Nike Inc. (Nike) recently agreed to pay more than $2.4 million to settle a class action lawsuit related to the Nike FuelBand activity tracker. The lawsuit, Levin v. Nike, was filed May 17, 2013, in California Superior Court in Los Angeles County. The Plaintiffs alleged violations of California unfair competition and false advertising laws, as well as breach of warranty.

The FuelBand Advertising Claims

The Plaintiffs’ allegations center around claims made in connection with the Nike FuelBand, which is a wristband activity tracker. Specifically, advertising for the FuelBand suggests that the product is capable of tracking every calorie burned and step taken by a FuelBand user. The complaint singles out the following claims:

  • “measures each step taken and calorie burned,”
  • “[t]racks steps, calories, and time of day,” and
  • “tracks calories burned, steps taken and more.”

Advertising for the FuelBand also claims that the device uses algorithms to accurately convert physical activity into “NikeFuel,” a proprietary unit of measurement developed by Nike to track fitness activity. Each FuelBand user’s NikeFuel is displayed visually on the face of the wristband.

What Went Wrong?

According to the complaint, the FuelBand does not in fact track each calorie burned, each step taken, or accurately measure activity for conversion to NikeFuel. Rather, the Plaintiffs allege that users experience wildly inaccurate step, calorie, and NikeFuel readings, and that Nike was aware that the product could not accurately perform these tasks when it first marketed and sold the product.

Based upon this, the Plaintiffs assert that advertising for the FuelBand violated California laws against unfair competition and false advertising by making false claims. The Plaintiffs also assert a breach of warranty claim, arguing that by representing that the product could measure “each step taken and calorie burned,” among other claims, Nike breached its implied warranty of merchantability and fitness for a particular purpose. Further to the above, the complaint also raises claims under the California Consumers Legal Remedies Act which provides standing to sue for any consumer harmed by unfair or deceptive acts or practices in connection with a commercial transaction, as well as under common law.

The Settlement

Under the terms of the settlement, any consumer or entity in the U.S. who bought a FuelBand since January 2012 is eligible to claim a $15 check or a $25 Nike gift card in exchange for waiving their right to bring future claims related to the product. Nike also agreed to pay up to $2.4 million for attorneys’ fees. Nike did not admit any wrongdoing.

The Takeaway

With the rise of the Internet of Things, more companies than ever are manufacturing and marketing connected devices. Many of these devices offer unprecedented insights into their users’ activities and behavior, including health and fitness data. This case is a reminder that companies must carefully calibrate how they pitch their products to consumers to ensure that they do not overstate the benefits or capabilities of their products and must ensure that they have adequate substantiation. This is particularly true for health and fitness claims, which the Federal Trade Commission, Food and Drug Administration, and other regulators have indicated will be closely scrutinized.

For example, companies should be mindful that asserting certain health and fitness claims could subject them to regulatory oversight by the Food and Drug Administration.  FDA has recently taken the position that mobile apps used in conjunction with activity trackers may be medical devices if they are intended to mitigate or prevent disease.  In a guidance issued in February of this year, FDA specifically noted that  apps intended to record, track, or make decisions about general fitness—including those used to calculate calories burned and actively monitor and trend exercise activity—may be medical devices.  For the time being, FDA does not intend regulate activity tracker apps.  The guidance, however, is still in draft.  Regardless of the position taken in the finalized document, FDA enforcement discretion policy is subject to change.  As such, developers of fitness tracker apps should remain mindful of FDA’s evolving thinking on the topic.