The latest shot in the long-running “sneaker wars” was fired Thursday in a federal court in California, where Skechers filed a lawsuit against Adidas. The action was based on revelations that have emerged from the FBI’s investigation into corruption in college basketball, with Skechers claiming it was financially damaged by Adidas’s alleged practice of delivering illicit payments to highly touted recruits and their families.
The payments “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’s overall brand quality and image well beyond the basketball footwear market,” the company said.
“The Skechers complaint is frivolous and nonsensical and should be summarily dismissed,” Adidas responded in a statement.
Skechers cited the September arrests of Adidas executive Jim Gatto and a consultant who worked for him, Merl Code, as well as of former sports agent Christian Dawkins. The three are accused of orchestrating a scheme to funnel money to high school players, in violation of NCAA rules, to get them to play at Adidas-affiliated schools and keep their loyalties once the players turned pro. They have been charged with felony counts of wire fraud, and their trial is scheduled for October.
Also named in the lawsuit were Jonathan “Brad” Augustine, an Orlando-based former AAU basketball director who had been accused of working with the trio to steer recruits to Louisville and Miami, and Thomas “T.J.” Gassnola, a Massachusetts-based director of an Adidas-sponsored AAU program. In April, Gassnola pleaded guilty to a felony count of wire fraud conspiracy, in connection with the FBI investigation.
“Skechers’ and other competitors’ basketball businesses cannot effectively compete for players’ footwear choices while they are amateurs — or for their endorsements when they turn professional — because adidas has sought to ‘lock up’ players by paying secret, illegal bribes to them and/or their families,” Skechers said in its lawsuit. “Moreover, even if adidas did not succeed in bribing a player or a player’s family, adidas’s pervasive conduct has created expectations that law-abiding competitors cannot meet.”
Skechers claimed that Adidas’s alleged activities cost it “increased advertising and/or marketing expenses,” as well as “lost sales and profits,” and damaged its brand. Skechers said its lawsuit “seeks recovery of adidas’s ill-gotten profits, damages for lost sales and diminished brand value and increased advertising and marketing costs, and an injunction preventing adidas from making further illegal, undisclosed endorsement payments to amateur basketball players.”
While Nike dominates the landscape of athletic footwear, Adidas has significantly increased its market share in recent years, in part because of partnerships with pop-culture figures such as Kanye West and a revival of appreciation for some of its “retro chic” styles. By contrast, Skechers has considerably less of a profile in the world of basketball shoes, a fact underscored in its lawsuit, in which it noted its past endorsement deals with the likes of the Timberwolves’ Jamal Crawford, NBA free agent Josh Smith and former all-stars Larry Bird, Kareem Abdul-Jabbar and Karl Malone.
Thursday also brought news that the 9th U.S. Circuit Court of Appeals ruled on a separate courtroom battle between Skechers and Adidas. The court upheld a preliminary injunction barring Skechers from selling a shoe that Adidas claimed resembled too closely its well-known Stan Smith model, while Skechers was allowed to continue to market a shoe that Adidas complained bore a too-familiar design with three stripes.
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