After much hype on Twitter regarding an action against a "major marketer of consumer goods," the Federal Trade Commission today announced that it has settled with Skechers USA, Inc. over allegedly deceptive claims that the company made concerning its Shape-ups and other "toning shoes." The settlement was part of a broader agreement resolving a multi-state investigation led by Attorneys General in Ohio and Tennessee and comes roughly eight months after a similar FTC action against Reebok. For its part, Skechers denies the allegations made by the FTC and Attorneys General and states that it settled the claims to avoid protracted legal proceedings.
The amount of settlement is substantial: $40 million. (Compare this to the $25 million that Reebok paid.) The proceeds, which will likely be paid to consumers through one or more private class action lawsuits, are intended to provide redress for allegedly unsubstantiated claims that Skechers' toning shoes would help consumers lose weight, build strength, and tone muscles. According to the FTC, Skechers lacked substantiation that its toning shoes provided more weight loss, strengthening, and muscle toning benefits than regular fitness shoes. Although Skechers ran an ad containing a chiropractor's endorsement of its toning shoes, the FTC alleges that the endorser was married to a Skechers marketing executive and that Skechers paid the endorser to conduct the "independent" clinical study cited in the ad.
In addition to paying $40 million, Skechers agreed to stop making three categories of claims without "competent and reliable scientific evidence" substantiating that those claims are true: (1) strengthening claims, (2) weight loss claims, and (3) "other health or fitness-related claims."
It is well-established that, before disseminating an ad, a marketer must have a reasonable basis for all express and implied claims contained in the ad. What constitutes a "reasonable basis," however, is far from uniform. Where a claim relates to a product's efficacy or its effect on a consumer's health, the standard is "competent and reliable scientific evidence" (as specified in the FTC's consent order). This vague standard is not the product of any federal rule or regulation, but rather one that has been developed over many years by agency enforcement precedent and guidance from the FTC. See Direct Marketing Concepts, Inc. v. FTC, 581 F. Supp. 2d 115, 118 (D. Mass. 2008).
To make matters worse, the standard is not only vague, it is also "flexible." Id. How it applies in a particular case "calls for evaluation of a variety of factors . . . such as the type of product, the type of claim, the benefits of a truthful claim, the cost and feasibility of developing substantiation, the consequences of a false claim, and the amount of substantiation that experts in the field find reasonable." Id. These abstract guidelines do little to help marketers answer the very practical questions that often underlie substantiation – e.g., whether a human clinical trial is required, whether a study must be double-blinded, and how many subjects are required?
The FTC's consent order provides some interesting insight into what constitutes "competent and reliable scientific evidence," but unfortunately it perpetuates rather than clears up the confusion posed by the standard's vague and flexible nature. How does it do this? It provides three different standards of substantiation for each of the three categories of claims. Consider:
- For muscle-strengthening claims, the order requires "at least one adequate and well-controlled human clinical study . . . that conforms to acceptable designs and protocols [and] is of at least six-weeks duration";
- For weight-loss claims, the order requires "at least two adequate and well-controlled human clinical studies . . . conducted by different researchers, independently of each other, that conform to acceptable designs and protocols" (without any mention of duration); and
- For "other health and fitness-related claims," the order requires "competent and reliable scientific evidence" – i.e., "tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results."
Although the niceties of the "reasonable basis" test are no clearer after the Skechers announcement than they were before it, there are several key points to take away from the settlement. First, the FTC's efforts on claim substantiation are not just focused on nutritional supplements, weight loss products, and other "ingestibles." The FTC is increasingly targeting consumer marketers making efficacy and health related claims in other contexts. Second, efficacy claims that reference specific percentages (e.g., increased "muscle activation" of up to 85%) seem particularly attractive to the FTC. Both the Skechers and Reebok cases featured very specific quantitative claims about the products at issue. Finally, the FTC continues to push for two clinical studies for certain types of claims even as it requires only a single clinical study for claims that are quite similar (i.e., weight loss and muscle strengthening). While this incongruous approach arguably calls into question the rationale for two studies, marketers can minimize their risk by relying on two clinical studies whenever possible.
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