Johnson & Johnson, which has spent years insisting that its baby powder is safe,

recalled 33,000 bottles of the product on Friday after the Food and Drug

Administration discovered evidence of asbestos, a known carcinogen, in one of

the bottles.

The recall, the first time Johnson & Johnson has pulled baby powder from store

shelves over asbestos concerns, could undercut its defense against a swarm of

allegations that its talc-based products caused cancer. It comes as the company,

which reaches into the lives of millions of people through brands such as Tylenol,

Band-Aid and Rogaine and reported nearly $82 billion in sales last year, is

entangled in numerous legal battles over the safety of its products.

Johnson & Johnson said that it is discontinuing its talc-based baby powder in the

United States and Canada as demand fell in light of mounting lawsuits that said it

caused cancer.

J&J attributed the decline in large part to changes in consumer habits and fueled

by misinformation around the safety of the product and a constant barrage of

litigation advertising.

The consumer and medical goods giant, which makes everything from Tylenol to

Aveeno lotions, has repeatedly denied the allegations.BBM208/03 Business Ethics

Sem: Sept 2020

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The company said it remains steadfastly confident in the safety of talc-based

Johnsons Baby Powder.

Decades of scientific studies by medical experts around the world support the

safety of our product, the company said in a statement to CNBC. We will

continue to vigorously defend the product, its safety, and the unfounded

allegations against it and the company in the courtroom.

The company has settled some claims and is still fighting others involving

its role in the nationwide opioid crisis. On Thursday, Johnson & Johnson agreed

to pay $117 million in a settlement over the deceptive marketing of transvaginal

pelvic mesh implants, and a jury this month ordered it to pay $8 billion to a

Maryland man who accused the company of playing down the risks associated

with the antipsychotic drug Risperdal. In total, the company faces more than

100,000 lawsuits over its products.

More than 15,000 of those are from people who say baby powder and other talc

based products caused them to develop cancer. Some have mesothelioma, an

aggressive cancer that is considered the signature disease of asbestos

exposure, while others have ovarian cancer.

The decision to pull the baby powder, sourced from China and distributed last

year, is a whopper for a company as dependent on consumer trust as Johnson

& Johnson, said David Noll, a law professor at Rutgers University.

I cant imagine an attorney for Johnson & Johnson standing up in front of a jury

now and saying with a straight face that the product is safe, Mr. Noll said. He

added that if people come to associate the companys signature product with

deadly diseases, there will be huge spillover effects for its ability to market other

products.

The recall was prompted by the FD.A.s discovery of trace levels of chrysotile

asbestos in samples from a bottle of baby powder bought from an online retailer.

The company said it was informed of the results on Thursday and recalled bottles

from lot number 22318RB out of an abundance of caution, though the F.D.A.

advised consumers with baby powder from the affected lot to stop using it

immediately.

But Johnson & Johnson also repeated its longstanding defense against cancer

claims, saying that thousands of tests over the past 40 years repeatedly confirm

that our consumer talc products do not contain asbestos. The company

appeared to question the testing process, saying in a statement that it is working

with the F.D.A. to determine the integrity of the tested sample and the validity of

the test results.BBM208/03 Business Ethics

Sem: Sept 2020

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Dr. Susan Nicholson, Johnson & Johnsons vice president of womens health,

said during a short conference call with investors on Friday that the F.D.A.s

report showed an extremely unusual finding that was inconsistent with our

testing to date.

In response, an agency spokeswoman, Gloria Snchez-Contreras, said, The

F.D.A. stands by the quality of its testing and results.

Analysts estimate the baby powder lawsuits could cost Johnson & Johnson $5

billion to $10 billion. The recall could lead to the companys having to pay more in

damages or to settle cases, said Erik Gordon, a University of Michigan business

professor who studies corporate governance. Shares of the company closed

down more than 6 percent on Friday.

Plaintiffs in the talc cases have accused Johnson & Johnson of failing to warn

customers of the risks of asbestos contamination, despite being aware of

concerns for decades. A New York Times investigation last year found internal

memos and reports made public during litigation that document executives

concerns about potential contamination that date back 50 years.

Johnson & Johnson disclosed this year that it was being investigated by the

Justice Department and the Securities and Exchange Commission over concerns

about possible asbestos contamination of its talc-based products.

Johnson & Johnson is awaiting a major decision that could tilt the talc litigation in

its favor. As part of pretrial proceedings for thousands of talc lawsuits

consolidated in New Jersey, a federal judge is mulling whether to block testimony

from expert witnesses hired by plaintiffs, a move that could cause many talc

cases to be dismissed or dropped.

[Thousands of people who trusted Johnson & Johnsons baby powder for

decades are suing the company after developing cancer. The Weekly, our new

TV show, investigates their allegations.]

Baby powder represents a tiny fraction of Johnson & Johnson sales but an

outsize threat to its reputation.

Johnson & Johnsons name is so synonymous with their line of baby products,

said Alla Valente, an analyst with Forrester. But recently, she said, the company

has started a damage control campaign that casts it as bigger than its baby

powder, focusing on its slate of other products.

Its about trust: If a mother could trust a Johnson & Johnson product for their

children, then that product must be safe, Ms. Valente said. But now, the dam is

finally breaking, where consumers are saying that enough is enough.BBM208/03 Business Ethics

Sem: Sept 2020

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Talc is a natural mineral, formed in underground deposits under the same

geological conditions as asbestos. In mines, veins of asbestos can intermingle

with talc, geologists say.

Johnson & Johnson officials emphasized on Friday that the level of asbestos

detected was very low, just a fraction of 1 percent of the sample. United States

health agencies, however, say there is no known safe level of exposure to

asbestos.

While health risks increase with heavier and longer exposure to asbestos, the

overall evidence suggests no level of asbestos exposure is safe, and disease

has been found in people with only brief exposures, according to the National

Cancer Institute.

Several earlier F.D.A. tests, including one in the past year and another about a

decade ago, did not detect any asbestos in samples of baby powder.

The F.D.A. does not require safety testing for personal-care products and

cosmetics before they are marketed, and tests products only occasionally,

usually after complaints by consumers or advocacy groups.

The agency considered and soon abandoned a plan to monitor talcum

products for asbestos in the 1970s, when concern about asbestos in household

products captured the publics attention. The F.D.A. commissioned tests of

Johnson & Johnson powders back then, and the company successfully

challenged their validity.

This year, after consumer tests found asbestos in makeup kits for children sold at

Claires, the F.D.A. followed up with its own tests. It detected the carcinogen in

half of 20 products, including Claires eye shadow and compact powder, JoJo

Siwa makeup sold at Claires, and bronzers, blush and other makeup made by

Beauty Plus Global City Color Cosmetics and sold in retail outlets. The products

were eventually recalled.

The agency plans to test 30 more products containing talcum powder, including

those popular on social media and others marketed to children, Ms. Snchez

Contreras said. The products are a tiny percentage of the thousands of personal

care products available for sale.

https://www.nytimes.com/2019/10/18/business/johnson-johnson-baby-powder

recall.html

https://www.cnbc.com/2020/05/19/johnson-johnson-discontinues-talc-based

baby-powder-in-us-and-canada.htmlBBM208/03 Business Ethics

Sem: Sept 2020

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Questions:

1. Although Johnson & Johnson took a massive short-term loss as a result of its

actions to recalled 33,000 bottles of the baby powder, it was cushioned by the

relative wealth of the company.

If the survival of the company is at stake, in your opinion, provide reason(s)

as whether the company should have acted the same way.

(25 marks)

2. Dr. Susan Nicholson, Johnson & Johnsons vice president of womens health,

said during a short conference call with investors on Friday that the F.D.A.s

report showed an extremely unusual finding that was inconsistent with our

testing to date.

Provide reason(s) on whether there was a moral imperative to recall all

Johnson & Johnson baby powder.

(25 marks)

3. Determine the moral minimum required of the company in this case. Provide

your opinion on whether it would favor some stakeholders more than others. If

so, provide your defense in balancing the interests of some stakeholders

more than others.

(25 marks)

4. Imagine that an under-developed country volunteers to take the recalled

product. Its representatives make assurances that all the baby powder will be

visually inspected and random samples taken before distribution.

Provide your argument whether it would that be appropriate in these

circumstances or that it would have been a better solution than destroying all

remaining baby powder bottles.

(25 marks)