02 MAY 02: NOW THAT’S
PROGRESS! — CA. SUPREME COURT RULES NIKE CAN’T LIE

From the LATimes:

Nike Can’t Just Say It, Court
Rules

Law: Firms can be found
liable for deceptive public statements, justices decide. Critics call the
decision a blow to free speech.

By MAURA DOLAN, Times Staff
Writer

SAN FRANCISCO — Corporations
can be found liable for deceptive advertising if they make misleading public
statements about their operations and conduct, the California Supreme Court
ruled Thursday.

    In its
4-3 decision, the court said Nike and other corporations are not protected
by the First Amendment when they present as fact statements about their
labor policies or company operations in advertisements, press releases,
letters to the editor or public statements.

    “If a
company is going to issue press releases or any information to the consumer
about their factories, they are going to have to tell the truth,” said
Alan Caplan, the plaintiff’s attorney in the case. “That shouldn’t upset
any corporation.”

    The ruling
is expected to increase public scrutiny of corporate image campaigns. But
critics said it also will prevent businesses from engaging in pubic debate
on isues that affect them.

    No other
state high court is believed to have ruled in such a case, and a Nike lawyer
said the firm is likely to appeal to the U.S. Supreme Court.

    The decision
“sets a dangerous precedent by restraining companies, such as Nike, from
making public statements about their business practices when challenged
in the arena of public debate,” the company said in a statement.

    The court’s
ruling came as a result of statements Nike made to defend itself against
charges that its products were made in Third World sweatshops.

    Several
media outlets published critical stories about working conditions in Asian
factories where Nike’s athletic shoes are made, prompting Nike’s response.
A San Francisco activist contended that Nike lied in its press releases
and letters to newspapers and athletic directors, and sued the company
for false advertising.

    The corporation
argued that its statements were protected by constitutional guarantees
of free speech. Lower courts agreed and dismissed the lawsuit.

    The state
high court, however, said Thursday that the statements were commercial
in nature and subject to a broad California law that prohibits misleading
advertising.

    When
a corporation makes “factual representations about its own products or
its own operations, it must speak truthfully,” Justice Joyce L. Kennard
wrote for the majority.

    Without
deciding whether the athletic shoe and apparel maker lied in its statements,
the court revived the lawsuit, which could lead to a trial and possible
restitution.

    …Labor
and environmental groups presented arguments against Nike in the case,
Kasky vs. Nike, while the American Civil Liberties Union sided with the
corporation.

    The case
arose in 1996 with a report on “48 Hours,” the CBS television news program,
about conditions in factories under contract with Nike in Southeast Asia.
Articles about the workers who make Nike shoes also appeared in several
newspapers.

    The stories
cited claims that the workers were paid less than the applicable minimum
wage, required to work overtime, subject to physical, verbal and sexual
abuse and exposed to toxic chemicals.

    Nike
countered in public statements, ads and letters that the factory workers
were paid in accordance with local labor laws and on average received double
the minimum wage plus free meals and health care.

    Marc
Kasky, 57, who has managed a foundation that preserves San Francisco’s
Ft. Mason, decided to sue Nike after reading an article in the New York
Times about the company’s contract factories.

    If Kasky
ultimately prevails at trial, Nike could be ordered to turn over an unknown
amount of profits it has made in California. The money then could be distributed
either to charities or to consumers who bought Nike products, lawyers said.

   
The state high court relied on U.S. Supreme Court precedents to distinguish
speech that is protected by the 1st Amendment from commercial speech, which
government can regulate and ban if it is false.

   
The California court said speech can be commercial even if it is not in
the form of an advertisement.

    Communications
are subject to government regulation if they are made by a commercial speaker,
such as an officer of a company, intended for a commercial audience and
contain representations of fact that are commercial in nature, Justice
Kennard wrote for the majority.

   
“Speech is commercial in its content if it is likely to influence consumers
in their commercial decisions,” Kennard wrote. “For a significant segment
of the buying public, labor practices do matter in making consumer choices.”

    At the
same time, she said, the ruling “in no way prohibits any business enterprise
from speaking out on issues of public importance or from vigorously defending
its own labor practices.”

    Nike,
in a press release, said it was “extremely disappointed” by the ruling
and stressed that the accusations are unproven.

    The manufacturer
also said it has made significant progress in its contract factories since
the lawsuit was filed in 1998.

    The company,
which has contracts with more than 700 factories in more than 50 countries,
said it forbids child labor and has raised wages by more than 40% over
the last several years for entry-level workers in Indonesian shoe factories.

    Caplan,
an attorney for Kasky, said the ruling will affect corporate public relations
across the country.

    “They
can’t say, ‘We are issuing this for everybody’s ears except those people
under California Supreme Court jurisdiction,'” Caplan said.

    Al Meyerhoff,
a plaintiffs’ lawyer who also worked on the Kasky case, said corporations
should be held accountable if they lie.

    “If companies
are claiming their goods are manufactured under certain conditions–no
clear cutting or organic food or free from child labor–if those statements
are being made, they should be true,” Meyerhoff said.

…