Nike Loses Supreme Court Ruling

May 3, 2002 ( - Companies which publicly discuss their labor practices can be sued if they lie in the process, the California Supreme Court ruled in a case involving sportswear giant Nike, Inc.

The California high court ruled in a split decision that Nike’s efforts to defend its Asia labor record by trying to counter stories that it buys products from sweatshops represents commercial and not constitutionally protected free speech, according to a BNA report.

“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,” the court said in its four to three majority decision. “It means only that when a business enterprise, to promote and defend its sales and profits, makes factual representations about its own products or its own operations, it must speak truthfully.”

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Three justices wrote strongly worded dissenting opinions saying that Nike was entitled to free-speech protections.

The Nike ruling could force other companies to rethink publicity campaigns, according to a lawyer involved in the case.

“This is a very important ruling,” said Alan Caplan, one of the lawyers who filed the original suit. “Now in California, if a company is going to discuss the labor conditions in their factories they cannot be deceptive. That is a big step.”

Case Background

The Supreme Court ruling overturns a decision from a California appeals court, which labeled Nike’s sweatshop comments as noncommercial free speech.

The case started with a 1998 civil suit charging that the sportswear company lied about working conditions for workers in Vietnam, China, and Indonesia. Nike has come under fire for the working conditions at some of its factories in Asia, which a staff of mainly female workers, aged 18 to 24.

The suit claimed Nike officials knew when they defended their labor policies that the Asian workers were the victims of physical punishment and sexual abuse, had to work in a dangerous environment, and were paid a substandard wage.

Unfair to Business

Allied with Nike was the American Civil Liberties Union (ACLU), which filed legal papers supporting the company’s free speech right.

“This is not a good decision for free speech values. Free speech is the loser here,” said ACLU staff attorney Ann Brick, noting that some of the speech covered by the California decision involved such traditional outlets as letters to the editor of the New York Times. “There is a huge chilling effect. It is very expensive to be defending your statements in a court of law. This decision is going to have national impact.”

A Nike statement called the ruling a “dangerous precedent” by denying businesses the right to defend themselves in public debate.