SAN FRANCISCO — California’s highest court has ruled Nike Inc. can be sued by a man alleging the athletic shoe and apparel maker violated false advertising laws with an ad campaign defending the wages, treatment and safety conditions of workers at overseas factories.
In a 4-3 decision Thursday, the state Supreme Court overturned lower court decisions and ruled Nike’s efforts to quell accusations of worker mistreatment constitute commercial speech, which is subject to a California consumer protection law that is one of the nation’s least friendly to businesses.
“Our holding, based on decisions of the United States Supreme Court, in no way prohibits any business enterprise from speaking out on issues of public importance or from vigorously defending its own labor practices,” wrote Justice Joyce L. Kennard.
“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.”
The court emphasized its ruling does not indicate whether the Beaverton, Ore.-based company made any false representations. Attorney David Brown, who represents Nike, said the company may ask the U.S. Supreme Court to review the case.
“We’re greatly disappointed with it because we feel that Nike’s position is legally the correct one,” Brown said, adding he was happy the court was silent on the case’s merits.
The highly publicized suit, which had been dismissed by a trial court and a state appeals court, claims Nike’s 1996-1997 campaign in defense of its wages, treatment of workers and health and safety conditions at Asian plants run by contractors was a misleading business practice, not the First Amendment-protected political debate that Nike has argued.
The suit said Nike deceived consumers by falsely stating it guarantees a “living wage” to all workers, that its workers in Southeast Asia make twice the local minimum wage and are protected from corporal punishment, and that it complies with government rules on wages, hours and health and safety conditions.
Those claims were refuted by studies by labor and human rights groups, news media investigations and — most damaging of all — a January 1997 audit by the firm of Ernst & Young, commissioned by Nike, said the suit filed by San Francisco resident Marc Kasky on behalf of California citizens.
Kasky helps manage a foundation that preserves Fort Mason, a former San Francisco military base-turned-recreation area.
Kasky’s attorney, Alan M. Caplan, was excited by the ruling.
“For four years basically we’ve not litigated the merits of the case. It’s all been the one issue of whether Nike’s speech was commercial speech,” Caplan said. Thursday’s ruling will hold companies “to the standard of telling the truth.”
The three dissenting judges wrote it was unfair to deny Nike and other corporations uninhibited speech when defending their reputations against unrestricted public accusations.
“While Nike’s critics have taken full advantage of their right to ’uninhibited, robust, and wide-open’ debate, the same cannot be said of Nike, the object of their ire,” wrote Justice Ming W. Chin. “When Nike tries to defend itself from these attacks, the majority denies it the same First Amendment protection Nike’s critics enjoy.”
Nike officials said Thursday the company has since improved standards for workers by raising minimum age requirements and using water-based adhesives to assemble products rather than petroleum-based.
Shares of Nike rose 55 cents to close at $54.24 Thursday on the New York Stock Exchange.