Why companies have struggled to navigate Olympic sponsorships

WASHINGTON — Companies typically pay for Olympic sponsorship because it helps their business and reflects well on their brands. But thi...


WASHINGTON — Companies typically pay for Olympic sponsorship because it helps their business and reflects well on their brands. But this year, with the Beijing Olympics, Procter & Gamble paid even more to try to prevent any negative fallout from being associated with China’s repressive and authoritarian government.

The company, one of 13 “Global Olympic Partners” that make global sports competition possible, hired Washington lobbyists last year to defeat legislation that would have prevented Beijing Games sponsors from selling their products to the US government. The provision would have blocked Pampers, Tide, Pringles and other Procter & Gamble products from military commissioners, protesting the companies’ involvement in an event seen as legitimizing the Chinese government.

“This amendment would punish P.&G. and the Olympic movement, including American athletes,” wrote Sean Mulvaney, senior director of global government relations at Procter & Gamble, in an email to the congressional offices in August.

Some of the world’s largest corporations are caught in an awkward position as they try to straddle a widening political divide between the United States and China: what’s good for business in one country is increasingly more a handicap in the other.

China is the world’s largest consumer market, and for decades Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economy and military might have grown, Washington felt that a victory for China was a loss for the United States.

The decision to locate the 2022 Olympics in Beijing has turned sponsorship, usually one of the most prestigious opportunities in the marketing industry, into a minefield.

Companies that have sponsored the Olympics have drawn censure from politicians and human rights groups, who say such deals imply tacit support for Chinese Communist Party atrocities, including human rights violations in Xinjiangmedia censorship and mass surveillance of dissidents.

“One thing that our companies, universities and sports leagues don’t seem to fully understand is that to eat from the CCP’s watering hole, you will have to turn into a pig,” Yaxue Cao, editor-in-chief of ChinaChange.org, a website that covers civil society and human rights, told Congress this month.

The tension plays out in other regions as well, notably with regard to Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced to work in fields and factories. In June, the United States enact sweeping legislation this will expand restrictions on Xinjiang, giving the United States the power to block imports of any material from that region.

Multinational companies trying to comply with these new import restrictions have found themselves facing costly backlash in China, which denies any accusations of genocide. H&M, Nike and Intel have all blundered into public relations disasters for trying to remove Xinjiang from their supply chains.

Tougher penalties could be in store. Companies that attempt to sever ties with Xinjiang may violate China’s anti-sanctions law, which allows authorities to crack down on companies that comply with foreign regulations they view as discriminatory against China.

Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could lead to sanctions, although as of now the list does not appear to have any members.

“Companies are between a rock and a hard place when it comes to complying with US and Chinese laws,” said Jake Colvin, chairman of the National Foreign Trade Council, which represents companies doing business in the US. ‘international.

President Biden, while less adversarial than his predecessor, has maintained many of the strict policies put in place by President Donald J. Trump, including high tariffs on Chinese goods and restrictions on exports of sensitive technology to Chinese companies.

The Biden administration has shown little interest in striking trade deals to help companies do more business overseas. Instead, he recruits allies to increase pressure on China, including boycotting the Olympics and promoting huge investments in manufacturing and scientific research compete with Beijing.

The pressures do not only come from the United States. Businesses increasingly face a complex global patchwork of export restrictions and data storage laws, including in the European Union. Chinese leaders have begun pursuing “wolf warrior” diplomacy, in which they try to teach other countries to think twice before crossing into China, said Jim McGregor, president of APCO’s Greater China region. Worldwide.

He said his company tells its customers “to try to comply with everybody, but don’t make a lot of noise about it because if you’re loud about compliance in one country, the other country will come after you”.

Some companies are responding by moving sensitive activities — like research that could trigger China’s anti-sanctions law or audits of Xinjiang operations — out of China, said Isaac Stone Fish, chief executive of Strategy Risks, a consultancy.

Others, like Cisco, have reduced their operations. Some have left China altogether, but usually not on the terms they would have chosen. For example, Micron Technology, a chipmaker that has been a victim of intellectual property theft in China, is closure of a chip design team in Shanghai after competitors poached its employees.

“Some companies take a step back and realize that maybe it’s more trouble than it’s worth,” Stone Fish said.

But many companies insist they can’t be forced to choose between two of the world’s biggest markets. Tesla, which counts China as one of its biggest markets, opened a showroom in Xinjiang last month.

“We cannot leave China, as China in some industries accounts for up to 50% of global demand and we have intense and deep supply and sales relationships,” said Craig Allen, president of the US-China Business Council.

Companies see China as an anchor to serve Asia, Allen said, and China’s $17 trillion economy still has “some of the best growth prospects in the world.”

“Very few companies are leaving China, but all feel the risk is increasing and they need to be very careful in order to meet their legal obligations in both markets,” he said.

US politicians from both parties are increasingly determined to force corporations to choose a side.

“To me, it’s entirely appropriate to have these companies chosen,” said Rep. Michael Waltz, a Republican from Florida who proposed the bill that would have barred Olympic sponsors from doing business with the US government.

Mr Waltz said participation in the Beijing Olympics sends a signal that the West is ready to turn a blind eye to Chinese atrocities for short-term gain.

The amendment was eventually removed from a defense spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the US Chamber of Commerce and others , Mr. Waltz said.

Procter & Gamble’s lobbying disclosures show that between April and December it spent more than $2.4 million on inside and outside lobbyists trying to influence Congress on a range of tax and trade issues, including Beijing Winter Olympics sponsor liability law.

Lobbying disclosures for Coca-Cola, Airbnb and Comcast, NBC’s parent company, also point to companies that lobbied on issues related to the Olympics or “sports programming” last year.

Procter & Gamble and Intel declined to comment. Coca-Cola said it explained to lawmakers that the legislation would hurt US military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.

Many companies have argued that they are sponsoring this year’s Games to show their support for the athletes, not the Chinese system of government.

During a July congressional hearing, where executives from Coca-Cola, Intel, Visa and Airbnb were also questioned about their sponsorship, Mulvaney said Procter & Gamble was using its partnership to encourage the International Olympic Committee to incorporate human rights principles into its monitoring. games.

“Corporate sponsors are being a bit unfairly maligned here,” Anna Ashton, senior fellow at the Asia Society Policy Institute, said at an event hosted by the Center for Strategic and International Studies, a Washington-based think tank.

The companies had signed contracts to support multiple iterations of the Games and had no say in where to host, she said. And the funding they provide goes to support the Olympics and the athletes, not the Chinese government.

“Sponsorship has hardly been an opportunity for companies this time around,” she said.

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