Skip to main content

OldSpeak

Commercial Speech v. Free Speech: Can Marc Kasky Make Nike Tell the Truth?

By Jayson Whitehead
April 23, 2003

This story begins in 1997, when Marc Kasky opened up his New York Times in his home in San Francisco and began reading an article about shoe manufacturer Nike. “Prior to that day, I was aware of the protests,” he says. “Nike had opened a Niketown in San Francisco. And there had been a lot of protests by activists and organizations about what they were claiming was Nike’s sweatshop practices in Southeast Asia, and the issues that related to that—health, safety, etc.”

In the face of these protests, Nike denied that there was any kind of abuse in their factories and maintained that their “Code of Conduct”—which mandated standards of work safety, health, and compensation—guaranteed that employees were treated well in their factories in Southeast Asia. To bolster their argument Nike hired an auditing firm, Ernst & Young, to study their plants and determine whether Nike was living up to their standards. When the report came back, Nike kept its contents secret, and continued to maintain that their factories were models of exemplar workers in Vietnam were exposed to numerous workplace hazards, including toxic chemicals without protection, and illegallly forced to work excess overtime. Right on its heels, a y employee conditions. However, when a disgruntled employee leaked a report that pertained to a large Vietnamese factory, it told a different story. According to the audit, Nike factorynumber of negative reports surfaced, one from the Vietnam Labor Watch documenting widespread abuses, as well as one from Australia and another from the Hong Kong Christian Industrial Committee finding widespread abuse in factories in Indonesia and China.

Nike sprang to its own defense, launching a massive media blitz that included news releases and letters to the editor in an attempt at immediate damage control. One such missive that Nike Communications director Lee Weinstein wrote to the San Francisco Examiner read, “During the shopping season, we encourage shoppers to remember that Nike is the industry’s leader in improving factory conditions.” Another claimed that the leaked Ernst & Young audit did not implicate Nike, but exonerated them.

***

Marc Kasky dropped out of graduate school in 1968 to work for Eugene McCarthy’s presidential campaign. “I was 23 or 24 years old during that campaign and just felt that at that point in the Vietnam War it was important to speak out,” he says. In particular, Kasky headed part of McCarthy’s campaign in New Hampshire. McCarthy received a strong vote in New Hampshire’s Democratic primary while incumbent president Lyndon Johnson did very poorly. Only a few weeks later, Johnson announced his decision to not run for reelection. “The city that I was running the campaign in was the only city in the state that McCarthy actually won,” Kasky recalls. “I can’t say that what I did, or what we did, directly led to Johnson’s deciding to withdraw from the campaign. But that was a very empowering experience for all of us.”

The McCarthy campaign imbued Kasky with an everlasting belief that one individual can make positive change. As he read the New York Times account of the Nike controversy almost thirty years later, Kasky got an idea. “When a corporation holds itself out as a model for great behavior, there are many consumers who make their decisions based on wanting to support a company that’s setting high standards,” he says. “And I believe there were a lot of people buying Nike products based on the reason that Nike was representing themselves in a very positive light. And here it turns out that it wasn’t true. So I thought it was blatantly unfair to mislead people, hoping for their support.”

Kasky put in a call to a friend, attorney Alan Caplan, who had successfully fought RJ Reynolds in the early 90s, forcing the company to stop using the Joe Camel cartoon character to promote cigarettes to young kids. “I said, ‘I’ve just read this article. Is there something we can do about it?’ He said he’d look into it, and he called me back a few weeks later, and said that there was a way that we could take action against Nike.” In the spring of 1998, Kasky, with the aid of Caplan, filed suit against Nike for unfair business practice using a controversial California statute that allows an individual to sue companies on the grounds that they have gained an advantage in the marketplace by misleading consumers. Kasky and Caplan also sued under another state statute alleging false advertising.

According to a summary of the facts as established in the California First District Court of Appeals, Kasky’s complaint alleged that Nike had in the course of its public relations campaign 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.'"

Rather than address these allegations in court, Nike made a simple argument. They claimed the protection of the First Amendment for any of their statements and asked for a dismissal. The trial court agreed with Nike, as did the appellate level. In a 4-3 decision, however, the state Supreme Court found for the plaintiff, holding that the company had engaged in commercial speech with its public relations campaign and that they were thus liable under the state provisions regulating corporate enterprise. The California Supreme Court majority scoffed at Nike’s claim that their free speech was being quashed. “Our holding in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices,” one Justice wrote. “It means only that when a business…makes factual representations about its own products or its own operations, it must speak truthfully."

Nike appealed, and the United States Supreme Court granted certiorari. Both the U.S. Solicitor General as well as the ACLU have filed amicus briefs on behalf of Nike, while Kasky has had the Sierra Club and the California Attorney General join his side. Oral arguments were presented today, April 23. Many corporations are waiting with baited breath for a decision that should arrive in early summer and could have a huge impact on how they conduct business in California. Currently helping convert an old army base in San Diego into a cultural center, Kasky meanwhile seems relaxed with regard to the outcome, feeling in some ways that he has already won. oldSpeak spoke with him late last month about the case that has made him a pariah to the corporate world and a hero to consumer activists everywhere.

***

oldSpeak: Were you surprised that the Supreme Court took this case?

MK: Not really, because it’s an issue of great importance, to not just Nike, but to any corporation that’s doing business in California. Because what it says is, if you market your products in California, you must tell the truth in how you market them—how they’re manufactured, what their ingredients are, where they’re manufactured—all the important facts the consumer would want to know. The current ruling in California says that if you’re marketing your products here, you have to tell the truth. It isn’t just California corporations that are affected, because almost any national and most international corporations do business here. So, I think the Supreme Court took it because they thought it was important.

The Supreme Court isn’t hearing an unfair business and false advertising issue. Nike said, “It doesn’t matter whether what we said was true or not. We had First Amendment protection to say whatever we want.” They wanted it to be private speech that I was suing them for, and I’m saying it’s commercial speech. So the Supreme Court decided I guess that the line between commercial and private speech had not been clearly drawn, and it was important that this time, given the right case, to try to draw that line.

Is one of the things at issue here whether corporations are protected by the Bill of Rights, whether they count as a person?

That’s a bigger issue. Specifically at issue here is whether the speech that Nike was engaged in, in representing this Nike code of conduct, was private speech or commercial speech. Right now, the Constitution does protect a corporation when using private speech. Meaning a corporation can participate in a debate on a public policy issue without fear of being sued. But if it’s not private speech—if it’s commercial speech—then the states get to regulate business, and they get to regulate unfair business practices and false advertising. The Constitution does not protect a corporation for false advertising or unfair business practice. So the issue here is which one is it?

In your brief for the Supreme Court, you ask for an injunction and restitution. What sort of injunction and restitution are you seeking?

First of all, you would correct the situation. You want to make sure that what we’ve accused Nike of doing isn’t happening anymore. Then you want to set up some kind of mechanism to ensure that six months from now it doesn’t re-occur. Then, the third thing is, you want to identify whether people bought their products based on the representations that Nike made. If those are false, then those people are entitled to some kind of restitution for their purchase. So that’s the restitution we’re talking about. That there may be some people who made the purchase on a false basis, that were misled into buying the product.

In light of everything that’s happened, wouldn’t Nike have been better off having stuck to the argument that the factories were just sub-contractors?

What Nike did was, on one hand, very admirable. Because a lot of corporations have their own codes of conduct, but when charged that their products are made by sweatshops in Southeast Asia, the corporation says, “Well, we have this code of conduct, and we maintain that with all of our employees, and all of our manufacturing plants. But if we hire a contractor, we can’t tell them how to treat their employees.” So a lot of companies get away with it. Nike went a step further and said, “Not only do we maintain this code, but we require that all of our contractors maintain this code.” That was explicit. “They signed a document saying they will do this, and we monitor to make sure that they are doing it.” So, Nike really didn’t have any way out.

In light of your suit, isn’t it highly unlikely that a corporation in California will ever vouch for their sub-contractors again?

If they can’t hold them to it, then they shouldn’t. I hope no one would do it, unless they can assure us that their contractors were maintaining that standard. That’s the whole point of the case. Don’t say it if it’s not true, or if you can’t hold your contractors to it. Some people have said, “Why didn’t you sue some other running shoe company? They run sweatshops in Asia, too.” Well, they’re not claiming that they’re not! They’re not saying, “We’re maintaining these standards.” What am I going to sue them for? I don’t like what they’re doing, but that doesn’t give me standing to sue them.

Were you disappointed that the ACLU wasn’t on your side in this?

I’d like them to be. But I understand that the ACLU takes positions on free speech issues that one time or another upset a lot of people. They defend the rights of Nazis to march in Jewish neighborhoods. It’s that thing that I don’t agree with your beliefs, but I’ll fight to the death for you to defend your right to have them. I’m a member of the ACLU. This is what they do. They take a stand on a certain approach to issues like this, and whether I agree with them or not isn’t as important, because on some other ones, I’m going to agree with them an awful lot, and other people will disagree with them. I’d be happy if they were on my side, but it’s not surprising to me that they aren’t.

If you lose at the Supreme Court level, are you worried what kind of an effect that could have? Could it establish a precedent that will hurt consumers in the long run?

Here’s the way I look at it. If I win this case and the Supreme Court rules in my favor, Nike wins also, as do other corporations. It would be a signal to the public that they can trust what the corporation tells them when they’re marketing their product. That’s important for the relationship between companies and consumers. If I lose, Nike loses also. Because what they will have won, essentially, is the right to misrepresent their products—the way they’re manufactured, the conditions, and where—to the public. And the public will now be put on notice that you cannot rely on the representations of corporations when they tell you about their products, and that’s a loss for the corporations as well.

If the Supreme Court were to rule in Nike’s favor, it’s telling the buyers to take care of themselves, because the government’s not going to defend you in this area. “We’re not going to protect you, you’re going to be at your own resources to determine whether this is true or not, and whether that’s important to you.” Ultimately I’m after truth. That’s really what this case is about from my standpoint. When corporations say we’re going to be afraid to speak in the future for fear of being sued no matter what we say, I say, “If you’re telling the truth, you really have nothing to worry about.”

Whether you win or lose at the Supreme Court level, have you achieved some of what you set out to do?

Well, it’ll put it into process, into motion. I think that people are much more aware of the issue now. I get calls from people in the media, and I get calls from people who’ve been working on this issue through different organizations like Reclaim Democracy. There are people in business who I’ve been speaking to who really are very much in favor of what I’m doing. They’re saying, “Keep up the good work.”

It gives corporations a bad name when someone’s arguing that they have the right to lie. It smears all of them. It really does damage many corporations to have that out there. I feel like a lot’s been put in motion already, and I’m not going to stop working on it, regardless. I feel we’ll learn a lot from what the Supreme Court decides, and how they decide it. Because it may not be a yes or no, black or white decision. It may be something that says, “Under these conditions, and with these limitations…,” or “In situations like this,” this can be done, or can’t be done. So it’s not necessarily going to be “Nike, you’re right,” or “Kasky, you’re right.” They don’t just vote yes or no, they write opinions. And it’s really not the yes or no, but the opinions that guides us, because it’s going to affect potentially many, many cases and situations, not just this one.

Is this case going to come down to clarifying what corporate speech is advertising, and what corporate speech isn’t?

I think so. You see what’s happened in probably the last 15 years or so. If you look at a business school’s curriculum, they’re teaching image advertising. Advertising isn’t just, “Buy my product because it’s better, lasts longer, works more efficiently.” It’s lifestyle, it’s image. And so image is partly what kind of corporation are we, and don’t you want to support us instead of some other company that has no image? And Nike is one of the reasons this case has generated so much interest. Nike is one of the companies that push the image concept as far as it can go.

They completely changed advertising in that way.

Swoosh? They don’t even need narrative in their advertising. It’s just people flying through the air, and that’s it. So, what’s happening here is that marketing is not simply what it used to be, which is claims about price and so on, but it’s image. By promoting their image, they’re really marketing their products. There’s no other reason to enhance your corporation’s image, than really to market your products. And that’s what business schools are teaching.

You are certainly the David versus the Goliath in this case. When you and Caplan set out with this, did you think that it was going to get this sort of attention?

No, it never occurred to me. To me, it was false advertising and unfair business practice, fairly straightforward. You go to trial, you determine whether Nike was lying or was telling the truth, and then they either win or lose. But they chose not to defend themselves against my charges, but to claim that they didn’t need to defend themselves against my charges, that they were protected by the first amendment. So they converted it into this significant landmark case really, not I. So, yes, I’m surprised, because we never envisioned it being a landmark case. I think you’d have to ask them what their reason was, but my belief is that they don’t want us to do discovery and find that the facts don’t support their statements.
 

DISCLAIMER: THE VIEWS AND OPINIONS EXPRESSED IN OLDSPEAK ARE NOT NECESSARILY THOSE OF THE RUTHERFORD INSTITUTE.

Donate