Bureaucracy and unclear contract language can slow down the decision-making process when problems arise
Adidas AG became the biggest brand to end a partnership with Kanye West this week, following anti-Semitic outbursts from the rap artist and designer.
Adidas said it cut ties with Mr. West, who goes with Ye, at a considerable cost to its own business because his recent comments and actions were “unacceptable, hateful and dangerous, and they spur diversity and inclusion, Violate the company’s values of mutual respect and fairness.”
Mr West could not immediately be contacted for comment.
Some observers and writers who felt the same way asked why it took Adidas so long to announce its findings, more than two weeks after it began reviewing the partnership.
Friedman, partner at the entertainment industry law firm Fox Rothschild, said of such situations, “Every day you procrastinate can damage your brand.”
An Adidas spokesperson declined to comment beyond the company’s opening statement. But the process of separating a company from a well-known business partner can be more complicated than it may seem.
Bureaucracy can slow decision-making in moments of crisis, said Mark Dimasimo, founder of Dimasimo Goldstein, a New York-based advertising agency.
Brands often ask their advertising agencies to assess public opinion and determine whether they should act while working internally on potential responses, Mr. Dimasimo said. The resulting competitive narrative may facilitate more delays, he said.
“When something comes along that requires fast, humane, clear action, very few companies are prepared,” Dimasimo said. “Customers can be like frogs in the proverbial pot of hot water.”
Marketers who have made their decision can often quietly terminate a contract if it is relatively basic, such as requiring a celebrity to be present at an event or requiring the brand to use one’s name and likeness for promotional purposes. According to Christopher R. Chase, a specialist in advertising and entertainment law at Frankfurt Kurnitt Klein & Selz.
But cases in which celebrities help design products bearing their names and may even have some equity in the company are more difficult to resolve, he said.
“If Talent retains some ownership, you have to discontinue the product entirely, rather than just name them,” Mr. Chase said. “It’s literally shutting down the factory to some extent.”
Brands are increasingly relying on so-called ethical clauses, which give them the right to terminate a contract when a spokesperson behaves in a way that could be considered detrimental to a customer’s reputation.
The offensive behavior may be specific to the company in question; Liquor brands typically include DUI arrests or contractual clauses prohibiting drunken and disorderly behavior among their representatives, Mr Chase said.
But ethics clauses became widespread during the #MeToo movement, as financial proponents of projects promoted by celebrities who had been accused of sexual misconduct insisted on rewriting contracts so as to reflect a brand’s stated values. Any behavior seen as inconsistent with could trigger termination, Mr. said. Friedman.
At the same time, vaguely worded ethical clauses can lead to costly and potentially harmful litigation as lawyers argue whether the spokesperson’s behavior constitutes a violation. While a brand may want to terminate a contract if a spokesperson’s behavior is not to its liking, the celebrity’s legal team often argues that the language should only apply to more specific violations, such as an arrest, Mr. Chase said.
Brands can try to hedge against potential monetary losses with a liquidated damages clause, which requires the spokesperson to pay a certain amount to the company as compensation for failing to fulfill the contract. But these types of clauses are not particularly general, as the language defining the types of offenses that justify such action has to be too specific to be considered seriously by courts, Mr Chase said.
Brands should carefully assess risk when they consider signing a spokesperson with a history of precarious or aggressive behavior, especially if the individual will play a large part in their marketing efforts. And it’s not just because such behavior could happen again, according to Mr. Chase.
A brand may struggle to justify canceling a contract over new behavior when a celebrity’s legal team can point to similar examples that preceded the deal, Mr. Chase said.
“Talent lawyers have said, ‘Listen, you’re hiring her because she’s a little out there, so I’m not going to eliminate you because she does something that’s a little out there,'” he said. .
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