FTC Spanks Skechers, Consumers Get Refunds
Skechers Will Pay $40 Million to Settle FTC Charges That It Deceived
Skechers’ advertising campaign involving four shoes (Shape-Ups, Resistance Runners, Toners, Tone-ups) is a stark reminder (or learning point) to fitness and training entrepreneurs about the importance of not making unfounded claims lest you desire to have the Federal Trade Commission breathing down your neck.
If you recall, Skechers had an advertising campaign built around the premise that their Shape-Ups and other “toning shoes” would actually help people with weight loss while at the same time enabling them to tone their abdominal muscles, including the buttocks and legs.
David Vladeck, Director of the Bureau of Consumer Protection at the FTC, said in a news release, “Skechers’ unfounded claims went beyond stronger and more toned muscles. The company even made claims about weight loss and cardiovascular health. The FTC’s message, for Skechers and other national advertisers, is to shape up your substantiation or tone down your claims.”
Skechers has agreed to pay out $40 million in refunds to anyone who has bought Skechers toning shoes. This is quite a bit of money, and goes to show how important it is to make sure you are not offering any false claims in your advertising.
Dangers of False Advertising
The Wild West days of advertising are long over – even online. In fact, now you really need to make sure you can back up any claims that your advertisements make – or risk being sued. Next, we are going to go over some of the specific ways false advertising can hurt your business.
– Unsubstantiated Claims – When you make claims and do not back it up with specific details, you may run into problems. Not providing details and examples of your claims may end up causing a lot of harm to your company and brand.
– Disclaimers – While you can and should use disclaimers when appropriate, they are NOT supposed to be used to “clear up” false information contained in the advertising copy. Disclaimers can help, but they are not the ultimate safety net absolving you from all liability..
– Testimonials – When testimonials are used, you need to be able to back them up with people that really exist. If people who give a testimonial receive any compensation, this needs to be noted as well. Testimonials are great, but they are also an easy way to get trapped with false advertising. And don’t even think about trying to slip in that Celebrity X endorses your product, unless there is a signed agreement in place authorizing you to use his or her likeness and endorsement of your product.
– Promises and Guarantees – If you make a promise or guarantee, you need to make sure you are able to back it up or you could face legal trouble. These are both great ways to get the public to try your product or service, but if you can’t back up and follow through on all promises and guarantees, you may find yourself facing legal action.
False Advertising for Video Games
Skechers is not the only company that has been accused of false advertising. The problem is also prominent in the world of video games. Over at Forge Today late last year, they had an in depth article about how video games do not live up to what is seen in trailers or advertising for them. More recently, EA was accused of falsely advertising Mass Effect 3, especially the ending of the game and being able to change or control it.
The claims EA made were that players would be able to:
- Experience the beginning, middle, and end of an emotional story unlike any other, where the decisions you make completely shape your experience and outcome
- Along the way, your choices drive powerful outcomes, including relationships with key characters, the fate of entire civilizations, and even radically different ending scenarios
Marjorie Stephens blogged at the Better Business Bureau that she thinks EA “technically” falsely advertised the game. It is another really good case study of how it is important for any and all marketing claims to be analyzed carefully before they are used in a live media campaign.
False Advertising at Skechers
Back to Skechers. While this incident resulted in a settlement, how many other potential cases exist out there? Each and every day is full of advertising. It’s critical to get your fitness and training product, fitness app or nutritional supplement in front of consumers. When the Federal Trade Commission and 42 states come at you with regulatory actions and lawsuits, it is very reasonable to assume the expense to your company is likely “game over.” For less established companies and brands than Skechers, that’s the likely outcome. And beyond the penalties and fines they have to pay out, the trust that they broke with consumers is not easily restored, if ever. Fool me once, shame on you, and so on. The biggest danger of false advertising is not that you may have to pay out tens of millions of dollars, but that your brand and image can be damaged in the public eye, which can cost you future revenue.
Skechers released a statement this past May, saying the company, “denies the allegations and believes its advertising was appropriate, but has decided to settle these claims in order to avoid protracted legal proceedings.” It will be interesting to see how Skechers does in the next few months as they pay out the Shape-Ups and toning shoe settlements and try to win back the trust of their customers.
In September of 2011, the FTC went after Reebok for similar claims with “toning shoes.” That resulted in Reebok paying out a $25 million settlement for people who had bought their toning apparel or fitness shoes that were supposed to help people lose weight and tone their body.
Think Long Term In Advertisement Campaign
Solid brands take time to build. If you’re truly in it for the long-haul and dedicated to making quality products, offering excellent service and building up that brand, then making outlandish claims and taking short cuts shouldn’t even be a consideration. If you’re in it for the short-run and only interested in making a quick buck, well good luck to you because it’s only a matter of time until you’re staring down the barrel of the FTC’s proverbial gun or some other lawsuit.