Can a Press Release Be False Advertising?

W A S H I N G T O N, April 23, 2003 -- If a coffee chain falsely advertises that its beans are harvested in a "rain-forest friendly" manner or a tuna company labels its product "dolphin-safe" when it's not, both companies could be in violation of false-advertising laws.

But what about public statements that a company issues through press releases and in letters to newspaper editors?

Is this also advertising, and thus subject to consumer fraud charges if found to be false? Or is it political speech entitled to much broader protection under the First Amendment?

That is the question that the U.S. Supreme Court tackled today when it heard Nike vs. Kasky.

At issue in the case is whether statements the Oregon-based athletic shoe behemoth made in defense of its labor practices can be considered grounds for a consumer fraud lawsuit, as the man who brought the case, San Francisco resident Marc Kasky, argues, or whether Nike's speech is protected by the First Amendment.

To resolve the issue, the justices face the daunting task of defining commercial speech, a vague category that they agree covers television and newspaper advertisements, but doesn't necessarily include press releases, letters to newspapers, and the myriad other ways that a company communicates to the public.

If such speech is found to be commercial, it may be subject to false advertising laws. If it is deemed political, it would be entitled to broader First Amendment protection.

Is It Both?

"It's both," Justice Stephen Breyer said during the hour-long session, "[Nike's] both trying to sell a product and contribute to political speech. So what do we do?"

Essentially, says American University constitutional law professor Jamin Raskin, the court's decision will clarify "whether all corporate speech is commercial because it has as its bottom line profit, or whether corporations can act outside that as political beings."

If the court finds for Kasky, he will have an easier time winning a lawsuit against the company, but a ruling against Nike could cause companies operating in California to curb corporate speech.

The dust-up started in the mid-1990s, when several news organizations and human rights groups published reports on labor conditions in factories where Nike subcontracted work in China, Vietnam and Indonesia.

In 1996, CBS News' 48 Hours reported that workers in one factory in Vietnam earned 20 cents an hour — less than the Vietnamese minimum wage — and that certain workers were hit by their supervisors for poor sewing.

To counter the slew of negative press, Nike went on a PR blitz, writing letters to newspapers, the directors of university athletic departments and holding press conferences disputing these charges.

"There's a growing body of documentation that indicates that Nike workers earn superior wages and manufacture product under superior conditions," said Nike spokesman Vada Manager in 1997.

But an Ernst & Young audit commissioned by Nike and leaked to the media in November 1997 seemed to cast Nike's assertions in doubt, angering Kasky and prompting him to sue in 1998.

According to Kasky's complaint, because Nike's allegedly false statements were made "with intent to induce members of the public" to buy Nike goods, the company is in violation of California's false-advertising law.

Kasky's case was dismissed twice. Then, last summer, the California Supreme Court unexpectedly found that Nike's public relations campaign did in fact constitute commercial speech.

‘Profoundly Destructive of Free Speech’

Today Nike asked the Supreme Court to reverse that decision. Whether or not Nike does in fact mistreat its workers is not of concern for the case. That finding will have to be determined in a separate trial.

The Justices didn't hint at how they would decide. Justice Sandra Day O'Connor initially asked, "How isn't this commercial speech?"

But Justice Breyer later noted, "[Nike's] statement plays a role in public debate about what kind of society we wish to live in, and it is entitled to the highest protection."

Attorney Paul Coughlin, who represents Kasky, told reporters after the arguments that the public statements Nike made defending itself were tantamount to taking out an advertisement.

"When you include facts about your own company, you better tell the truth," Coughlin said. "In the commercial speech arena, you can't lie about your products and that's what this case is about."

Attorney Laurence Tribe, who argued on behalf of Nike, disputed that interpretation.

"If there were advertisements for Nike shoes that said 'You like Michael, you'll love these shoes and we are great to Third World workers,' that would be an advertisement and every bit could be tested," Tribe said. "If we don't draw distinctions, then this commercial speech doctrine will gobble up the freedom of speech in this country."

In his legal filing, Tribe argued a ruling in Nike's favor would be vital to protecting free speech.

"Not since New York Times vs. Sullivan has this court been presented with a lower court ruling as profoundly destructive of free speech," wrote Harvard Law School professor Laurence Tribe in his brief. Tribe, along with Walter Dellinger, will be arguing the case for Nike.

A slew of media organizations, including ABC, CBS, The Washington Post, The New York Times and Time magazine, have filed amicus briefs on behalf of Nike, citing the "chill" that would hamper corporate entities from speaking out without fear of liability and impede upon newsgathering abilities.

"We were really startled by the notion advanced in the California Supreme Court that a corporate speaker is essentially disabled from participating in a public debate over its employment policies, simply because some of its statements might have some bearing on the market for its products." said Robert O'Neil, director of the Thomas Jefferson Center for Freedom of Expression, another group filing on behalf of Nike.

Perhaps the most unlikely supporter of Nike's is the AFL-CIO. While it has not filed an amicus brief on behalf of Nike, it has come out in favor of Nike's position.

"We think Nike's practices are abysmal in these factories and we think that Nike owes a lot of responsibility for those conditions," said John Hiatt, general counsel for the organization that represents the rights of 13 million workers.

"We think the groups that have brought Nike's problems to light have provided a critical public service," he said. "But regardless of whether a party is criticizing or defending those conditions, they have to have the right to engage in free speech."