cibs wp05 tennis

8/3/2019 CIBS WP05 Tennis

1/29

CIBSCentre for the International Business of Sport

The CIBS Work ing Paper Series no.5

WALKING ADVERTISEMENTS:TENNIS GRAND SLAM COMMITTEE

AND ADIDAS

Simon ChadwickCoventry University

Geoff WaltersBirkbeck College, University of London

2008Series editor John Beech


2/29

The CIBS Working Paper Series no.5 Walking Advertisements: Tennis Grand Slam Committee and Adidas

Chadwick and Walters (2008)

- 2 -

Centre for the International Business of Sport

(CIBS)

CIBS aims to deliver high quality applied research, training, consultancy

and networking outputs across a range of sports and in a number of

different disciplines.

The activities of CIBS include

undertaking applied sport research

providing a range of consultancy activities to the sport industry

offering the services of retained sport academics

delivering generic and bespoke sport training programmes

creating opportunities for networking and collaborative exchange in

sport

working with prospective, actual and previous clients in sport to

identify ways in which CIBS can assist them with specific projects

The Centre for the International Business of Sport

Coventry University Business School

Coventry University

5 Priory Street

Coventry CV1 5FB

United Kingdom

Website: h t t p :/ / w w w .co ven t r y .ac.u k / r esear ch n et / d / 6 9 1

Em ai l enqu i r ies : Sim on.Chadw ick@covent r y .ac .uk


3/29



- 3 -

BACKGROUND

Over the last two decades, sport has become an increasingly importantindustrial sector. For sports themselves, faced with rising costs andcommercial opportunity, many have adopted new approaches to

management. Alongside this, related organisations, ranging from themedia corporations through to sportswear manufacturers and sponsors,have also sought to utilise sport as a focus for their commercial andmarketing activities. At the centre of these developments are theindividuals, teams, leagues and competitions responsible for creating thecontests that evoke a plethora of deep emotions amongst sports fans andother consumers alike.

Professional tennis is typical of the commercial changes that have cometo characterise 21st century sport. The top male and female players aresporting and cultural icons, attracting major sponsorship and

endorsement contracts, appearing in promotional campaigns for majorbrands across the world, and securing huge financial rewards for theirappearances and tournament victories. As such, these players havebecome hugely wealthy; yet some critics are sceptical about the benefitsof the commercial and financial development of the sport. For instance,many will talk of Anna Kournikova, the darling of marketers, brandmanagers and sponsorship agents, but someone who nevertheless failedto win a single Grand Slam tennis tournament.

Tennis tournament organisers, keen to attract major stars to their events,

have added impetus to the clamour to be associated with the worldsleading players, and prize money at the leading tour tournaments hastherefore risen dramatically. At the same time, tournament managershave become more commercially savvy, providing better facilities forincreasingly demanding fans whilst seeking to maximise capacityutilisation in order to promote revenue growth.

In combination, the growth of globally high profile tennis players andtournaments has provided fertile ground for a multitude of relatedorganisations including sportswear manufacturers and sponsors tobecome involved in the sport. Such is the power of tennis, that some

organisations are using the sport as a specific focus for the strategicdevelopment of their businesses. This is not so surprising because globalmedia coverage of the sport is growing and leading performers thereforeremain in the spotlight for fans and consumers across the world. In manyways, tennis is therefore a perfect global platform upon whichcorporations can produce and market, amongst other things, shoes,shirts, shorts and racquets. Witnessing Federer at Wimbledon orMauresmo at the US Open can have a major influence on peoplesperception of a sportswear brand; indeed there is compelling evidence toindicate that people respond positively to such associations and we havetherefore seen sportswear and non-sportswear brands fighting it out with


4/29



- 4 -

each other to win the right to place logos on the equipment used tennisplayers.

Over the last few years, the tennis has come to be dominated by a smallnumber of very powerful global sportswear manufacturers. Many of the

worlds leading tennis players are now associated with them and, such isthe market power of these corporations that they have engaged inintensive non-price competition. This has resulted in intense competitionto be associated with tennis leading performers, with product innovationand design, and with a growth in the size of logos appearing on tenniswear. However, the latter has become a particular problem for tennistournament managers, who are keen to protect against tennis playersbecoming little more than walking advertisements for the worlds leadingsportswear brands. These concerns are particularly acute where leadingtournament managers, such as Wimbledon, take pride in, and value the

look and feel of the tournament including the clothing worn by players.At one level, there is a philosophical issue underpinning these concerns;in tennis there is a certain ethos that the game should be played in aparticular way and that rampant, unfettered commercialism should not beallowed to impinge upon the sport. At another level, there is an issue ofpower and position; tournaments are held to be the property of the eventowners, not sportswear companies, and managers therefore see it as aduty and a responsibility to protect their properties. As such, a conflict ofinterest has arisen between sportswear manufacturers who have paidhuge sums to be associated with leading tennis players and are seeking tomaximise the return on their investments, and tournament managers whowish to retain control of their events and what happens at them.

This case therefore sets out to examine a major incident in thisrelationship: the attempts of the Grand Slam Committee to regulate theuse of brand logos on tennis wear. In particular, the case focuses on thelegal action taken by Adidas against the Grand Slam Committee as theresult of attempts to restrict the use of the corporations Three-Stripes.The basis for Adidas action is firstly considered, and this is followed by anexamination of the market for tennis wear and the leading producers.

Thereafter, the development of Adidas and the corporations involvementin tennis is examined, as is the involvement of rival manufacturers. Thecase concludes by examining the way in which the legal action was settledas well as identifying some potential implication of this.

INSTIGATION OF LEGAL ACTION

In April 2006, sportswear company Adidas issued a claim in the EnglishHigh Court against the International Tennis Federation (ITF) and the fourGrand Slam tennis tournaments: Wimbledon, the French, the Australian

and the United States Opens. The claim alleged infringements ofEuropean competition law resulting from a ruling by the Grand Slam


5/29



- 5 -

Committee (GSC - a representative body consisting of the four grandslams and the ITF) that Adidas Three-Stripe design was to be considereda manufacturers identification for the purpose of the GSCs rules and wastherefore subject to size restrictions imposed by these rules. The basisfor the GSCs decision arose from concerns that Adidas were being givenpreferential treatment as the three stripes were in their opinion clearlymore of a marketing tool/logo than simply a design feature and thereforefell within the scope of their rules. According to ITF and GSC regulations,on logos and manufacturers identifications should be restricted on tennisapparel to 26 square centimetres.

Adidas have incorporated Three-Stripes into their sportswear designs foralmost 70 years, but a number of other sportswear manufacturers haverecently complained to various governing bodies and federations aboutthem. They have claimed that the Three-Stripes are distinctive and

recognisable, and therefore it is unfair that they are not caught by thesize restrictions imposed by virtually all governing bodies onmanufacturers identifications such as the Nike swoosh, the Lacostecrocodile and the Puma cat.

A number of US sports already interpret Adidas Three-Stripes as a formof manufacturer identification and have subjected them to sizerestrictions. Moreover, in early 2005, the International OlympicCommittee announced that at the Turin Winter Olympics in 2006, theThree-Stripes would be deemed a manufacturers identification andsubject to the size rules. Despite these actions, Nike, amongst others,has staged protests against what they have perceived to be Adidasfavoured position. During the Berlin and Rome Masters tennis seriesevents, the company sent Rafael Nadal and other players out with oversized Nike swooshes on their shirts. The swooshes were clearly andblatantly in breach of each competitions rules governing the size ofmanufacturers logos.

In May 2005, the GSC decided that the Adidas Three-Stripes was amanufacturers identification or logo for the purposes of their rules andthey informed Adidas of their decision. The GSC acknowledged that it

could take Adidas time to redesign retail stock and they deferredimplementation of the rule with respect to the Three-Stripes until theAustralian Open in January 2006. The next few months saw frenziednegotiations, threats of litigation and resulted, in October 2005, with anextension of Adidas grace period until June 2006. This extension in turnresulted in threats of legal action from Nike and the other manufacturers.In March 2006, Adidas pushed for a further extension but, when the GSCrefused, they instigated legal proceedings in April 2006.

Adidas claimed that the GSCs implementation of their rule was aninfringement of European competition law. In particular, Adidasexpressed concerns that the lead times for designing products did not


6/29



- 6 -

give them sufficient time to redesign their retail products and thereforetheir sponsored players would have different shirts to Adidas retailproducts. This would put them at a competitive disadvantage in relationto their competitors. Adidas also claimed that the GSCs implementationof the rule was discriminatory as it picked on their Three-Stripe designbut not the distinctive designs of their competitors, such as Nikes sunrayor Diadoras two-stripe design. In another move by Adidas, the companymade an application for an injunction to prevent the GSC applying theirrule before a trial, in effect suspending the rule for Wimbledon and the USOpen tournaments.

In response to Adidas actions, the Grand Slam tournaments and the ITFall applied for summary judgement, that is a declaration from the courtthat Adidas did not have a reasonable chance of succeeding at trial andtherefore the case did not justify a full trial. Although this was difficult for

them to prove, the Grand Slams felt it was worth trying as the consensuswas that Adidas had a weak case. At an interim hearing in the LondonHigh Court in May 2006, Adidas made some amendments to their claim:firstly, the company withdrew its injunction application against Roland-Garros and Australia (principally as it was felt there would be time for afull trial before these events next took place, in 2007); secondly, in thelight of GSC concerns about how other sportswear manufacturers wouldreact if a Adidas was awarded an injunction, Adidas gave the court anundertaking stating that if an injunction was granted, but they lost thecase at a full High Court trial, they would indemnify all losses suffered by

other manufacturers who sponsored grand slam tennis players as a resultof the competitive advantage Adidas enjoyed in that period.

The following judgement on the interim hearing was made in June 2006:

1) the judge struck out the part of Adidas claim where the companyalleged they were at a competitive disadvantage as they were notgiven enough time to comply with the rule that was being imposedon them;

2) the judge did not strike out the remainder of their claim andaccepted that there was a chance that Adidas would succeed in their

claim that, in implementing the Dress Rule governing logo size andthe nature of manufacturer identifications appearing on tennis wear,the GSC and ITF had discriminated against Adidas;

3)on the basis of an Adidas undertaking, the judge granted thecompany an injunction against Wimbledon and the US TennisAssociation preventing them from implementing the Dress rulebefore full trial could take place;

4) the judge ordered an expedited trial to take place in October 2006.

In August 2006, the case became a rather more complex one when Nikeand Puma instigated their own legal action against the GSC claiming that


7/29



- 7 -

they had been prejudiced as the GSC hadnt applied their Dress Rules .The move was widely seen as being a ploy to ensure Nike and Puma weregiven a voice in the negotiations to settle the case.

SPORTSWEAR MARKET OVERVIEW 1

The sportswear market can be split into two separate markets: sportsclothing and sports footwear. The mass-market for sportswear initiallydeveloped in the 1980s with the growth of the training shoe market. Thiswas initially passed off as a fad. However, during the late 1980s and inthe 1990s, the sportswear market grew rapidly. In the early 1990s, thesports clothing market overtook sports footwear, and since the early2000s, there has been a steady sales ratio of 70% clothing to 30%footwear in the overall sportswear market. Between 2000 and 2004, the

overall sportswear market grew by 16.2%. However, during this period,sales of sports clothing grew 18.9% in contrast to sports footwear, whichgrew by 10.4%. One of the reasons for this is that price deflation of 13%occurred between 2000 and 2004, which encouraged consumers toincrease the number of garments and pairs of footwear they buy eachyear. The overall sportswear market in the UK in 2005 was worth 4.5billion. This was 10.1% of the overall 44.5 billion clothing and footwearmarket in the UK, demonstrating that sportswear is now a mainstreammarket in the UK in its own right and a key component in the overallclothing and footwear market.

Of the sports clothing and sports footwear markets, sports clothing is thelarger market and can be further sub-divided by garment type, forinstance fitness and athletics, football and outdoor pursuits. The sportsclothing market in 2005 in the UK was worth 3.2 billion, 71.1% of theoverall sportswear market and 8.3% of the overall clothing market(although this is a fall from its peak of 9.3% of the clothing market in thelate 1990s). The sports footwear market in the UK was worth 1.3 billionin 2005. This was 28.9% of the sportswear market and 21.3% of theoverall footwear market. The sports footwear market peaked in the mid1990s when it accounted for 25% of the overall footwear market.

The sportswear market can be sub-divided to look at sportswearspecifically designed for racket sports tennis, squash and badminton. In2005, the total market size for sportswear designed for racket sports was150 million, 3.3% of the total sportswear market. The market size forsports clothing designed for racket sports was worth 100 million in 2004,3.2% of the total sports clothing market. This is a fall from 125 millionin 2002 (4.3%) and 125 million (4.7%) in 2000. Two possible reasonsfor this are the decline in levels of participation and the trend towardsmore informal dress on court, which has reduced the demand for racket-

1 All figures taken from Keynote, 2005 and Keynote, 2006.


8/29



- 8 -

specific clothing. The market for sports footwear designed for racketsports was worth 50 million in 2004, 3.8% of the total sports footwearmarket. Although the market was also worth 50 million in 2002, thisrepresented 4.3% of the total sports footwear market. In 2000, themarket for sports footwear was worth 60 million, 5% of the total sportsfootwear market. Two possible reasons for this are again the decline inparticipation rates and also the trend towards multipurpose trainers,which reduces the need for racket-specific sports footwear.

The global sports footwear market was worth 8 billion in 2005, with over350 million pairs of sports shoe sold annually. Nike was the marketleader with a market share of 34.1%. Adidas was second with 16.5%,and Reebok and New Balance equal third with approximately 10% each(Davis, 2005).

Leading companies

The three leading sportswear companies in the world areNike, Adidas andReebok. In August 2005, Nike was the leader in global market share with32.9% compared to the recently constituted Adidas-Reebok organisationthat had 26.3% market share. In the largest market in the world, theUnited States (US), Nike had 36.3% market share in August 2005.Following the acquisition of Reebok in August 2005, the market share ofAdidas-Reebok in the US jumped to 21.1% from 8.9%. In the UnitedKingdom (UK), as in the rest of the world, the three leading sports brandsare Nike, Adidas and Reebok. However, the Pentland Group rivals Nike

and Adidas in terms of UK sales as it owns a number of sportswear brandsincluding Ellesse and Lacoste, as well as several specialised marketleading brands including Berghaus and Speedo swimwear.

Tables 1 and 2 clearly show that Nike and Adidas have the largestbudgets in terms of overall advertising spend in the UK for sportsfootwear and sports clothing. However, given the strong performance byPuma in the late 1990s, they are now pushing close in terms of theiradvertising expenditure. Surprisingly, the advertising expenditure ofReebok is low in comparison to these three. The Keynote Report (2005)claims that advertising expenditure is cyclical and that Reeboks fall out of

the top three spenders in 2005 is probably temporary.

An annual report produced by Interbrand (2006), in cooperation withBusinessWeek, ranking the top 100 global brands shows that Adidas wasranked 71st and Nike 31st. The ranking is based on brand value, which isdefined as the dollar value of a brand, calculated as net present value, ortodays value of the earnings the brand is expected to generate in the

future (2006: 20). Given that this puts both brands ahead ofcorporations such as Shell, Porsche, and fashion brands such as Armani,Burberry and Levis, it signifies the strength of the two brands. Indeed,

Adidas and Nike are the only sportswear companies in the top 100 globalbrands. The positions of the two companies during the previous five


9/29



- 9 -

years had been relatively stable, with Adidas ranked at 70th, 68th, 67th,69th, and 71st between 2001 and 2005 respectively, and Nike ranked at34th, 35th, 33rd, 31st and 30th over the same period.

2004 2005

Adidas 5,603 3,574

Nike 4,880 1,422

Puma 2,237 2,282

Reebok 891 126

Umbro 80 113

K-Swiss 299 247

O'Neill 103 97

Columbia - 327

Champion USA 113 322

Gore-Tex - 321

Quiksilver/Roxy - 266

Other 4,356 4,212

Table 1: Main media advertising expenditure on sports clothing

(,000) in the UK, 2004 - 2005Source: Keynote Market Report 2005 - Sports Clothing and Footwear: 54

2004 2005

Adidas 2,064 2,086

Nike 1,259 6,030

Puma 389 1,445

Reebok 2,249 753K-Swiss 256 1,285

Skechers 1,591 949

Other 2,305 3,365

Table 2: Main media advertising expenditure on sports footw ear

(,000) in the UK, 2004 - 2005

Source: Keynote Market Report 2005 - Sports Clothing and Footwear: 55


10/29



- 10 -

Consumers of sports apparel in the UK and their socio-

demographic profiles

The Keynote Report on the Clothing and Footwear Industry (2006)revealed that an important characteristic of sportswear consumers is the

bias towards men, in contrast to most clothing and footwear marketswhere women spend more and buy more frequently. A surveyundertaken by NEMS Market Research survey on behalf of Keynote (2006:93) found that the most widely used outlet for buying sports, leisure orcasual clothing or footwear was a sports shop, with 55% of consumersstating this. The survey also found that sports shops were used by 72%of 16-19 years olds, 49% of 20-24 year olds, and 72% of 25-34 yearolds. Further information about the socio-demographic profiles of buyersis presented in Table 3.

Nike Adidas Reebok

All 39 36 31

By sex

Male 39 36 31

Female 39 36 32

By age

16-24 59 49 46

25-34 53 48 40

35-44 44 45 38

45-54 44 37 35

55-64 23 22 21

65+ 14 13 10

By social grade

AB 38 35 27

C1 40 36 31

C2 48 43 40

D 33 32 35

E 32 29 25

Table 3: Penetration of Top Three Sports Clothing and Footw ear

Brands by Sex, Age and Social Grading (% of adults) in

the UK, 2004

Source: Keynote Clothing and Footwear Industry (2006): 98


11/29



- 11 -

Buying behaviour

A survey of consumer attitudes towards sportswear was undertaken byBMRB Access, for Keynote, in June 2005. Based upon a representativesample of 1,016 adults, the key findings were:

36% of respondents believed that sports brands like Nike or Adidasoffer better quality than most other clothing or footwear;

58% of respondents in the 25 34 age group believed that sportsbrands like Nike or Adidas offer better quality than most other clothingor footwear;

In 2004, when asked which brands consumers had bought in the lastyear, 36% had bought Adidas, 39% had bought Nike, and 31% hadbought Reebok;

In 2002, when asked which brands consumers had bought in the lastyear, 40% had bought Adidas, 44% had bought Nike, and 36% hadbought Reebok;

In 1998, when asked which brands consumers had bought in the lastyear, 48% had bought Adidas, 37% had bought Nike, and 35% hadbought Reebok

The tennis market

The tennis market in the UK is a relatively small sub-sector of the overallsportswear market. The Keynote Report on the Clothing and Footwear

Industry (2006) revealed that the racket sportswear market, whichincludes badminton and squash, was worth 150m in 2005, just 3.3% ofthe total sportswear market (Keynote, 2006: 90). It is thereforeunsurprising that only 1.8% of adults in the UK in 2004 regularlyparticipated in tennis (Keynote, 2005: 5). The 2005 Keynote reportrevealed that the major companies supplying sportswear to the racketsport sector in the UK are Nike, Adidas, Reebok, Hi-Tec, Pentland Group(Ellesse, Lacoste), Puma.

HISTORY OF ADIDASThe founder of Adidas, Adolf Adi Dassler first started making shoesspecifically designed for sport in 1920, in his hometown ofHerzogenaurach, Bavaria, Germany. His brother Rudolf joined him in1923 and in 1924, the two set up the company Gebrder Dassler with Aditaking on the role of technician and Rudolf the salesman. They movedinto their first shoemaking factory in 1927. From an early stage, Adi wasaware that the best form of promotion for their sports shoes was throughathlete endorsement, with Gebrder Dassler shoes first being used at theAmsterdam Olympics in 1928. Moreover, at the infamous 1936 Olympic

Games held in Berlin, Adi Dassler managed to persuade Jesse Owens,winner of the 100 metres, 200 metres, 4x100 metre relay and the long


12/29



- 12 -

jump to wear Dassler spikes. The success of this led Gebrder Dassler toopen a second factory in 1938, however the Second World War badlyaffected the company although it did manage to continue trading. It alsoexacerbated the rift between Adi and Rudolf, eventually causing a splitbetween the brothers in 1948. Rudolf left to form Puma, while Adiregistered a new company name, Adidas, in 1949. Throughout the1950s and 1960s, Adidas along with Puma - became the market leadersin sportswear.

Adidas in the modern era

Although Adi Dassler died in 1978 at the age of 78, the Dassler familyretained control of Adidas until 1989. Having previously been displacedby Nike in the 1970s in the sports footwear market (Farquahar et al,1992: 37), the 1980s and the early 1990s were difficult times for Adidasas the company struggled to compete with Nike and Reebok, the two

dominant companies at this time. As Lane Keller states Adidas, once thestandard of athletic footwear, saw its leading market position overtaken

by rivals Nike and Reebok as the company became mired in out-dated

business practices and internal squabbles (1999: 110). In 1992, Nikehad 24% market share of the global sportswear market. Reebok had20% with Adidas a distant third with 14% (Olins, 1992). In the USsportswear market, Adidas only had 3% market share in 1992 (Olins,1992).

In 1990, Adidas was sold to Bernard Tapie although he was unable to

change the companys fortunes. In 1991 Adidas made a profit of 7.6m,although given that this was against turnover of 1.1bn, it was notconsidered a success. In 1992, Adidas lost more than $100 million,forcing the banks to search for potential new owners. In 1993, RobertLouis-Dreyfus and a group of friends put in $10,000 each and signed upto $100milllion in loans for 15% of the company with the option to buythe remainder 18 months later at a fixed price (Wallace, 1997). He wasappointed chairman in 1993, and this started a turnaround in thecompany. Louis-Dreyfus implemented a number of changes: productionwas moved overseas to China, Indonesia and Thailand; he cut staff

numbers from a high of 14,600 in 1986 to 4,600 in 1994; the advertisingbudget was doubled, effectively turning Adidas into a marketing-orientedcompany rather than a production-oriented one; he also reduced thelevels of bureaucracy, decentralised the organisation, adopted USaccounting rules, and brought in international managers (Wallace, 1997).The turnaround was successful in that Adidas made a profit in 1994. In1995, Adidas sold off the non-core brands that they had developed.These included Le Coq Sportif, Arena and Pony.

In 1995, Adidas floated on the Frankfurt Stock Exchange, making aninitial public offer on 17th November. By June 1998, Adidas became partof the DAX 30 Index indicating that the company had become one of the


13/29


14/29



- 14 -

Adidas brand values and strategy

The companys approach to manufacturing and marketing sportswear canbe summarised in the following way:

Mission: To be the leading sports brand in the world;

Vision: Passion;

Brand slogan: impossible is nothing.

In order to realise its vision, Adidas has created three separate operatingdivisions, each with its own strategy. These are:

Sport Performance Division: Innovate to Perform

The focus of the Sport Performance Division is on footwear and apparel

for athletes that want performance and function first and style second.The main sports that it concentrates on are running, football, basketballand the womens market;

Sport Heritage Division: Celebrate Originality

The focus of the Sport Heritage Division is on sportswear and footwearthat are aimed at lifestyle and street wear while still maintaining asporting base;

Sport Style Division: Modern Sportswear

The focus of the Sport Style Division is at fashion conscious consumersthat want the sporting look but in a more sophisticated interpretation.

Adidas involvement in sport

Adidas is involved in a number of sports. The nature of their involvementappears to be two-fold. Firstly, Adidas produce a range of sportsfootwear and apparel designed for specific sports. The more prominentsports include football, tennis, athletics, golf (using the TaylorMadebrand), swimming, cycling and basketball. Secondly, they have long helda firm commitment to sport sponsorships and the endorsements ofsporting stars. In each of the above sports, Adidas endorse elite

sportsmen and sportswomen.

Football has been and continues to be the main sport for Adidas. It wasfootball that helped to get the original Dassler company up and running inthe 1920s, and it also helped to re-establish the brand in the 1990s, withthe sponsorship of the German World Cup winning team in 1990, theFrench World Cup winning team in 1998, and some of the major clubteams in the world including Real Madrid and Bayern Munich. In England,Adidas has the number 1 spot in football-related products. The companywas an official sponsor of the 2006 football World Cup, having also been

an official supplier for to the European Football Championships since2000. Their individual player and endorsement deals sponsorship


15/29



- 15 -

includes one with David Beckham. In a consumer survey of 288 people in2004, 28% of adults without being prompted were able to name Adidasas a product that David Beckham endorsed, rising to 42% for 16 25year olds and 32% for 26 35 year olds. A similar survey of 388individuals showed that when prompted, 39% were able to name Adidasas a product that David Beckham endorsed, with 64% for 16 25 yearolds and 46% for 26 35 year olds (Miles and Rines, 2004: 85 86).

In athletics, Adi Dassler was well aware, even in the 1930s, of thebenefits of associating top sports stars with Dassler shoes, hence hispursuit of US sprinter Jesse Owens at the 1936 Berlin Olympics. Athleticscontinued to be an important sport for Adidas in the 1950s, as sportbecame more commercialised. As Magdalinski and Nauright (2004)stated, Dassler, the founder and head of Adidas, was one of the firstentrepreneurs to recognise the transformation of the games from an

amateurish affair to a grand televisual spectacle and the benefits thatsponsors could derive from increased exposure and renewed public

interest (2004: 193). As such, Adidas effectively promoted theirfootwear at the Olympics in Melbourne (1956), Rome (1960) and Tokyo(1964). Adidas still have a firm commitment to athletics. They were anofficial supporter of the 2004 Olympics in Athens and recent athleteendorsements include the US Olympic Team that included Maurice Green,the 100m sprinter.

Adidas and Tennis

Up until the 1960s, tennis was largely an amateur sport. For instance,Wimbledon only gave up its exclusive amateur status in 1968. However,from the 1960s onwards, tennis became increasingly popular, and thedistinction between amateur players and professional players becameblurred as players made a living through endorsements, resulting in theterm shamateurism (Smit, 2006).

According to Garrett (2002), Adidas (Dassler) shoes have a long history ofinvolvement in tennis. Dassler first began making specialist tennis shoesin the 1920s. However, up until the 1960s, the more prominent makersof tennis shoe were Dunlop and Uniroyal (Smit, 2006). It was not until

Horst Dassler (son of Adi and in charge of the French Division of Adidas)decided to move into tennis and turn it into a cornerstone of thebusiness (Smit, 2006: 108) that Adidas had much involvement. Heapproached Robert Haillet in 1964, a French professional on the verge ofretirement, to help him design the first all-leather tennis shoe, the RobertHaillet, launched in 1965. In 1971, Adidas turned to Stan Smith, aleading US tennis player, developing a tennis shoe bearing his name thatsold 40 million pairs over a ten-year period. Following this, Ilie Nastase,the Romanian player, signed up to wear full Adidas clothing and shoes ona four-year, $50,000 contract in 1973. The Nastase shoe sold 20 millionpairs over a ten-year period (Smit, 2006). Following Nastase, Adidas


16/29



- 16 -

have maintained a strong commitment to tennis through their playerendorsements which have included some of the worlds best tennisplayers such as Rod Laver, Billie-Jean King, Ivan Lendl, Stefan Edberg,Steffi Graf, and Martina Hingis. Adidas also paid Anna Kournikova $7.5million in 2000 to wear Adidas, despite the fact that she was never a topplayer but she became one of the most photographed tennis players inthe world before her early retirement.

Therefore, tennis has been an important sport for Adidas, and continuesto be; at the moment, it is their number one individual sport and is worth$200 million in turnover to the company (for both footwear and apparel).Also, in recent years Adidas has shifted its strategy from one of US-European dominance to one with more of a more global focus, withmultiple ATP partnerships in South American and Asia. At present, Adidasare an official partner of the French Open at Roland Garros. They also

currently endorse more than 20 leading tennis players, including TimHenman, who has been with Adidas for over 10 years and in 1997 wasdescribed by Steve Martin, then UK Public Relations Manager at Adidas asthe classic, clean-cut British hero (White, 1997). Henman was one ofAdidas three biggest sporting stars in the UK alongside David Beckhamand Naseem Hamed (White, 1997). Their major endorsers featured ontheir website are Fernando Gonzalez, Andre Agassi, Guillermo Coria,Marat Safin, Mike and Bob Bryan, Justine Henin-Hardenne, Nadia Petrova,Patty Schnyder, Ana-Lena Groenfeld, and Ana Ivanovic.

ADIDAS LOGOS AND THE THREE-STRIP ES

According to Heard (2003), the Three-Stripes first appeared on an Adidasproduct (a pair of training shoes) in 1949. These were introduced.as ameans of strengthening the shoe and providing extra stability.

Smit (2006) provided an alternative explanation, stating that the reasonAdi Dassler introduced the Three-Stripes was so that his shoes couldeasily be distinguished from other shoes at that time. Also, the twostripes had previously been used by Gebrder Dassler, and so Adi wanted

to avoid any further conflict with his estranged brother Rudolf, and fourstripes was considered too confusing; therefore Three-Stripes seemed agood compromise (Smit, 2006). The Three-Stripes were registered as atrademark in 1949 at the same time as the company was registered. Thecompany slogan at the time referred to Adidas as the brand with theThree-Stripes.

At the 1952 Helsinki Olympics, fourteen gold medals were won byathletes wearing shoes made by the Finnish footwear company, Karhu.At that time, Karhu also used Three-Stripes on their shoes, making itdifficult to distinguish from a distance - between Adidas and Karhu

shoes. Smit (2006) stated that trademark legislation was fairly unclear atthe time, and after the Helsinki Olympics in 1952 the first time the


17/29



- 17 -

Three-Stripes appeared at the Olympics - Adi Dassler was able topersuade Karhu company executives to part with the Three-Stripes forwhat was a relatively small sum of money and two bottles of Schnapps.Two years later, the Three-Stripes logo made its inaugural appearance atthe World Cup.

In 1962, Adidas diversified into producing tracksuits, and this was thefirst time that the Three-Stripes were used down the side of a tracksuit.The 1980s and early 1990s was a period of poor financial performancefor Adidas, but from 1993 onwards, the Three-Stripes logo becamefashionable again and demand soared (Wallace, 1997).

In 1972, the year of the Munich Olympics, of which Adidas was the officialsupplier, the company introduced its famous trefoil logo, or the threeleaves. According to Heard (2005: 91) the trefoil is said to have comefrom the motif of the laurel crown given to the winners of sporting

festivals in ancient Greece.

In 1991 Adidas introduced their geometric performance logo. Theperformance logo started out specifically for the equipment range and isprobably not as widely recognisable or as fondly thought of as the original

trefoil logo, which is synonymous with the brand (Heard, 2005: 93).

RIVAL COMPANIES

The 2005 Keynote Report (2005) on sports clothing and footwear

revealed that the main companies involved in the racket sportswearmarket are Nike, Reebok, Hi-Tec, the Pentland Group (through Ellesseand Lacoste), and Puma. In terms of the specialist companies, Dunlop,Slazenger, Diadora, Lotto, Fred Perry, K-Swiss and Fila are listed. Tovarying extents, New Balance, Diadora, Sergio Tacchini, K-Swiss, Princeand Wilson are also involved in the tennis footwear and apparel market.Prince and Wilson are nevertheless specialists in the manufacturing oftennis rackets, as noted in the Keynote Report (2004) on sportsequipment.

Nike

Nike originally started out as Blue Ribbon Sports in Oregon, in the US in1964. It was founded by Bill Bowerman and Phil Knight, and distributedJapanese Onitsuka products, most notably running shoes (Gratton, 2003).Blue Ribbon Sports changed its name to Nike in 1972, launching at theAmerican Olympic trials (Olins, 1992). During the 1970s, Nike grewrapidly, displacing Adidas as Number 1 in the sports footwear market dueto weak promotional support for the Adidas brand and Adidas failure tointroduce advanced design products (Farquahar et al, 1992).

In the 1980s, however, Reebok was the force in the sports footwearmarket. In 1987, Reebok had 30% market share compared to Nikes


18/29



- 18 -

18%. However, aggressive advertising and the athlete endorsementmeant that in the 1990s, Nike overtook Reebok and became the marketleader in sporting footwear. By 1998, Reebok announced that it could notcompete with Nike any longer because it could not match the investmentthat was Nike making in marketing its brand (Gratton, 2003). Forinstance, Nike paid Michael Jordan $10m a year to wear Nike basketballshoes in the NBA (Olins, 1992), paid tennis player Andre Agassi a $120mdeal over ten years (Badenhausen, 2004), and more recently paid up to$70m to endorse Tiger Woods for 5 years (Roberts, 2001), demonstratingan aggressive approach to personal endorsements as a way to enhancethe brand, generate sales and build market share. This demonstratesthat Nike is a strongly marketing-oriented company. As the chairman andChief executive, Phil Knight, stated in 1992 For years we thought ofourselves as a production-oriented company, meaning we put all our

emphasis on designing and manufacturing the product. But we now

understand that the most important thing we do is market the product.

Weve come around to saying that Nike is a marketing-oriented company,

and the product is our most important marketing tool. What I mean is

that marketing knits the whole organization together. The design

elements and functional characteristics of the product itself are just part

of the overall marketing process (Phil Knight, Nike Chairman and ChiefExecutive, quoted in Willigan, 1992: 92)

All manufacturing is therefore contracted out to overseas factories with99% of them in Asia. Given that Nike has often relocated to cheaper

factories within different Asian countries, the company came underintense scrutiny in the late 1990s over the conditions and the workingpractices in the factories in which its sports goods were made. There arenow over 650,000 people working in sub-contracted factories producingNike sportswear.

Nikes recent financial performance is indicated in Table 5.

2006 2005 2004 2003 2002 2001

Revenues 14,954.9 13,739.7 12,253.1 10,697.0 9,893.0 9,488.8

Net Income 1,392.0 1,211.6 945.6 474.0 663.3 589.7Table 5: Nike: Global Sales in $,000s

Source: Hoovers - www.hoovers.com

Tennis is an important sport for Nike. Previous players to wear Nikesportswear include Ilie Nastase, John McEnroe, Andre Agassi, and PeteSampras. Ian Hamilton, Nikes Tennis Marketing Director has stated thatthe criteria Nike use for selecting player endorsements:

When I started at Nike tennis, John McEnroe was the most visible playerin the world, and he was already part of the Nike family. He epitomised

the type of player Nike wanted in its shoes talented, dedicated and


19/29



- 19 -

loud. He broke rackets, drew fines and, most of all, won matches. His

success and behaviour drew attention on and off the court and put a lot of

people in Nikes (quoted in Willigan, 1992)

The portfolio of players who currently endorse Nike includes Andre Agassi,

Roger Federer, Rafael Nadal, and Maria Sharapova.Puma

Puma was formed in 1948 following the feud between the Dasslerbrothers that resulted in Rudoph leaving to form the company. In 1986,Puma listed on the Munich and Frankfurt stock exchanges, but it wasntuntil 8 years later, in 1994, that they posted a profit. During the late1980s and early 1990s Puma struggled financially. In 1993, Puma lost$32m on sales of $190m. During this time, Grainger and Andrews (2003)have stated that the brand presence and identity of Puma was negligible.

However, since 1994, the company has made a successful turnaround.By 2001, Puma posted a profit of $36m. The turnaround has been theresult of a long-term corporate strategy that, as the global director ofbrand management Antoine Bertone said in 2002, has seen Puma positionitself as the brand that mixes the influence of sport, lifestyle and fashion(Davis, 2002). In 2006, Puma launched phase IV of this long-termcorporate strategy, focusing on company expansion in three areas:category expansion, regional expansion and non-PUMA brand expansion.Puma is seeking to reinforce its position as one of the leading multi-category sport lifestyle brands. It currently employs about 4000 staff.

Pumas recent financial performance is indicated in Table 6.

2005 2004 2003 2002 2001

Sales 2,387 2,017 1,692 1,380 1,012

Table 6: Puma financial performance: Global sales figures in

billions of Euros

Source: Puma Website - www.puma.com

Puma has had a strong presence in the football and athletic market sinceits formation. For instance, in the 1958 World Cup, winners Brazil andhosts Sweden wore Puma boots. Other top footballers to wear Pumaboots include Eusebio, Johan Cruyff, Mario Kempes, Diego Maradona, andLothar Mattheus. The Italian national team that won the 2006 World Cupwere wearing Puma kit. In athletics, Puma also have a presence withLinford Christie, Colin Jackson, Merlene Ottey and Jonathan Edwards.

Pumas involvement in tennis has been less prominent. Guillermo Villaswon the French and US Open in 1977, and the Australian Open in 1978wearing Puma, and Martina Navratilova and Boris Becker won Wimbledonin 1984 and 1985 respectively wearing Puma shoes. From 1998, Serena

Williams has also endorsed Puma, and Puma have been the officialsponsor of the Womens Tennis Association Tour.


20/29



- 20 -

Reebok

Reebok has its origins in Bolton (UK) when in 1898, Joseph William Fosterformed J.W. Foster and Sons Limited, but it wasnt until 1958 when thefounders grandson, Jeff and Joseph Foster formed a separate company

that they named Reebok. In 1979, Paul Fireman, a partner in an outdoorsporting goods distributorship, negotiated for the license to distributeReebok shoes in North America, after which the company grew rapidly inthe 1980s to become the market leader in the sports footwear market. In1987, Reebok had 30% market share compared to Nikes 18%. However,in the 1990s, Reebok struggled as Adidas and Nike overtook it. Goldmanand Papson (1996) suggested that Reeboks failure in the 1990s was dueto an inconsistent image.

Fila

Fila was formed in 1911 in Biella, Italy, although it took until 1973 for thebrand to become an elite performance brand and one that is associatedwith European sport. The main product markets that Fila concentrate onare tennis, running, mountain sports, fitness and golf, although tennis istheir core market. The most prominent tennis player that Fila havesponsored in the past was Bjorn Borg, who helped to establish Fila as aperformance brand in the tennis market in the 1970s. They had a 22-year sponsorship deal with the US Open, and the major names in tennisthat they currently sponsor are Kim Clijsters, Svetlana Kuznetsova andMark Philippoussis.

Hi-Tec

Hi-Tec was formed in 1974 in Shoeburyness (UK) by the Dutchman Frankvan Werzel. His love of squash led him to develop a sports shoespecifically designed for the sport the Hi-Tec squash, which has sincesold over 18 million pairs sold worldwide, making it Britains best sellingsports shoe model. Hi-Tec became successful in the 1970s and 1980s,leading to the floatation of the company in 1988, although in 2000 theChairman and founder Frank van Werzel bought the company and de-listed it. In 2006, Hi-Tec employed 500 staff, had global sales of more

than $250m, and distributed their products to 100 countries.Hi-Tec focus their sports shoeson the mid-price market segment, aimingto develop sports shoes that are attractive, comfortable, lightweight andhigh-quality at a fair true-value price. This is in keeping with theirmission statement that is to Enjoy your shoes, and they aim to develop abrand personality that is easy, friendly, contemporary, comfortable andaccessible.

In 2002, after an 18-month strategic review, Hi-Tec re-launched its brandidentity, trying to emphasise the technical and performance side in their

three core areas of golf, outdoor and court. In addition to these threecore areas, Hi-Tec also focus on Hi-Tec Sport; Urban Collections and


21/29



- 21 -

Magnum Brands. With regards to golf, in 2002, Hi-Tec was the thirdbiggest golfing shoe brand in the UK after Footjoy and Adidas and theysponsor a number of golfers including Ian Woosnam and PadraigHarrington. In 2004, Hi-Tec launched a golf shoe in association with Irishgolfer Padraig Harrington to try and reposition the brand as an alternativeto Nike and Reebok. In terms of racket sports, Hi-Tec do not sponsor anytennis players. Their sponsorship focus is on badminton with worldmixed doubles number 1s Gail Emms and Nathan Robertson - andsquash. However, Hi-Tec does manufacture three pairs of tennis shoe Classic, Sigma and V-Lite Phantom.

New Balance

New Balance was formedby William Riley, an English immigrant, inBoston (US), in the early 20th century. In 1934, he went into partnershipwith Arthur Hall who at the time sold arch supports for shoes. In 1961,

New Balance released the Trackster, the worlds first performance runningshoe with a ripple sole. The main focus of New Balances activities isrunning. However, the extent of the companys involvement in tennis islimited, despite the fact that they have an extensive range of tennis shoeson offer. They sponsor the Palisades Tennis Club in Newport Beach,California, in addition to the Pacific Southwest Senior TennisChampionship.

Diadora

Diadora was started in the Veneto region of Italy in 1948 by Marcello

Danieli. The first product of the company was mountain boots. By the1960s, Diadora had expanded into ski boots and aprs-ski boots. In the1970s, Diadora expanded into other sports including athletics with theMontreal Olympics in 1976, football in 1978, and tennis with thesponsorship of Bjorn Borg. In the 1970s, Diadora became synonymouswith success, Italian style and technical excellence, and sportingfootwear, especially tennis shoes, became more mainstream and wereworn for everyday use, in particular by young people. Indeed, theDiadora Borg Elite trainer was a cult classic in 1982 (Heard, 2003). In the1980s, the three core disciplines of football, tennis, and athletics were

strengthened, whilst the company also expanded into cycling, basketball,volleyball, motoring, fencing, boxing and motorcycling. More recently,Diadora have had a long-term strategy to increase its presence in footballin the UK, with the sponsorship of Bradford City, West Bromwich Albion,Glasgow Rangers, Aston Villa and Sheffield Wednesday, while also havingan individual boot deal with Roy Keane.

Famous sportsmen to have been endorsed have included Zico, RobertoBaggio, Marco Van Basten, George Weah, Gianluca Vialli, and the Italianfootball team in football, while in athletics, Sebastian Coe and Edwin

Moses have worn Diadora. In tennis, Boris Becker, Jim Courier,Kafelnikov, Goran Ivanisevic and Gustavo Kuerten have all previously


22/29



- 22 -

worn Diadora. Current tennis players to wear Diadora are Nicolas Kiefer,Ivan Ljubicic, Gaston Gaudio, David Ferrer, Francesca Schiavone, AgustinCalleri and Katerina Srebotnik.

Sergio Tacchini

Sergio Tacchini, a professional tennis player, formed the company in1966. Given his tennis background, the company originally focused ontennis clothing, in particular coloured tennis wear. The company hassince expanded to produce both sport footwear and apparel for othersports and has three divisions; sport, heritage and leisure. SergioTacchini has always had a very strong association with tennis, with JanKodes, Jimmy Connors, Roscoe Tanner, Ilie Nastase and John McEnroe allwearing Sergio Tacchini in the 1970s. In the 1980s, Pat Cash, MartinaNavratilova, Gabriele Sabatini all wore Sergio Tacchini clothing, while thecompany expanded into basketball, skiing, formula 1 and Golf. In the

1990s, it continued to expand into swimming, fitness, leisure andfootwear, while also becoming the official sponsor of the Italian team atthe 1996 Atlanta Olympics. It maintained a presence in tennis with GoranIvanisevic, Constantino Rocca, and Nicolas Escude. Since 2000, SergioTacchini has further expanded into sailing. In tennis, they now endorseTommy Robredo, Fillipo Volandri, Olivier Rochus, Xavier Malisse, VeraDouchevina and Flavia Pennetta.

K-Swiss

K-Swiss was founded by two brothers in the early 1960s after they

moved to Southern California from their home country of Switzerland.They developed a love for tennis and formed the company originally toproduce tennis footwear, developing the K-Swiss Classic in 1966. Sincethen, the company has continued to develop tennis footwear, but alsoproduces multi-purpose training shoes for other sports and has alsobecome a fashion brand.

Lacoste

Rene Lacoste was a tennis champion of the 1920s, winning the FrenchOpen (three times), the US Open (twice) and Wimbledon (twice) between

1925 and 1929. Lacoste was nicknamed The Alligator by the Americanpress following a successful bet with a compatriot that he would win theFrench Open. He soon embroidered an alligator onto his blazer and sobegan the foundations of the Lacoste sportswear company. In 1933,Lacoste branded products became available for the first time, using therevolutionary material/design Jersey petit piquelt. In 1952, the companybegan producing non-white tennis shirts for the first time and also beganexporting to the US. By the early 1980s, the Lacoste brand had becomeperceived as an exclusive one, especially in the US where it wasassociated with preppies. More recently, as the brand has grown, the

company has licensed many of its products to other companies. Hence,Samsonite holds the licence to produce Lacoste bags and leather goods,


23/29



- 23 -

Devanley the licence to produce clothing and Pentland Brand the licenceto produce footwear.

Ellesse

Leonardo Servadio, the LS who gave his name to the brand, was an

Italian tailor who began making ski pants that became a socially exclusiveproduct during the late 1950s. Given the exclusivity and prestige of thebrand, the Ellesse name was therefore subsequently introduced into thethen equally exclusive world of tennis. By 1976, the company hadembarked on an aggressive strategy of global expansion, notablysponsoring many of tennis leading players and later many, often leading,tennis tournaments.

Onitsuka Tiger (ASICS)

Formed in 1949 in Japan and motivated by a perceived need to help the

countrys post-war youth, the company is now known as ASICS. Thecompanys first shoes, incorporating a special sucking mechanism, wereused in basketball and by 1951 had achieved a 50% market share inJapan. In the late 1950s, Onitsuka bought the Tiger brand; the stripesthat were characteristic of the latter brand were adopted by Onitsuka andhave been used on their products ever since. By the early 1960s,Onitsuka was working with the fledgling Blue Ribbon Sports, the companyformed by Phil Knight that was later to become Nike. Onitsuka suppliedBlue Ribbon Sports with Japanese sportswear that was marketed underthe Blue Ribbon name in the USA. However, the relationship came to an

end in 1970 when Knight decided to source his footwear from anothercompany. The current incarnation of the company, ASICS, emerged in1977 following a merger between three organisations: GTO (makers ofsportswear and nets), Jelenk (makers of knitwear) and Onitsuka (makersof training shoes). ASICS was adopted as the new company name,drawing its letters from the initials of the Latin phrase Anima Sana InCorpore Sano (a sound mind in a sound body).

Prince

Prince has long had a strong association with tennis, and is one of the

leading companies in the world that manufactures tennis rackets, as wellas producing a range of tennis equipment. Prince was originally started in1970 by Bob McClure as a tennis ball machine manufacturing company.By 1976, the company had expanded into developing tennis rackets.During the 1980s, Prince further expanded into tennis bags, tennis shoesand apparel. It now sponsors many top players, providing them withtheir rackets including Maria Sharapova, Guillermo Coria (who wearsAdidas clothing), Jennifer Capriati, and Martina Navratilova.

Wilson

Wilson was formed in 1914. Like Prince, it is one of the most prominentmanufacturers of tennis rackets. At present, Wilson has endorsement


24/29



- 24 -

deals Roger Federer and Serena Williams. Previous sponsors haveincluded Pete Sampras and Billie Jean King.

PREVIOUS LEGAL CASES INVOLVING ADIDAS

In the past, Adidas has aggressively and successfully defended the Three-Stripes as a logo and as a trademark, taking numerous companies tocourt over two, three and four-stripe designs which they have claimedinfringed their Three-Stripe trademark. Indeed, Marinovich stated thatsince the 1970s, two, three and four stripe designs have been held toinfringe the Adidas three-stripe trademark in the German courts. AsMarinovich (2006) wrote, According to the German Federal Court ofJustice, the public recalls and recognises such well-known and distinctive

brands rather than un-established marks. It is therefore likely that

consumers associate and confuse signs with two, three or four parallelstripes with the Adidas trademark. This gives Adidas a certain amount ofprotection in the German courts. However, five stripes have beendeemed not to infringe the Three-Stripe trademark, althoughinterestingly, in 2000, K-Swiss had not registered their five-stripe designas a trademark in Germany because they were concerned over a possibleconflict with Adidas' Three-Stripe design mark.

There have been more than 90 cases in the German courts, 37 in the USand numerous cases in other countries where Adidas have sought toprotect their Three-Stripe design. A number of companies including Nike

and Tom Tailor have been forced to withdraw a range of clothing that hada two-stripe motif as this would have infringed the Adidas three-stripetrademark.

Following the Adidas-FitnessWorld case in the European Court of Justice(ECJ) in 2003, the ECJ ruled that a proprietor of a trademark with areputation is unable to stop the use of a similar sign as a decorativedesign. But the ECJ went on to state that an infringement of Article 5(2)of the 1988 European Trademark Directive that covers signs that areidentical or similar to the trade mark on identical, similar or dissimilar

goods or services can be deemed to have occurred if the trademarkowner is able to prove that the similarity between its registeredtrademark and an offending sign is such that the public is able toestablish a link between the sign and the mark, without necessarilyconfusing them.

Adidas brought cases in the US in 2005 against Abercrombie and Fitchover a three-stripe design on a line of casual clothes, and the US PoloAssociation over two-stripe designs, while in 2004 they sued RalphLauren. They have previously filed a lawsuit against German clothingmanufacturer Tom Tailor in the German Court, and also Gruppo Coin in

the Italian Courts. In the case of Tom Tailor, Adidas took legal actionafter company had used a two-stripe motif on the sleeve of a jacket,


25/29



- 25 -

while the CEO of Tom Tailor, Michael Rosenblat said that the courtsruling monopolises the use of stripes in favour of Adidas and limits the

possibilities of fashion design. (Marinovich, 2006)

Adidas-Salomon v. F itnessWorld

In 2003, Adidas were involved in a lawsuit with FitnessWorld, asportswear company. It initially began in the Dutch Courts, and was laterreferred to the ECJ. Adidas filed a lawsuit claiming that a two-stripe motifthat FitnessWorld used on clothing was too similar to Adidas Three-Stripes. The European Court of Justice ruled that the proprietor of atrademark with a reputation cannot prevent the use of a similar signviewed purely as a decorative motif, but that an infringement can bedeemed to have occurred if the trademark owner is able to prove that thesimilarity between its registered trademark and an offending sign is suchthat the public is able to establish a link between the sign and the mark,

without necessarily confusing them.

Adidas-Salomon v. Dolce and Gabbana

In 2004, Adidas filed a successful lawsuit in the German courts againstDolce and Gabbana over the use of a two-stripe motif on black stretchtrousers. The verdict was that Dolce and Gabbana infringed article 5(1)bof the Trade Marks Act 1994 which covers signs that are identical orsimilar to the trade mark on identical or similar goods.

Adidas-Salomon v. Nike

In 2006, Adidas won their case against Nike in the German Court over theuse of a two-stripe motif on shorts, training vests and sports clothingclaiming that it was confusing for the consumer as to the origin of theclothing. On one piece of clothing, Nike had placed two parallel stripesalong the seam of a pair of tracksuit bottoms. Nike had to discontinueselling the line and was fined 1m euros.

Adidas v. National Collegiate Athletic Association

In 1998, Adidas brought a lawsuit against the National Collegiate AthleticAssociation over the size and number of logos on student athletes

apparel, although they later withdrew it. The NCAA argued the need topreserve Bylaw 12.5.5 which was there to protect the integrity of collegeathletics and avoid commercial exploitation of student athletes. However,the NCAA agreed to several new guidelines regarding Adidas apparel.Adidas claimed that they have built their communication with the publicon the basis of their Three-Stripes and that they have been accepted bysports governing bodies for decades.

RESOLUTION OF THE CASE

Following months of negotiations and the threat of further legal action byAdidas rivals, the parties involved in the case agreed to an out of court


26/29



- 26 -

settlement in September 2006. It was accepted by all parties that theAdidas Three-Stripes is a manufacturers identification, but the ITF DressRule was amended to increase the space for manufacturers identificationsso that a 52-square-centimeter patch can be placed on the sleeves of atennis shirt by a sportswear manufacturer. In cases where amanufacturer includes their name in this patch, the manufacturersidentification can only be 25-square-centimeters in size. It was alsoagreed that Adidas has a grace period until the Australian Open in 2007to produce ITF Dress Rule compliant shirts. Thereafter, tennis shirtsproduced by all manufacturers will be regulated by the new code.

CONCLUSIONS

At the end of the legal case, it would appear that honours were even.

The GSC asserted some control over tennis, restricting the growth (bothin size and number) of sportswear manufacturer logos, thus addressingconcerns about commercialism impacting upon the sport. Whether or notthis will be a long-term solution to controlling the walking adverts theGSC was so concerned about remains to be seen, especially as varioustennis tournaments continue to work in partnership with sportswearmanufacturers. For instance, despite the some times bitter nature of theGSCs dispute with Adidas, the company remains a major partner of theFrench Open staged at Roland Garros. Given the proliferating costs ofstaging Grand Slam tennis events allied to the exposure that being

associated with them delivers to commercial partners, there is nodoubting the mutual dependence that exists between the GSC and Adidas,and indeed other sportswear manufacturers. How such relationships aremanaged, especially in the light of concerns about the sanctity of sport,would therefore appear to be a major issue for parties involved in theaforementioned legal case. Given the cost and consequent revenuepressures nevertheless facing sporting events, the decision to morestringently regulate sponsorship and advertising is an interesting one,raising a number of issues. Amongst these, is the extent to whichsportswear manufacturers (and other commercial partners) will accept or

tolerate their regulation before seeking other promotional opportunitiesor, as happened in this case, they instigate legal proceedings to protecttheir positions.

For the other suppliers of tennis and sportswear, most notably Nike andPuma who joined the proceedings in August, their immediate concernshave been allayed. Adidas use of the Three-Stripes has at last beenbrought under control, thereby limiting, if not eliminating, any commercialor competitive advantage the company has secured. In one sense, this isa little nave; despite the ubiquity and power of, say, Nikes swoosh,Adidas enjoys a historical accumulation of brand equity that will bedifficult to undermine or challenge, even in the light of the Dress Rule


27/29



- 27 -

change. Many consumers, both of tennis wear and sportswear generally,are highly aware of the Adidas brand and are able to readily associate theThree-Stripes with the brand. While reducing the size of a manufacturersidentifier or of a logo might diminish visibility of the Three-Stripes, thepositive cognitive and behavioural impact of them will remain. Therefore,just as Adidas is being forced to re-design its tennis wear to comply withthe new regulation, their competitors equally face a challenge: to re-design their tennis wear in order to compete with Adidas Three-Stripedesign. In the short-term at least, there is likely to be a period ofuncertainty as the leading manufacturers interpret the new ruling, andmake their competitive and commercial responses to it. Now there isclarity in the Dress Rule, one can begin to think ahead and speculate howlong it will be before we see tennis shirts with, for example, largerswooshes or longer leaping cats running down their sleeves.

Following years of largely unregulated use of the Three-Stripes, Adidaswill be allowed to continue using arguably their most valuable asset.Whether or not company officials feel aggrieved is a moot point. Becausethe Three-Stripes remain, it means the company will retain one elementof competitive advantage that it has over its rivals. It also means thecompany will not have to radically change one of sportswear historysmost recognisable images. However, given the companys contentionthat the Three-Stripes are a historic design rather than being a directform of commercial promotion or a logo, will no doubt concern them. Notleast amongst these concerns will be the opportunities it presents to their

rivals. Although it has not been the policy of, for example, Nike to placeextended or enlarged identifiers or logos on the sleeves of their tenniswear, the potential for this to happen has now been established. Thecompetitive response of Adidas rivals may be the real downside to whatAdidas is otherwise likely to perceive as a legal victory.

The tennis and sportswear markets are incredibly competitive, locally andglobally, and Adidas will be loathed to concede ground to its majorcompetitors, especially its closest rival Nike and newer, increasinglyaggressive rivals such as Diadora. Adidas recent acquisition of Reebokwill help in this fight, but the way is now clear for other tennis wearmanufacturers to instigate design changes that may ultimately be moreinnovative, visible and/or appealing to consumers, consequently puttingAdidas in the shade. With exciting games between the top tennis playersalways assured, what clothes they wear and what they look like are goingto make for an equally interesting contest in the future.

BIBLIOGRAPHY

Adidas (2006), Adidas Annual Report 2006, Herzogenaurach, Germany.

Badenhausen, K. (2004), King of the Court, Forbes, 174 (1): 93 94.


28/29



- 28 -

Davis, J (2005), Secrets of success: its the cost of a pair of shoes, The Independent,

10th April: 15.

Farquhar, P., Han, J., Herr, P., and Ijiri, Y. (1992), Strategies for Leveraging Master

Brands: How to bypass the risks of direct extensions, Marketing Research, September:

32 43.

Garratt, S. (2002), When is a trainer not a trainer? The Times, 19th October: 28.

Goldman, R., and Papson, S. (1996), Sign wars; The cluttered landscape of advertising,

Boulder: Westview Press.

Grainger, A., and Andrews, D. (2003,) Postmodern Puma, M/C: A Journal of Media and

Culture, 6 (3): 1-10.

Gratton, C. (2003), Sport in the Global Marketplace, chapter 2 in Trenberth, L. (ed),

Managing the Business of Sport, New Zealand: Dunmore Press, p33 46.

Heard, N. (2005), Trainers: Over 300 designs from rare vintage to the latest designs,

London: Carlton Books.

Hoovers (2006), Hoovers Intelligence, accessed 2nd September from www.hoovers.com

Interbrand (2006), Best Global Brands 2006, Interbrand, London.

Keynote (2006), Clothing and Footwear Industry Report, Hampton: Keynote Reports

Limited.

Keynote (2005), Sports Clothing and Footwear Report, Hampton: Keynote Reports

Limited.

Lane Keller, K. (1999), Managing Brands for the Long-Run: Brand Reinforcement and

Revitalization Strategies, California Management Review, 41 (3): 102 124.Magdalinski, T. and Nauright, J. (2004), Commercialisation of the Modern Olympics, in

Slack, T., The Commercialisation of Sport, London: Routledge, p185 204.

Marinovich, S. (2006), Much Ado About Adidas Stripes, Business Week Online, accessed

28th April from

http://www.businessweek.com/innovate/content/apr2006/id20060428_729369.htm

Miles, L., and Rines, S. (2004), Football Sponsorship and Commerce: An Analysis of

Sponsorship and Commercial Opportunities in Football, 2004: International Marketing

Reports, London.

Olins, J. (1992), Going for Gold, The Sunday Times, 12

th

July: 14.Puma (2006), Puma Home Page, accessed 31st August from www.puma.com

Roberts, L. (2001), The Brand New Heavies: how Adidas muscled their way back into

the game with Nike, The Sunday Mail, 17th June: 46.

Wallace, C. (1997), Adidas goes for Gold, Time Australia, 27th January, available from:

http://www.time.com/time/magazine/1997/int/970120/business.adidas_goes.html

White, J. (1997), The Big Match, The Guardian, 1st July: 54.

Willigan, G.E. (1992), High Performance Marketing, Harvard Business Review, 70 (4):

90 101.


29/29


Contact author: [email protected]

Dr Simon Chadwick is Professor of Sport Business Strategy and Marketing at Coventry

University. He is a Director of CIBS, Editor of the International Journal of Sport

Marketing and Sponsorship and has worked with organisations involved in sport including

the Football Association, Mastercard, the four tennis Grand Slams and FC Barcelona.

Professor Chadwick has been widely quoted in various media outlets including the Wall

Street Journal, Forbes, Time, Newsweek, The Economist, Bloomberg, CNN, Reuters and

the BBC. He is the author of more than 300 books, papers, articles and reports on sport.

Geoff Walters is a Lecturer in Management at Birkbeck, University of London and an

associate of the Birkbeck Sport Business Centre. He completed an Economic and Social

Research Council funded PhD looking at corporate governance in the football industry,

with a specific focus on the stakeholder model of governance.

For m ore i n fo rm a t ion on Coven t r y Un ivers i t y s

Cen t r e fo r t he I n t e rna t iona l Bus iness o f Spo r t

p lease v i s it ou r w ebsi te a t h t t p :/ / w w w .co ven t r y .ac.u k / r esear ch n et / d / 6 9 1

cibs wp05 tennis

Documents