Reference no: EM133154981

Nike Inc. has had its share of criticism for exploitative labor practices in their supply chain. To defend itself against the that they ran "sweatshop" manufacturing operations abroad, Nike proceeded to launch a CSR publicity cam- paign in the late 1990s, claiming to be a socially responsible employer. The state of California at the time had a con- sumer protection law that allowed "any person acting for the interest of ... the general public" to sue for equitable relief against false and misleading advertisements.50 Marc Kasky, a fair labor activist, sued the company under claims of false advertising. The case turned on whether Nike's claims about socially responsible labor practices were "commercial speech" that could be regulated strictly to prevent deception, or "noncommercial speech" about matters of public concern that required intentional deception to be unlawful. Com- mercial speech is expression solely related to the economic interests of the speaker and its audience, so whether 'process information' such as the fair treatment of laborers counts as commercial speech depends in large part upon whether such statements primarily shape consumers' purchasing decisions or only tenuously influence how consumers behave. The trial court rejected Nike's argument that their advertising campaign was noncommercial speech, holding: "when a corporation, to maintain and increase its sales and profits, makes public statements defending labor practices and working conditions at factories where its products are made, those public statements are commercial speech that may be regulated to prevent consumer deception."51 In reaching this decision, the California trial court reasoned that, unlike gen- eral corporate discussions about the value of globalization, factual statements about how Nike makes its products are (1) designed to appeal to consumers, are (2) motivated by the prospect of economic gain, and (3) constitute an important fac- tor in consumer decision-making. The trial court rejected the notion that companies only had to tell the truth about 'product information.' Accordingly. Statements made about production processes were also subject to truth in advertising law. Nike appealed the court's decision to the California Supreme Court, arguing that commercial speech (where truth was required) should include only statements about the qualities of a product as such, as in, the product's price, whether it was available in stores, and whether it was suitable to the purposes for which it was advertised. In a sense, Nike took the position that information about business opera- tions, manufacturing processes, supply chain issues, and the like are not subject to truth in advertising law. Three advertis- ing trade groups also filed briefs to the California Supreme Court, arguing that the only legitimate concern for consum- ers was the price of the product and whether it works as it should. The implication of these arguments is that consum- ers attempting to make purchasing decisions based on ethi- cal, environmental, or social considerations were not entitled to such information in the first place, yet if companies did voluntarily provided such information, they need not tell the truth when doing so because it was not "commercial speech." Several scholars and members of the U.S. Congress disagreed with Nike's position, because refusing to acknowl- edge 'process information' as legitimate items of consumer concern in the transactional context was an unduly narrow view of corporate commercial speech and its role in today's market-based society. Indeed, more and more, consumer good purchases are based on satisfying the consumer's con- cerns that those products are made sustainably. The California Supreme Court never ruled on whether process-related information that was voluntarily given constituted commercial speech, so we do not yet know whether such statements are subject to truth-in-advertising rules. The issue was not resolved as a matter of law in this case because it settled out of court, with Nike agreeing to donate $1.5 million to a worker's rights organization.

Read the paragraph above and answer the questions below

1. Explain the difference between commercial and non- commercial speech.

2. Explain the difference between "product information" and "process information." 

3. Should companies be truthful when volunteering infor- mation about production processes? 

4. Is the distinction between product and process informa- tion a legitimate basis for requiring truth in advertising? What about the distinction between commercial and noncommercial speech? 

5. What is your opinion about how Nike resolved the Kasky lawsuit?