Wednesday, May 16, 2012

FTC Tells Skechers to Shape Up with their Exercise Shoe Ads; Skechers will pay $40 mil.

Companies spending marketing dollars on ad campaigns may want to think carefully about how they go about substantiating the claims made in their ads. This Wednesday, the FTC announced that Skechers USA, Inc. will pay $40 million to settle a complaint filed by the FTC that Skechers deceived consumers by making unfounded claims that Skecher’s “Shape-ups” and “Resistance Runner” brand shoes would help people lose weight and strengthen and tone their muscles.

Under  FTC policy, all express and implied claims must be substantiated; in other words, the advertiser must have a “reasonable basis” for making the claims. When advertising claims concern “health and safety,” a higher level of substantiation is generally required. But the FTC-Skechers complaint did not mention the level of substantiation required by Skechers to support their claims of the weight loss and muscle-strengthening benefits of their shoes. Instead, the FTC focused on the case studies that were run by Skechers that were supposed to substantiate Skechers' claims. These studies were harshly criticized for the following reasons:
  • Skechers represented in advertising that the studies were independent, but the chiropractor who ran the studies was a compensated endorser for Shape-ups, and is married to the senior VP of marketing at Skechers;
  • One fitness study did not have a control—that is—a group of participants who wore normal fitness shoes to which Skechers shoes could be compared. The sample size was also apparently small—only eight participants;
  • In another study, the data was altered and incomplete: some participants actually gained weight, but were falsely reported as having lost weight;
  • Data was missing and/or not collected for some participants in one study;
Unfortunately for Skechers, these irregularities in the clinical studies evolved into large-dollar liability. However, problems such as these can be avoided: studies should both be constructed and run in a manner that is consistent with good scientific principles. 

When preparing such studies as support for advertising claims, close work with a company’s in-house (or outside) counsel who has experience in consumer surveys (in either the advertising, trademark, or unfair competition fields) can ensure compliance with FTC substantiation principles. Essentially, the study should be able to stand up to judicial scrutiny—even if this is done at the expense of having to run a more costly study. 

The Skechers $40 million settlement demonstrates that the return on investing time with counsel to construct substantiation and formulate claims that can withstand scrutiny is worth the effort.