An ASA expert found that L'Oreal's consumer study was limited and was not scientifically evaluated.
Mr Sarkozy is accused of accepting thousands of euros from L'Oreal heiress Liliane Bettencourt, now aged 90.
BBC: Nicolas Sarkozy to be investigated in Bettencourt scandal
"A partnership between our companies makes perfect sense, " said L'Oreal Chairman and Chief Executive Lindsay Owen-Jones .
Mr Sarkozy denies receiving illegal donations from L'Oreal heiress Liliane Bettencourt in 2007.
"Combining L'Oreal's expertise and knowledge of international markets with The Body Shop's distinct culture and values will benefit both companies, " he added.
Though she's lent her famous face overseas to brands like Heineken and L'Oreal, the Smartwater deal marked the actress' first stateside endorsement.
Information about eligibility and the application process including the link to an on-line application form can be found on L'Oreal Australia's website.
UNESCO: Call for Applications: L'Or��al New Zealand for Women in Science Fellowship 2015
Bettencourt has held on to her controlling 27% stake in the L'Oreal for some four decades, securing her spot as France's second-richest resident.
L'Oreal said it planned to operate the British company as a stand-alone business with Anita Roddick remaining in her current role as consultant.
Mr Sarkozy, who faces an election campaign next April, has himself been accused this year of taking illegal donations from L'Oreal heiress Liliane Bettencourt.
But L'Oreal said both commercials had been approved by the Broadcast Advertising Clearance Centre on the basis of the "technical substantiation of the product benefits".
But after an investigation, the ASA ruled that L'Oreal did not have enough evidence to prove that the cream's effect was anything more than cosmetic.
Then again, potential bidding rival L'Oreal may not be far behind.
In June, French magazine Challenges reported that Clarins management had informed employee representatives of interest from PPR, its luxury goods rival LVMH and beauty specialist L'Oreal.
Sixteen executives, including Europe's richest woman, the L'Oreal heiress Liliane Bettencourt, offered in an open letter to pay a "special contribution" in a spirit of "solidarity".
Today France's billionaires, such as L'Oreal heiress Liliane Bettencourt, tend to stay discreetly out of view and lack the same spirit of charity found in America.
Fast makeover: Shares in the natural-products chain Body Shop hit a 14-year high in February when L'Oreal admitting it was always looking to add shareholder value.
Like the other L'Oreal Fellowships awarded around the world, the New Zealand Fellowship is intended to help early-career female scientists to consolidate their careers and rise to leadership positions in science.
UNESCO: Call for Applications: L'Or��al New Zealand for Women in Science Fellowship 2015
L'Oreal said the Body Shop brand would be kept and the company would continue to be based in and run independently from its head office in Littlehampton, West Sussex.
Dame Anita hoped L'Oreal, which makes Maybelline mascara, Lancome skin cream and Armani and Ralph Lauren fragrances, would be able to bring its technological expertise to Body Shop's food-themed products.
London - Fast makeover: Shares in the natural-products chain Body Shop hit a 14-year high in February when L'Oreal admitting it was always looking to add shareholder value.
Challenges magazine to be published tomorrow, Clarins management told employee representatives that PPR and LVMH had expressed interest in the firm, with L'Oreal also rumored to be angling for a bid.
"We have always had great respect for The Body Shop's success and for the strong identity and values created by its outstanding founder, Dame Anita Roddick, " said L'Oreal's chairman Sir Lindsay Owen-Jones.
Trials carried out by L'Oreal showed the average improvement was not noticeable to the user, and that half of those using the product had not registered the improvement claimed, the ASA said.
The watchdog also upheld complaints about a TV advert which claimed L'Oreal's Perfect Slim cellulite cream had been "judged best anti-cellulite product in an independent study (based on an independent French consumer study)".
Gregory Jette, an analyst at Jefferies in Paris, said Friday the company lacked mid-term prospects and the critical mass, possessed by the large players of the industry such as L'Oreal, to achieve substantial growth.
Yet we think the lemongrass deodorizing foot powder lotions and hemp lip conditioners are here to stay, with Body Shop becoming L'Oreal's much-trumpeted "ethical" brand, allowing the French giant to penetrate the lucrative liberal-middle-class guilt market.
During her visit to Japan, the Director-General participated in a symposium on gender equality in sciences and scientific education in the presence of Mr. Hideki Fukuda, the President of Kobe University - one of the oldest in Japan, as well as Professor and 2008 L'Oreal Prize Winner Ingrid Scheffer, Dr. Yoshie Soma, Special Adviser to the University President, and Professor Roumiana Tsenkova, Director of Gender Equality Office at Kobe University.
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