Skechers Pays Up in “Shape-Up” Class Actions
July marked the latest milestone in the years-long legal proceedings related to Skechers USA, Inc.’s marketing and sale of toning shoes. On July 11, 2013, the Federal Trade Commission (FTC) announced that an administrator mailed 509,175 checks to consumers who bought various shoes that Skechers marketed through allegedly deceptive advertisements. (See the FTC announcement here.)
As part of an ongoing effort to crack down on misleading and deceptive health claims, the FTC filed a complaint for permanent injunction and equitable relief against Skechers, pursuant to Section 13(b) of the Federal Trade Commission Act, alleging that Skechers made unfounded claims that various shoes — most notably, the brand’s Shape-Up shoes — would help people lose weight and add muscle tone. (See Dkt No. 2-1, 12-cv-01214 [N.D. OH].) In 2012, Skechers and the FTC agreed to a settlement, including a stipulated final judgment and order for relief, whereby Skechers agreed to pay $40 million in restitution through a court-approved class action lawsuit. (Id.) Skechers also agreed to take down advertisements related to the claims, but did not admit any wrongdoing. (Id.) The settlement also paved the way for resolution of investigations of the attorneys general of 43 states, and the multi-district litigation filed by plaintiffs. (Id.)
In May 2013, the United States District Court for the Western District of Kentucky granted the class-action plaintiff’s motion for approval of a final settlement in Grabowski v. Skechers USA, Inc., No. 3:12-cv-00204 (W.D. KY). (See the settlement here.) In that order, the District Court rejected arguments that the settlement was inadequate because parties should have been reimbursed for the full purchase price of shoes, stating that the amount had been appropriately calculated as the difference between the price of the shoe the consumer expected and the value of the shoe the consumer received. (See Dckt No. 933, 3-11-md-02308 TBR LLK.) The deadline for consumers to make claims pursuant to the settlement was in April 2013.
The FTC’s allegations regarding Skechers were the agency’s latest attempt to crack down on companies who aggressively advertise health and fitness products. The settlement was also the largest ever for the FTC. In 2011, the FTC settled charges against Reebok relating to a similar line of shoes and products, whereby Reebok agreed to pay $25 million in restitution to customers. (See the agreement here.)
For more information or advice about advertising and fair business practices, or class action litigation generally, contact Anthony V. Lupo.