Skechers Files Federal Lawsuit Against Adidas, Claims NCAA Corruption Diminished Brand Value

Sketchers

Skechers USA, Inc. has filed a federal lawsuit against Adidas America, Inc. (ADDYY) claiming financial damages stemming from illegal payments made by ADDYY company executives to college basketball recruits and/or their families. The suit claims Adidas “denied competitors like Skechers who play by the rules a fair opportunity to compete for the cachet of having trend-setting high-school and college athletes seen in their products, effectively blocked Skechers and other companies from competing on a level playing field for young NBA-level endorsers, and unfairly bolstered consumer perceptions of Adidas’ overall brand quality and image well beyond the basketball footwear market.” The company seeks to recover “Adidas’ ill-gotten profits, damages for lost sales and diminished brand value and an injunction preventing Adidas from making further illegal, undisclosed endorsement payments to amateur basketball players.” ADDYY has since put out a statement calling the complaint “frivolous”, “nonsensical” and has asked that it be “summarily dismissed”.

Howie Long-Short: Adidas wasn’t following NCAA guidelines (neither was Nike) and Skechers added accusations of “false advertising” and “unfair competition”, but it’s difficult to see how they can prove ADDYY’s actions damaged their brand’s reputation. Adidas, Nike and Under Armour were wise to invest in the grass roots level, spent heavily to acquire valuable sneaker/apparel rights on the college level and now control the market when players turn pro. There was nothing preventing Skechers from pursuing multi-million dollar agreements with college programs (or working on product design, adding influencers etc.), besides their lack of fiscal resources relative to the competition; Adidas generated $20 billion in 2017 revenue while Skechers brought in a small fraction of that ($4.2 billion) amount.

These 2 companies have had a history of battling it out in court that dates to 1995. On the same day that Skechers filed this suit, the 9th U.S. Circuit Court of Appeals held up a ruling that will prevent Skechers from selling a shoe that looks nearly identical to Adidas’ popular Stan Smith line. The day wasn’t a complete loss for Skechers though, the court reversed an injunction that had prevented them from selling their Cross Court model; one that contains a 3 stripe design on the side.

Fan Marino: I first learned that Skechers (best known for mom sneakers) was still making basketball shoes when it was disclosed that Big Ball Brand was collaborating with Brandblack, a Skechers backed company founded by David Raysse (former head of Adidas basketball), on the ZO2 Remix (Lonzo Ball’s signature shoe) and Melo Ball 1 (LaMelo Ball’s signature shoe). While Lonzo Ball is certainly the highest profile player to wear a Brandblack made shoe on the court, Jamal Crawford (T-Wolves) and Josh Smith (currently unsigned) have both worn Brandblack sneakers in the past; Crawford has since signed with Adidas. Skechers has endorsement deals in place with retired legends Karl Malone, Kareem Abdul Jabbar and Larry Bird, but there is no indication the company has ever tried to compete for active NBA players.

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Author: John Wall Street

At the intersection of sports & finance.

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