Power Balance files for bankruptcy in the United States after Australian collapse sparks class action lawsuits

The American manufacturer of the Power Balance bracelet has filed for bankruptcy after being inundated with lawsuits months after its Australian distributor ran into trouble with the competition regulator over claims the product helped improve athletic performance without any evidence.

The American parent claims the lawsuits have put a tremendous financial strain on the business, but insists it has been careful to ensure all of its advertisements are compliant and do not promise unobtainable athletic improvements.

In a statement delivered to various press publications, Power Balance confirmed its company – whose list of creditors includes basketball superstar Kobe Bryant – had filed for Chapter 11 bankruptcy on November 18.

“Due to the unauthorised marketing tactics of an independent distributor in Australia and the proliferation of counterfeit operations of which we obviously have no control, Power Balance has become the target of number of class action lawsuits.”

Although it says the lawsuits are baseless, “they have cost the company millions of dollars in legal fees and continue to threaten the core business”.

The business also confirmed it is “taking a proactive approach to continuing growth by restructuring parts of the business”.

The move comes after the Australian distributor was slammed by the ACCC for misleading comments – local owner Tom O’Dowd told SmartCompany earlier this year he was “naïve” to think the business would not be subject to local health product regulations.

“There is a degree of naivety on my part as well. We thought we were selling a sporting product and we didn’t realise that we were subject to the Therapeutic Goods Act.”

The ACCC’s key problem was that Power Balance did not conduct specific scientific testing to determine whether the bracelets actually work. O’Dowd explained he did not know he would be subject to the Therapeutic Goods Act.

The company eventually admitted the wristbands don’t actually do this.

“The company has gone through extensive efforts to ensure that its marketing messages are supportable and compliant with local laws.”

The company has said it will continue to make new products, despite the bankruptcy.