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Free Speech Inc.: when companies defend themselves
Inside the First Amendment

By Ken Paulson
Executive director, First Amendment Center

The U.S. Supreme Court is taking on a case that could change forever the way businesses speak to the public.

On Jan. 10, the Court agreed to review Nike Inc. v. Kasky. This landmark case pits Nike against a California consumer activist named Marc Kasky, who says that the corporation engaged in misleading speech when responding to public criticism.

Nike has been hammered by social critics and the news media in recent years for its treatment of workers in Third World countries. Allegations include substandard wages, safety violations and abuse. In response, Nike has issued press releases, written letters to newspapers and bought full-page ads in major newspapers defending its reputation. This defense included an investigation by former U.S. Ambassador Andrew Young, who found no violations in Vietnam, Indonesia or China.

In a society that believes in the marketplace of ideas, that’s not an unusual give-and-take. If someone attacks you or your business, you want to be able to state your point of view in a public forum.

The twist in this case is that Kasky filed a lawsuit against Nike over the public statements defending its practices. Using a California law designed to prevent deceptive advertising, Kasky contends that the corporation’s defense included inaccuracies and misstatements that violated the law.

Here’s where things get complicated. Under the First Amendment, anyone speaking about public issues has great latitude. Courts have ruled that free speech is protected even if you make some minor errors in your comments, recognizing that we can maintain an atmosphere of robust debate only if people don’t need to have their every sentence pre-screened by a lawyer. Free speech that addresses public issues and controversies is known as “political speech.”

On the other hand, speech that is designed primarily to sell a product is called “commercial speech.” Commercial speech does not enjoy the same level of First Amendment protection, and courts have upheld the government’s right to impose certain content restrictions, particularly to prevent consumers from being cheated.

In this case, the California Supreme Court ruled that Nike’s campaign defending its reputation was commercial speech, not political speech. This meant that Kasky could sue Nike under the false-advertising law. The net effect of this ruling is that a critic has free reign in attacking the policies of a corporation, but the corporation is handcuffed in fashioning a response.

In assessing the impact of the case, California lawyers Jonathan Loeb and Jeffrey Sklar wrote in Los Angeles Lawyer that “when advising a business client … practitioners should alert the client that the safest choice is silence.”

In his dissent in the Nike case, California Supreme Court Justice Ming Chin pinpointed the problem: “Handicapping one side in this important worldwide debate is both ill-considered and unconstitutional. Full speech protection for one side and strict liability for the other will hardly promote vigorous and meaningful debate.

“In its pursuit to regulate Nike’s speech – in hope of prohibiting false and misleading statements – the majority has unduly trammeled basic constitutional freedoms that form the foundation of this free government,” Justice Chin continued.

While there’s not a lot of public sympathy for an international corporation accused of exploiting workers, the California Supreme Court’s decision reeks of unfairness. The court concluded that Nike was engaged in more limited commercial speech because the underlying purpose of the ads was to sell products.

The irony here is that Nike couldn’t possibly hope that its letters to the editor or full-page ads would have the effect of selling more shoes. Their real goal was to counter the negative publicity that could lead to selling fewer shoes.

Major companies – including media organizations such as The New York Times, The Washington Post, NBC, ABC, CBS, the American Booksellers Association Foundation and the Magazine Publishers of America – have called on the U.S. Supreme Court to hear the Nike case. The Court is expected to decide shortly whether it will take on the review.

In recent years, the U.S. Supreme Court has steadily increased First Amendment protection for commercial speech. In fact, Justice Clarence Thomas has argued that speech by a company should have the same protection as speech by individual citizens.

In a society in which the marketplace of ideas and the marketplace are so often intermingled, the distinction between commercial and political speech may no longer be so meaningful.


Supreme Court examines corporate free speech in Nike case

Historically, ads, promos get less protection than newspapers or corporate critics like Marc Kasky. 04.23.03

Supreme Court agrees to consider Nike commercial-speech case
By Tony Mauro California high court had found company could be sued for false advertising for the statements it made in defense of its labor practices. 01.13.03

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