While people in China were still enjoying the relaxed atmosphere of the National Day holiday, well-known beauty brand L'Oreal Co. (LRLCY) found itself mired in a series of talc-related lawsuits.
According to recent foreign media reports, L'Oreal Co. (LRLCY) has hired restructuring advisors to explore spinning off tort liabilities related to talc into a separate legal entity and selling it to external investors, in a bid to transfer potential "talc causes cancer" risks. As of June 30 this year, the number of talc lawsuits against L'Oreal Co. (LRLCY) in the United States had reached approximately 760, with thousands of additional claims alleging that hair straightening products cause cancer.
Whether "talc-containing" products are sold in mainland China remained unclear, as L'Oreal Co. (LRLCY)'s official customer service and relevant personnel were not working during the National Day holiday. Only the customer service of L'Oreal Co. (LRLCY)'s official flagship store on JD.com responded, saying: "All products sold in domestic stores are brand-direct, and all products strictly follow quality management measures and comply with relevant national quality, hygiene and safety standards." Regarding whether products containing "carcinogenic talc" raw materials are being sold, the personnel did not give a direct response.
Talc Cancer Lawsuits Mount as China Unit Issues Latest Response
On October 5, foreign media reported that L'Oreal Co. (LRLCY) had hired restructuring advisors to study how to deal with growing legal liabilities in the United States, which stem from the use of talc (which can cause cancer in extreme cases) and other chemical ingredients in some of its cosmetics. The report said L'Oreal Co. (LRLCY)'s U.S. subsidiary is working with law firm Weil Gotshal & Manges and investment bank Ducera Partners to handle personal injury lawsuits alleging that its talc-containing products cause illness.
Public information shows that talc is a powder mined and processed from natural mineral talc. Because of its unique softness, smoothness and moisture-absorbing properties, it is widely used in talcum powder, pressed powder, eye shadow and other cosmetics. Since talc and asbestos (a Group 1 carcinogen identified by the International Agency for Research on Cancer) often coexist in nature, if purification is not thorough during mining and processing, talc powder may contain asbestos impurities, posing a cancer risk.
Although L'Oreal Co. (LRLCY)'s U.S. subsidiary had previously denied the allegations, saying: "The company is confident in the safety of its products, but the claims lack legal and scientific basis," this response did not fully dispel consumer concerns. According to L'Oreal Co. (LRLCY)'s latest half-year report, as of June 30, there were about 760 pending lawsuits in the United States concerning certain talc-containing cosmetics alleged to contain asbestos particles, up from about 620 at the end of 2025.
According to people familiar with the matter, L'Oreal Co. (LRLCY) is considering transferring tort liabilities to a separate legal entity and selling it to external investors, thereby separating the related risks from its main business. This approach is similar to Honeywell's move last year to spin off asbestos-related tort debt into a newly created entity.
Amid the overseas turmoil, are "talc-containing" products sold in mainland China? According to the latest response from the customer service of L'Oreal Co. (LRLCY)'s official flagship store on JD.com: "All products sold in stores are brand-direct, and all products strictly follow quality management measures and comply with relevant national quality, hygiene and safety standards." The person revealed that although L'Oreal Co. (LRLCY) originated in France, products sold through domestic online official channels are all produced in China and manufactured and tested according to domestic cosmetics standards, so they can be purchased and used with confidence. However, regarding whether products containing "carcinogenic talc" raw materials are being sold, the personnel did not give a direct response.
Capital Market Insiders: Liability Transfer Is Not Easy
In fact, before L'Oreal Co. (LRLCY), talc had already caused several giants to stumble in the U.S. market. In July this year, Johnson & Johnson spent about $5.5 billion to settle about 69,000 existing ovarian cancer claims, an agreement that covers only existing claims and does not affect future lawsuits by new patients. Since the first lawsuit in 2009, Johnson & Johnson has been embroiled in a 17-year battle over talc disputes, during which it tried to transfer related liabilities to a newly created subsidiary, LTL Management, and seek bankruptcy protection, but its bankruptcy settlement proposals were rejected by courts three times. Avon's outcome was more direct: in 2024, Avon Products filed for bankruptcy protection to deal with debt and talc liabilities.
A capital market insider said in communication that L'Oreal Co. (LRLCY)'s consideration of transferring tort liabilities to a separate legal entity and selling it to external investors is equivalent to turning tort liabilities into a tradable "asset package." Unlike Johnson & Johnson, which repeatedly challenged bankruptcy proceedings, or Avon, which ended in bankruptcy, the appeal of this approach is obvious: once the deal is completed, the related liabilities are permanently removed from the balance sheet, which helps improve the company's free cash flow. However, the legal threshold for this operation is also stringent: the seller must inject sufficient capital into the new entity and obtain an independent solvency opinion, otherwise it may repeat the path of Johnson & Johnson's rejected bankruptcy plan. In the view of the aforementioned person, this kind of "liability transfer" is essentially spending real money to buy finality, not a free loss-cutting move. But Johnson & Johnson's experience also reveals a fact: in the eyes of the courts, it is far from easy on paper for a wealthy parent company to separate litigation risk from its main business.
It is worth noting that in addition to the "talc causes cancer" issue, L'Oreal Co. (LRLCY) also faces thousands of lawsuits alleging that hair straightening products may cause cancer in women. In September this year, Arizona filed a lawsuit against L'Oreal Co. (LRLCY) and its U.S. subsidiary, accusing them of concealing evidence that products may cause cancer. If the hair straightening lawsuits and the "talc cases" are integrated into the same new corporate entity, it will further increase the difficulty of implementing the restructuring plan.
Nearly 50,000 Complaints: How Long Can the Market Value Myth Last?
On September 15, L'Oreal Co. (LRLCY) overtook LVMH with a market value of about 203 billion euros to become the highest-valued listed company in France, the first time since 2017 that a "non-luxury company" has topped the Paris stock exchange at the close. L'Oreal Co. (LRLCY)'s rise is, to some extent, a mirror of the global luxury industry's contraction. Data from consulting firm Bain shows that over the past three years, the global luxury consumer base has fallen from about 400 million in 2022 to about 340 million in 2025, the first decline in 30 years, with about 60 million consumers no longer buying luxury goods. During the same period, prices of most luxury brands rose 50% to 70% compared with 2019, and continuous price increases became an important reason for customer attrition. Berenberg analyst Nick Anderson used the "lipstick effect" to explain this substitution: "When people cannot afford high-end handbags and shoes, they turn to lower-priced small consumer goods such as lipstick for comfort." This shift in consumption trends has also become key to L'Oreal Co. (LRLCY)'s market value overtaking.
But from an overall development perspective, even if L'Oreal Co. (LRLCY) temporarily ascends the French stock market "throne," how long can it stay there? For L'Oreal Co. (LRLCY), China is both its largest single market and its biggest variable. In 2025, L'Oreal Co. (LRLCY) Group's revenue was 44.05 billion euros, of which North Asia, including China, recorded sales of 10.075 billion euros (about 80.6 billion yuan), up only 0.5% on a comparable basis. According to L'Oreal Co. (LRLCY)'s disclosures, the mainland China business accounts for about 17% of the group's total revenue and about 70% of North Asia. In the first quarter of this year, L'Oreal Co. (LRLCY)'s North Asia growth also rebounded 4.8%, with overall growth still limited.
At the same time, shortcomings in consumer experience are also accumulating. In the view of the "BUG" column, on the Black Cat Complaint platform, complaints related to L'Oreal Co. (LRLCY) have accumulated to nearly 50,000. Sorting through the complaints, the issues are concentrated in three categories: first, counterfeit goods, with many non-official channels accused of selling suspected fake L'Oreal Co. (LRLCY) products; some consumers complained that sample products bought on Pinduoduo had "multiple batch numbers that were completely identical." Second, insufficient after-sales control, with complaints such as no price difference compensation after live-stream discounts, customer service passing the buck, and delayed refunds common. Third, allergies or damage after use, with merchants refusing to bear the full cost of treatment. The value of the market value "throne" ultimately depends on products and trust. While overseas litigation turmoil continues, how domestic channels tackle counterfeiting and how the after-sales system makes up for shortcomings will determine how long L'Oreal Co. (LRLCY) can enjoy this wave of "lipstick dividend." For consumers, no matter how market value rises or falls, safety and quality are always a bottom line that cannot be discounted.
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