Nike v. Berian: Why the athletic-wear giant tried to fight an Olympic hopeful
A few weeks ago, at a track and field meet in California, middle-distance runner Boris Berian was presented with documents that said he was being served by Nike, his clothing sponsor for part of 2015.
The lawsuit alleges that Berian, a U.S. Olympic hopeful and gold medal contender for the 800 meters in Rio, violated the terms of his contract with the sportswear giant, which expired at the end of 2015. New Balance offered Berian a deal at the beginning of 2016, which Nike had the right to match, but the terms and conditions of Nike’s deal (specifically, the reduction clauses and the right of first refusal) have led a battle over what footwear the runner should wear just days before the Olympic Trials. (Read the complete deposition here.)
Berian didn’t always have top apparel companies fighting over him. The former Adams State University (DII) runner won indoor and outdoor national titles as a freshman, but his grades prevented him from competing as a sophomore. He left the program, and took a job taking orders and flipping burgers at McDonald’s to make ends meet.
Berian re-entered the running scene when he got an opportunity to train at the Big Bear Track Club in California. His major breakout came last June, when he ran 1:43.84 to finish just behind Olympic champion and world record holder David Rudisha. He lowered that personal best to 1:43.44 at the Monaco Diamond League meet in July and is now the fifth fastest American of all-time at the distance.
The 23-year-old won the 800 meters at the Prefontaine Classic last month, running a 1:44.20—the fourth fastest time in the world this year and second fastest by an American. A subtle jab at Nike was delivered, since the Pre Classic is a Nike-sponsored Diamond League meet, and every competitor behind Borian was wearing a swoosh on his chest.
He’s a favorite to make the 2016 Olympic team, if he can handle the rounds of the U.S. Olympic Trials (held in Eugene, Ore. from July 1–10) and the latest hurdle thrown in his way by Nike.
Why is Nike suing Berian?
Berian’s contract with Nike expired at the end of 2015, but Nike had the option of matching New Balance’s contract offer through its right of first refusal. Berian started racing in a New Balance kit (which sponsors the Big Bear Track Club) during the indoor season in January, which is when he received the New Balance offer of $375,000 over three years ($125,000 per year). Berian wore New Balance spikes as he went on to win his first U.S. title at the indoor national championships before taking the gold medal at the world indoor championships.
On April 29, Nike filed the lawsuit at a U.S. District Court in Oregon. The lawsuit accuses Berian of breaching his Nike contract.
The first statement issued by Nike said that the company “values its relationships with athletes and we expect them to honor their contractual commitments. Where necessary we'll take steps to protect our rights.”
In one sense, Nike matched Berian’s contract offer. But in another, it failed to do so. Nike included what are known as “reduction clauses.” These clauses can be very impactful by allowing the company to reduce an athlete’s salary for poor performances or not competing. The New Balance contract did not include any reduction clauses, whereas the Nike reductions were anywhere from 20% to 50%. As a consequence, New Balance’s contract will pay Berian what the contract says it will pay him, whereas Nike’s could pay him far less if certain conditions arise.
The most notable reductions can be seen below:
a) By withholding some or all base compensation if Mr. Berian fails to compete for 120 days (or simply terminate if he fails to compete for 180 days)
b) By withholding base compensation, bonuses, and travel reimbursement during any period of review by any anti-doping organization.
c) By a reduction of 25% to 50% if Mr. Berian does not compete in at least 10 IAAF or USATF sanctioned competitions during any contract year.
d) By a reduction of 20% if Mr. Berian is not ranked in the top 10 worldwide for the 800 meter event, and by 25% if Mr. Berian does not compete in a “major outdoor championship”—even if the reason he does not compete is a failure to qualify
e) By withholding bonuses and up to a 25% reduction in base compensation if any third party (including for example, the International or U.S. Olympic Committees, or any of their broadcast partners) “enforces or threatens to enforce any regulations, restriction, prohibition or practice that deprives NIKE of the promotional benefits and/or product/brand exposure contemplated by NIKE’s use of the ATHLETE Endorsement in any advertising or promotion.
f) By a reduction of 20% per missed meet or press conference if Mr. Berian “for any reason does not compete on behalf of NIKE in, or attend a press conference at, either one or both of the Prefontaine Classic or the Penn Relays (or, at NIKE’s discretion, alternate NIKE-sponsored competitions)”
g) By a reduction of 25% per occurrence if Mr. Berian covers or obscured (including, without limitation, through the placement of any numbered or bib) any NIKE Marks on any NIKE Products” that he is wearing or using, or if he wears any “tattoos” with any third-party marks, names, or identifications
h) By a reduction of 25% for any failure “for any reason” to wear NIKE Products at any and all athletic or athletic-related activities (including during competition, training, press conferences, camps, autograph sessions, interviews, etc.); by 25% for any missed appearance, after the first in each contract year)
It is possible the contract could be reduced by 100% or more, and Berian would still be held to it.
Berian and his agent, Merhawi Keflezighi, reject the idea that Nike has matched the contract, and they insist that the reduction clauses materially alter the projected value of the contract and thus no such match exists. Berian has moved on to New Balance, and he wore their spikes and uniform when he won at the U.S. indoor championships. Nike, which has a deal with USA Track and Field through 2040 worth an estimated $20 million per year, provided the national team kit that Berian wore when he crossed the finish line for gold at the world indoor championships. New Balance spikes, however, were on his feet.
On June 8, a judge ruled that Berian is temporarily banned from wearing any footwear from a Nike competitor, which includes New Balance, until June 21, but no ruling was handed down in U.S. District Court in Portland, Ore. Judge Marco Hernandez said he needed time to review additional documents that were filed and expects to issue a formal ruling on June 29, which is two days before the start of the trials. Berian has also scratched from his pre-trials races.
In response to the preliminary injunction, Berian and Keflezighi argued that “a decade (or a century) from now, few outside the industry will remember or care whether Mr. Berian was wearing New Balance or Nike. But history will remember where he finishes.”
Nike responded to the reductions by saying that they would match the contract with no reductions, but they wanted further clarification and official word from New Balance, and Berian and Keflezighi did not file timely responses to their request for more information from New Balance.
Keflezighi also started a defense fund to raise about $25,000 for legal feeds as they take on Nike.
The men’s 800-meter final at the Olympic Trials is scheduled for July 4.
Who is on Berian’s side?
Nike, which made about $31 billion in the 2015 calendar year that concluded in Feb. 2016, has not fared well with its public image during the proceedings. Berian has grown his social media following, which in track and field is one of the ways to be marketable, and has received more attention for taking on the giant.
T-Mobile CEO John Legere has been very supportive of American distance running in the last few years. He’s offered up prize money at many road races across the country and most recently won the bidding for ad space on the shoulder of two-time Olympian Nick Symmonds. Legere has to help Berian in any way that he can.
"irreparable harm" to Nike if he doesn't wear them for the Olympics. Sounds a little dramatic if you ask me.— Chris Giesting (@the_geese) May 21, 2016
Jesse Williams, Brooks Running’s director of sports marketing, and Sally Bergesen, the CEO of Oiselle (a sports apparel company for women based in Seattle) have issued sworn affidavits in the case that say contracts for their respective athletes do not always contain reductions.
The hashtag #FreeBoris has also been used on Twitter, which has even caught the attention of acclaimed writer Malcolm Gladwell.
Why does Nike care at all?
Nike, which already has a monopoly in track and field, sees value in Berian and would like to see him wear their footwear and apparel if he crosses the finish line for gold in Rio. But Berian has said that he’s not comfortable in their gear—at the 2015 U.S. Track and Field Championships, his first time wearing their gear, Berian failed to advance out of the heats—and appears firm in his stance that he would not accept any contract offered to him by the swoosh. How serious is he taking things? His coach, Carlos Handler, told the Associated Press that Berian would contemplate retirement than run for Nike.
Berian’s backstory also has appeal. As someone who went from sleeping on a friend’s couch while working at McDonald’s, television is going to love that storyline come Rio (if he makes it that far, which at this point he seems like a favorite to do so).