The following is a summary of the facts of the case of MARC KASKY, Plaintiff and Appellant, v. NIKE, INC., et al., Defendants and Respondents as presented in the record of the Court of Appeal of the State of California. First Appellate District, Division One

Nike, Inc., a marketer of athletic shoes and sports apparel, has grown into a large multinational enterprise through a marketing strategy centering on a favorable brand image, which is associated with a distinctive logo and the advertising slogan, “Just do it.” To maintain this image, the company invests heavily in advertising and brand promotion, spending no less than $978,251,000 for the year ending May 31, 1997. The promotional activities include product sponsorship agreements with celebrity athletes, professional athletic teams, and numerous college athletic teams. Reviewing the company’ s successful marketing strategy, the 1997 annual report asserts, “[W]e are a company . . . that is based on a brand, one with a genuine and distinct personality, and tangible, emotional connections to consumers the world over …”

Like other major marketers of athletic shoes and sports apparel, Nike contracts for the manufacture of its products in countries with low labor costs. In Nike’ s case, the actual production facilities are owned by South Korean and Taiwanese companies that manufacture the products under contract with Nike. The bulk of Nike products are manufactured in China, Thailand, and Indonesia, though some components or products involving more complex technology are manufactured in South Korea or Taiwan. In 1995, a Korean company opened up a major new facility in Vietnam, giving that country also a significant share of Nike’ s production. The record indicates that between 300,000 and 500,000 workers are employed in Asian factories producing Nike products. The complaint alleges that the vast majority of these workers are women under the age of 24.

The company has sought to foster the appearance and reality of good working conditions in the Asian factories producing its products. All contractors are required to sign a Memorandum of Understanding that, in general, commits them to comply with local laws regarding minimum wage, overtime, child labor, holidays and vacations, insurance benefits, working conditions, and other similar matters and to maintain records documenting their compliance. To assure compliance, the company conducts spot audits of labor and environmental conditions by accounting firms. Early in 1997, Nike retained a consulting firm, co-chaired by Andrew Young, the former ambassador to the United Nations, to carry out an independent evaluation of the labor practices in Nike factories. After visits to 12 factories, Young issued a report that commented favorably on working conditions in the factories and found no evidence of widespread abuse or mistreatment of workers.

Nevertheless, Nike was beset in 1996 and 1997 with a series of reports on working conditions in its factories that contrasted sharply with the favorable view in the Young report. An accounting firm’ s spot audit of the large Vietnamese factory, which was leaked to the press by a disgruntled employee, reported widespread violations of local regulations and atmospheric pollution causing respiratory problems in 77 percent of the workers. An investigator for Vietnam Labor Watch found evidence of widespread abuses and a pervasive “sense of desperation” from 35 interviews with Vietnamese workers. An Australian organization published a highly critical case study on Nike’ s Indonesian factories. And the Hong Kong Christian Industrial Committee released an extensively documented study of several Chinese factories, including three used by Nike, which reported 11- to 12-hour work days, compulsory overtime, violation of minimum wage laws, exposure to dangerous levels of dust and toxic fumes, and employment of workers under the age of 16.

These reports put Nike under an unusual degree of public scrutiny as a company exemplifying a perceived social evil associated with economic globalization-the exploitation of young female workers in poor countries. An article in The Oregonian of Portland, Oregon, asserted: “The company’ s worldwide production system has turned the Beaverton giant into an international human rights incident.” The News & Record of Greensboro, North Carolina, asked, “But who wants to enjoy products made on the backs of human misery?” The New York Times carried a series of eight articles in 1996 and 1997, reporting “grim conditions” and widespread human rights abuses in Nike factories. And a CBS television report juxtaposed the complaints of a Vietnamese worker with disclaimers by company officials.

Nike countered with a public relations campaign that defended the benefits of its Asian factories to host countries and sought to portray the company as being in the vanguard of responsible corporations seeking to maintain adequate labor standards in overseas facilities. Press releases responded to sweatshop allegations, addressed women’ s issues, stressed the company’ s code of conduct, and broadly denied exploitation of underage workers. A more lengthy press release, entitled “Nike Production Primer” answered a series of allegations with detailed information and footnoted sources. Another release drew attention to the favorable Young report and invited readers to consult it on-line. A letter to the presidents and athletic directors of those colleges sponsoring Nike products defended the company’ s labor practices. And company officials sought to rebut specific charges in letters to the editor and to nonprofit organizations.

The complaint alleges that, in the course of this public relations campaign, Nike made a series of six misrepresentations regarding its labor practices: (1) “that workers who make NIKE products are . . . not subjected to corporal punishment and/or sexual abuse;” (2) “that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;” (3) “that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;” (4) “that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;” (5) “that workers who produce NIKE products receive free meals and health care;” and (6) “that NIKE guarantees a ‘ living wage’ for all workers who make NIKE products.” In addition, the complaint alleges that NIKE made the false claim that the Young report proves that it “is doing a good job and ‘ operating morally.’ ”

The first and second causes of action, based on negligent misrepresentation and intentional or reckless misrepresentation, alleged that Nike engaged in an unlawful business practice in violation of Business and Professions Code section 17200 by making the above misrepresentations “In order to maintain and/or increase its sales and profits . . . through its advertising, promotional campaigns, public statements and marketing . . . .” The third cause of action alleged unfair business practices within the meaning of section 17200, and the fourth cause of action alleged false advertising in violation of Business and Professions Code section 17500. The prayer sought an injunction ordering Nike “to disgorge all monies” that it acquired by the alleged unlawful and unfair practices, “to undertake a Court-approved public information campaign” to remedy the misinformation disseminated by its false advertising and unlawful and unfair practices, and to cease “[m]isrepresenting the working conditions under which NIKE products are made . .”

Nike and the individual defendants filed demurrers to the complaint challenging the application of Business and Professions Code sections 17200 and 17500 and contending that the complaint is barred by the First Amendment to the United States Constitution and article I, section 2(a), of the California Constitution. The trial court regarded the constitutional distinction between commercial and noncommercial speech to be dispositive. Following a hearing, the court sustained the demurrers without leave to amend and entered a judgment of dismissal from which the plaintiff appeals.

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(and our responses to ACLU claims)

Editor’s Note: While this statement was written by the ACLU’s Northern CA chapter, the national headquarters directed people to it as representing the national ACLU’s position on Kasky v. Nike. The ACLU statement is followed by our rebuttals to specific points.

While we are grateful for the ACLU’s work in defense of civil liberties, we urge its directors to reconsider what we consider counter-productive advocacy to advance “corporate free speech” and the concept that spending money to influence elections is free speech (more on that topic).

The ACLU is often asked why we file a brief in support of a controversial speaker. That is the case with our brief in Kasky v. Nike, Inc., which was recently decided by the California Supreme Court. Our main concern in cases like Nike is to ensure that important First Amendment protections are not eroded because the speaker or the speech in question is unpopular or controversial. Thus our brief was not about the merits of the controversy surrounding the conditions under which Nike’s products are manufactured nor did it take a position on whether or not Nike’s statements in defense of its business practices were accurate. Rather, the purpose of our brief was to assure that the question of the truthfulness of Nike’s assertions was judged by the same set of rules that would apply were someone to question the truthfulness of the assertions of its critics.

The actual question before the Court in Nike was whether a specific set of statements that Nike made in a specific set of documents should be considered commercial speech (i.e., advertising) that is entitled to a lower degree of First Amendment protection than the protection accorded to the statements of its critics made in comparable documents. We filed a friend of the court brief arguing that, on the particular facts of the case, Nike was entitled to the full protection of the First Amendment in responding to the criticism leveled at it by others. Although the California Supreme Court ultimately held that Nike’s statements should be considered commercial speech, we believe that the Court’s decision is inconsistent with fundamental First Amendment principles that protect the rights of those on both sides of a debate to speak their minds freely on issues with ramifications that go beyond the simple question of whether or not to buy a particular product.

The statements in question in this case were made in a letter to the editor of the New York Times in response to one of a series of columns about Nike written by Bob Herbert; a letter to the CEO of the YWCA; a letter to a human rights organization; letters to the presidents and athletic directors of colleges and universities; and a group of lengthy, detailed press releases. These letters and press releases were a direct response to a series of newspaper articles, television programs, and newspaper columns, all of which were highly critical of the conditions under which Nike’s products are manufactured abroad. Nike’s statements were not what one ordinarily thinks of as advertising. Letters to an organization that are part of an ongoing written discussion and letters to the editor are qualitatively different from a label on a pair of shoes. Similarly, press releases are not comparable to ordinary advertisements. Unlike an advertisement, press releases are not printed verbatim. The most one can usually hope for in sending out a press release is that the media, after evaluating the press release, will present your side of the story at the same time that they report your opponents arguments. By writing letters, including the letter to the editor of the New York Times, and by issuing press releases, Nike was responding in the same places in which it had been the subject of criticism and in which the debate about its practices was going on. The intended audience was the general public that had read the newspaper articles and columns and seen the television shows that had criticized Nike—whether or not these members of the general public were also potential buyers of Nike’s products.

The ACLU took the position that, in this context, Nike’s statements could not be considered commercial speech. Nike was taking part in a public debate in the public forum within which the debate was occurring. To provide full First Amendment protection to the speech of its critics while providing reduced First Amendment protection to Nike’s speech is inconsistent with First Amendment values that seek to maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong.

If we accept the logic that speech that furthers the economic interests of a company is always commercial speech aimed at consumers, because the “general public” is by definition made up of “consumers,” then businesses will never be able to speak freely, because anything they say on any subject affecting their business interests will, inevitably, affect whether some consumers will want to do business with them. This is as true for companies that speak out in defense of business practices and policies that we applaud, such as the need for a diverse workforce, as it is for Nike. It was for this reason that the ACLU argued that there is an important difference between speech that is directed primarily to consumers, and speech that is directed at a broader audience that occurs in the context of a public debate on broader issues of public concern.

Interestingly enough, Bob Herbert, the New York Times columnist whose columns Nike was responding to when it sent its letter to the editor, takes the same position on this question as does the ACLU. He wrote a column on May 13, 2002, arguing that Nike’s statements should not have been treated as commercial speech.

It has always been a cornerstone of the First Amendment that, when presented with both sides of an argument, the people can, by and large, be relied on to separate the wheat from chaff in evaluating conflicting claims on issues of public importance. While it may not always be a perfect system, it is far better than one in which the government becomes the arbiter of truth, thereby silencing one side of the debate. Where, as here, both sides of the debate are, indeed, being heard, the outcome of the debate should be judged in the court of public opinion, not in a court of law.

Our response to points raised by the ACLU

“The ACLU is often asked why we file a brief in support of a controversial speaker…Our main concern in cases like Nike is to ensure that important First Amendment protections are not eroded because the speaker or the speech in question is unpopular or controversial.”

The opening sentence simply diverts attention to a non-issue. 1. No party in this case argues against controversial views being expressed. 2. Being non-controversial is not a requirement for enjoying the protections of the First Amendment–being human, however is indeed a valid condition. There is no Constitutional or common sense basis for bestowing Bill of Rights protections upon corporations.

“The actual question before the Court in Nike was whether a specific set of statements that Nike made in a specific set of documents should be considered commercial speech (i.e., advertising) that is entitled to a lower degree of First Amendment protection…”

This statement frames the issue as merely a matter of whether or not the speech is “commercial” or not and focuses only on the content of the communication and the medium through which it is delivered, without regard to the source of the message. The corporate, non-human source of the PR campaign is the critical matter. Also, the statement equates commercial speech with advertising, but communications need not be ads referring to specific products to attempt to influence the actions of potential customers (and therefore be commercial speech), as Nike’s PR campaign obviously was intended to do.

“…we believe that the (California Supreme) Court’s decision is inconsistent with fundamental First Amendment principles that protect the rights of those on both sides of a debate to speak their minds freely…”

Exactly whose mind is the ACLU referring to here? A corporation is a legal construct, not a living and thinking being. Nike executives would, of course, be free to say what they like as individuals with full Constitutional protection. Different standards can and must apply when they are carrying out the business of the company, acting as a tool for exercising the power of a multi-billion dollar corporation.

“To provide full First Amendment protection to the speech of its critics while providing reduced First Amendment protection to Nike’s speech is inconsistent with First Amendment values that seek to maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong.”

Again the writer presumes that corporations enjoy equal standing with human beings and that the corporation constitutes the “public” whose rights must be protected from the government. In so doing, the ACLU not only ignores the fact that corporations are not people, it also ignores the fact that corporations are artificial creations that owe their very existence to the government.

Given that they are created by government, it is perfectly reasonable that corporations should be under the control of the political process rather than be empowered to influence or control it. In fact, given the many special powers and privileges that the government grants corporations (e.g. limited liability, perpetual lifespan, etc.), it is imperative that they be subject to such control lest they threaten to overpower the democratic process itself.

As justices White, Brennan and Marshall pointed out in their dissent in First National Bank of Boston v. Bellotti (1978), “the special status of corporations has placed them in a position to control vast amounts of economic power which may, if not regulated, dominate not only the economy but also the very heart of our democracy, the electoral process.” They recognized that restricting corporate communication was necessary because “The State need not permit its own creation to consume it.”

“Nike’s statements were not what one ordinarily thinks of as advertising.”

Again, this diverts from the question at hand and misrepresents the question as one of whether or not the communications were advertisements. No one made claims to the contrary about some items in question, such as letters to university presidents (although they are among Nike’s biggest customers). Items in Mr. Kasky’s complaint, however, included full-page paid advertisements in the New York Times among the communications alleged to misinform–a fact that Nike and the ACLU conceal from the public.

“The ACLU took the position that, in this context, Nike’s statements could not be considered commercial speech.”

A publicly traded corporation such as Nike is legally mandated to maximize shareholder return. They do it by selling goods. To argue that Nike Inc. expended resources to influence public opinion for an ultimate purpose other than furthering profit is more than merely silly–it effectively accuses the company of illegal behavior. This point is key to understanding corporations. Does the fact that Nike’s communications attempted to sell the corporation’s image and all its products, rather than a specific product, make it any less commercial? If so, a great many of Nike’s ads are “non-commercial,” since so many sell an image rather than the product directly.

“…maximize the opportunity for both sides of the debate to be heard so that the public, not the government, can decide who is right and who is wrong…”

California has a law against consumer fraud precisely because it is impractical, if not impossible, for individual citizens to research Nike’s claims. It is up to the California courts to decide whether the plaintiff’s charges are valid. This dispute is now a legal matter, not a popularity contest.

“If we accept the logic that speech that furthers the economic interests of a company is always commercial speech aimed at consumers, because the “general public” is by definition made up of “consumers,” then businesses will never be able to speak freely…”

The question to be decided in Kasky v. Nike is whether Nike Inc. has a right to lie, while violating state laws and then claim immunity from prosecution as a corporate “person.” An accurate rewording of the ACLU’s statement would be “then businesses will never be able to lie freely and with impunity from democratically enacted laws.”

“Bob Herbert, the New York Times columnist whose columns Nike was responding to when it sent its letter to the editor, takes the same position (as ACLU).”

Mr Herbert is entitled to his opinion, but we’re not persuaded by celebrity endorsements unless they have a compelling argument. You can read Mr. Herbert’s on our site and evaluate his case for yourself. We also wish Mr. Herbert walked his talk of supporting free speech. After his employer published both his pro-Nike piece and its own concurring editorial, while barring any dissenting opinions from its editorial page, Herbert refused requests to encourage his bosses on the opinion page to allow readers to hear the other side of the story.

“…when presented with both sides of an argument, the people can, by and large, be relied on to separate the wheat from chaff in evaluating conflicting claims…”

Could the ACLU board really believe that individual citizens or non-profit organizations are on a level playing field with transnational corporations when it comes to influencing public opinion? We doubt that their members would agree. How many people died because tobacco corporations used their overwhelming monetary power to create doubt about the fatal effects of smoking for decades afer all scientific doubt was gone?

While it may not always be a perfect system, it is far better than one in which the government becomes the arbiter of truth, thereby silencing one side of the debate.

Citizens have a right to expect the absence of deliberate or reckless untruth in corporate communications. To equate requiring that a multi-billion dollar corporation not deliberately deceive the public with “silencing” it is hyperbole unworthy of the ACLU and a twisted representation of the issue–help the ACLU do better.

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