Skechers Settles Deceptive Ad Case With FTC for $40M

Reminiscent of Reebok suit, settlement is commission's largest

When it comes to cracking down on health and fitness claims in ads, the Federal trade Commission isn't sitting on its butt.

Skechers' health and fitness advertising claims didn't go the distance with the FTC, which forced the fitness apparel manufacturer to fork over $40 million to settle claims that deceptive advertising was used to sell Skechers' toning shoes and apparel.

The $40 million settlement fee is the the largest ever for the FTC, which has escalated its oversight of advertisers that use unsubstantiated health and fitness claims to lure unsuspecting consumers. Last September, Reebok agreed to a $25 million settlement with the FTC in very similar case.

The Skechers settlement is also part of a broader agreement resolving an investigation across 42 states and the District of Columbia led by the Tennessee and Ohio attorneys general offices.

In its complaint, the FTC charged that Skechers violated federal law by falsely representing clinical studies backing up claims that Shape-Ups, Resistance Runner, Toners, and Tone-Ups would help people lose weight, and strengthen and tone their butts, legs and abdominal muscles.

Ads used lines like: "Shape up while you walk," "get in shape without setting foot in a gym" or "make your bottom half your better half." During a press conference this morning, the FTC pointed to an ad that ran during the Super Bowl that it found particularly egregious, featuring Kim Kardashian dumping her personal trainer for a pair of Shape-Ups

David Vladeck, the director for the FTC's bureau of consumer protection, pulled no punches in his advice to advertisers that claim their products can reduce fat or make their wearers lose weight.

"Skechers put its foot in its mouth by making unproven claims. People didn't lose weight, they gained weight. Either shape up your substantiation or tone down your claims," Vladeck said during a press conference.

Skechers denied it did anything wrong, but in a statement, the company said it decided to settle in order to avoid protracted legal proceedings. "Skechers could not ignore the exorbitant cost and endless distraction of several years spent defending multiple lawsuits in multiple courts across the country," said David Weinberg, CFO of Skechers. "While we believe we could have prevailed in each of these cases, to do so would have imposed unreasonable burdens on the company regardless of the outcome."

The FTC has made a mission of forcing marketers to shape up health and fitness claims.

"They are sending a very strong message to the big national advertising industry that the free pass is over," said Jeffrey Greenbaum, a managing partner with Frankfurt Kurnit Klein & Selz. "If you get caught for false advertising, it's not going to be a slap on the wrist."

Skechers' $40 million settlement was based on its market share, Vladeck said. The company is the market leader in the toning footwear category with shoe sales close to $1 billion in 2010.

As part of the settlement, Skechers must take down advertising and inform retailers to remove or conceal the deceptive claims. It also has agreed to stop misrepresenting any tests, studies, or research results regarding toning shoes.

Consumers that purchased any of Skechers' footwear can file for a refund on the FTC's website.