Skechers settles with FTC for $40M
Skechers will have to pay FTC $40M for deceptive ads
Skechers USA Inc. has agreed to settle Federal Trade Commission (FTC) charges that the company made unfounded and deceitful claims about the benefits of its Shape-Ups fitness shoes, which began retailing in 2008.
According to the FTC, the settlement occurred as part of the organization's ongoing efforts to ensure that health and fitness marketers provide competent scientific evidence to back their products. Skechers will pay $40 million into a fund that will be used to refund customers who bought the shoes. An additional $5 million will go to 42 states.
“You don't have to be Don Draper to know that health benefits attract consumers,” David Vladeck, director of the FTC's Bureau of Consumer Protection, stated in a press conference Wednesday morning. Shape-Ups promised to tone the lower body and abdominal muscles, as well as assist in weight loss.
Vladeck asserted that Skechers' clinical studies backing Shape-Ups had a number of defects and that the company reported incorrect results. “[Skechers] reported that [those who wore Shape-Ups over a trial period] lost weight when they in fact gained weight.”
The FTC declined to comment on what directly led them to investigate Skechers, alluding instead to “a multiplicity of factors.” The FTC settled similar charges with Reebok last year over its EasyTone walking shoes and RunTone running shoes. Reebok paid $25 million.
Vladeck attributes the difference in the settlement amount to Skechers' larger market share. “In terms of magnitude, [Skechers] was the market leader in a category that in 2010 was a billion dollar industry,” Vladeck said.
Still awaiting approval by court, the FTC says consumers will have eight months to submit claims on ftc.gov\skechers. Refund checks are expected to start going out in two months.
“In terms of actual cash being sent out to consumers, this is probably the largest settlement we've had,” Vladeck noted.