June 30, 2003	Monday	Rabi-us-Sani 29,1424

WASHINGTON: This country’s highest court has left Nike and other businesses operating in California wary of making any public claim about their operations, including responding to accusations about their overseas labour practices.

On Thursday, the US Supreme Court dismissed an appeal by the athletic apparel giant of a California Supreme Court decision last year that shocked the corporate world by saying basically that “commercial speech” is not entitled to the same degree of protection as “free speech”.

While in a dissenting opinion, three justices on Thursday indicated sympathy for Nike’s appeal, the Court majority decided it was too early to take up the free-speech issues raised by Nike, Inc. v. Kasky and sent it back to California, where pre- trial manoeuvres remain to be played out.

The case is being closely watched by corporate public- relations departments, free-speech advocates, and globalization activists worldwide. It hinges on whether Nike’s efforts to respond to public attacks on its overseas operations amounts to “free speech”, which is protected by the First Amendment of the US Constitution, or “commercial speech”, which is not.

The case arose out of the growing public controversy over globalization, specifically the use by US apparel and shoemakers like Nike of overseas factories and assembly plants where, according to labour activists, working conditions and wages often fail to meet the core standards set forth by the International Labour Organization (ILO).

Nike, whose sales skyrocketed during the 1980s and early 1990s due partly to its phenomenal success in advertising, soon found itself a major target of the globalization debate and by the latter half of the decade launched an aggressive public- relations effort to rebut attacks by social and labour activists.

The firm even hired Goodworks International, a consultancy company owned by former United Nations Ambassador Andrew Young, to audit some of its factories and then touted its favourable conclusions in full-page newspaper ads in 1997. It also sent out press releases and letters to editors and other forums to deny that it was mistreating or underpaying workers at foreign plants.

But activists charged that these claims — and Goodworks’ audit — were not only misleading, but demonstrably untrue. In 1998, environmentalist Marc Kasky filed suit claiming that Nike had engaged in unfair business practices by making false statements about conditions in its Asian factories on at least six occasions.

Under California’s tough consumer-protection laws, the most far-reaching in the United States, members of the public are permitted to bring lawsuits to enforce the law without having to prove that they personally suffered as a result of misleading statements.

The trial court sided with Nike’s contentions that its efforts to respond to the critics amounted to “free speech” rather than “commercial speech,” because the subject dealt with a topic of public interest and was not aimed at selling a particular product. A California appeals court upheld the lower court’s dismissal.

But in May 2002, four out of the seven California Supreme Court judges disagreed. When a corporation makes “factual representations about its own products or its operations, it must speak truthfully”, wrote Justice Joyce Kennard for the majority.

She said courts should apply a three-pronged, “limited- purpose test” to determine whether speech should be considered commercial: the speaker must be engaged in commerce; the intended audience should be actual or potential customers; and the content of the message must be commercial in character.

“Speech is commercial in its content if it is likely to influence consumers in their commercial decisions,” she wrote. “For a significant segment of the buying public, labour practices do matter in making consumer choices.”

Two of the three dissenters assailed the decision as fundamentally unfair. “If Nike utters a factual mis-statement, unlike its critics, it may be sued for restitution, civil penalties and injunctive (relief),” they wrote. “When Nike tries to defend itself from these attacks, the majority denies it the same First Amendment protection Nike’s critics enjoy.”

Corporate-accountability and labour activists hailed the decision as a major breakthrough in countering sophisticated public-relations campaigns by corporations on issues ranging from their treatment of workers to environmental protection. “This puts corporate ‘greenwashers’ on notice that what they say needs to reflect what they actually do, rather than be a diversion from their true practices,” said Josh Karliner, director of the California-based corporate watchdog, CorpWatch.

But many free-speech activists were shocked. “It essentially shuts business speakers out of the public debate on any issue that affects them,” said Ann Brick of the American Civil Liberties Unions (ACLU), which has supported Nike’s position. “That kind of analysis is antithetical to the basic First Amendment principle that we let the people, not the government, decide who’s right and who’s wrong on an issue of public dispute.”

In appealing to the Supreme Court, Nike had a lot of support, including business groups like the Chamber of Commerce, the ACLU, and media organizations that argued that upholding the California decision would exercise a “chilling effect” on the willingness of corporations to address key issues in the public domain. In a teleconference on Thursday, Nike spokesman Vada Manager noted that the company has not issued its annual corporate responsibility report for fear of liability.

Even the AFL-CIO labour confederation filed a brief on behalf of Nike’s free-speech claims, although it opposed the company on the factual claims regarding its treatment of workers.

With so much attention paid to the outcome, Thursday’s dismissal came as an anti-climax, if not a major disappointment to corporations doing business in California. “We look at the opinion as certainly not resolving what we had hoped to have resolved today,” said Jim Carter, Nike’s general counsel, in a press teleconference.

Writing for three of the judges who preferred to dismiss the case for now, Justice John Paul Stevens said the case is an important one and further noted, “the speech at issue represents a blending of commercial speech, non-commercial speech and debate on an issue of public importance”. But, he added, in the absence of a “full factual record” as would be developed in pre-trial proceedings, as well as the trial itself, it was “premature” for the Court to rule on the key constitutional issues.

In a lengthy dissent written on behalf of himself and two other justices, Justice Steven Breyer insisted that he could “find no good reason for postponing a decision in this case”, particularly in light of “the importance of the First Amendment concerns at stake”. He predicted that Nike would eventually prevail on its First Amendment claims.—Dawn/The InterPress News Service.