In the News: Adidas' Alleged China Bribery; Alternative Chinese Fund Raising from US Convertibles; and EU EV Tariffs

June 21, 2024 | BY

Clarence Lee &Krista Lee

Alleged receiving of kickbacks by senior executives in China could subject Adidas to Chinese, as well as German and U.S. investigations; U.S. convertible bond market is used to raise funds by Chinese big tech amid IPO restrictions; and EU tariffs may lead to localization of Chinese EV production.

Credit: Robert/Adobe

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Whistleblowers Allege Senior Executives in Adidas Corruption

Sportswear giant Adidas has received a letter flagging potential compliance violations in China,  according to Wall Street Journal. The letter, which the company received on June 7, alleged that senior executives in China received millions of dollars in kickbacks from various marketing service providers.

The letter, which was unsigned but which some have said was written by longtime Adidas employees in China, was widely publicized online. Adidas told Reuters it is not providing any further information until the investigation is complete. Adidas said it has hired external legal counsel to investigate the allegations.

According to CNN, a senior executive who was in charge of Adidas' marketing budget was accused of embezzlement, and several members of the executive's team and other employees were implicated. According to the letter, the senior executive received millions of kickbacks from external advertising and celebrity agencies. One of the manager's subordinates allegedly also received "millions…from suppliers and physical items such as real estate," according to CNN.

The letter also alleges that the total budget for Adidas' marketing campaigns in China in 2023 was approximately $267.6 million, with almost all of it involved in corruption, according to Beijing Business Today. Furthermore, the letter alleges that the marketing team received between 15% and 20% in kickbacks and went as far as to forge contract fees with celebrity agents during celebrity endorsements, jointly extracting marketing costs from Adidas.

Apart from possible criminal investigation in China, Adidas, which is a German company, could also be prosecuted under the German Act on Regulatory Offenses (OWiG) for crimes and/or regulatory offenses committed by their organs, board members, authorized representative shareholders or management-level employees.

According to Howard Master, a partner at Nardello & Co and a former prosecutor with the Southern District of New York, Adidas "could be prosecuted in Germany under the German equivalent of the FCPA (U.S. Foreign Corrupt Practices Act)."

"It is even possible [that] the U.S. could prosecute, since Adidas ADRs are traded in the U.S.," he said.

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