The Federal Court has recently made orders including a pecuniary penalty of $350,000 against Reebok for representations made in relation to its EasyTone shoes. It was represented that the EasyTone shoes would increase the strength and muscle tone of their wearer’s calves, thighs and buttocks more than if they were wearing traditional walking shoes. Reebok had no reasonable grounds for making the representations.
EasyTone or just a Croc?
Reebok claimed that the shoes could strengthen and tone buttock muscles up to 28 percent more, and hamstring and calf muscles up to 11 percent more than regular shoes. Reebok’s representations were made on the shoe boxes and swing tags on shoes, and information cards/ booklets and in-store promotional material.
Converse with the FTC
Launched in 2009, in 2011 the USA Federal Trade Commission investigated Reebok over its advertising claims. A settlement was swiftly reached between the FTC and Reebok, with Reebok paying $25 million for its deceptive advertising. As part of the settlement consumers were entitled to obtain refunds.
Whilst Reebok sold EasyTone shoes in Australia since December 2009, it continued to market EasyTone in Australia and did not materially change its representations from September 2011 to February 2013. During this time, Reebok was aware that similar claims about EasyTone were the subject of the FTC settlement.
Just do it
As with the FTC settlement, the Federal Court ordered Reebok to provide a refund of $35 per pair of EasyTone shoes to relevant consumers who purchased a pair during that period (from September 2011 to February 2013), and who believe they suffered loss or damage as a result of Reebok’s representations.
One of the interesting orders that the Court made was for Reebok to establish a 1800 number by which consumers can contact Reebok to make enquiries regarding whether they are eligible to receive a refund. The Court also ordered Reebok to publish corrective notices with details of how consumers can seek redress, and for Reebok to implement a compliance program.
A wedge between outcomes?
The Court’s penalty of $350,000 is in contrast to the FTC obtaining a US $25million settlement with Reebok within 2 years of the product launch.
ACCC loafing or flip-flopping?
The proceedings highlight that for the period 2009 to 2011, the ACCC did not appear to have undertaken any investigation in relation to EasyTone, and for the period post 2011 moved relatively slowly in taking enforcement action. EasyTone shoes have been available in Australia since 2009 and representations relating to their alleged strengthening and toning capabilities made throughout that time. Reebok has continued to sell thousands of EasyTone shoes during that period.
Platform for more proceedings?
Whilst the ACCC commenced and proceedings against Reebok have now resolved, there does not appear to have been any proceedings commenced by the ACCC against Skechers USA Inc in relation to their range toning shoes. In 2013 a US federal judge approved a US$40 million settlement between Skechers and the FTC, with an additional US$5 million awarded towards legal costs. The FTC was concerned with representations made as to toning characteristics of the Skechers shoes, as well representations made as to the shoes’ contribution to weight loss and cardiovascular health. Whether the ACCC is investigating Skechers or will be commencing similar proceedings remains to be seen.