CrossFit Inc’s eight-year business relationship with Reebok is all but over, with claims the latter has been ‘deceptive and dishonest’, costing CrossFit roughly $4.8 million in royalties.
CrossFit has filed a twenty-page complaint in the U.S. District Court for the Northern District of California, which outlines claims of breach of contract and breach of the covenant of good faith and fair dealing.
Things began to turn sour back in 2013, as CrossFit claims. Instead of paying out royalties per the agreed upon net sales calculation, it is alleged that Reebok began calculating royalties due based on a ‘wholesale equivalent price,’ which decreased royalties owed through certain sales channels by 50 per cent. This use of lower wholesale equivalent price continued without consent through to 2016.
Signed back in 2010, the original deal envisaged CrossFit providing Reebok with a ten-year exclusive license to sell CrossFit-branded apparel, footwear and other products in exchange for royalties on the net sales, as well as a commitment to market such products per an annual schedule.
‘All told, Reebok's deceptive and dishonest conduct has robbed CrossFit of the benefit of its bargain to the tune of at least $4.8 million in royalties and has tarnished what was once a golden opportunity for Reebok to revive its image and establish a long-term partnership with the highly valued CROSSFIT® brand,’ states the complaint.
CrossFit and Reebok have attempted to settle their dispute, but it hasn’t gone well so far.
‘The allegations set forth in CrossFit’s complaint have no merit,’ says a Reebok spokesperson. ‘We are disappointed that CrossFit chose to escalate a disagreement between long-time partners in an unreasonable manner that damages Reebok’s reputation. We will respond through the appropriate legal channels and we expect a favorable outcome. In the meantime, Reebok will continue to fully support the community of coaches, athletes, boxes and members who inspire us every day with their passion, energy and camaraderie.’