Misleading Product Promotion Leads Federal Court to Order Significant Fines
It pays for businesses to get advice from lawyers and be careful with the way they promote their goods and services. In the case of ACCC versus Reebok Australia in 2015, the Federal Court gave Reebok Australia a fine of $350,000. They were found as having falsely advertised their footwear in Australia. In addition to these fines, there were also restraining orders issued, an order to correct the advertising, and $45,000 in legal costs. This was paid to the ACCC. Of particular interest is the fact that Reebok’s parent company, Reebok International, had already been dealt with for similar conduct in the United States.
The Federal Trade Commission, which fills a similar role to the ACCC in Australia, investigated the issue of false advertising and dealt with it accordingly. Reebok Australia was fully aware of the problem with false advertising, but did nothing to bring the practice to a stop, as far as the Federal Court viewed the matter.
There are lessons to be learned from this case, for businesses of all sizes. The product in question what the “EasyTone” footwear that Reebok International exported to Reebok Australia. They were found to be making claims about the footwear building strength and muscle tone. These were found to be unsubstantial. As people had essentially been “tricked” into buying shoes that they thought could improve their muscle tone, $25 million USD was ordered to be redressed to customers by the international company.
After this ruling was given, Reebok International actually advised their Australian child company to take down marketing material for all “EasyTone” footwear in Australia. This included tags, stickers, booklets, and other informational material. The promotional material included illustrations, with “28% glues, 11% thighs, 11% calves” written on them. There were also statements that the footwear could add muscle strength to the buttocks, calves, and legs.
The “EasyTone” footwear was tested alongside similar footwear. There was no evidence that Reebok’s footwear could do any of the things claimed on their marketing material. Despite all of the above, Reebok Australia still did nothing to test the product, or alter their marketing material. This is the kind of careless attitude that all retailers and manufacturers should avoid. It is one thing to make a mistake, or overlook the claims that your business makes. There does not seem to be any excuse for Reebok Australia to have continued with these promotions.
There are some unique factors that likely contributed to Reebok Australia’s vast oversight in this scenario. They did make some minor attempts to take down the misleading marketing material. However, without a program that was compliant with competition and consumer law, it was unlikely to be very effective. Senior management knew about what had happened with Reebok International’s case with the FTC. It could be considered lucky on their part that the damage consumers suffered was hard to quantify. If the false advertising had have led to any serious injury or damages, the charges might have been vastly greater.