Corporate Free Speech

Here’s an interesting article from the NYT reviewing a case in California wherein Nike is arguing that its defense of their labour practices should be protected by commercial free speech rights, after a suit by a private citizen argued that their descriptions of working conditions in their factories were so wrong as to be criminal under California’s law against false advertising. What’s particularly interesting are the varied allies on either side of the argument.

(forwarded on to me by Christian

April 20, 2003

Free Speech for Companies on Justices’ Agenda

WASHINGTON, April 19 ‹ A Supreme Court case on Nike’s potential liability
for any misstatements in defense of its overseas business practices has become
the focus of a passionate debate over the free speech rights of corporations.

The case, to be argued Wednesday, could produce the most important ruling
in years on the constitutional contours of commercial speech. It is an appeal
by Nike of a California Supreme Court decision last year subjecting the company
to a trial on a San Francisco man’s complaint that its benign descriptions
of working conditions in its Asian factories were misleading enough to violate
California’s law against false advertising and unfair trade practices.

The trial has not yet taken place, meaning that neither the accusations against
Nike nor the merits of the company’s self-defense have been tested in court.
That has not dimmed the intensity of interest from the business and publishing
worlds, which support Nike, and antiglobalization groups, which support Marc
Kasky, a 58-year-old runner and former Nike customer who brought the lawsuit
five years ago. He invoked an unusual provision of California law that permits
individuals to file unfair trade cases as "private attorneys general." Among
other remedies, the suit seeks restitution of Nike’s California profits attributable
to any violations.

As the three dozen briefs submitted to the Supreme Court demonstrate, the
case has become a kind of First Amendment mirror not only for the globalization
debate but also for a debate of the role of corporations in society.

"California has caused the entire business community to stand up and
take notice," the Washington Legal Foundation, a pro-business group here,
says in its brief for Nike.

On the other side is Reclaim, a group based in Boulder, Colo.,
that organized some of the anti-Nike briefs and has the motto "Restoring
citizen authority over corporations." In its newsletter, the group declares, "We
have worked diligently on this case because it offers a superb opportunity
to provoke public scrutiny of the judicial creation of constitutional rights
for corporations and to raise awareness of the far-reaching effects such protections
have upon our lives."

One such judicial creation is commercial speech, a concept that has flowered
only recently as a result of a series of Supreme Court cases beginning in the
1970’s. As constitutional doctrine, it remains much in flux. The definition
of commercial speech in the court’s recent cases is speech that "does
no more than propose a commercial transaction." As long as it is not false
or misleading, such speech is deserving of constitutional protection, though
not at the level of "pure" or political speech.

This case, Nike v. Kasky, No. 02-575, presents the court with two questions,
one of definition and one of application.

First, did the California Supreme Court properly characterize Nike’s challenged
statements as commercial speech, for which liability could attach without the
need to show deliberate or reckless falsehood?

Second, even if the speech was properly labeled commercial ‹ a characterization
that Nike disputes ‹ does the First Amendment permit California to impose
liability at the behest of a "private attorney general" without evidence
that he or any other California consumer relied on the statements or was harmed
by them?

Mr. Kasky contends that in 1996 and 1997, at the height of public criticism
over its employment practices in the third world, Nike made six misrepresentations
about its employees’ pay and working conditions in nine separate communications,
all directed toward reassuring customers that it was an ethical company that
deserved their continued loyalty.

None of these were conventional product advertisements. They included, for
example, a letter to the editor published in The New York Times and signed
by Nike’s chairman; a posting on Nike’s Web site; a letter to the chief executive
of the Y.W.C.A. of America; a press release; and a letter from Nike’s director
of sports marketing to university presidents and athletic directors.

Nike’s purpose was simply "to induce consumers to buy its products" and
the communications were no more than commercial speech, Mr. Kasky’s brief asserts.

Before the California Supreme Court, he conceded that if Nike’s statements
were deemed not to be commercial speech, the First Amendment would require
dismissal of his lawsuit.

Among those supporting Mr. Kasky in the current case are California and 17
other states, including New York and Connecticut; Global Exchange, a human
rights organization active in the international labor movement; the Sierra
Club; Domini Social Investments, which advises funds and individuals on "socially
responsible investing"; and Public Citizen, a group affiliated with Ralph
Nader. Nike’s speech was properly deemed commercial, Public Citizen’s brief
says, because the company was "speaking to promote and protect its corporate
image, an image that has long been at the crux of its marketing campaign and
its sales success."

The California court’s 4-to-3 decision against Nike adopted a broad definition
of commercial speech to include speech by a person or organization "engaged
in commerce" that conveys factual information "likely to influence
consumers in their commercial decisions." This definition is so broad
as "to include virtually every corporate utterance," the three leading
advertising industry trade associations tell the justices in a brief for Nike.

Nike’s basic argument in its brief is that in its challenged statements, not
only was it not directly proposing a commercial transaction, but it was engaging
in a topical discussion of broad public interest for which its "status
as a corporate speaker is immaterial." Its defense of its labor practices
in the context of the globalization debate "belongs at the very core of
the First Amendment protections," the brief says, while the California
court’s theory "cuts the heart out of the First Amendment’s protections
for statements by commercial entities on nearly every public issue."

Nike’s "friends of the court" also include an unusual range, from
the American Civil Liberties Union to the Bush administration to the Business
Roundtable (150 chief executives of major corporations) to organized labor.
The A.F.L.-C.I.O. says in its brief that while it considers Nike an exploitative
employer, the discussion should be "an open free speech debate under the
First Amendment and not one subject to legal regulation under the commercial
speech doctrine." The New York Times Company signed a brief for Nike filed
by 40 media organizations.

Beyond the question of the boundary between commercial and noncommercial speech,
various groups are pressing a dizzying range of options on the court, from
giving commercial speech full protection (a position advocated by Justice Clarence
Thomas) to stripping corporations of constitutional rights entirely.

"This is one of the great First Amendment cases," Prof. Robert C.
Post of the University of California at Berkeley said in an interview. "State
control of corporate speech is fully at the heart of it." Professor Post,
a First Amendment scholar who is not involved in the case, added, "The
structure of public discourse is at stake."