Reebok runs into more regulator trouble

Published On 06/11/2014 | By Smriti Arora | Consumer protection, Enforcement

Back in January we posted about the ACCC commencing proceedings against Reebok Australia Pty Ltd (“Reebok”).  In October the Federal Court made consent orders requiring Reebok to pay a pecuniary penalty of $350,000 and comply with various non-punitive orders for making misleading representations regarding the benefits of wearing its EasyTone shoes.

From September 2011 to February 2014 Reebok represented by swing tags and stickers on the EasyTone shoe box, information cards and booklets, and in-store promotional material that:

  • design features of the EasyTone shoes will tone and strengthen key leg and buttock muscles whilst walking in the shoes compared to if a consumer used a traditional walking shoe; and
  • more specifically, these shoes would increase muscle activation by up to 28% in glutes, 11% in thighs, and 11% in calves, compared to walking in a traditional shoe.

An example of Reebok’s advertising is available here.

The Federal Court found that Reebok had no reasonable grounds for making these representations and therefore:

  1. engaged in misleading and deceptive conduct, in contravention of section 18 of the Australian Consumer Law (“ACL”);
  2. made false or misleading representations that EasyTone shoes had performance characteristics, benefits or uses which they did not have, in contravention of section 29(1)(g) of the ACL; and
  3. this conduct misled the public as to the nature, characteristics and suitability for their purpose of EasyTone shoes, in contravention of section 33 of the ACL.

In addition to the pecuniary penalty and a contribution to the ACCC’s costs, the Court ordered that Reebok repay consumers $35 for each pair of EasyTone shoes (with appropriate proof of purchase), as well as undertaking a variety of corrective advertising measures and lodging a Consumer Redress Process Review Report with the ACCC.

The Court also made orders restraining Reebok from supplying any toning or strengthening footwear unless it has obtained written evidence from an expert substantiating that there is a sound basis for making such claims for 3 years, in an effort to constrain future advertising initiatives.

This case reflects the ACCC’s continued focus on credence claims, which is a 2014 enforcement priority for the Commission.  Credence claims are a type of advertising that give the impression that a product, or an attribute of the product, has some added benefit when compared to similar products or services (eg, muscle strengthening of the EasyTone shoes).

As the ACCC Deputy Chair Delia Rickard noted, these cases are particularly important “where it is difficult for consumers to independently verify the claims”.  Other examples of misleading credence claims we have discussed in the last year include: “Victoria honey”; “free range” eggs; “organic” water; and “Australian made” solar panels.  Whilst credence claims are often focused on the food and beverage industry, this case demonstrates a broader approach to potentially misleading “health” benefits, with penalties recent imposed in relation to claims made in respect of the performance characteristics of two breast check services ($100,000 and $250,000).

The ACCC’s success in this case comes after the US Federal Trade Commission (“FTC”) reached a $25 million settlement agreement with Reebok International Ltd in September 2011 on similar deceptive advertising of EasyTone shoes.  The fact that Reebok was already ‘on notice’ of consumer law issues in its supply of EasyTone shoes in another jurisdiction, yet did not change any of its advertising or marketing in Australia, is unlikely to have helped its case before the Federal Court.  While it is worth noting that the US settlement did not find that Reebok breached any US laws, the ACCC’s prosecution reflects its increasing observance of enforcement actions by sister agencies overseas.  It will be interesting to see whether this internationalised approach to consumer protection enforcement actions continues in the future.

Picture: Courtesy Flickr / Jennie Faber

About The Author

is a Solicitor in the Competition team at King & Wood Mallesons, based in the Sydney office. She is an avid tennis fan and hopes to attend each grand slam.

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