Reebok Settles FTC False Sneaker-Claims Case for $25 Million
(Updates with closing share prices in 10th paragraph.)
Sept. 28 (Bloomberg) -- Reebok International Ltd. agreed to pay $25 million to resolve government allegations it made false claims that its so-called toning shoes helped strengthen leg and buttock muscles.
The settlement with the Federal Trade Commission covers advertising starting in 2009 for Reebok’s EasyTone walking shoes and flip flops and RunTone running shoes. The agency said the ads made unsupported claims that walking in EasyTone footwear was “proven” to tone buttocks 28 percent more than other sneakers and build calf muscles by 11 percent more.
“We spent a lot of time examining the evidence the company put forward and found it wanting,” said David Vladeck, head of the FTC’s Bureau of Consumer Protection, during a news conference today in Washington. “This settlement is also to remind advertisers big and small that they must have adequate proof before making claims.”
The toning athletic shoe category grew to $1 billion in sales in 2010 before dropping off this year as retailers and shoemakers were forced to slash prices after demand fell. Skechers USA Inc. led the market with its Shape-ups, followed by Reebok’s EasyTone brand. Sales of toning shoes in the U.S. may drop about 40 percent this year to $600 million, according to researcher SportsOneSource.
The settlement prohibits Reebok, a unit of Herzogenaurach, Germany-based Adidas AG, from making any more unsubstantiated assertions regarding toning benefits of its footwear, the agency said. The FTC set up a website for consumers that explains how to seek a refund for the shoes covered by the lawsuit.
Sneaker maker Skechers also has been contacted by the FTC over claims that its Shape-ups shoes have toning benefits, the company said in an August filing with the U.S. Securities and Exchange Commission.
Skechers, based in Manhattan Beach, California, said in the filing it was responding to the FTC’s requests and would “ defend the company’s position,” if needed. Leonard Armato, president of Skechers USA Fitness Group that includes the Shape- ups brand, said today the company doesn’t comment on legal proceedings.
The FTC’s Vladeck declined to comment on whether other shoe companies are being probed for similar advertising.
“If this is pointing in Skecher’s direction, the number could be bigger for them,” said Sam Poser, a New York-based retail analyst for Sterne Agee & Leach Inc., who has an “underperform” rating on Skechers, in a telephone interview.
Adidas fell 0.97 euros, or 2 percent, to 48.22 euros in Frankfurt trading. Skechers fell 36 cents, or 2.4 percent, to $14.72 in New York trading.
“We stand behind our EasyTone technology -- the first shoe in the toning category that was inspired by balance-ball training,” Reebok spokesman Dan Sarro said in an e-mailed statement today. “Settling does not mean we agree with the FTC’s allegations; we do not.”
Reebok, based in Canton, Massachusetts, said it will continue to develop the EasyTone product line.
“It’s not that important to their business anymore as they’ve come out with more running products,” Sterne Agee & Leach’s Poser said.
The case is Federal Trade Commission v. Reebok International Ltd., 1:11-cv-02046, U.S. District Court, Northern District of Ohio (Cleveland).
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