Skechers sues Adidas over alleged payments to basketball prospects

Skechers shares plunge after the shoe retailer issued a disappointing outlook for this quarter.

The strangest fallout from the FBI’s investigation into corruption in college basketball occurred Wednesday in U.S. district court in California.

That’s where Skechers filed a wildly optimistic federal lawsuit arguing that it could have emerged as a more significant player in the basketball footwear market were it not for Adidas’ alleged misconduct.

The entire complaint is founded on federal charges alleging that Adidas illegally funneled money to elite basketball prospects under the table in hopes of steering them to schools it sponsored and persuading them to ink endorsement deals as pros. Skechers argued it incurred substantial economic harm as a result of Adidas’ scheme, complaining of increased advertising and marketing expenses, lost sales and profits and the diminishing value of its brands relative to that of Adidas.

“Adidas has coopted young players into wearing and expressly or implicitly endorsing its products by funneling hundreds of thousands of dollars in secret payments to players, their coaches, and/or family members in violation of NCAA rules,” the lawsuit reads.

“These illicit 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.”

Adidas responded to the Skechers lawsuit with this statement: “The Skechers complaint is frivolous and nonsensical and should be summarily dismissed.”

Adidas executive Jim Gatto and employee Merl Code were among the 10 men arrested last September two years into the FBI’s investigation into bribery and corruption in college basketball. Federal prosecutors filed additional charges against the men in April, alleging they also conspired to funnel cash to the families of former basketball players at Adidas schools Louisville, Kansasand NC State.

When word of Skechers’ lawsuit spread on social media on Thursday, it was the first time many realized that the shoe company even dabbled in the basketball footwear market.  You don’t see Skechers sponsoring AAU basketball teams like Nike, Adidas and Under Armor do, nor do you see Skechers vying for endorsement deals with NBA players or sponsorship agreements with marquee universities either.

While Skechers does sell basketball shoes, they’re not exactly flying off the shelves. You’d probably have to pay most prospects even more than Adidas shelled out for Brian Bowen or Dennis Smith Jr. to get them to play basketball wearing these Skechers.

Even if Adidas is found guilty of the charges against it, Skechers will have a very tough time proving its case or establishing damages. The whole lawsuit seems more like a continuation of the public feud between Adidas and Skechers than a serious attempt to seek money.

The two companies have already been engaged in a legal standoff over Skechers creating shoes that Adidas believes too closely mimic some of its top sellers. 

Thanks to another lawsuit, the feud is now escalating anew.