Decoding and leveraging AI regulations for beauty sector in US and EU with Duane Morris

01 Mar 2024 --- Duane Morris provides insights into the challenges and opportunities beauty companies face while using AI to appeal to younger consumer demographics.

We previously learned about the possible risks associated with beauty companies integrating AI technologies with issues such as regulatory compliance, appearance bias and personalization.

Personal Care Insights now delves into the intersection of law and innovation with Agatha Liu, a partner at Duane Morris and Kelly Bonner, an associate attorney at the law firm. We look at the competitive dynamics of the beauty market to the balance between innovation and American AI regulations.

How does the competitive landscape of the beauty industry impact businesses’ use of AI technologies, especially when it comes to targeting younger consumer segments?
Bonner: The highly competitive nature of the beauty industry, with its desire to appeal to younger consumers, is certainly a key driver in beauty brands embracing AI tools to offer enhanced customer shopping experiences. Kelly Bonner, an associate attorney at Duane Morris.

Increasingly, brands are pursuing Gen Alpha, who value authenticity and approachability. They engage more directly with beauty products and services and with much greater technological agency than previous generations. Tools like virtual try-on (VTO) technology and conversational AI can deliver real-time, personalized experiences and generate tailored product recommendations, visuals and descriptions that appeal to how Gen Alpha thinks and shops. 

Can you provide some context about US AI regulations that the beauty industry should know? What do you expect is coming, especially considering the AI Act in the EU?
Bonner: In the US, AI regulation is still somewhat state-dependent, with bills or resolutions introduced or enacted in approximately 20 states. Several other states have formed councils and task forces to look into AI, particularly with respect to its impact on individual privacy rights and the right to opt out of AI systems. 

On the federal level, the National Artificial Intelligence Initiative under US Code Annotated Title 15, Chapter 119, Subchapter I guides on matters related to AI, such as the potential consequences of technological displacement and the responsibility for any violations of existing laws by an AI system. Also, the US Code Annotated Title 15 discusses developing a strategic plan for AI and developing a voluntary risk management framework for trustworthy AI systems. These regulations could be relevant to the beauty industry as it increasingly incorporates AI into its products and services.  

Additionally, President Biden’s 2023 Executive Order on AI provides significant guidance, while regulatory agencies like the Federal Trade Commission have guided chatbots and fake reviews or product endorsements. I think we can expect continued regulatory activity in the US. Brands are focusing more on Gen Alpha consumers, who prioritize approachability and genuineness, with tools like VTO.

Liu: The EU AI Act imposes specific obligations on the providers and deployers of so-called high-risk AI systems, including testing, documentation, transparency and notification duties. These have been some of the basic principles in developing and using AI since the beginning, even if the evolution of corresponding regulations has been slow in the US. Therefore, we could expect more regulations to generally make the development and use of AI more transparent, which could certainly benefit from more documentation of how AI technologies are built and applied, more testing to see how AI technologies perform, and more notification of the use and results of AI technologies.  

How crucial is it for beauty companies to balance integrating AI to innovate and ensuring compliance with laws and consumer protection guidelines?
Bonner: It’s very important for companies to balance innovation with compliance, particularly as technological innovation often outpaces legal regulations and consumer protection standards. These are business judgments and risk assessments that companies will have to make, and it’s important to have the advice of counsel when making them.

By Venya Patel