ADVERTISING
GETS MORE RISKY
Most
of Nike's products are manufactured by subcontractors in China,
Vietnam and Indonesia. Most of the workers who make Nike products
are women under the age of 24. Beginning in October of 1996 and
continuing through December of 1997, Nike was regularly flogged
in the press with reports of poor working conditions in its subcontractors'
factories.
So,
Nike defended itself. It issued press releases, placed letters in
newspapers, and sent letters to university presidents and athletic
directors. It hired GoodWorks International, LLC, to investigate
its factories and produce a report, which it did under the direction
of none other than Andrew Young, former U.S. Ambassador. The report
found no evidence of illegal or unsafe working conditions at Nike
subcontractor factories.
Either
this didn't satisfy Mr. Kasky, or his greedy plaintiff's lawyer
was unfulfilled. Kasky filed suit in San Francisco against Nike,
claiming the statements Nike made in its defense were false and
misleading, in violation of state law. The remedy Kasky asked the
court for was an order that Nike provide restitution, by giving
up all monies it acquired by selling apparel and shoes in California
since issuing the defensive statements. But wait, that's not all.
Kasky also asked for an injunction requiring Nike to undertake a
public information campaign to "correct any false or misleading
statement, and to cease misrepresenting the working conditions under
which Nike products are made." Oh, and one more thing-attorneys
fees and court costs. Kasky's only claim to fame is that he is a
consumer resident of California.
The
trial court decided there was no real case, and dismissed it. The
Court of Appeals agreed with the trial court. Both decided that
Nike's statements of defense were protected free speech. So far,
so good, but then along came the California Supreme Court. In a
highly technical opinion, the California Supremes bought the plaintiff's
argument and decided that Nike could be liable for its statements
of fact because they were commercial in nature, designed to sell
more Nike product. Kaske should have the chance to prove that the
statements were false, and if he does so, he should win the case.
Nike,
to no avail, argued that these statements were not commercial speech
but rather were part of an "international media debate on issues
of intense public interest." The California Supremes said,
in effect, "yeah, so what, you were still just trying to sell
shoes."
As
just one example of what I think is wrong with this opinion, the
majority said, "for the public as whole, information on commercial
matters is 'indispensable' not only 'to the proper allocation of
resources in a free enterprise system' but also 'to the formation
of intelligent opinions as to how that system ought to be regulated
or altered.'" Now, let's see how that would apply in this case.
It basically means that consumers in California think they can,
or should be able to, regulate and alter the employment conditions
on the other side of the globe. That idea works great when all acts
and facts come from things in the States, but it doesn't work well
in the international marketplace where the likes of Nike operates.
Here's the guts of the ruling:
we
conclude that when a corporation, to maintain and increase its
sales and profits, makes public statements defending labor practices
and working conditions at factories where its products are made,
those public statements are commercial speech that may be regulated
to prevent consumer deception.
The
regulation they have in mind is California's myriad of consumer
protection laws.
Can
you think of any statement a business would make that was not ultimately
designed to maintain and increase its profits under this type of
analysis? I can-those designed to increase its stock price. And
in that case the business must deal with the securities laws. But
the reason businesses exist is to make a profit, and so this argument,
carried to its logical extreme, would hold that every act a business
undertakes, every communication they publish, are unprotected commercial
speech subject to being regulated to prevent consumer deception.
Hopefully, the U.S. Supreme Court will take this case and return
some reason to the free speech issue.
In
the interim, businesses in California will have to circumscribe
their public policy statements more carefully to avoid any appearance
of a profit motive, and also to be absolutely sure of the factual
accuracy of any statements made.