The Federal Trade Commission said that the company's claims that its fitness shoes would help people lose weight and strengthen their buttocks, legs and stomach muscles were unfounded.
"The complaint alleges that the studies had a number of defects, not the least of which was incorrectly reporting the results," said David Vladeck, director of the FTC's Bureau of Consumer Protection. "For instance, they said that people lost weight, when in fact they gained weight."
Several celebrities, including Kim Kardashian and Brooke Burke Charvet, endorsed the shoes in many company ads.
"I know a lot of people who do wear the shoes, and they all swear by them," said Sue Seidel of Manhattan Beach.
Upon court approval of the settlement, Skechers will pay $40 million to a fund that will be used to refund people who bought its Shape-ups, Resistance Runner, Toners and Tone-ups shoes.
But Skechers isn't backing away from their claims. In a statement, Skechers said the company denied the allegations and would continue to make and sell its toning shoes.
"While we vigorously deny the allegations made in these legal proceedings and look 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, Skechers chief financial officer.
The company also said it would continue to advertise that wearing "rocker" bottom shoes like Shape-ups can lead to increased leg muscle activation, increase calorie burn, improved posture and reduced back pain.
"Our company's goal has always been and will continue to be designing and selling quality, affordable shoes for our loyal customers," Weinberg said. "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."
Company President Michael Greenberg said they have tens of thousands of letters from customers who love their line of toning shoes.
Refunds will be available for those who bought the shoes, but it was not yet clear how much each person would get. The amount will depend on how many claims are received in the eight-month filing period, according to the FTC.
The FTC settled similar charges against Reebok last year.
To submit a claim, visit http://www.skecherssettlement.com/.
