The Tax on Free Speech: Companies Have to Be Able to Speak out Openly on Major Public Issues without Fearing That They Might Be Sued for False Advertising

By Samuelson, Robert J. | Newsweek, July 14, 2003 | Go to article overview

The Tax on Free Speech: Companies Have to Be Able to Speak out Openly on Major Public Issues without Fearing That They Might Be Sued for False Advertising


Samuelson, Robert J., Newsweek


Byline: Robert J. Samuelson

To anyone concerned about free speech, the failure of the Supreme Court to rule on a case brought by Nike Inc. is more than disappointing. It's a disaster. Just about the last people you'd want to put in charge of the First Amendment are trial lawyers, whose business is suing large companies on any available pretext. The latest pretext imperils free speech, but the Supreme Court--out of intellectual laziness or reckless indifference--has unwisely given trial lawyers the power to curb and to tax free speech. Bad show.

Nike is (as almost everyone knows) a huge seller of sports shoes and gear. Its most recent annual sales and profits total $10.6 billion and $474 million, respectively. Although Nike employs only 22,000 workers directly, it has contractors that make its products and have 600,000 workers in 910 factories in 51 countries. They're concentrated in China, Indonesia, Vietnam and Thailand, where roughly 90 percent of Nike shoes are manufactured.

The case before the court involved these factories' labor practices, which Nike polices through agreements with contractors. In the mid-1990s, anti-globalization activists claimed these workers were underpaid and mistreated. Nike defended its record in letters, pamphlets and press releases, arguing that the jobs were highly prized and had above-average wages. But Nike also raised labor standards in 1998 by, among other things, increasing the minimum working age at shoe factories to 18.

Enter Marc Kasky, a self-styled activist, who sued Nike in 1998 claiming that, under California law, its defenses constituted "false advertising." The suit asked that Nike be forced (1) "to disgorge all monies" acquired through its misleading statements, (2) to "undertake a court-approved public information campaign" to correct misstatements and (3) to pay "reasonable attorneys' fees and costs." His lawyers include well-known trial attorneys who, presumably, are financing the case (they wouldn't say).

The Supreme Court should have swatted this down 9-0. Two lower California courts dismissed the suit as violating the First Amendment. Only the California Supreme Court, in a 4-3 decision, sustained it, arguing that Nike's defenses constituted "commercial speech" not entitled to broad constitutional protections. Now, many laws protect against outright fraud in the sale of products and securities. But this open-ended expansion of "commercial speech" would, if upheld, create a double standard for free speech: a mini-version for firms; a full-size model for everyone else.

Big companies couldn't easily discuss public issues involving their products without risking costly suits in California, where most do business. …

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