ANALYSIS: The Nike Judgment - Nike ruling forces many to pondercost of free speech

As Nike reacts to the court verdict that it violated commercial speech laws, many sectors, including PR, contemplate both the decision and its long-term effects.

As Nike reacts to the court verdict that it violated commercial speech laws, many sectors, including PR, contemplate both the decision and its long-term effects.

The Supreme Court of California's recent ruling against Nike could be construed as an isolated victory for advocates of fair working conditions around the world.

But PR pros in this state and across the country should take note: The court's decision makes no judgment on the truth of Nike's statements concerning the health and well-being of its workforce abroad. Instead, it places Nike's PR tactics squarely in the same category as advertising, even though the intent behind each of these marketing communications functions are fundamentally different.

Could the judgment have a "chilling effect

on other companies operating in California - legalese for a situation that results in the restriction of speech? Will a ruling like this send companies back into the dark ages of PR, where silence is not only golden, but also a defensive maneuver?

This is an issue that no PR person can safely ignore.

The case started as a lawsuit filed against Nike by Mark Kasky, a San Francisco-based activist, who filed a lawsuit against the sportswear giant for violating California's law that prohibits false and misleading statements in commercial speech.

It all began in October 1996, according to the court's case summary, when press reports began to surface in such news outlets as the San Francisco Chronicle, The New York Times, and CBS' 48 Hours. In these reports, allegations were made claiming that Nike's workers in China, Vietnam, and Indonesia were being paid less than the local minimum wage, required to work long hours, and were subjected to abuse and poor conditions.

Nike responded to the reports by claiming that, on average, workers were paid double the minimum wage, received free meals and healthcare, and worked in conditions commensurate with the local health and safety regulations.

The company employed a range of tools to communicate these points, including press releases, letters to newspaper editors, and a letter to university presidents and athletic directors.

The company also bought full-page ads to tout the results of an investigation by a former US ambassador who said that he had found no evidence of negligence in Nike's overseas factories.

Nike successfully defended its claims based on First Amendment protection when the case went to California Superior Court and the Court of Appeal.

But upon appeal to the California Supreme Court, the judgment came down on Kasky's side (by a narrow margin of 4-3), meaning that the suit against Nike will now go ahead.

Now Nike is contemplating its legal options, while also communicating its dismay to the media. "The reaction we have is of great concern over the impact that the ruling has on our ability to be engaged in the discussion about what is going on in our business,

says Jim Carter, Nike's general counsel/USA.

Widespread ramifications

Carter says that the issue reaches beyond Nike manufacturing, and has implications for comments made about any of the company's business practices in the state of California. "The reason for concern is the nature of the California statute, and the breadth of statements and information relating to our business that would be covered under this ruling."

The essence of the problem for Nike is that its efforts to communicate with a range of constituencies about the working conditions in its factories are being construed as an attempt to persuade the consumer to buy its products.

Julius Turman, VP of litigation communications for Ketchum, which has worked with Nike previously, says that the ruling effectively puts advertising and PR into one category. "When you react to something like (accusations of poor working conditions), you aren't looking to use this to your advantage as a marketing tool,

he says. "Companies do things that are much more than just going after market share, sales, and profit."

But Alan Caplan, Kasky's attorney, says that the information is crucial to consumers.

"For consumers it means a lot. Now if a company is going to offer up any information regarding specifics of their product, they have to tell the truth."

Turman says there are other consequences of viewing Nike's reactive speech as commercial. It could mean that California companies will resist engaging in any activity that could put them at risk for liability, including community and charitable engagements. "It cuts the company's ability to be active in their community,

Turman says. "Why should they get involved in any public debate?"

He adds that the ruling is also flawed because it makes no reference to scope. In fact, it seems to raise more questions than it answers. When officers of a California company speak publicly, are they always to be held to the commercial standard?

The American Civil Liberties Union of Northern California has also chimed in on the issue, filing an amicus brief with the courts endorsing the right of Nike and other companies to retain First Amendment protection on issues of public interest.

"Public discourse lies at the heart of the First Amendment because it is the sort of speech that serves to shape public opinion on issues of importance not just to the individual, but to the nation as a political entity,

read the brief. Conversely, according to the ACLU, commercial speech serves to supply consumers with information for making purchasing decisions.

Ann Brick, staff attorney for the local ACLU chapter, says the case is important because it serves the public interest to hear unrestricted points of view from all sides of a public debate. "(The case) also involves the right of the audience to have access to a full range of views,

Brick says.

She finds the ruling troubling in that it offers unequal protection to all sides of the debate. In other words, the First Amendment protects anyone's right to accuse a company of wrongdoing, while the state restricts how that company can respond.

"When a decision like this one holds Nike, or any other business entity, to a strict liability standard, while the other side of the debate gets full First Amendment protection, there is an obvious, chilling effect," claims Brick.

Public will have final say

Ultimately, the general public will decide who is right and wrong in the Nike case, and in any other issue of broad concern. "If this is an issue of public importance it should be up to the general public to decide who is right and who is wrong,

Brick continues. "We put our faith in the people to be able to hear both sides of the story and then decide who to believe."

The PRSA is equally concerned about the public's right to know. "Our belief is that people have the right to make informed decisions - corporate, group, or NGO,

affirms Catherine Bolton, PRSA executive director. "What it's really about is different people sharing their points of view."

The biggest worry is that this case will trigger a return to opacity on the part of companies operating in California, and could drive companies further away from the communities in which they operate. At the very least, firms will be more careful than ever about public statements, possibly opting to remain silent on issues rather than being vulnerable to litigation.

If Nike does appeal to the Supreme Court on this issue, the PR community had better pay attention.

MAJORITY OPINION

"Commercial speech, because it is both more readily verifiable by its speaker and more hardy than non-commercial speech, can be effectively regulated to suppress false and actually or inherently misleading messages without undue risk of chilling public debate."

"... 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."

Justice Joyce Kennard, California Supreme Court

MINORITY OPINION

"While Nike's critics have taken full advantage of their right to 'uninhibited, robust, and wide-open' debate, the same cannot be said of Nike, the object of their ire. When Nike tries to defend itself from these attacks, the majority denies it the same First Amendment protection Nike's critics enjoy."

"The majority today refuses to honor a fundamental commitment and guarantee that both sides in a public debate may compete vigorously - and equally - in the marketplace of ideas. The First Amendment ensures the freedom to speak on matters of public interest by both sides, not just one judicially favored."

Justice Ming Chin, California Supreme Court.

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