Skechers Lawsuit Claims Adidas College Bribery Scandal Hurt Its Business

Skechers USA Inc. is taking aim at Adidas America Inc. for its allegedly questionable basketball recruitment tactics.

In a lawsuit filed yesterday with the U.S. District Court for the Central District of California, Skechers has accused Adidas of false advertising and unfair competition, in connection with a bribery scandal that surfaced last year involving at one Adidas executive, a brand consultant and several college basketball coaches.

In its filing, Skechers states, “Some of the key ways that law-abiding shoe companies get their products on players’ feet are through sponsoring youth basketball programs, sponsoring college/university sports programs and through endorsement deals with professional players in the NBA. Adidas’ illicit bribery program, however, has corrupted all of these channels, tipping the scales unfairly in Adidas’ favor to the detriment of competitors, such as Skechers.”

Specifically, Skechers claims that it incurred increased advertising costs, lost sales and other damages in excess of $75,000.

In September 2017, Jim Gatto, Adidas’ director of global sports marketing, was arrested on charges of fraud, bribery and corruption following an FBI investigation dating back to 2015. Also named in the documents were Adidas consultant Merl Code and Jonathan “Brad” Augustine, director of an amateur basketball league in Florida sponsored by the company.

According to an indictment issued in November 2017 by the U.S. Attorney for the Southern District of New York, Gatto has been accused of funneling hundreds of thousands of dollars from Adidas to the families of All-Star high school athletes to ensure they will play for brand-sponsored schools.

However, through its lawsuit, Skechers alleges that Adidas may be guilty of more misconduct. “Skechers is informed and believes … that Adidas’s illegal scheme may have involved more than the six college players who have been publicly identified in connection with the criminal proceedings to date,” the company claimed in its filing.

In a statement emailed to FN, an Adidas spokesperson said: “The Skechers complaint is frivolous and nonsensical and should be summarily dismissed.”

The company further pointed to its own ongoing suit against Skechers alleging infringement of the Adidas Stan Smith sneaker and Three-Stripe trademark. Today, the 9th U.S. Circuit Court of Appeals upheld an earlier injunction prohibiting the sale of the Skechers Onix shoe.

Judge Jacqueline H. Nguyen stated in the court’s decision, “The evidence supports an inference that Skechers intended to confuse consumers; it not only created a nearly identical shoe to the Stan Smith, but then used metadata tags to direct consumers who searched for ‘adidas stan smith’ to the Onix web page.”

(The 9th Circuit also overturned an injunction against the sale of another Skechers sneaker, the Cross Court.)

In its case filed yesterday against Adidas, Skechers has requested a jury trial to address its claims about unfair competition.

The company is seeking an injunction to prohibit Adidas from making further alleged payments to student athletes and demands a full declaration of all its alleged payments. Skechers also is seeking compensation for damages and legal costs and has requested an “award of the profits that defendant Adidas unlawfully derived as a result of its wrongful conduct.”

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