How Brands Split With Celebrity Partners

Adidas AG this week became the largest brand to end a partnership with Kanye West after anti-Semitic outbursts from the rap artist and designer.

Adidas said it cut ties with Mr. West, who goes by Ye, at considerable cost to its own business because his recent comments and actions had been “unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”

Mr. West couldn’t immediately be reached for comment.

Some observers and writers who felt the same way asked why it took Adidas so long to announce its conclusion, more than two weeks after it began a review of the partnership.

“Every day that you delay may be damaging your brand,” Alan R. Friedman, partner at entertainment industry law firm Fox Rothschild, said of such situations.

An Adidas spokesman declined to comment beyond the company’s initial statement. But the process of disentangling a company from a famous business partner can be more complicated than it might seem.

Bureaucracy can slow decision making in moments of crisis, said Mark DiMassimo, founder of New York-based ad agency DiMassimo Goldstein.

Brands often ask their advertising agencies to assess public opinion and determine whether they should take action while simultaneously working internally on potential responses, Mr. DiMassimo said. The resulting competing narratives can facilitate more delays, he said.

“When something comes up that requires a fast, human, unambiguous action, very few companies are prepared,” said Mr. DiMassimo. “Clients can be like frogs in the proverbial pot of heating water.”

Marketers that have made their decision can often quietly terminate a contract if it is relatively basic, such as those requiring a celebrity to appear at an event or letting brands use someone’s name and likeness for promotional purposes, said Christopher R. Chase, a partner specializing in advertising and entertainment law at Frankfurt Kurnit Klein & Selz.

But cases in which celebrities help design products that bear their names and may even own some equity in the company are more difficult to resolve, he said.

“If the talent retains some ownership, then you have to stop making the product entirely instead of just taking their name off,” said Mr. Chase. “This is literally shutting down the factory to some extent.”

Brands have increasingly come to rely on so-called morals clauses, which give them the right to terminate a contract when a spokesperson behaves in ways that could be perceived as damaging to the client’s reputation.

The offensive behaviors may be specific to the company in question; alcohol brands commonly include contractual clauses forbidding D.U.I. arrests or drunk and disorderly behavior among their representatives, said Mr. Chase.

But morals clauses became broader during the #MeToo movement, as the financial backers of projects promoted by celebrities who had been accused of sexual misbehavior insisted on rewriting contracts so that any behavior seen as inconsistent with a brand’s stated values could trigger termination, said Mr. Friedman.

At the same time, vaguely worded morals clauses can lead to costly and potentially damaging litigation as lawyers argue over whether a spokesperson’s behavior constitutes a violation. While a brand may wish to terminate a contract if a spokesperson’s behavior isn’t to its liking, the celebrity’s legal team often argues that the language should apply only to much more specific violations, such as an arrest, Mr. Chase said.

Brands may also try to hedge against potential monetary losses with liquidated damages clauses, which require the spokesperson to repay a certain amount to the company as compensation for failing to fulfill the contract. But these sorts of clauses aren’t particularly common, because language defining the sorts of offenses that justify such action must be very specific to be considered seriously by the courts, Mr. Chase said.

Brands should also carefully gauge the risk when they consider signing a spokesperson with a history of erratic or offensive behavior, especially if the person will play an outsize role in their marketing efforts. And that is not just because such behavior could occur again, according to Mr. Chase.

A brand might struggle to justify canceling a contract over new behavior when a celebrity’s legal team can point to similar instances that predate 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 let you terminate because she does something that’s a little out there,’” he said.

Write to Patrick Coffee at [email protected]