Lush said it was raising awareness of what it calls the “ongoing undercover policing scandal”.
In a provocative press release, it claims undercover officers have “infiltrated the lives, homes and beds of activists”.
The Poole-based firm said its campaign, controversially called SpyCops, “aims to highlight the current lack of progress of the Undercover Policing Inquiry and the granting of anonymity to key police witnesses”.
The chain’s shop windows have been decorated with police tape, saying: “Police have crossed the line.”
A split image of a man, one half with a police helmet on, another without the helmet, has the tagline “paid to lie”.
Activists have been “spied on for taking a stand”, a video released by the company claims.
The campaign has sparked a negative reaction on social media, with more than 30 complaints submitted to the Advertising Standards Authority (ASA).
The ASA said it would not be taking action as the campaign was outside its remit.
John Duncan tweeted that the campaign was “misguided at best, nasty at worst”.
Lush had shown “terrible judgment”, Tom Sleigh said.
An inquiry into undercover policing was launched in 2015.
It is looking at the work of the Special Demonstration Squad, the National Public Order Intelligence Unit and police forces across England and Wales.
It is expected to begin hearing evidence next year, and will continue to do so for around two years.
The year before the inquiry began, a report found that 17 families were spied on by undercover police officers who operated unchecked and by their own rules.
It has been claimed that undercover police officers working for the Metropolitan Police assumed the identities of dead children and were issued fake passports in their names.
Responding to Lush’s campaign, the inquiry said it was “wholly independent of the police and has the authority to investigate any aspect of undercover policing, from 1968 to the present day”.
It added that while its work would be “rigorous and objective”, there would be times when it was not possible to hear evidence in public, in cases where “to do so would give rise to a risk of harm to an individual”.
Lush said it was not running an “anti-state/anti-police campaign”.
“This campaign is not about the real police work done by those frontline officers who support the public every day,” it added.
“This public inquiry needs help from the public to keep it on track and ensure that this one opportunity for full honesty and disclosure is not lost or squandered.”
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Pressure group Police Spies Out of Lives, which worked with Lush on the campaign, said it was “flabbergasted that people think we are talking about all police officers”.
It added: “We are talking about the undercover police officers… the picture used is a model, and it is meant to signify the two-faced nature of these officers.”