Adidas Probes Allegations of Corruption in China

Adidas said it is investigating potential compliance violations in China after receiving a letter alleging senior executives in the country received millions of dollars in kickbacks from service providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The probe comes as the German sportswear company seeks to revive its fortunes in China as part of a broader effort to reinvigorate the brand globally.

Adidas said Monday it received a letter flagging potential compliance violations in China on June 7, and that it was now investigating the matter with external legal counsel.

A letter circulating on Chinese social media accused Adidas executives in China of receiving personal rebates from various marketing services providers in the country. The authors of the letter claim to be longtime Adidas employees in China.

“Adidas takes allegations of possible compliance violations very seriously and is clearly committed to complying with legal and internal regulations and ethical standards in all markets where we operate,” a spokesperson said.

The probe into the allegations was earlier reported by the Financial Times.

Shares in Adidas were down about 4% in early afternoon trading in Europe.

Adidas has faced a number of challenges in China in recent years, hurting its performance in what had been one of the company’s most important growth markets.

Extensive lockdowns and store closures during the pandemic led to significant sales declines.

Adidas’s position in the country was then weakened further in 2021 when it joined other Western companies, including H&M Hennes & Mauritz and Nike, in pledging not to use cotton sourced from Xinjiang. U.S. and other Western governments say authorities in the region have detained millions of Uyghur and other minority people and subjected many of them to forced labor. Beijing has denied the allegations.

The German company’s stance on Xinjiang triggered a nationalist backlash against Adidas that has had a lasting impact on its sales in China.

Adidas, along with U.S. rival Nike, has also faced far greater competition from local newcomers such as Anta Sports Products and Li Ning, which are now taking a larger share of the Chinese sportswear market.

Last year, Adidas’s sales in the region that includes China, Taiwan, Hong Kong and Macau increased 8% on a currency-neutral basis to 3.19 billion euros, equivalent to about $3.41 billion, accounting for roughly 15% of the group’s total.

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