What would you do? Nike V. Kasky case puts public relations campaigns under new scrutiny.Scenario: Your New York-based company has led the effort in your industry for environment-friendly practices. Now your CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. is named "Green CEO of the Year" by a Canadian environmental protection group. Do you issue a press release and give the award star billing in your annual Environmental Report? Or do you advise your CEO to grant no interviews, make no statements and say nothing at the awards ceremony? Scenario: After its own investigation, an activist group uses full-page ads to accuse your company of exploitative labor practice in Poland. The company's investigators find the charges to be untrue. An independent third-party labor auditor finds them untrue. The Polish government states that your company is in compliance with national law. Do you refute the charges when queried, citing the investigations? Or do you answer, "No comment?" Depending on the outcome of Nike v. Kasky, a case now before the United States Supreme Court United States Supreme Court: see Supreme Court, United States. , you may find yourself saying "no comment" much more often because it will be the only way to avoid lawsuits in California for false advertising. HOW DID WE GET TO THIS POINT? To know why, we first look back to 1996. Nike, an athletic-shoe maker, was widely accused of ignoring its contractors' alleged exploitative labor practices in Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. . Several charities and activist groups cited instances of workers being subjected to long working hours, sexual harassment sexual harassment, in law, verbal or physical behavior of a sexual nature, aimed at a particular person or group of people, especially in the workplace or in academic or other institutional settings, that is actionable, as in tort or under equal-opportunity statutes. and unsafe working conditions. Nike countered with public statements showing that it required all contractors to sign, abide by and document compliance with a Memorandum of Understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment. that commits its contractors to follow all local laws about wages, benefits, child labor child labor, use of the young as workers in factories, farms, and mines. Child labor was first recognized as a social problem with the introduction of the factory system in late 18th-century Great Britain. , equal opportunity, working conditions, etc. In 1997, the company asked Andrew Young Andrew Jackson Young, Jr. (born March 12, 1932) is an American civil rights activist, former mayor of Atlanta, Georgia, and was the United States' first African-American ambassador to the United Nations. , a U.S. civil rights leader and former United Nations ambassador, to carry out an independent audit of Nike contractors' labor practices. Young examined 12 factories and reported favorably for Nike, finding no evidence of widespread abuse or mistreatment mis·treat tr.v. mis·treat·ed, mis·treat·ing, mis·treats To treat roughly or wrongly. See Synonyms at abuse. mis·treat , but did comment that Nike could do better. Yet the accusations continued. By mid-1997, news outlets across the U.S. were asking if Nike was indeed exploiting--or allowing others to exploit--workers making its footwear. Nike responded with a major public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most effort, citing the rules it expected contractors to follow, referencing reports from auditors and citing the Young Report. As one part of that effort, it published advertisements in major papers to make its case. Those advertisements caught the eye of Marc Kasky, a California resident and community activist. Kasky believed that the advertisements and other statements made by Nike were misleading. Kasky sued Nike, under a California law California Law consists of 29 codes, covering various subject areas, the State Constitution and Statutes. See also
Kasky alleged that Nike had violated California law by making negligent or reckless misrepresentations "to maintain and/or increase its sales and profits...through its advertising, promotional campaigns, public statements and marketing." He asked the court to order Nike to 'disgorge all monies" that it had acquired as a result of the alleged misrepresentations, and to carry out a court-supervised public relations campaign to correct the alleged misrepresentations. At trial, the judge dismissed Kasky's suit, ruling that Nike, in responding to accusations about work practices, was exercising its right to protected free speech. Such freedom of speech, guaranteed under the First Amendment of the U.S. Constitution, does not make the speaker liable, except in the case of libel. In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke" put differently , Kasky could not sue. Because the judge decided Nike's speech was protected, he ruled that there were no grounds to try the validity of the allegations. WHAT QUALIFIES AS COMMERCIAL SPEECH? Kasky appealed to the California Court of Appeals. That court also rejected Kasky's suit, saying that Nike's statements were part of a "poublic dialogue on a matter of public concern...protected by the First Amendment." The court warned Kasky that he was unlikely to prevail in an appeal to a higher court. But Kasky did appeal to the California Supreme Court. In a 4-3 decision last year, that court agreed with Kasky, and ordered the case remanded to the California Court of Appeals. In its order, the court majority said that although Nike's noncommercial speech on issues of "general policy" are protected, the company loses that protection when the speech "concerns facts material to commercial transactions--here, factual statements about how Nike makes its products." The majority ruled that Nike's statements were commercial speech--and thus not protected by the First Amendment guaranteeing freedom of speech--because the statements failed three tests. First, the court majority found that Nike is a commercial speaker because "Nike and its officers and directors are engaged in commerce." Second, the justices found that "Nike's letters...were addressed to actual and potential purchasers" and noted that Kasky had "alleged that Nike's press releases...although addressed to the public generally...were also intended to reach and influence actual and potential purchasers of Nike products." Third, the court majority found that "in describing its own labor practices...Nike was making factual representations about its own business practices." The court stated: "Because...Nike was acting as a commercial speaker, because its intended audience was primarily the buyers of its products and because the statements consisted of factual representations about its own business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , we conclude the statements were commercial speech for the purpose of applying [California] state laws designed to prevent false advertising and...deception." Under the California Supreme Court ruling, when a company responds to accusations about its operations, the company response must be considered "advertising." Three of the California justices dissented. Justice Chin confronted the First Amendment issue directly: "Various persons...have accused Nike of. ...despicable practices...[using such] scathing words as 'slavery' and 'sweatshop.' Nikes critics receive full First Amendment protection. And well they should. "[But] when Nike tries to defend itself from these attacks [this court] denies it the same First Amendment protection. Why? Because Nike sells shoes--and its defense against its critics may help sell those shoes. "According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the majority, if Nike utters a factual misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. , unlike its critics, it may be sued...." Under the U.S. legal system, the U.S. Supreme Court is the ultimate court of appeal. One of its most important functions is to hear cases in which one party believes that a state law or state supreme court decision violates the U.S. Constitution. But the court will hear a case only if it presents significant constitutional issues. The vast majority of cases are rejected. Rebuffed, 4-3, by the California Supreme Court, Nike appealed to the U.S. Supreme Court. The court agreed to hear Nike v. Kasky. WHAT IS AT STAKE? First is whether a company can, in any sense, engage in protected free speech if the topic at issue touches on its business. If not, then the company could be sued on grounds of misrepresentation misrepresentation In law, any false or misleading expression of fact, usually with the intent to deceive or defraud. It most commonly occurs in insurance and real-estate contracts. False advertising may also constitute misrepresentation. and will need to defend each case in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . That the company might win these cases is cold comfort: it will have been hauled into the court of public opinion and it cannot usually counter sue the plaintiffs (who need show only that they believe statements to be false or misleading). Second, will any communicator advise a CEO to give an acceptance speech for a "Green CEO of the Year" award if the possible result is a suit in California claiming the company's production methods are not quite as "green" as it claims? If yours is a biotech company, will you enter the debate on genetically modified genetically modified Adjective (of an organism) having DNA which has been altered for the purpose of improvement or correction of defects genetically modified genetic adj [food etc] → crops? If your company is an airline, will you let your CEO speak on improvements your company has made to airline passenger safety? Indeed, will you issue your environmental report? Your social responsibility report? Or include sections about labor practices in your company's annual report? Nike said "No," by refusing to release its social report, citing the threat of suits. In fact, so much of the public relations industry believes that your answer would be "No!' that a number of parties have filed an amicus curiae brief Noun 1. amicus curiae brief - a brief presented by someone interested in influencing the outcome of a lawsuit but who is not a party to it brief, legal brief - a document stating the facts and points of law of a client's case stating that a decision for Kasky would "chill the PR industry" and stifle public comment. Noting that a decision against Nike would drive McDonald's from any debate on nutrition, Monsanto from the debate on genetically modified organisms ge·net·i·cal·ly modified organism n. Abbr. GMO An organism whose genetic characteristics have been altered by the insertion of a modified gene or a gene from another organism using the techniques of genetic engineering. , biotech companies from publicly discussing cloning and drug companies from commenting on FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. procedures, the amicus curiae amicus curiae (Latin: “friend of the court”) One who assists a court by furnishing information or advice regarding questions of law or fact. A person (or other entity, such as a state government) who is not a party to a particular lawsuit but nevertheless has a parties elaborate on the possible consequences of a Kasky victory. "Because the Kasky test covers any utterance where consumers might be present or might be expected to receive the information through media outlets, corporate speech will disappear from every medium of communication with the public," they wrote. At press time, oral argument of the case before the U.S. Supreme Court is scheduled for 23 April. RELATED ARTICLE: NIKE LABOR PRACTICES HISTORY 1970s Nike begins production in Indonesia, People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China and Vietnam. 28 Sept. 1992 Approximately 6,500 Indonesian workers stage a strike in protest of low wages. Some demands are met, and workers resume working two days later. 1992 Nike adopts a Code of Conduct that provides for occupational health and safety of workers. The company also adopts a Memorandum of Understanding that sets standards for Nike subcontractors worldwide. January 1993 Twenty-four Indonesian workers appeal to Committee for Settlement of Labor Disputes regarding a strike they have organized against Nike. Workers win the case. Nike appeals to federal judiciary and ruling is overturned. Workers then mount an appeal and win. Nike appeals to the Indonesian Supreme Court Jurisdiction The Indonesian judicial system comprises several types of courts under the oversight of the Supreme Court (Mahkamah Agung). Following the civil law tradition of The Netherlands, Indonesian courts do not apply the principle of precedent. . Case pending. 3 Sept. 1993 Nike signs the Athletic Footwear Association "Guidelines on Business Practices of Business Partners." 2 Aug. 1996 Nike joins the Fair Labor Coalition under U.S. President Bill Clinton. November 1996 CBS's "48 hours" airs a documentary detailing Nike worker abuses in a Vietnamese factory. Documentary gains the attention of groups such as the Vietnam Labor Watch, which investigates working conditions in Vietnamese factories. January 1997 Nike hires former United Nations ambassador Andrew Young to inspect factory conditions in 12 of its Asian factories. 20 March 1997 Vietnam Labor Watch announces findings of its investigation into labor conditions in Vietnamese factories manufacturing Nike products. It reports several violations and poor practices. May 1997 Nike stock falls as a result of slower sales growth and alleged unfair labor practices Conduct prohibited by federal law regulating relations between employers, employees, and labor organizations. Before 1935 U.S. labor unions received little protection from the law. . 24 June 1997 Andrew Young releases favorable report of Asian factories. Nike advertises findings in newspapers. July 1997 The United States Student Association The United States Student Association (USSA), founded in 1947, bills itself as the oldest and largest student association in the United States. It has a historical and current commitment to diversity and breaking the barriers to educational access imposed by inequality and passes resolution condemning Nike's labor practices. 13 Sept. j997 University of California The University of California has a combined student body of more than 191,000 students, over 1,340,000 living alumni, and a combined systemwide and campus endowment of just over $7.3 billion (8th largest in the United States). Student Association passes similar resolution. 22 Sept. 1997 Nike announces that it will temporarily sever TO SEVER, practice. When defendants who are sued jointly have separate defences, they may in general sever, that is, each one rely on his own separate defence; each may plead severally and insist on his own separate plea. See Severance. ties with a number of its Asian factories with unfair labor practices. 18 Oct. 1997 Several U.S. states and countries around the world participate in the International Day of Protest. Much of the protest centers on Nike factory labor practices. 23 Oct. 1997 Several members of the U.S. Congress sign a letter requesting Nike to employ fair labor practices with its Asian workers. 9 July 1997 Nike signs a US$11.6 million deal with University of North Carolina's (UNC (Universal Naming Convention) A standard for identifying servers, printers and other resources in a network, which originated in the Unix community. A UNC path uses double slashes or backslashes to precede the name of the computer. ) athletic department to outfit most of its sports teams and to manufacture UNC-logo sweatshirts and T-shirts, which in turn would generate US$6 million to US$8 million in annual sales for the company. Student activists oppose contract and lobby coaches and administrators to cancel the contract. 1998 Nike engages in heavy campaigning to boost public opinion. The public relations campaign includes several press releases, continued mention of adherence to a code of conduct, a lengthy press release titled "Nike Production Primer" and an attempt to draw attention to the Young Report through online postings of findings. 7 Jan. 1999 California resident Marc Kasky brings suit against Nike in the Superior Court of San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden . 21 Jan. 2000 Kasky v. Nike is tried in the California Court of Appeals. May 2002 Kasky v. Nike elevated to the California Supreme Court. 10 Jan. 2003 Amicus curiae granted. Oral arguments in Nike v. Kasky scheduled to be presented to U.S. Supreme Court 23 April 2003. Allan Jenkins Allan Jenkins is the editor of Observer Magazine, the magazine section of The Observer. is a communication consultant in Copenhagen, Denmark, and a member of IABC's Executive Board and Foundation Board of Trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. . He can he reached at ajenkins@tallulah.org. |
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