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Adidas claims to have opened an inquiry into claims of "compliance violations" in China, one of its main sportswear markets.
Last week, local officials were accused of embezzling "millions of euros" in an unsigned letter written by whistleblowers posing as Adidas China workers, according to a story by Chinese state broadcaster Jiemian. Online, the letter received a lot of attention.
An anonymous letter "indicating potential compliance violations in China" was received by the garment giant on June 7, according to Claudia Lange, director of media relations, who spoke with CNN on Monday.
In an email answer, she said, "Adidas is currently intensively investigating this matter together with external legal counsel." Lange refrained from commenting more while the investigation was ongoing.
Adidas's stock dropped 3.7% on Monday.
Before being posted on social media, Jiemian said that the whistleblowers' letter had been forwarded straight to the company's German headquarters.
According to the accusation, a top official overseeing Adidas' marketing budget in Greater China is accused of embezzling millions of euros and accepting substantial bribes from outside advertising and celebrity firms. A copy of the letter released by the Chinese official media source also named additional workers and members of the executive's team as being involved.
According to Jiemian, who cited the letter, Adidas Greater China's annual promotional budget was 250 million euros ($268 million), which included costs for trade shows, marketing, and branding.
According to the whistleblowers, the senior manager was also charged with "nepotism" and "workplace bullying," which included isolating and evicting certain workers. They further said that those who obeyed her orders were given promotions.
One of the manager's subordinates was also accused in the lawsuit of receiving "millions... from suppliers and physical items such as real estate."
If the corporation failed to respond to the charges, the whistleblowers promised to report the story to police authorities and the media.
The second-biggest sportswear retailer in the world is Adidas. 15% of the company's revenues come from Greater China, which includes Taiwan, Hong Kong, and the Chinese mainland.
After Nike (NKE), Adidas is the second-biggest multinational sportswear brand in mainland China. The German company's sales growth in China has recovered after Beijing lifted the Covid limitations at the end of 2022.
Its unwillingness to employ cotton from Xinjiang and rivalry from local competitors have caused a considerable reduction in its market share from pre-pandemic levels.
Adidas, H&M, Nike, and other well-known Western clothing companies were the target of a boycott in China in 2021 as a result of the positions they had taken against the purported use of forced labor in the production of cotton in the western province of Xinjiang.
Adidas is renowned for using the "celebrity" angle in Chinese marketing. It has previously collaborated with well-known performers and actresses, such as Yi Yangqianxi, Dilraba, and Yang Mi, as brand ambassadors.
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