WASHINGTON, April 23 (UPI) -- The Supreme Court heard argument Wednesday on whether government can force businesses to tell the truth, or at least not issue misleading statements, when they are engaged in public debate.
A California man sued the company under a state truth in advertising law when it repeatedly denied it was an "immoral company, generating great profits on the backs of Third World labor."
The case presents the Supreme Court with a problem, one several justices acknowledged from the bench Wednesday.
For two decades, the Supreme Court has ruled that government may not regulate "commercial speech" -- in most cases, advertising -- as long as the speech promotes a lawful activity and does not mislead.
The only exception is when government can show that the regulation furthers a "substantial government interest."
Under those precedents, the California law would seem to be constitutional, since it seems to target untrue or misleading commercial speech.
However, speech in a public forum or in pure debate outside of commercial interests is protected from government regulation by the First Amendment.
Nike Inc. is the world's largest manufacturer of sports apparel and equipment.
The company wants the U.S. Supreme Court to determine whether a company engaged in a public debate -- "writing letters to newspaper editors and publishing communications addressed to the public on issues of great political, social and economic issues" -- can be held liable for not telling the truth.
In effect, did Nike's public relations push constitute commercial speech?
In the latest figures cited by court records, Nike reported annual revenues of $9.2 billion in 1997, as well as an advertising and marketing budget of $1 billion.
Court records said most Nike products are manufactured in China, Vietnam and Indonesia by women under 24.
Beginning in 1996, however, the CBS News program "48 Hours" and a number of publications ran stories alleging near sweatshop conditions in Nike's overseas factories. In Nike's words, the allegations included "physical, verbal and sexual abuse," as well as exposure "to toxic chemicals, noise, heat and dust without adequate safety equipment," all for less than the local minimum wage.
After watching itself take a public relations beating, Nike launched a campaign to counter the reports.
The company issued statements saying that the allegations were false, and included the statements in press releases, letters to newspapers and other media.
At this point, a private citizen, Marc Kasky, filed suit under California's false advertising law against Nike and several company executives, alleging that the public relations campaign included false statements.
The state law allows anyone to, in effect, become a "private attorney general" and prosecute a company under its provisions, even if the private citizen cannot show he or she was harmed by the company's actions.
Kasky was rejected in the lower courts, but eventually the California Supreme Court agreed that he should be allowed to file his suit.
"The issue here is whether (Nike's) false statements are commercial or non-commercial speech," the California Supreme Court said in its ruling last May. "Non-commercial speech" would have greater constitutional protection.
"Because the messages in question were directed by a commercial speaker to a commercial audience, and because they made representations of fact about the speaker's own business operations for the purpose of promoting sales of its products," the state court said, "we conclude that these messages are commercial speech for purposes of applying state laws barring false and misleading commercial messages."
Nike then asked the U.S. Supreme Court for review, saying the California law violated the free speech guarantees of the First Amendment.
Wednesday's argument before the U.S. Supreme Court presented some very strange allies working for Nike.
Harvard law professor Laurence Tribe argued the case for the company. Tribe also represented the Gore campaign in one of the cases before the Supreme Court in late 2000, Bush vs. Palm Beach County.
Tribe was supported in argument by the Bush administration's top courtroom lawyer, Solicitor General Theodore Olson.
Olson represented the Bush campaign in the Palm Beach case, but also successfully argued in Bush vs. Gore. Tribe was replaced by the Gore campaign before Bush vs. Gore was argued.
Wednesday, Tribe told the justices that the "pivot of this (Nike) case" was actually another case before the California Supreme Court in which positions were reversed.
The state court ruled for the organizers of a boycott against a company that protesters felt had sullied the environment. The state court said statements by the boycotters were protected by the First Amendment against allegations they were misleading, Tribe said.
Olson told the justices that the California law allowed private persons to "advance their own agendas ... The impact and potential for abuse is hard to overstate ... Anyone with a grievance and a filing fee could become a government censor."
Speaking for Kasky, San Francisco attorney Paul Hoeber told the justices that the only injury Nike claims in the case "is the certain injury that Nike will confront as a result of this litigation."
"What we have is a plausible claim that speech of a political nature is being stopped," Justice Stephen Breyer said, asking Hoeber how he responded.
Hoeber said "litigation is not stopping speech." But Justice Anthony Kennedy said sharply at that point, "That's still at issue."
Hoeber argued that "the (Nike) statements alleged in the complaint (by Kasky) are specific factual statements ... what in fact was going on in the shoe factories."
Nike "made statements about their product with the assumption that consumers rely on those statements," he added.
Justice Sandra Day O'Connor said at that point in order to reach a decision, "you're going to have to know what commercial speech is."
Breyer said, "They're both trying to sell their product" -- commercial speech -- "and make a statement in a public debate," and it may be hard to separate the two.
The Supreme Court should hand down a decision in the case before recessing for the summer in late June or early July.
A number of organizations filed support briefs in the case, mostly in support of Nike.
Nike was backed by the American Civil Liberties Union, which is closely associated with Tribe; but also by a number of conservative business organizations and foundations.
Kasky was supported by California and some members of Congress, but was also backed strongly by consumer organizations.
(No. 02-575, Nike et al vs. Kasky)