The other shoe has dropped.
The Federal Trade Commission announced today that Skechers agreed to pay $40 million to settle charges it deceived consumers with weight-loss and toning claims related to Shape-ups shoes and other toning products. It is among the FTC's largest settlements. David Vladeck, director of the Bureau of Consumer Protection, said it most likely represents the largest settlement to date in terms of cash paid to consumers.
In the wake of Reebok's $25 million settlement with the FTC, Skechers had been bracing for something similar. Skechers' settlement with the FTC is part of a broader agreement that resolves an investigation including attorneys general from nearly all 50 states. Consumers are being asked to file claims online.
"While we vigorously deny the allegations made in these legal proceedings and looked forward to vindicating these claims in court, Skechers could not ignore the exorbitant cost and endless distraction of several years spent defending multiple lawsuits in multiple courts across the country," Chief Financial Officer David Weinberg said in a statement. "This settlement will dispose once and for all of the regulatory and class-action proceedings."
More so than any other marketer, Skechers put a spotlight on the toning category, with Super Bowl spots in 2010 and 2011. In 2010, ads featured customer testimonials and NFL Hall of Famer Joe Montana. In 2011, Kim Kardashian starred in the spot. Brooke Burke also appeared in ads. Skechers' marketing is handled internally.
The toning category reached $1.1 billion in 2010, with Skechers controlling about 60% of the market, according to Matt Powell, an analyst with SportsOneSource. Shape-ups helped propel Skechers' sales to more than $2 billion in 2010, making it the second-largest footwear brand in the U.S. Only Nike is larger, according to Sports Market Intelligence. Shape-ups, introduced in April 2009, cost about $100 a pair. Resistance Runner, Toners and Tone-ups were introduced in mid-2010 and retailed for between $60 and $100.
At issue were ads urging consumers to "Shape up while you walk" and "Get in shape without setting foot in a gym." Skechers also claimed Shape-ups were designed to promote weight loss and tone muscles. The FTC also alleged that specific "muscle activation" results related to the use of Resistance Runner shoes were "cherry-picked" from a study and failed to substantiate ad claims. Skechers ads also included an endorsement from a chiropractor who was married to a Skechers marketing executive. The FTC alleges the "independent" clinical study conducted by the chiropractor and cited in ads did not produce the results claimed.
Under the FTC settlement, Skechers is barred from making any claims about strengthening, weight loss or any other health or fitness-related benefits resulting from toning shoes, unless they are true and backed by scientific evidence. Reebok faced similar restrictions but has bounced back, enhancing its testing protocol and tweaking its marketing messages. Reebok execs believe toning remains a viable category.
Skechers said it will continue to make and sell toning shoes. President Michael Greenberg said the company has received "overwhelmingly enthusiastic feedback" from customers who have tried its toning products and remains "committed to the continued development" of such products.
