Skechers to Foot $40 Million FTC Bill

Business Litigation Update

Date: May 17, 2012

Overview

On May 16, 2012, the Federal Trade Commission (FTC) announced that Skechers U.S.A., Inc. (Skechers) agreed to pay $40 million and adhere to restrictions on future advertising to settle FTC charges that it made misleading claims for its Toning Footwear products: Shape-ups, Resistance Runner, Shape-ups Toners and Tone-ups.

According to the FTC's complaint, Skechers represented that wearing these shoes - which sold for $60 to $100 - while walking would provide a number of benefits, including increased cardiovascular health, improved circulation, weight loss, lower body fat and improved muscle tone. To add credibility to these claims, Skechers represented that they were supported by independent studies, including studies showing that subjects who wore Shape-ups lost 2.7 pounds and 1.31 percent body fat, while a control group lost a mere 0.3 pounds and 0.57 percent body fat. According to the FTC's complaint, the studies were not independent because they were performed by the husband of Skechers' senior vice president of marketing, and were not otherwise reliable because they lacked necessary controls, and the data relied upon in one study was altered and incomplete. Similarly, the FTC found another study for the Resistance Runner unreliable because it was based on data gathered from a single subject in a one-day study and therefore did not replicate the experience of actual consumers.

To settle the matter, Skechers agreed to pay redress of $40 million. The company also agreed to make claims that its footwear products strengthen muscles, cause weight loss or otherwise benefit health or fitness only if such claims are not misleading. In addition to barring misleading claims, the FTC order imposes detailed substantiation requirements, including:

  • "Weight loss claims" require at least two adequate and well-controlled human clinical studies conducted by different researchers independently of each other.
  • "Strengthening claims" must be supported with data from at least one human clinical study that conforms to acceptable designs and protocols.
  • General health or fitness claims require competent and reliable scientific evidence.

As in past orders, the FTC requires data from these studies to be consistent with the entire body of available scientific evidence. In other words, the results cannot be "outliers." These provisions are consistent with the FTC's recent trend of including heightened substantiation requirements in its orders.

Finally, the agreement has a twist on the usual compliance and monitoring provisions in that it expressly authorizes representatives of the FTC to pose as "consumers and suppliers to [Skechers] or its employees ... without the necessity of identification or prior notice" and it permits the FTC to interview any "employer, consultant, independent contractor, representative, agent or employee" who agrees to an interview relating to Skechers' compliance with the order. The order states that the person being interviewed is entitled to have counsel present. These compliance and monitoring provisions indicate that the FTC may become more active in monitoring and enforcing compliance with its orders.