Companies and their brand partners have had a symbiotic relationship for decades in which both entities help the other succeed. But what happens when a brand ambassador begins to inspire a negative image for the company, and the bureaucratic process hinders it from making a change?
The recent split between Adidas AG and Kanye West highlights the complicated process of cutting ties and ending a brand partnership.
Adidas announced that it was ending its partnership with Kanye West after the rap artist made several disparaging and anti-Semitic comments during an interview on Revolt TV’s Drink Champs series.
Adidas expects to take a big hit in revenue after terminating its partnership with West, the German-based sportswear manufacturer said in a statement. It claims that Kanye’s recent comments and actions have been “unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
Adidas came to its decision more than two weeks after it began a review on whether to end its partnership with West. Adidas declined to comment beyond the company’s initial statement.
“Every day that you delay may be damaging your brand,” said Alan R. Friedman, partner at Fox Rothschild, an entertainment industry law firm.
Larger corporations that use advertising agencies to assess public opinion typically have a more challenging time making quick decisions due to the higher level of bureaucracy.
Bureaucracy can slow decision-making in moments of crisis, according to Mark DiMassimo, founder of New York-based ad agency DiMassimo Goldstein.
“When something comes up that requires a fast, human, unambiguous action, very few companies are prepared,” said DiMassimo. “Clients can be like frogs in the proverbial pot of heating water.”
Terminating a contract is not much of an issue when celebrities are booked for small appearances at an event or when their likeness is used for promotional purposes, explained Christopher R. Chase, advertising and entertainment partner at law at Frankfurt Kurnit Klein & Selz. The problem, however, is when celebrities were integral in helping design the products that bear their name or when they own equity in the company, he added.
“If the talent retains some ownership, then you have to stop making the product entirely instead of just taking their name off,” said Chase. “This is literally shutting down the factory to some extent.”
One way brands have worked around the issue of terminating a spokesperson is through the use of “moral clauses” in their contract. Moral clauses give companies the right to end a brand partnership when a spokesperson’s behavior optically damages a client’s reputation.
For example, alcohol brands commonly include contractual clauses forbidding their celebrity partners from receiving D.U.I. arrests or participating in drunk and disorderly behavior.
Another way is through “liquidated damages clauses,” which require the spokesperson to repay a certain amount to the company as compensation for failing to fulfill the contract.
According to Chase, in some cases, vaguely worded moral clauses can result in costly litigation over what technically constitutes damaging behavior.
In the end, Chase said that brands should carefully gauge the various risk factors when considering signing a spokesperson with a history of erratic or offensive behavior, especially if the person plays an outsized role in their marketing efforts.
After Adidas ended its partnership with Kanye West, the rapper strolled into Skechers’ corporate office in California uninvited, reportedly looking for a new collaboration. Shortly after his unwelcome arrival, security escorted West out of the building.
“Skechers is not considering and has no intention of working with West,” the company said.
