Skechers USA, Inc. said it has settled all domestic legal proceedings
relating to advertising claims made in connection with marketing its
toning shoe products, including its Shape-ups line of shoes. While continuing to stand behind its toning technology, Skechers said the settlement will result in substantial net savings over the exorbitant long-term cost of defending against multiple legal proceedings brought by federal and state regulators and private consumer class actions lawyers.
The company also said it will not pay any fines or penalties.
As discussed in the company's previous annual report filed with the Securities and Exchange Commission, the company has been involved in legal proceedings brought by the United States Federal Trade Commission, multiple states’ Attorneys General and consumer class action lawyers, all investigating whether or alleging that the Company made unsupported advertising claims in connection with marketing its toning shoes. As previously disclosed in the company’s annual and quarterly reports with the Securities and Exchange Commission, the company will pay a one-time settlement of $45 million dollars plus $5 million in class action attorneys' fees to settle the domestic advertising matters and related claims on a global basis.
Skechers said in its statement that it denies the allegations and believes its advertising was appropriate, but has decided to settle these claims in order to avoid protracted legal proceedings. The one-time settlement is expected to result in substantial net savings for the Company compared to the significant long-term cost of defending against multiple regulatory and civil legal proceedings in numerous jurisdictions. The Company will not be paying any fines or penalties.
“While we vigorously deny the allegations made in these legal proceedings and looked forward to vindicating these claims in court, Skechers could not ignore the exorbitant cost and endless distraction of several years spent defending multiple lawsuits in multiple courts across the country,” said David Weinberg, the company's chief financial officer. “This settlement will dispose once and for all of the regulatory and class action proceedings. While we believe we could have prevailed in each of these cases, to do so would have imposed an unreasonable burden on the Company regardless of the outcome.”
Weinberg continued: “Our company’s goal has always been and will continue to be designing and selling quality, affordable shoes for our loyal customers. In short, we settled to avoid the cost and distraction of protracted legal battles so we could get back to doing what we do best.”
The company said shoes that employ toning technology have been sold in the United States for more than 15 years and have been the subject of numerous research projects with at least 19 reports published in peer-reviewed clinical and sports medicine journals. Researchers from around the world have analyzed various models of toning shoes and found demonstrable fitness benefits from walking and standing in such shoes, as compared to flat-bottomed athletic footwear.
The settlement strictly relates to certain advertising and related claims and does not prevent or prohibit Skechers from making and selling the toning shoes, which the company will continue to do.
“The company fully stands behind its toning shoe products and technology and is permitted under the settlement to continue to advertise that wearing rocker-bottom shoes like Shape-ups can lead to increased leg muscle activation, increased calorie burn, improved posture and reduced back pain,” said Michael Greenberg, President of Skechers.
Greenberg continued, “The company has received overwhelmingly enthusiastic feedback from literally thousands of customers who have tried our toning shoes for themselves and have written unsolicited testimonials about their positive experiences-not just with our products’ exercise benefits, but also with their well known comfort and style. We remain committed to the continued development of our toning shoe products, and will continue to deliver quality products that our customers love.”
