NASIR: Welcome to our podcast where we cover business in the news and add our legal twist.
My name is Nasir Pasha.
MATT: And I’m Matt Staub.
NASIR: And we get to cover your favorite actress today, right? She is an actress, right?
MATT: Yeah, and I have something to bring up. She has like a bio on their company site.
It’s Jessica Alba and it says, “Golden Globe-nominated actress whose career includes roles in films such as Fantastic Four, blah blah blah… and television shows like Dark Angel, The Office, and Entourage.” When was she on The Office? That’s what I trying to remember. Was that a typo?
NASIR: Yeah, it’s a typo.
MATT: She’s prone to typos or making mistakes.
NASIR: Making mistakes, yeah.
MATT: We’ll get down to the bottom of this before the end of the episode.
You know, how do you choose the name of your company if you’re starting a new company? You know, there’s a lot of thought that’s put into the name, probably – or at least I would hope. Her company is called Honest – The Honest Company Inc. Started in California in 2011 – maybe a little bit later, 2014? Somewhere in that range.
NASIR: Sorry to interrupt. I had to look it up, of course, on The Office. I couldn’t get over it. Apparently, remember there was a movie within the show where Jim and Pam would watch?
MATT: That doesn’t count. Yeah.
NASIR: She was in that with Jack Black. I guess she was on The Office.
MATT: All right. Well, that’s fine. She’s not lying about it but why would that be…?
NASIR: How she’s known for? I know. It was like one episode, right?
MATT: And that one was tricky, if you remember, because it was I think someone right after the Superb Bowl and they kept billing it as “oh, we have all these big names in this episode with Jack Black, Jessica Alba and all these people” and then we got into the actual episode which was funny. The episode was funny, I’ll give them that. But it was tricky because these actors just being in a separate show.
NASIR: It was a little deceiving or dishonest, I would say, no?
MATT: Perfect, there you go – dishonest – and that’s what we’re getting to and it is deceiving. It was misrepresentation. Whether it’s intentional or negligent, it was something.
NASIR: That is the question.
MATT: Here is the problem. So, she has this company that has all these I guess we’ll call them beauty products and products for babies and kids.
NASIR: I think they’re trying to expand in different vertical. I mean, they do baby wipes, too.
MATT: Oh, I that was the reason it started – because she’s a mom of two and she wanted to have these “safe products” that are not full of all these chemicals like most things out there and that’s fine and that’s why she named it The Honest Company because our products are honestly made without all these things and there’s a whole list of them on the website. And so, one of the them is SLS – this is listing it as sodium lauryl? Do I have the right thing?
NASIR: Yeah, it’s a sodium lauryl sulfate.
MATT: Okay. Yeah, sodium lauryl sulfate – SLS.
NASIR: They’re not selling that. That’s what’s in it.
MATT: Just bottles of that.
NASIR: They’re selling a laundry detergent that is apparently SLS is a common known chemical. It’s used a lot in soaps and different things like that. It’s a common active ingredient but apparently – for whatever reason – some people say it’s not good so they were basically selling this laundry detergent. If you look at the product, it will list out all the chemicals that it doesn’t have. As we commonly see, we see a list of ingredients. Part of their transparency is they list all the ingredients that it doesn’t have and that’s one of them.
MATT: Right, and that’s the whole Honest aspect of it, you know? It’s trying to be honest about things.
“We honestly don’t have these chemicals,” but apparently they did and I don’t know why Wall Street Journal was the one that did this investigation. I didn’t know that Wall Street Journal did investigations.
NASIR: At least in those types of things but yeah.
MATT: Yeah, exactly. It’s like, what was the thought process? They’re probably upset about the Office thing as well.
NASIR: Yeah, that’s probably it. Well, if we want to really dig into it – kind of conspiracy theory – one of the things that Jessica Alba and her co-founder were saying when they first started this business is they’re entering into a very tough market. This is a good example with this SLS – all soaps pretty much have that so, if you want to create a soap, it’s almost as if you have to use it in order to do so. And so, entering that market and figuring out supply chains, you’re kind of working against yourself because you have to recreate certain aspects of this business. And so, conspiracy theories could suggest that there’s these bigger markets, big industry guys are kind of wanting Jessica Alba and her company to fail and so that’s why the Wall Street Journal got into play but, yeah, maybe that’s what they would say. I don’t know.
MATT: That’s a good point because her company was valued in a private valuation at 1.7 billion – with a B – in less than four years.
NASIR: With a P? Or a B?
MATT: B as in billion.
NASIR: Not pillion, okay.
MATT: In four years, 1.7 billion for this clean company or whatever they want to call it. I mean, that’s a possibility because you have the Procters and Gambles of the world, Clorox, big companies like that – the mainstream known items like, you know, the example here is Tide.
MATT: That’s going to be a direct competitor of what she’s offering. I think there might be something to your theory.
NASIR: Yeah, and I’m not suggesting that Wall Street Journal’s owned by Procter & Gamble and that’s why they did it. I’m suggesting that it’s easy for a competitor to say, “Hey, wait a minute, we make laundry detergent, too. How are you able to create this laundry detergent without SLS?” And so, of course, they do the reporting and then the studies.
Let’s narrow it down to what’s going on here because I think, from a business legal perspective, it sounds obvious. It’s like, “Okay, if you’re saying that your detergent doesn’t have SLS and you’re selling it and it does, then that’s pretty, pretty bad.” But it’s a little more complicated than that because, apparently, what their initial response was that, “We’ve tested it. We disagree with these other people that have tested it. There may be trace amounts of SLS but we use this chemical called SCS,” – I believe is sodium coco sulfate – and they term it as a less harsh alternative to SLS. And so, that’s all well and good but, apparently, what is a little confusing is that the manufacturer – or I should say the supplier that they get this chemical SCS – Honest said its manufacturing partners and suppliers have provided assurances that these products don’t contain SLS. But then, when asked this actual supplier, Earth Friendly Products, there was zero SLS content in the product because we didn’t add any of our own chemical or any of our own SLS to it. Apparently, the supplier of this particular product – SCS – has their own supplier and that supplier is called Trichromatic West and they said that there’s some kind of misunderstanding with the detergent maker because it said that the SLS content was listed zero because they didn’t add any SLS material to it. There’s this kind of chemistry lesson going on here because it seems like SCS may contain SLS and, somehow, SLS is still there. Whether it’s a different chemical compound or diluted, it’s a little confusing, right?
MATT: Well, yeah, and that’s the reason they basically came out and said, you know, “We disagree with these two independent studies that were done.” I don’t think we even mentioned the part where, seven days after the Wall Street Journal reported on this, there was a class action lawsuit which I probably should have led off with, I suppose.
NASIR: Yeah, but that’s going to happen, of course. You get something that clearly shows that there’s a discrepancy of whether a chemical is contained in a product that is otherwise advertised not to. But, at the same time, Honest, this company is kind of asking for it – to be sued. I mean, first of all, they are presenting themselves to a market that is ultrasensitive to even the smallest of mistakes regarding what you have in your product. I suppose, from their defense, they’re like, “Okay, well, so long as we’re transparent…” They’re not saying they’re perfect. They’re not saying that there’s no chemicals in their products. “We’re going to disclose to you what’s in it and what’s not in it.” It seems as though, if what they’re saying is true – which I think ultimately that may be the case – I think Honest still doesn’t know what’s going on here – that they just made a mistake. It may not have been their mistake; it may have been the supplier’s mistake.
MATT: That all will get sorted out and I believe, if these independent studies, if they’re true, they’re saying that the amount of SLS in Honest’s laundry detergent would basically equate to what a Tide would have in theirs.
At the end of the day, it’s basically producing the same thing, I guess. At that point, it would make sense. Like, “Oh, maybe that’s how you’re able to turn out a healthy profit margin on this – because you are not paying more.” I am assuming that the SLS is a cheaper alternative than this SCS.
NASIR: Oh, so-called “less harsh” version of it or something.
MATT: Well, that’s the thing, too. There’s debate over whether this is even harmful.
NASIR: Yeah, that’s a different issue as well. But you mentioned Tide. That’s a great point because the maker of Tide, of course, is Procter & Gamble and they’re like, “Well, wait a minute, you are advertising yourself as if you don’t have SLS and this is somehow a better product than ours because we don’t use it and you were even charging more for it because of that, that’s not fair!” And so, there’s legitimate gripe for this but it seems like everything seems to contain SLS, right? Toothpaste, shampoo, body wash, mouthwash, dish soap…
MATT: Depends what you buy.
NASIR: I suppose. I’m going to start looking to see what products have SLS and drive me crazy.
MATT: Well, I’m trying to see… I probably should have done some number-crunching on this beforehand but the thing of laundry detergent on their site sells for $12.95. it seems pretty cheap, I think.
NASIR: Well, that’s for one ounce.
MATT: Well, that’s for 70 ounces. How much is Tide?
NASIR: Like I would know, I don’t know. I know the barrel of Tide; I don’t know it by the unit price. I go by barrels.
MATT: So, 50 ounces of Tide is $9.99 so, I mean, that’s about the same.
NASIR: I’m sure it’s comparable. But, hey, you know Jessica Alba calls it in one of her books, I guess, 2013, The Honest Life. She calls SLS a toxin that consumers should avoid. And so, it does look, you know, it doesn’t look too good when you include a toxin within one of your products.
MATT: The two main options are The Honest Company Inc. knew about this and was trying to get away with it.
NASIR: That seems doubtful, right?
MATT: Yeah, I mean, that’s what I was going to say. That seems doubtful. I mean, at some point, especially when they got successful, you figure someone was going to look into it so I think it’s the latter in that somebody made a mistake somewhere. Now, whether it’s The Honest Company Inc., whether it’s probably the supplier or one of the many sub-suppliers or these other ones.
NASIR: Mistake is a strong word too because, for example, alcohol-free products, if you buy some wet wipes that are supposedly alcohol-free and you look at the ingredients, it still may say “alcohol” in there and it’s because, when people say “alcohol-free” I guess it’s called ethyl alcohol, right? It’s that kind of chemical or substance that dries out your skin. But then, there’s a different type of alcohol. And so, from an FDA perspective, you know, disclosing ingredients and things like that, that’s an acceptable difference because, somehow, without getting into the chemistry of it, they’re different things. And so, that still may be the case here.
MATT: Yeah, and I think with the alcohol-free, that was just a typo and it was not supposed to say “alcohol-free.” It’s supposed to be “alcohol, free” so it’s like free alcohol that’s added.
NASIR: Oh, got it.
MATT: I think that was a Simpsons. This is too many references in this episode.
NASIR: Well, I don’t get alcohol-free beer because I don’t drink alcohol and I look at the back and it still contains alcohol or like a very small percentage or something. So, I don’t really get how that works.
MATT: Is that true?
NASIR: Yeah, but I don’t know. Maybe it’s such a small amount that it’s negligible because you don’t have to be 22 to buy alcohol-free beer from what I recall – not that I’ve ever tried it.
MATT: Well, we have a lot of things to figure out.
Let’s go back to The Honest Company. Whatever ends up happening in this class action lawsuit, you know, something will happen but I think the biggest thing with this case is just this could be a crushing blow from a PR standpoint – well, not crushing blow necessarily but, from the PR perspective, this really needs to be handled because the type of people that are buying her products now are going to feel betrayed.
NASIR: Yeah, it’s not good but I feel like it can be explained. It does require a little bit of PR work. The only thing that I’d be worried about on their end is we try to look for the class action lawsuit. The misrepresentation aspect or even truth in advertising, that can be explained and can pass off the blame a little bit, but there are certain things in products that you may not be able to pass on the blame and there might be strict liability with some of these things. And so, that’s the only concerning part about it on their end and how they’re reacting is also a little concerning too because now Honest – you know, their first reaction at least and maybe they’ll have a second reaction was that, you know, “We’ve tested it ourselves and it’s not in there.” That’s probably the best way to maintain it. If it’s just a disagreement of interpretation – which, apparently, according to the Wall Street Journal or it wasn’t the Wall Street Journal, I think it was Inc.com that basically interviewed different chemists – there’s no disagreement as far as how these things are determined and so my biggest concern is that, if somehow there’s some kind of strict liability because of some statute that they may have broken by making this mistake, that would be the biggest concern.
MATT: You know, another thing we forgot to mention as well – and I hadn’t heard of this – this personal assistant service.
NASIR: Oh, yeah, TaskRabbit.
MATT: Yeah, TaskRabbit, they partnered up with Honest and you can get this “Honest clean” where somebody shows up and only uses Honest branded products so some sort of partnership they’ve formed.
NASIR: TaskRabbit is one of those sharing economy – not the sharing economy – kind of like the Uber model but they used to start out with any random task. Now, it’s very limited to a certain task like cleaning and so forth. So, I mean, it’s a good partnership and kind of comes in the midst of all of this. But, overall, I can’t imagine. Most of these class action lawsuits only go forward because there’s money there, right? Other class actions for a small business can really destroy it but you’re talking about a company that’s at least valued over a billion dollars and so they should survive over one product, right?
MATT: That’s something we didn’t really talk too much about. Supposedly, they only did testing on this one product so who knows if it’s true and, if they’re liable for something, maybe it’s in more or way more.
NASIR: Yeah, true.
MATT: I wouldn’t be surprised if there’s independent tests outside – or external tests – and then internally with The Honest Company Inc. both.
NASIR: And they should be – they should be doing both and then making the adjustments accordingly and doing recalls accordingly and all that.
MATT: The comma thing I found it, it was Lionel Hutz’ business card.
NASIR: Was it The Simspons?
MATT: So, it says, “Works on contingency. No money down.” She’s like, “Well, what about this?” He’s like, “Oh, no,” and he writes on there, “Works on contingency? No, money down!” I’m going to get a business card, except we don’t really do contingency work but it’d still be funny to have.
NASIR: Well, all right, thanks for joining us!
NASIR: Stay SLS free!
MATT: Keep it honest, keep it sound, and keep it smart!