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People walk in front of an Adidas flagship store in Shanghai, China on September 29, 2022.
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Adidas said it had launched an investigation into alleged “compliance violations” in China, a key market for its sportswear.
Chinese state media outlet Jiemian reported last week that an unsigned letter written by a whistleblower claiming to be an Adidas China employee accused local executives of embezzling “several million euros.” The letter was widely published online.
Claudia Lange, the apparel giant’s head of media relations, told CNN on Monday that the company received an anonymous letter on June 7 “indicating possible compliance violations in China.”
“Adidas is currently actively investigating this matter with outside legal counsel,” she said in an email. Lange declined to comment further pending the outcome of the investigation.
Adidas shares fell 3.7% on Monday.
Ziemian wrote that the whistleblower’s letter was sent directly to the company’s German headquarters before being shared on social media.
The reported allegations alleged that a senior executive in Greater China who manages Adidas’ marketing budget embezzled millions of euros and accepted huge bribes from outside advertising and celebrity agencies. Several members of the executive’s team and other employees were also allegedly involved, according to a copy of the letter published by Chinese state media.
Adidas Greater China’s promotional budget is estimated at 250 million euros ($268 million) per year, including costs for marketing, branding, trade fairs and other activities, Jiemian reported. I quote from that letter.
The senior manager was also accused of “nepotism” and “workplace bullying,” isolating some employees and forcing them to quit, the whistleblowers said. Employees who followed her instructions were promoted, they added.
The suit also alleges that one of the manager’s subordinates received “millions of dollars from suppliers, real estate and other items.”
The whistleblowers have vowed to disclose the matter to the media and law enforcement if the company does not address the allegations.
Adidas is the world’s second largest sportswear retailer, with Greater China, which includes mainland China, Hong Kong and Taiwan, accounting for 15% of the company’s sales.
Adidas is the second largest company in mainland China. The international sportswear brand behind Nike (NKE). The German company is enjoying a sales recovery in China after Beijing lifted anti-coronavirus restrictions at the end of 2022.
But competition from local rivals and controversy over its refusal to use cotton from Xinjiang has seen the company’s market share fall significantly from pre-pandemic levels.
In 2021, Adidas, along with H&M, Nike and other major Western apparel brands, faced a boycott in China for taking a stance against allegations that forced labor is used in cotton production in China’s western Xinjiang Uighur Autonomous Region.
Adidas is well known for using “celebrities” in its marketing in China, and has previously appointed popular actors and singers such as Yang Mi, Dilraba and Yi Yangchenxi as brand ambassadors.
