Nike is (as almost everyone knows) a huge seller of sports shoes and gear. Its most recent annual sales and profits total $10.6 billion and $474 million, respectively. Although Nike employs only 22,000 workers directly, it has contractors that make its products and have 600,000 workers in 910 factories in 51 countries. They’re concentrated in China, Indonesia, Vietnam and Thailand, where roughly 90 percent of Nike shoes are manufactured.
The case before the court involved these factories’ labor practices, which Nike polices through agreements with contractors. In the mid-1990s, anti-globalization activists claimed these workers were underpaid and mistreated. Nike defended its record in letters, pamphlets and press releases, arguing that the jobs were highly prized and had above-average wages. But Nike also raised labor standards in 1998 by, among other things, increasing the minimum working age at shoe factories to 18.
Enter Marc Kasky, a self-styled activist, who sued Nike in 1998 claiming that, under California law, its defenses constituted “false advertising.” The suit asked that Nike be forced (1) “to disgorge all monies” acquired through its misleading statements, (2) to “undertake a court-approved public information campaign” to correct misstatements and (3) to pay “reasonable attorneys’ fees and costs.” His lawyers include well-known trial attorneys who, presumably, are financing the case (they wouldn’t say).
The Supreme Court should have swatted this down 9-0. Two lower California courts dismissed the suit as violating the First Amendment. Only the California Supreme Court, in a 4-3 decision, sustained it, arguing that Nike’s defenses constituted “commercial speech” not entitled to broad constitutional protections. Now, many laws protect against outright fraud in the sale of products and securities. But this open-ended expansion of “commercial speech” would, if upheld, create a double standard for free speech: a mini-version for firms; a full-size model for everyone else.
Big companies couldn’t easily discuss public issues involving their products without risking costly suits in California, where most do business. Among the nine Nike documents cited as false or misleading, none was a standard advertisement, and none was made exclusively in California. They include a letter to The New York Times, a letter to university athletic directors and presidents, and several postings on Nike’s Web site. Statements made to reporters might also be vulnerable to suits. Indeed, the threat to journalistic communication is so obvious that 40 news organizations (including NEWSWEEK; its owner, The Washington Post Company; The New York Times Co., and National Public Radio) filed a brief supporting Nike.
What’s occurring here is that trial lawyers are road-testing a new form of corporate shakedown. First, advocacy groups would attack a company or industry. Next, companies would face a dilemma: be silent and let the attacks stand, or respond and face an expensive and embarrassing suit. Finally, companies that ended up in court might face a daunting standard of proof–not whether what they said was true, but whether it might be misleading. Nike said that its contractors’ average workers received double their government’s minimum wage. Suppose a court found that 1 percent, 10 percent or 20 percent didn’t. What would be misleading?
Courts can’t police the accuracy of every public comment without veering into censorship–real and threatened. Every argument is selective and, therefore, somewhat misleading. Applying this standard universally would make every newspaper article, political speech and TV interview actionable; applying it only to businesses creates two-tiered free speech. The losers are not just companies. The value of free speech goes beyond the ability of people to vent their views. It presumes that open debate–thrashing out conflicting views and facts–is the best way that a free society informs itself and settles controversial issues.
Free speech, to be free, has to cover everyone, not just the politically correct or fashionable. It’s true that the Supreme Court didn’t directly impose any restrictions on free speech. It simply refused to decide the constitutional issues in the Nike case and sent it back to California for trial. But the practical effect is to expose Nike and other companies to expensive trials and huge economic risks. Their choice may be to shut up or pay up. This amounts to a tax on free speech. The result must “chill” open discussion–as Justice Stephen Breyer noted in dissent–because when you tax something, you often get less of it.
