A dirty game in sportswear: Reebok India

The German group Adidas who is expecting to rise worldwide sales to 10 percent more compared to the €13.3bn from last year, is facing a reputation problem in India. Adidas Group acquired 7 years ago the brand Reebok.It’s very well positioned in the Indian market due to it’s association with cricket.

Unfortunately the Group announced that it will cut one third of its 1,000 stores in that country together with an aggressive restructure, in words of the chief executive Herbert Hainer. Reebok and Adidas , have 70 percent of the country’s branded sports market, which makes the case particularly popular in public opinion.

This comes as a consequence of the criminal charges made to former executives of Reebok India subsidiary, accusing them from a multimillion-dollar fraud. Rumors are quoting a number of around 125 million euro in fraud.

The two executives: former managing director Subhinder Singh Prem and former chief operating Vishnu Bhagat, are being investigated from charges such as falsified receipts, and merchandise being hid in four warehouses and later sent to fake distributors.

On the other hand the managing director Prem he argues that every accusation has to do with the fact that he was with Reebok before the acquisition and when the merger was done he suit for damages to be paid to him saying he had unearthed “major frauds” that took over before he was head of marketing and managing director of Adidas India in 2011. He says it’s all “bad blood” because he has been fighting against raising an objection in July-August 2011, and was assured that the practice was stopped, and he received orders from headquarters in Germany of ending any internal investigations on the matter”.

If accusations are true, this will be the second biggest fraud scandal in India since three years ago when a computer services company named Ramalinga Raju, Satyam chairman told authorities he fixed company’s books for several years, causing a fraud worth 1 billion dollars. It will be certainly interesting to see if the true will be revealed and we cab be able judge the veracity of the facts and accusations. Until then all we can see is nothing but a dirty play inside the sportswear fashion business in India.

Sources: WWD, FT