safety of products manufacturers must carry out a safety assessment, which includes a study of the intrinsic properties of all ingredients contained in the product. A number of key endpoints need to be addressed, such as whether the ingredient can cause allergies or whether it otherwise causes damage to the human body as a result of repeated use, such as cancer. To assess these questions currently animal testing data is often relied on. The testing to obtain such data does not have to be carried out by the manufacturer - in many cases such safety data is available upstream from the ingredient manufacturer or through other data sources. Testing does not need to be carried out for each batch or each product, it is sufficient to have determined the profile of an ingredient once. Such testing would typically be carried out relatively early on in the product development, in most cases around 2 to 3 years before the product actually reaches the market. Testing must comply with the principles of good laboratory practice[31] and follows defined testing protocols set out in Council Regulation (EC) 440/2008[32] and in most cases based on OECD Testing Guidelines. Whether animal testing data is relied on or not becomes evident in the manufacturers safety assessment – which needs to be documented and kept available to the authorities.

The Cosmetics Directive aims at phasing out animal testing for cosmetic purposes. Besides the complete testing ban for cosmetic products and their ingredients, a marketing ban has applied since 11 March 2009 for all human health(-related) effects with the exception of repeated-dose toxicity (including skin sensitisation and carcinogenicity), reproductive toxicity and toxicokinetics, for which the deadline is 11 March 2013. As a result no testing for cosmetic purposes can be carried out inside the EU, but for the endpoints covered by the 2013 deadline testing can be carried out outside the EU and the results of tests performed before that date can be relied on in the safety assessment. There is a possibility for Member States to request a derogation from these provisions in case a human health problem is substantiated for an ingredient that is in wide use and cannot be replaced by another ingredient capable of performing a similar function.

The provisions in relation to animal testing were not changed by the recast of the Cosmetics Directive by Regulation (EC) 1223/2009. The Cosmetics Regulation did however further strengthen the requirements for the safety assessment and will thus rather lead to an increased need for toxicological data. It also introduced specific provisions for nanomaterials, requiring manufacturers to inform the Commission about the toxicological profile and the safety data of the material before placing the cosmetic product on the market. The Cosmetics Regulation repealing the Cosmetics Directive as of 11 July 2013, any proposal would amend the Cosmetics Regulation only.

2.1.3. Previous Legislation in relation to the Marketing Ban

The first provisions in relation to the marketing ban of cosmetic ingredients or combinations of ingredients tested on animals in order to meet the requirements of the Directive were introduced to the Cosmetics Directive by Directive 93/35/EEC[33] with an application date of 1 January 1998. The introduction of the marketing ban was based on the political objective to end animal testing for cosmetics. The '3R' principle – aiming to replace, reduce and refine animal testing wherever possible – had earlier on been integrated in Directive 86/609/EEC[34]. The introduction of the ban at the time was not based on a science based assessment that alternative methods would be available by 1998. Indeed, the European Centre for the Validation of Alternative Methods (ECVAM) had only been founded in 1992 and no validated alternative methods were in place yet. The provisions foresaw that, in case alternative methods would not be available in time, the Commission would propose the postponement of the ban by 1 January 1997 for no less than 2 years.

The ban was postponed for the first time by Commission Directive 97/18/EC[35] to June 2000, essentially stating that alternative methods were not yet available and that the scientific developments were difficult to foresee, but that given the need of close follow-up of the issue the next scientific re-assessment should not be pushed out too far.

The second postponement was an interim Commission measure. In 2000 the Commission had already made the co-decision proposal that eventually lead to Directive 2003/15/EC[36], the third postponement. But it was clear that this proposal would not be adopted before the lapse of the deadline in 2000. The Commission therefore proposed by Commission Directive[37] to postpone the deadline until 30 June 2002. Directive 2003/15/EC, the third postponement which sets the current deadlines, was adopted in February 2003.

With the proposal for Directive 2003/15/EC the Commission intended to move from a marketing to a testing ban, first for products and later for ingredients. It also proposed to postpone the entry into force of the testing ban for ingredients in the absence of alternatives. These changes were proposed in order to address enforcement difficulties and the unavailability of alternative methods. However, in the co-decision procedure the testing and marketing ban were both imposed and the 2009 deadline for the full testing ban and the partial marketing ban was clearly made independent of alternatives being available.

A number of elements are therefore different in the situation under consideration now compared to the earlier postponements. These are:

· The European Parliament and the Council made it clear that it is willing to set fixed cut-off dates, even in the absence of alternatives. The testing and part of the marketing ban accordingly apply since 2009 in the absence of alternatives with respect to some endpoints;

· The European Parliament and the Council made it clear that a constant review process with postponements by the Commission is not the acceptable way forward and did not provide this right to the Commission in Directive 2003/15/EEC (any change now requires co-decision);

· Considerable progress has been made in the development of alternatives since 2003. The extensive expert review carried out in the above described first phase of stakeholder consultation made it however also clear that for most endpoints covered by the 2013 deadline it will take at least 10 years and most likely more to fully replace animal testing. This puts the overall policy approach of recurrent postponements in question.

One of the options considered in this assessment is a postponement similar to the ones before (see option 2 (a) below). However, as described above, the current situation does not necessarily require the same policy response as before.

2.1.4. Implementation of the 2009 Testing and Marketing Ban and Impacts

The implementation and enforcement of the testing and marketing ban is the responsibility of Member States. The Commission annual reports[38] cover certain aspects of the implementation and enforcement. They address the availability of alternative methods and the progress in research, the number of animals used in the EU for testing until the 2009 ban entered into force and technical difficulties in complying with the bans. Endpoints falling under the 2009 deadline of the marketing ban are: skin corrosivity, skin irritation, dermal absorption, phototoxicity, mutagenicity/genotoxicity, acute toxicity and eye irritation. Not all endpoints falling under 2009 can be fully replaced by alternative methods yet. For the last three endpoints full replacement is not yet possible, respectively limitations exist. The 2009 marketing ban applies irrespective of this unavailability and appears not to have caused major negative impacts so far. The Commission services are not aware of products being taken from the market by Member State authorities as a result of the marketing ban and the stakeholder consultation did not result in concrete information on negative impacts, even though this question was raised. Nevertheless the Commission services are faced with first cases in which the SCCS cannot provide a conclusive opinion on the safety of a substance as data on the 2009 endpoints is missing or not sufficient for the assessment. These situations are expected to become more frequent.

Impacts of the 2009 ban are therefore not excluded and the fact that not many were reported so far in no way prejudices the possible impacts of the 2013 deadline. A number of elements have to be taken into account here:

· Since the animal testing data is needed at the early stage of the product development, any impacts would most likely become more evident later. The deadline was known and industry prepared;

· The endpoint acute toxicity plays in practice a limited role for the cosmetics industry. Ingredients used in this sector essentially do not raise the risk of acute toxicity and sufficient information is often available from repeated dose studies;

· As regards mutagenicity/genotoxicty alternative tests are available, but come with some drawbacks in that they appear to be oversensitive. However in many cases they will be sufficient to exclude certain properties;

· As regards eye irritation, again some judgements can be made using existing alternative approaches, eg. existing alternatives provide the possibility to eliminate severe irritants;

· Another aspect why the 2009 deadline has apparently not had negative impacts is the uncertainty in relation to the interpretation (see below under 2.1.5.).

These elements also explain why the derogation for Member States has only been requested one time so far.

2.1.5. Legal clarity in relation to the scope of the testing and marketing ban

The current provisions on animal testing have been subject to diverging interpretations by different stakeholders. The main discussions on the scope centre on the wording used in the testing as well as the marketing ban "in order to meet the requirements of this Directive".

Starting point for the discussion is the fact that the majority of ingredients used in cosmetic products are ingredients that are equally in use in many other consumer and industrial products, such as in pharmaceuticals, detergents and food, and animal testing may be necessary to ensure compliance with the legal frameworks applicable to these products. Ingredients used in cosmetics will generally also be subject to the horizontal REACH[39] requirements and animal testing may be necessary as a last resort to complete the respective data packages.

Shortly after its adoption, the relevant provisions of Directive 2003/15/EC were challenged by the French Republic before the European Court of Justice in case C-244/03. However, the case was held inadmissible. Currently, there is no jurisprudence of the Court of Justice of the European Union ('the Court') on the interpretation of the scope of the 2013 marketing ban. Only the Court can provide a legally binding interpretation of Union law. The Commission services role is to oversee, under the control of the Court, the application of the provisions by Member States.

The Commission services consider that data from animal testing generated before the respective deadlines can be used and relied on after the deadline and do not trigger the marketing ban.

The Commission services also consider that animal testing that has clearly been motivated by compliance with non-cosmetics related legislative frameworks should not be considered to have been carried out 'in order to meet the requirements of this Directive/Regulation'. The resulting animal testing data should not trigger the marketing ban and could subsequently be relied on in the cosmetics safety assessment.

Independent of the option chosen, it is necessary to provide clarification on the interpretation in order to ensure a coherent application of the legal framework by Member States and to provide a clear and predictable legal framework for the economic operators.

2.1.6. Provisions in relation to Animal Testing in other Union legislation

The protection and welfare of animals is an area covered by a wide range of Union legislation. It is covered by Article 13 of the Treaty on the Functioning of the European Union, which requires the Union and Member States to pay full regard to the welfare requirements of animals when formulating policies. Prior to that, the issue was addressed in a Protocol to the Amsterdam Treaty.

Already in 1986 the EU introduced specific legislation covering the use of animals for scientific purposes, Directive 86/609/EEC. In September 2010 Directive 2010/63/EU[40] was adopted, which updates and replaces the existing legislation. The aim of the new Directive is to strengthen the legislation and to improve the welfare of those animals still needed to be used, as well as to firmly anchor the principle of the '3Rs', to replace, reduce and refine the use of animals, in Union legislation. Directive 2010/63/EU has taken full effect since 1 January 2013. Member States must accordingly ensure that, wherever possible, a scientifically satisfactory method or testing strategy, not entailing the use of live animals, is used instead of animal testing. If replacement is not possible reduction and refinement have to be ensured.

Toxicological data requiring animal testing is needed under many pieces of Union legislation for the regulatory safety assessment. This is for example the case under REACH[41] for chemical substances, which are a major ingredient source for cosmetics. REACH has several provisions in place to reduce animal testing for its purposes. It requires companies to share data in order to avoid unnecessary animal testing. If testing is needed and depending on the tonnage a testing proposal must be submitted to the European Chemicals Agency. Under REACH, animal testing is to be avoided in favour of alternative methods and registrants can only carry out tests involving the use of animals as a last resort. Similarly, the proposal for a new Regulation on Biocides[42] will require toxicological data including animal data, but animal testing is allowed as a last resort only and data sharing is required.

In summary, Union legislation recognises that animal testing is still needed to ensure the protection of human health and the environment and thus acknowledges that animal testing will be carried out to fulfil the legislative requirements. Union legislation at the same time sets very high animal welfare standards for such testing and requires that whenever possible this testing is replaced, reduce and refined. The Cosmetics legislation is the only legislation that prohibits animal testing irrespective of the availability of alternative methods.

2.1.7. Animal Testing Requirements for Cosmetics in non-EU Countries

In the United States cosmetics are regulated by the Federal Food, Drug & Cosmetics Act, which prohibits the use of any unsafe substance in a cosmetic product. There is no list of toxicology test methods for use in determining the safety of cosmetic ingredients and cosmetic products. It is the manufacturer who is under an obligation to verify whether the cosmetics he places on the market present any risk to consumer health, but it is up to him to decide on the data (literature, tests on animals or humans, alternative tests etc.) used as the basis for proving harmlessness. Otherwise the product must bear the statement ‘The safety of this product has not been determined’. New active ingredients in Over-The-Counter (OTC) products (anti-acne, anti caries/anti-plaque, anti-hair loss, anti-dandruff, anti-perspirant products, skin whiteners, sun protection products etc.) must prove their safety on the basis of tests on animals and also clinical tests.

The United States, while not prohibiting animal testing, are also working towards the '3R's'. In 1997, the United States created the Interagency Coordinating Committee on the Validation of Alternative Methods (ICCVAM) to reduce animal testing. Once ICCVAM recommends that an alternative method has been adequately validated and the relevant test recommendations are accepted or endorsed by Federal regulatory and other agencies, it becomes available for all toxicology purposes in the United States.

In Japan a number of products that are qualified as cosmetics in the EU are qualified as quasi-drugs. Quasi-drugs include hair dyes and decolourants, anti-hair loss products, hair permanents/straighteners, depilatories, anti-perspirants, deodorants, anti-acne, skin whiteners, bath treatment products, medicinal cosmetics such as anti-dandruff shampoos etc. and are subject to the regulations on pharmaceutical products. A toxicological dossier is required for approval of a new quasi-drug ingredient, including tests for which no alternatives are in place yet. The Act on Welfare and Management of Animals was revised in 2006 incorporating basic consideration for animal testing, handling of animals and introducing the '3Rs' principle. Japan also set up the Japanese Centre for the Validation of Alternative Methods (JaCVAM) in 2005.

In China, the control of cosmetic products and new cosmetic ingredients is since 2008 under the responsibility of the Chinese State Food and Drug Administration (SFDA). For finished cosmetics, depending on the type of product, a hygiene license or record-keeping certificate from the Health Administrative Department of the State Council is required. The hygiene license would for example be required for hair dye or sun protection products or for deodorants. Obtaining the hygiene license requires a testing report from a cosmetics testing institution approved by the SFDA, including animal data. China is starting to consider the acceptance of alternative methods.

In conclusion, animal testing data will in many cases be needed to ensure the safety of cosmetic products internationally. If alternative methods are available these will often be acceptable, however levels of acceptance vary between countries. Notably methods included in OECD Test Guidelines will often be accepted.

2.2. Problem Description

According to the expert report on the availability of alternatives (see 1.1), alternative methods to fully replace animal testing for the endpoints covered by the 2013 deadline will not be available by 2013. No specific timeline could be estimated in the areas of toxicokinetics, repeated-dose toxicity, carcinogenicity and reproductive toxicity due to the underlying scientific challenges. The timelines estimated for full replacement of animal tests in the area of skin sensitisation pointed to a further 7-9 years (i.e. 2017-2019) for scientific development. Another 3 to 6 years are likely to be needed for validation and regulatory acceptance of the alternative methods. However, alternative methods able to simply discriminate between skin sensitisers and non-sensitisers are expected to become available earlier.

The problem is therefore in a nutshell that the marketing ban would apply as of 11 March 2013 in the absence of alternative methods, thus effectively limiting the tools needed for compliance with the Cosmetics Regulation. This would have several consequences:

2.2.1. Animal Welfare

The entry into force of the marketing ban in 2013 would be positive in relation to animal welfare, in that it would end animal use for EU cosmetic purposes. This was the objective of the provisions when they were first introduced in 1993. This objective was based on overall ethical considerations and not on animal numbers. Nevertheless animal numbers are an important indicator of the impacts of the 2013 bans on animal welfare.

Since 11 March 2009, animal testing for cosmetic purposes is no longer allowed in the EU. In the reports under the Cosmetics Directive the number of animals used for cosmetic purposes in the EU were highest in 2004 with 8 988 animals and came down to 1 510 in 2008 and 344 in 2009. Animals used for testing for cosmetic purposes include rats, mice, guinea-pigs and rabbits. Any animal testing currently done for EU cosmetic purposes is done outside the EU. Animals spared would therefore be animals of these species outside the EU. Annex 2 provides further data on animal use.

Currently, toxicological animal data is still needed for the cosmetics safety assessment. Whether or not ingredients can be used in cosmetic products depends on whether their safety can be demonstrated. Toxicological data needs arise in two scenarios, the manufacturers own safety assessment and the review by the SCCS, either with a view to the ingredient being added to one of the positive lists or to being prohibited or restricted in use. The highest data need for cosmetic manufacturers exists for skin sensitisation tests, second for repeated dose, third for reproductive toxicity and then for toxicokinetics and carcinogenicity. Information on the need for toxicological data for the cosmetics safety assessment is included in Annex 3.

Over the last ten years large cosmetics companies together carried out on average 213 animal tests for the 2013 endpoints per year, out of which 151 addressed skin sensitisation and 36 repeated dose, thus these two endpoints represent 87% of all testing[43]. For all of these endpoints the complete replacement of animal tests is not yet possible.

These figures relate to testing carried out for cosmetic purposes. By far not all testing data relied on for the cosmetics safety assessment has been generated for this purpose. The data used so far for the cosmetics safety assessment is indeed in many cases not generated specifically for this purpose. About 90% of ingredients are used in other areas as well. In many cases testing data is provided by the ingredient supplier, who offers the ingredient also for other purposes. Testing data may also be available in publications, databanks, etc. Often the original reason for the testing will not be obvious from the testing data itself. Information on testing data sources is contained in Annex 4.

Large cosmetics companies considered testing data from food, cosmetic products outside the EU and REACH as most important to them[44]. This does not necessarily indicate that this data is available in most cases, as the question was only how important it is considered to be, not in how many cases it was available. However, while there remains uncertainty, it is likely that the importance given also reflects the availability.

As regards the possible total number of animals used outside the EU for EU cosmetic purposes that could be spared as a result of the implementation of the 2013 marketing ban, there is no reliable statistical data. Simply taking EU numbers before the bans as a baseline does not work because 1) in a number of Member States testing for cosmetic purposes was banned before the EU ban (eg. in the United Kingdom in 1998), 2) many manufacturers already moved outside the EU for testing many years ago and 3) older animal numbers can not really give a reliable baseline as some of the tests that where still carried out 10 years ago were using more animals and might now not be needed as such.

While there are no reliable statistics, the information supplied by stakeholders in the targeted stakeholder consultation allow a reasonably solid estimate.

On the one hand, industry contributors confirm that tests were already done outside EU, also ahead of the 2009 testing ban deadline in the EU. About 90% of the testing for cosmetics took place outside the EU in 2008[45]. Given that testing inside the EU for cosmetic purposes in 2008 was at 1 510 this would indicate about 13 590 animals were used outside the EU in 2008. Since after 2009 all testing for cosmetics purposes has to take place outside the EU, around 15 000 animals are likely to be used. Large cosmetic companies carried out in 2010 185 tests for 2013 endpoints using a total of 7 732 animals. They indicated that over the last ten years they carried out in average 213 tests per year. SMEs reported 8 tests in 2010 and a total of 160 animals and a yearly average of 7 tests over the last 10 years[46]. Taking into account that in addition testing is also done or commissioned by ingredient manufacturers, this data suggests that the overall estimate of a minimum of 15 000 animals used outside the EU for EU cosmetic purposes per year is reasonable.

On the other hand, animal welfare organisations provided an estimate for 2005, according to which 58 339 972 animals are used in actual animal testing procedures outside the EU annually[47]. Assuming that the percentage of cosmetics testing in relation to the overall testing would be the same as inside the EU, the respective animal welfare organisation estimates that about 26 836 animals were used for cosmetics testing in 2005 worldwide. This estimate relates to cosmetics specific testing. In contrast to the information supplied by industry above, this information does however not specifically relate to cosmetic specific testing done for EU cosmetic purposes, which could explain why the estimate is higher than the industry figures.

Overall the data provided indicates that between 15 000 and 27 000 animals are used for EU cosmetics specific testing outside the EU yearly.

These figures remain comparatively limited in relation to the overall number of animals used in the EU for experimental purposes per year (about 12 million)[48] .

However, not all of these 15 000 to 27 000 animals per year would be spared once the 2013 marketing ban comes into force. Cosmetic specific testing outside the EU may be for two reasons at the same time. One is testing for non-EU cosmetics regulatory requirements. While the EU is working with trading partners in order to accelerate acceptance of validated alternative methods, it is unlikely that other countries would ban testing irrespective of the availability of alternatives or even accept alternative methods for regulatory purposes to the same extent as the EU in the short term. The other important reason for testing outside the EU is testing to meet the EU cosmetics requirements.

There is no reliable data that would allow determining exactly which part of the testing outside the EU is carried out for EU cosmetics purposes only and would not take place beyond 2013. Testing is often carried out at the supplier level to establish the safety dossier of an ingredient, without specifically targeting only a certain market. Equally, testing carried out by international cosmetic companies will be geared at establishing the safety of the ingredient, but not necessarily only with a view to a specific market. Testing carried out in line with OECD Test Guidelines can be relied on then in all OECD countries and beyond.

To which extend testing outside the EU would diminish as a result of the ban depends largely on business decisions of companies. It concerns cases in which the data is needed to ensure the safety of the product and cannot be obtained through alternative methods. In the EU the ingredient could therefore not be used. Essentially the question is whether a cosmetics company would forego the testing for third countries in these cases. This depends on several criteria and strategic decisions of companies and manufacturers, e.g. how important the ingredient for manufacturers or companies is; how profitable it is to invest in a certain test (animal testing can be costly, from EUR 4 000 for a skin sensitisation test to about EUR 780 000 for a carcinogenicity test[49]), whether or not the manufacturer considers that the non-EU market alone warrants the investment or if the company considers a possible shift of investment into other non-EU markets.

Due to these underlying uncertainties making further assumptions (such as all animals currently used would be spared, versus none of them or a certain percentage of them) will not lead to a more reliable estimate. In addition, the exact number of animals spared is likely to play a limited role for the political decision-making. Animal welfare stakeholders recognise that the number of animals used for cosmetics is comparatively low, but consider that the question is one of principle. For the purposes of this impact assessment it is therefore considered that a sub-set of the 15 000 to 27 000 will be spared.

The ban would have no immediate positive impacts in relation to the number of animals used in other sectors overall in the EU for the respective 2013 endpoints, which amounted in 2008 to 257 350 animals[50] and was estimated by animal welfare stakeholders to be 134 180 in 2005 outside the EU. In the absence of alternative methods animal testing will still need to be carried out to comply with other applicable legislative frameworks. On the longer run, the marketing ban in the Cosmetics Directive is expected however to also have kick-off effects on the use of animals in other sectors. Alternative methods developed in the cosmetics context can and are used to replace animal testing in other sectors as well and vice-versa. All methods validated and accepted at regulatory level are included in Commission Regulation (EC) 440/2008, and not specifically in Annex IX to the Cosmetics Directive. Also, while the Cosmetics Directive only looks at replacement, the path to developing a full replacement often leads first to refinement and reduction and thus already benefits animals.

As mentioned, the number of animals used is not the sole indicator of animal welfare: the existing provisions represent a clear political and ethical choice to value animal welfare higher than economic and “lifestyle” driven interests. They result from many years of very engaged public and political discussions, going back more than 20 years.

Most information on public opinion in relation to animal testing for cosmetics was presented by the animal welfare organisations in the framework of the targeted stakeholder consultation. The information provided indicates that, depending on the poll, between 60 and 88% of the citizens favoured a complete ban on animal testing for cosmetics. A 2009 "You Gov" poll showed that 79% of respondents were against testing that does not relate to serious or life-threatening human conditions.

A Eurobarometer[51] study showed that the majority (66%) of respondents find that scientists should be allowed to do research on animals, like mice, if it produces new information about human health problems, while only 18% of respondents disagree. However, the purpose of the testing is critical for the decision.

The overall long-term objective to end animal testing for cosmetics is shared by all stakeholders. Stakeholders have no interest in animal testing as such, other than as a tool to ensure and demonstrate consumer safety. Indeed alternative methods may turn out to be beneficial for industry. A recent example of an ECVAM validated method to address in vitro carcinogenicity testing – while it only presents a partial replacement - shows that the costs of the alternative (EUR 12 000 to 35 000 per substance) were low in comparison to the animal test (EUR 1 to 1.5 million per substance). With 2-7 weeks required per substance compared to 3 years in the animal test the alternative would also be faster.[52]

Stakeholders hold however diverging views on the impacts of the ban on animal welfare. Animal welfare groups consider the effects on animal welfare to be very high and point also to the kick-off effects for other sectors. They underline that actual numbers are in any case not decisive for their view, but the underlying basic ethical decision against animal testing. Industry stakeholders point out that the overall number of animals to be saved is very small in relation to overall animal use for scientific purposes. They also consider that the animal use would continue for outside EU use in any case.

2.2.2. Research into Alternatives to Animal Testing

The implementation of the ban is expected to have overall positive impacts in relation to research into alternative methods.

Considerable amounts of funding have been made available to find and validate new alternative test methods. For this purpose the Commission made about EUR 238 million available between the years 2007 to 2011 alone. The major part of this budget, around EUR 198 million, was spent on projects through the 6th and 7th Framework Programmes and the LIFE + Programme. The second most important tranche, about EUR 38 million, was spent on the European Reference Laboratory (EURL) for Alternative Methods to Animal Testing (ECVAM).

At Member State level the funding available varies strongly from Member State to Member State.

Examples (Note that these figures are not always representative of the entire funding in the Member State concerned):

Austria: Average for 1992 -2005 EUR 250 000 per year;

Belgium: Between 2005 and 2013 EUR 1 395 847;

Denmark: Between 2005 and 2008 EUR 47 million;

France: In 2010 EUR 2.75 million;

Germany: Between 2000 and 2009 EUR 42.5 million and in 2010 EUR 7.4 million;

Netherlands: In 2010 EUR 2 million;

Sweden: From 2004 onwards around EUR 1.6 million per year.

On the industry side equally there have been significant efforts. In the recently launched research project Seurat-1[53] on methods for repeated dose systemic toxicity, the EUR 25 million which come from the EU research framework programme are matched with EUR 25 million from the European cosmetics industry, represented by Colipa.

This is in addition to various projects at association and company level. Individual companies often work in partnerships with academic institutions.

Examples: One company invested EUR 30 million in the last 25 years, another has spent an overall of 285 million USD and another gave the figure of EUR 3 million a year for external research on alternatives in addition to own research. There are no overall figures available for the industry investments.

The percentage of cosmetics and cosmetic ingredients industry's investment in research and development (general, not alternative method related) ranged from 0.5 to 3.5% of net sales. The German industry association IKW estimates that about 2.5 to 5% of the turnover are used for R&D. EFfCI assumes that up to 1% of the annual turnover achieved in the cosmetic ingredients business by larger companies is used to develop alternative testing methods.

The majority of the answers received in the stakeholder consultation highlight the positive impact the provisions in the Cosmetics Directive and in particular the setting of the 2013 deadline had on research into alternative methods to replace animal testing. The provisions are generally seen as a crucial accelerator of research and validation of alternative methods by all stakeholders. Indeed many projects in this area make explicit reference to the provisions in the Cosmetics Directive. Stakeholders also point out that the number of validated methods has greatly increased since 2003 when the current deadlines were set (13 methods between 2003 and 2009 compared to 6 in the period between 1998 and 2002). The search for alternative methods is by now also more and more recognized as the search for better science and forms part of an overall shift of paradigm in safety assessment. Maintaining the deadline is expected by many to lead to a continuation or even acceleration of these developments. Certainly the deadline leaves industry with no other choice than research into alternatives to bring new cosmetic ingredients on the European market.

Industry stakeholders however point out that while the research investments were motivated by and linked to the deadlines, letting the marketing ban apply without alternatives would risk leading to less funding available for research into alternatives. The main argument brought forward is that the expected negative impacts from the marketing ban on competitiveness (see below under 2.2.5) will also weaken the industry's ability to invest in alternatives. Industry also cautions that research might move outside the EU.

2.2.3. Consumer Safety

Specific impacts on consumer safety are not expected from the 2013 deadline. Consumer safety is the key objective of the Cosmetics Directive. Manufacturers can only place cosmetic products on the market if they are safe. Manufacturers must not place products with ingredients for which insufficient safety data is available on the market. Market surveillance authorities must ensure that the requirements of the Directive are complied with. Most Competent Authorities in the replies to the targeted stakeholder consultation confirmed that in the course of market surveillance manufacturers that would rely on insufficient data would be identified.

There is no pre-market authorisation for placing cosmetic products on the market. Compliance with the Directive, such as for example not using ingredients that are prohibited, is ensured through market surveillance, thus in market product spot-checks. Market surveillance is always linked to resources available, only a sample of products will come under scrutiny. These limitations apply to all provisions of the Directive.

Nearly all stakeholders agree that while it is clear that a full safety assessment solely based on alternative methods is not possible yet, this will result in not being able to place certain products on the market, not in placing unsafe products on the market. Stakeholders agree that consumer safety is not put at risk through the 2013 deadline.

2.2.4. Consumer Choice and Product Innovation

Overall negative effects are expected from the 2013 marketing ban for consumer choice and product innovation compared to the situation before the ban. The cosmetics industry is highly innovative. On average large cosmetic companies have a product portfolio of around 10 000 different cosmetic products, SMEs of around 160 products[54]. Companies working under the Leaping Bunny label had a smaller product portfolio. They have, for large companies, 592 products on offer and, for SMEs, 40.

Industry stakeholders indicate the product life of a cosmetic product at 3 years[55]. There is an estimated 25% - 30% renewal of cosmetic products on the market per year. Out of the 25% to 30% of reformulations, 90% rely on ingredients already used in the cosmetics sector, 10% depend on new to market (= ingredients not yet used in any other sector) or new to cosmetics market (= ingredients already in use in other sector, but new to cosmetics use) ingredients[56]. Information on cosmetic products and their lifecycle is contained in Annex 5.

Cosmetic products consist of between 5 to 60 ingredients each. Large cosmetics companies have an ingredient portfolio of 2 000 ingredients and SMEs of 600 ingredients. This toolbox is constantly evolving.

Large companies introduced around 80 new ingredients per year between 2000 and 2009 (SMEs 22), representing around 4% of their ingredient portfolio[57]. Only 10% of these ingredients introduced into the portfolio are estimated to be new to the market. 90% are/have been used in other sectors, including cosmetic products outside the EU, food, pharmaceuticals, detergents, and will partially be covered by REACH. Information on cosmetic ingredients portfolios and changes to it are included in Annex 6.

Negative impacts of the 2013 deadline are first expected in relation to ingredients that are new to the market – thus ingredients that are cosmetic specific and have not been used in other areas. For such new cosmetic specific ingredients at least part of the data necessary for the safety assessment will not be available. Since these are new cosmetic specific ingredients it is not possible to rely on existing data or data from other regulatory frameworks. 4% of the ingredients portfolio are renewed each year and 10% of these 4% new ingredients introduced are new to the market. When calculating this down to total numbers per manufacturer a large manufacturer with an ingredient portfolio of 2 000 ingredients could lose 8 of the 80 ingredients it would normally introduce per year.

Second, negative impacts are expected, though to a lesser extent, for ingredients that are new to the cosmetics market, but have been used in other sectors. This is the case for 90% of the 4% newly introduced ingredients, in total numbers this represents about 72 ingredients per large manufacturer per year. For these ingredients in the majority of cases data from other regulatory frameworks will be available, however not in all cases and not always on all relevant endpoints. In 50 to 70% of the cases submitted to the SCCS, data from other sources has been relied on in the past. The availability of such data from other sectors depends however on many factors. Data may not have been necessary for other uses (for example low tonnage under REACH), it may not be accessible to the cosmetics manufacturer or the data may not be sufficient to address the use (eg. different exposure routes). If this is calculated down to total numbers per manufacturer this would mean that a large manufacturer with an ingredient portfolio of 2000 ingredients would in the worst case loose another 21 to 36 of the 72 new to cosmetics ingredients it would normally introduce per year. However, this is a worst case scenario. The SCCS review will often require more data than the manufacturer's safety assessment. The majority of ingredients are not reviewed by the SCCS. This means that, realistically, the loss of ingredients from other sectors would likely be considerably lower but uncertainty remains.

Example: Nanomaterials

Nanomaterials are chemical substances or materials manufactured and used at a very small scale. Over the past years, the cosmetics industry has focused on nanomaterials and they play an important role in innovation. The number of patents in the cosmetics field involving nanotechnology grew by 103% over the last seven years.

Nanomaterials display improved functionalities in UV filters, but also in dental care, appearance enhancement and skincare.

Under the Cosmetics Regulation, nanomaterial's come under special scrutiny. Products containing nanomaterial's need to be notified to the European Commission and information on their toxicological profile is to be provided. The Commission may request an opinion of the SCCS. The SCCS has issued guidance for the safety assessment of nanomaterial's in cosmetics[58], which clearly underlines the specific challenges of this assessment in the light of the marketing ban, which will make the introduction of new nanomaterials only possible in very limited cases in which data is already available.

Third, negative impacts are also expected for existing ingredients. This can be the case if ingredients already in cosmetic use come under scrutiny and new safety concerns arise. Also, using existing ingredients in new types of products (e.g. spray) can raise new safety questions that cannot be addressed by animal testing after 2013. As regards existing ingredients, the SCCS delivered between 2000 and 2009 opinions on 220 substances, thus an average of 24 per year. In at least 154 cases a full toxicological data set was provided. However, the activity in the last 10 years is not entirely representative, because the majority of cases concerned hair dyes. Nevertheless an important number of areas of future concern in relation to existing substances were pointed out by stakeholders. Some of these cases could be addressed by the existing derogation for Member States, however this has only been requested one time so far. Uncertainty remains therefore in how many cases existing ingredients would be impacted.

Examples:

Parabens are widely used as preservatives in cosmetics. They have come under review as they were considerd to have endocrine disrupting effects. The SCCS has recently reviewed the safety of parabens[59]. This review was based on animal data. Without the relevant data to support the safety the SCCS can not provide a conclusive opinion.

The negative impacts described above are expected certainly until the time when alternatives for skin sensitisation tests would become available, but also well beyond as for the other endpoints no clear timeline for replacement exists. These impacts would aggregate over the years, but would start diminishing once alternatives become available.

This loss of ingredients will also have negative impacts on the availability of cosmetic products. There is no linear link between ingredients and cosmetic products. 25% to 30% of the cosmetic products are on average reformulated per year. 90% of these reformulation rely on existing ingredients, 10% rely on new to market or new to cosmetics ingredients.

Three situations can be differentiated. The first one concerns cases in which reformulations rely on new to market ingredients extensively used in cosmetics. These are unlikely to be possible after 2013 as the safety of these ingredients cannot be demonstrated. Second, the cases in which the reformulation depends on new to cosmetics ingredients. Also here in a number of cases the reformulation will not be possible if existing data from other fields is not sufficient. Third, cases in which reformulation concerns ingredients used already in other cosmetic products. This should in most cases remain possible, but different uses may lead to different types of exposure and therefore different data needs. Overall, while it is difficult to give a clear indication of the total number of products concerned, the data implies that in the worst case up to 10% of the total 25 to 30% of annual reformulations will be affected (= 2.5%), mainly those relying on new to market ingredients. Assuming a total number of 300 000 products on the market this could mean that up to 7 500 products could be lost per year. Assuming the lower estimate of a total of 100 000 products on the market it could mean a loss of about 2 500 products.

Example:

Company A (=ingredient manufacturer) develops after 2013 an ingredient with better anto-ageing properties. Company B (=cosmetics manufacturer) would like to bring a new skin care product on the market using this ingredient. To do so it needs to comply with the Cosmetics Regulation and carry out the required safety assessment. This requires information on the toxicological profile of the new ingredient. While the Cosmetics Regulation contains no tick-box of data required, at a minimum information on skin sensitisation (= can the ingredient cause allergies) and repeated dose toxicity (= are there other negative effects on the body as a result of repeated use) will be needed. Currently no alternative methods exist for these endpoints and since the ingredient is new and not used in other areas, no data is available. As a result Company B would not be able to place the new skin care product on the market.

Impacts would likely not be immediate in 2013. Due to the product development cycle and the fact that the deadline has been known for a long time it is expected that the impacts will mainly kick-in by 2014/2015 and continue over the following years. It is also assumed that the cosmetics industry is likely to be able to counteract some of these developments by innovating using existing ingredients or new ingredients supported by sufficient data. As mentioned above impacts would start diminishing as alternatives become available.

Stakeholders have different views on the likely impacts on ingredient and product availability. Industry stakeholder provided the figures discussed above and summarized in the table below and consider that the impacts will be serious. An argument made by some animal welfare stakeholders on the other hand is that if some companies can innovate and reformulate without animal testing, others should be able to do so as well. The argument here is essentially that the existing ingredient pool is sufficient.

The graph below summarises the figures discussed above and the likely impacts:

2.2.5. The Competitiveness of the EU Cosmetics Industry

The impacts of the 2013 deadline on the competitiveness of the EU cosmetics and cosmetics ingredients industry are expected to be overall negative compared to the situation before the ban. This assessment concentrates on the impacts on product innovation and turnover resulting from a limited access to ingredients. These impacts could be mitigated by other measures taken by the industry to maintain its role and turnover, such as marketing and new ways of innovation. While ingredients clearly are key to innovation, to some extent also other factors, such as product presentation, product application (brushes, form of delivery etc.) play a role in innovation. It is also assumed that this innovation would be extended if the innovation capacity from ingredients is limited.

The innovation capacity of the cosmetics industry is linked to the availability of innovative ingredients and the possibility to reformulate products. The European cosmetics industry has a leading role in product innovation. The EU is home to some of the most advanced and luxurious cosmetic products brands. Limits on the ability of the European industry to reformulate products and to introduce innovative ingredients could reduce its overall role as driver of future developments. Such a development is expected by industry to lead to more conventional, mass market and lower priced products, which is in turn could lead to a reduction in sales and profitability for the cosmetics companies.

Along with a loss in innovation capacity, industry also expects potential impacts on turnover. The cosmetics industry had a turnover of EUR 71 billion in 2010. New ingredients have a significant impact on profitability as it is often these ingredients and the products formulated with them that lead to the greatest profit. There is however considerable uncertainty as to the exact impacts. The estimates provided by the Colipa respondents were that large companies expected an overall significant loss in turnover and profitability, with losses ranging from 3 to 20% in the short term (2013-2015), 7 to 20 % in the medium term (2015 – 2018) and 1 to 25% in the long term (2018 and beyond).

Turnover and profitability may also be affected by the costs of loss of existing ingredients. The examples below show the costs that could be occurred as a result.

Examples of direct costs incurred in past in case of re-formulation:

Product Withdrawal: Company Y decided to replace a UV-filter (included in skin care products) because its supplier had withdrawn it from the market rather than fund additional testing to support an SCCP dossier. 12 formulations were affected at a cost of between EUR 5 000 and EUR 10 000 per formulation, equivalent to between EUR 60 000 and EUR 120 000.

Product Reformulation: Company Y decided to replace a thickening ingredient in 70 formulations, 30% of which were produced by a contract manufacturer, which increased the reformulation costs. The cost of this was between EUR 1500 and EUR 5000 per formulation, equivalent to between EUR 100 000 and 350 000.

Impacts are expected in particular for ingredient manufacturers. In particular ingredient manufacturers specialised in cosmetics are expected to face difficulties. EFfCI data suggests that in the medium term (2015 to 2018) reductions in sales of up to 20% are expected.

However, stakeholder views on the effects on competitiveness diverge enormously. While industry and some Competent Authorities share the expectations above, animal welfare stakeholders on the other hand point out that maintaining the ban provides the opportunity for the EU industry to be the leader in implementing animal free safety assessment strategies. Companies following the 'Leaping Bunny' label and ECEAE considered to 57% that it would have a positive impact on sales and to 43% that it would have no impact. 65% of the participating companies considered that it would have a positive impact on the EU marketing position and its global positioning.

Finally, the development of alternative methods in itself is innovation and leads to business opportunities. An example is the development of reconstructed skin by a cosmetic company now used in place of animal testing for skin irritation and which is being tried for other uses as well. It is by now also marketed outside the company and has become a business in itself.

2.2.6. Regional and Sectorial Impacts

Member States with the largest cosmetics industry are Germany, France, the United Kingdom, Italy and Spain. These make up 69% of the total sales. It is these Member States that would likely be most impacted by the 2013 marketing ban. These countries are also the largest exporters of cosmetics.

The largest market segments are skin care and toiletries (52% of the market share), overall all market segments had a positive growth over the last years. There is no clear indication which segments would be most impacted, but a number of assumptions can be made. Products which rely most on cosmetic specific ingredients, such as UV filters, hair dyes or specific skin care, are likely to be impacted most. It could also be assumed that sectors which currently have a high innovation activity based on the patents activity described under 2.1.1., such as make-up and skin care could be particularly impacted.

Depending on the ingredient the supply chain starts with either raw material producers or ingredient manufacturers. Some ingredients are also produced by the cosmetics manufacturers themselves. As regards the distribution channels for the cosmetic products they generally fall under four main categories: mass distribution, specialised distribution, pharmacy sales and direct sales. In France the breakdown in 2007 was 54% mass distribution, 28% specialised distribution, 10% pharmacy sales and 7% direct sales, while in Italy it is 41% mass distribution, 40% specialised distribution, 13% pharmacy sales and 6% sales[60]. While the impacts on the ingredient manufacturers and the cosmetics manufacturers were described above, there is no clear indication on how these impacts may affect the distribution chain.

2.2.7. Trade Impacts

The deadline on export and import of cosmetic products could also have a certain negative impact. The EU cosmetics market represents almost half of the global market, with the United States and Japanese market estimated respectively at EUR 37.8 billion and EUR 29.4 billion.

In relation to exports, industry stakeholders expect export losses. One reason brought forward in the targeted stakeholder consultation is that less innovative EU products would be less attractive for export. Also, around 76% of the larger Colipa companies expect the development and production of innovative products to move outside the EU to continue to serve emerging markets, particularly in Asia.

Similarly, it is feared that ingredient manufacturers based outside of the EU would have a competitive advantage. EU based manufacturers fear no longer being able to drive demand for new ingredients which could result in the drivers for innovation in cosmetic ingredients moving away from the EU.

Another problem EU products are expected to face is that many trading partners – such as China – still require animal testing data for certain endpoints. While it is possible to have different product lines or safety assessments for inside and outside the EU and production in the EU could therefore still take place for export only, this is likely to be an option only for a few larger companies. Larger companies may formulate more innovative products for export with ingredients for which they cannot show the safety purely based on alternative methods yet and which can therefore not be placed on the EU market.

The 2013 deadline is also expected by industry stakeholders to lead to impacts on imports. At the moment, the EU is the only region with such stringent bans in place. New products developed outside the EU will still mainly rely on animal data for the safety assessment and are likely in many cases to fall under the marketing ban. Between 52% and 64% of responding large Colipa companies expect imports to be reduced. Similarly, between 60% and 69% of EFfCI companies expect such impacts. In the short term this could lead to a competitive advantage for EU companies on the EU market. While this may be a short-term advantage for industry there could be a growing risk of non-compliant products being imported to the EU to meet consumer demands.

2.2.8. Employment

In relation to employment, while future developments are difficult to predict and to quantify, the cosmetics industry and the ingredients industry expect that the 2013 marketing ban could lead to negative impacts on employment though again it needs to be stressed that the data basis is rather uncertain.

The overall number of direct employees in the cosmetics industry in 2009 was approximately 177 000, around 137 000 of whom were in manufacturing, including 17 000 in Research & Development, and around 40 000 in distribution. In 2010 direct employment had grown to 184 000. In addition, indirect employment, including retail and salons, is estimated to be about 1.7 million. SMEs are estimated to employ around 35% of the total direct employees, thus around 62 000. However, figures supplied from Germany indicate that in Germany alone 45 000 employees work in the cosmetics industry and that of these 85% to 90% work in SMEs.

In addition, large ingredient manufacturers (cosmetics and cosmetic and other ingredients) employ about 110 000 people overall in the EU with approximately 5% of these employed in the development, manufacture, import or supply of cosmetic ingredients, thus about 5 500 employees. Taking cosmetics and cosmetic ingredients manufacturer together, this leads to total of 182 500 employees based on 2009 data. The average number of employees in SME´s according to EFfCI data is 90, with 71 of them employed in the development (including R&D), manufacture, import or supply of cosmetic ingredients.

The main impacts on employment could occur as a result of possible relocation of activities in reaction to the marketing ban. Industry expects that a limited possibility to develop new products in the EU will favour R&D and product development to move closer to emerging markets. Industry also points out that this could be a threat to the cosmetic industry's strong academic networks in the EU as well, with new networks being developed outside the EU.

Example:

One large company alone currently collaborates with around 60 academic groups and funded over EUR 3.5 million in external research in 2010.

76% of responding large Colipa cosmetic companies predict that R&D would be relocated. The amount of R&D relocated could be up to 50%, depending on the company. 45% of SMEs considered that R&D facilities would relocate.

The ingredient manufacturers have similar expectations; 53% predict that up to 50% of R&D could relocate. The development of innovative new raw materials and finished ingredients is expected to move more outside the EU. Relocation of R&D is however not a necessary impact, since R&D could remain in the EU, even for products that can as a result of the marketing ban not be placed on the EU market, but only exported.

Besides the relocation of R&D, industry considers that production facilities could also move outside the EU to focus on growth markets and because of the reduced turnover and profitability of the industry in Europe. This could in the longer run also impact jobs in supporting functions and management. 89% of large cosmetics company respondents from Colipa considered that the ban would have such impacts on employment. It is estimated that a considerable part of the 17 000 scientists' posts would be endangered. In addition, the loss of jobs in the production and supporting functions is expected. More than 66% of EFfCI large company respondents considered that the ban would have impacts on employment. It was also pointed out that once the shift of excellence (and related jobs) outside the EU has occurred, it is unlikely to be reversed.

It needs to be stressed once again that there is considerable uncertainty about the exact impacts on employment. The figures above are forward looking industry expectations. According to these expectations, the majority of industry stakeholders expects an impact that would affect several thousand R&D staff, up to 8 000, as well as other staff.

However, many of the target markets for European manufacturers are already today outside the EU. The highest market growth is expected to take place by 2015 in South America and Africa. The market for premium cosmetics in China is expected to double by 2015. Relocation may therefore take place in any case.

2.2.9. Specific Impacts on SMEs and Micro-Enterprises

Particular attention has been given to the situation of SMEs[61] and micro-enterprises[62] in the assessment. Around 100 SME's provided input to the Colipa response to the targeted stakeholder consultation and the Commission services met with a number of national associations and small manufacturers to complement the information.

The marketing ban applies to large and small companies alike and the cosmetics industry has a high percentage of SMEs. SMEs are therefore clearly among those affected by the ban. According to data provided by Euromonitor for 2010, there were about 4 072 small and medium sized cosmetic product manufacturers in the 27 EU Member States. In some Member States, SMEs represent more than 80% of the overall cosmetic manufacturers, as reported by Colipa and EFfCI. In Germany, in 2008 SMEs represented 76% of the total number of cosmetic manufactures (but the statistics do not cover all sectors, so the percentage for the whole cosmetic sector is probably even higher). Figures from Germany also indicate that the overall number of SMEs in the cosmetics field is much higher than the Euromonitor data suggests. The European Organization of Cosmetics Ingredients Industries and Services (UNITIS), representing companies in the field of botanical natural complex substances is made up of 50 member companies, all of them SME's.

Specific data on the number of micro-businesses is not available, however data collected in the context of the earlier impact assessment[63] indicated that there were 855 firms with fewer than 10 employees in France in 2004 and that Italy had over 1000 firms with fewer than 10 employees. These figures would indicate that the share of micro-businesses is very high.

Colipa estimates that the SME market share is about 30% (about EUR 20 billion) of the total EU cosmetics industry. This is confirmed by figures received from Germany, where SMEs have 36% of the market share in this sector.

SMEs and micro-enterprises were not excluded from the testing and marketing ban when it was introduced. Exempting SMEs and micro-enterprises would run counter the animal welfare objective and is therefore also not considered in this assessment.

SMEs and micro-enterprises face in principle the same impacts as those described above, ie. less access to ingredients and thus limited possibilities of product re-formulations. However, the impacts are not expected to be the same for all SMEs.

SMEs and micro-enterprises specialised in cosmetics with a high rate of innovation could feel the impacts of the marketing ban. They often consider that the bans will have no impacts on them since they do not themselves test or commission tests. However stakeholders also underline (eg. the input received from UEAPME) that SMEs might be the least aware of these impacts. SMEs depend to a large extent on toxicological data being provided to them by their suppliers and may not be aware of the extent to which this data will not be available in the future. They will also often have less access to data from other sectors than larger companies with a varied product portfolio. Also, a more commoditised market/mass market that competes more on price is likely to disadvantage SMEs that can less easily compete on economies of scale rather than in niche markets. SMEs are also less likely to relocate or to focus on exports.

Another group of SMEs and micro-enterprises that is likely to be affected are small and specialised ingredient manufacturers. UNITIS in particular underlined in its submission to the targeted stakeholder consultation impacts on its around 50 SME specialised member companies. Ingredient manufacturers and especially small and specialised ones depend on constant ingredient innovation.

There are however also a number of niche market SME's and micro-enterprises that might be less negatively affected by the ban or even benefit from it. This would include companies already working under the 'animal testing' free label. Around 115 companies are part of the Leaping Bunny label in Europe (400 worldwide) alone, many of whom SME's. This would also apply to SMEs that work with well-established product lines, such as traditional soaps or other products less prawn to product innovation.

2.3. Subsidiarity

The use of Union competences is governed by the principles of subsidiarity and proportionality (Article 5 TEU). The current EU legislation on cosmetics is based on Article 114 TFEU (ex-article 95 TEC) and its aim is to ensure a high level of protection of human health as well as the proper functioning of internal market. Article 13 of the TFEU contains the obligation to pay full regard to the welfare requirements of animals when implementing the internal market policies.

The Cosmetics Directive/Regulation exhaustively harmonises rules on consumer safety of cosmetic products placed on the EU market. Thus, changes to this legal framework can only be achieved by EU action. The marketing ban directly addresses the free movement of cosmetic products in the Union. This is already subject to harmonized legislation and cannot be addressed at Member State level without leading to a serious fragmentation of the market. It can therefore only be achieved at Union level. Besides the testing and marketing ban, the Cosmetics Regulation also harmonised the possibility to grant derogations from the bans and provided such a possibility under Article its 18 (2).

All previous legislation in relation to the marketing ban was adopted at Union level. The first provisions in relation to the marketing ban of cosmetic ingredients or combinations of ingredients tested on animals in order to meet the requirements of the Directive were introduced to the Cosmetics Directive in 1993 with an application date of 1 January 1998, first postponed to June 2000, then to 30 June 2002 and finally for the endpoints in question here to March 2013. These extensions of the deadline were essentially due to the non-availability of alternative methods to animal testing, however the last extension made the testing ban and the 2009 marketing ban independent of the availability of alternatives (see for more details above 2.1.3.).

3. Objectives 3.1. General objective

The general objective is to ensure a proper functioning of the internal market and maintaining a high level of protection of human health, while paying full regard to the welfare requirements of animals.

3.2. Specific objectives

The specific objectives followed are accordingly on the one hand linked to the functioning of the internal market (3.2.1. and 3.2.2., Article 114 TFEU) and on the other hand to the animal welfare objective (3.2.3. and 3.2.4., Article 13 TFEU).

3.2.1. To maintain consumer safety and consumer choice (specific objective 1 – Consumer Safety and Choice)

For more than 30 years, the Cosmetics Directive has provided a legal framework that ensures consumer safety. The Cosmetics Regulation strengthens this framework. The Cosmetics legislation has favoured a broad, varied and innovative offer of cosmetic products to European consumers. Consumer choice is likely to be impacted by a limited access to certain cosmetic ingredients and thus products. The objective is to maintain the current level of consumer safety and consumer choice.

3.2.2. To maintain innovation and competitiveness of the European cosmetics industry (specific objective 2 – Innovation and competitiveness)

The Europe 2020 strategy for smart, sustainable and inclusive growth[64] called for an ‘Innovation Union’ to improve the framework conditions for innovation[65]. The regulatory framework for cosmetics should therefore be supportive of innovation. The current framework has contributed to a thriving cosmetics industry that has also largely been able to resist the economic crisis. The cosmetics and cosmetic ingredients industry also plays an important role in creating jobs - direct and indirect. A reduced access to cosmetic ingredients and the resulting limited product innovation could impact the competitiveness of the industry. The objective is to maintain industry's capacity to innovate and its competitiveness. The EU is an important trading partner for third countries when it comes to cosmetics, with the EU representing almost half of the global market, followed by the United States and Japan. The objective is to maintain this trade.

3.2.3. To provide animals with a high level of protection and welfare (specific objective 3 - Animal Welfare)

Animal welfare is enshrined in Article 13 of the Treaty on the Functioning of the European Union, which is part of its provisions with general application. The objective is to pay full regard to animal welfare in implementing the Union's policies. While currently animals are still used outside the EU for the purposes of the EU cosmetics legislation, once the 2013 deadline enters into force such testing data cannot be relied on, leading to a likely reduction in animal use. Animal welfare is also served through a proper enforcement of the current provisions. Legal clarity in relation to the scope of the provisions and additional tools for Member State authorities to carry out the necessary checks in relation to the compliance with the marketing ban will help ensure the effectiveness of the provisions in place. The Commission Communication on the European Union Strategy for the Protection and Welfare of Animals 2012-2015[66] in particular underlined the need for better implementation and enforcement of existing provisions in relation to animal welfare.

3.2.4. To maintain the incentive for continued research on alternative methods to animal testing (specific objective 4 – Research into alternatives)

A safety assessment of cosmetics without using animals can only be achieved if alternative methods are in place. Considerable funding has been made available to develop and validate new alternative methods to animal testing by the Commission, Member States and the cosmetics industry. These efforts have contributed to validated alternative methods for several endpoints. Significant advances have been made in reducing the number of animals used in tests. These findings have not only benefited the cosmetics industry, but help to reduce the number of animals used across sectors. The objective is to keep up or step up the momentum for the remaining endpoints, not only out of animal welfare considerations, but also because this work allows to better understand the toxic pathways and to make better safety assessments in the long run. Development of alternatives is itself innovation and creates new opportunities for industry. Continued efforts in research into alternatives is also in line with the Commission's international co-operation in the International Cooperation on Alternative Test Methods (ICATM).

4. Policy Options 4.1. Option 1: Baseline/No