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Skechers USA Inc. is suing rival footwear maker Adidas America Inc. over a college basketball corruption scandal that illegally pays high-school basketball players to wear Adidas products.

The U.S. footwear company is saying that Adidas has put them at an unfair competitive disadvantage due to a basketball corruption scandal, allegedly including people affiliated with Adidas.

In a lawsuit filed last week in U.S. District Court in Los Angeles, Skechers alleged that the U.S. unit German sportswear giant illegally paid high-school basketball players and others to persuade the players to wear Adidas products and prop up its brand at Skechers’ expense.

Skechers, based in Manhattan Beach, said the alleged actions not only violated National Collegiate Athletic Association rules but also amounted to false advertising and unfair competition.

"Adidas has co-opted 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," the suit alleges.

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Adidas Lawsuit

The Portland, Oregon-based U.S. unit of German sportswear company called Skechers’ suit “frivolous and nonsensical” and said the case “should be summarily dismissed” by the court.

The suit, filed Wednesday, extensively cites a scandal that has rocked college basketball since last September.

That’s when federal prosecutors charged 10 people including three people linked to Adidas and four assistant coaches after an FBI investigation of allegations bribes and kickbacks meant to steer recruits to specific schools, agents and footwear companies including Adidas.

“These illicit payments denied competitors like Skechers, who play by the rules, a fair opportunity to compete” for high-school and college players who would be seen wearing their products, Skechers’ lawsuit alleges.

Consequently, the suit says, consumers would be deceived into believing that the players chose Adidas “on the basis of superior quality or brand identity.”

Stan Smith Scandal

A U.S. appeals court on Thursday said Adidas AG can protect its famous Stan Smith tennis shoe against an alleged Skechers USA Inc knockoff, but that Skechers could sell another shoe mimicking Adidas’ familiar “three-stripe” design.

By a 3-0 vote, the 9th U.S. Circuit Court of Appeals upheld a preliminary injunction barring Skechers from selling its Onix shoe, which Adidas said looked like its white Stan Smith shoe, its all-time best-seller with more than 40 million pairs sold.

The same panel, in a 2-1 vote, also reversed a similar injunction barring Skechers from selling its Cross Court shoe, which has three stripes on its side, finding no proof Adidas would suffer irreparable harm.

Adidas and Skechers face a scheduled trial on June 4 before U.S. District Judge Marco Hernandez in Portland, Oregon, who had issued an injunction covering both Skechers shoes in February 2016, court records show. The appeals court sat in Portland.

In a statement, Adidas said “we will not stand by and allow others to blatantly copy our products,” and that it was “committed to bringing a complete end to Skechers’ pattern of unlawful conduct” at trial.

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