(CNSNews.com) - One of the world's leading corporations finds itself at the center of an important First Amendment case that reaches the U.S. Supreme Court Wednesday and could have a long-lasting impact on the way American companies do business.
Sneaker giant Nike is accused of making misleading statements about the treatment of workers in Third World countries - a charge lodged by California activist Marc Kasky, who claims the company violated unfair competition and false advertising laws.
The California Supreme Court sided with Kasky in a divided 4-3 decision, which the U.S. Supreme Court will now review. At issue is whether corporations are guaranteed the same rights as individuals under the First Amendment or if their statements fall under "commercial speech," which is subject to less protection than political speech.
While consumer groups, including Ralph Nader's Public Citizen, have rallied behind Kasky, free-speech organizations, some of the country's largest media outlets and the powerful U.S. Chamber of Commerce have filed briefs in support of Nike.
At a Federalist Society debate held Tuesday in Washington, D.C., attorney Kannon K. Shanmugam, whose firm filed a brief for the U.S. Chamber of Commerce, warned about the dangers posed by Kasky's argument.
"Any test that takes the speaker's motivation into account runs the risk of turning the judiciary into a form of thought police, where the purpose behind the speech is scrutinized rather than the speech itself," he said.
Shanmugam said he believes the justices took the case partly to reverse the California Supreme Court decision, as well as to clarify the concept of commercial speech.
The case stems from the debate over sweatshop labor, which threatened Nike's success in the 1990s and led some consumers to boycott its products. In response, Nike launched a campaign that included newspaper advertisements, letters to the editor and correspondence with college and university presidents.
The goal was to clear up debate and show Nike had taken steps to improve conditions for its overseas workers, who were often employed through a third party that ran factories and oversaw many of the day-to-day conditions.
Despite taking these steps and even hiring Good Works International to assess the conditions, Kasky claimed Nike was misrepresenting the issue to win over consumers.
His lawsuit challenged the company's statements under California business laws, but before it was allowed to proceed, Nike cited the First Amendment as a defense and claimed it had every right to make the statements since the topic had become a highly charged political debate.
Public Citizen Litigation Group Director Alan B. Morrison said the court should make a distinction since Nike's speech was the result of a major publicity campaign to "tell the American people the facts as Nike sees them," leaving the public with little option but to accept the company's word.
"Consumers have the right to the truth," Morrison said. "And they have the right, as some would say, to be irrational in their selection. They have the right to pay more. But they have the right to make that decision based on the facts. If Nike wants to engage in a debate about those facts, it must come clean and tell the truth."
While Kasky would like to hold the company accountable in a court of law, a brief filed by 32 newspapers and media organizations suggests that the press should be charged with that responsibility instead. They fear that a restriction on speech coming from corporations will harm their coverage of corporate America.
Attorney Erik S. Jaffe, who filed a brief with the Center for Individual Freedom, agreed with that argument. He said the court shouldn't distinguish between different types of speech; otherwise, it risks heading down a dangerous path.
Jaffe called the commercial speech doctrine "incoherent." He also said it's hard to imagine that a misleading statement from Nike about its overseas working conditions would be considered more important than a misleading statement from someone running for president.
"If we're talking about the importance of speech because consumers will get hurt, imagine how much more people will get hurt if they are misled about their leaders," he said. "If the importance of speech to the ultimate transaction is key, then political speech is far more subject to this type of criticism, and hence, should be far more subject to regulation."
No one, however, has suggested limiting political speech, which is considered a bedrock principle and regulated in only the most extreme cases.
The speech rights of corporations are a different story, said Carl Mayer, an attorney who used to work for New York Attorney General Eliot Spitzer. He would like the court to make a distinction in the Nike case.
Chief Justice William Rehnquist, part of the court's conservative bloc, has often argued that corporations shouldn't be afforded any special protection, said Mayer, who agrees with that position.
"There is nothing in the language or the legislative history of the Constitution to suggest that corporations should have any constitutional protections or Bill of Rights protections," Mayer said. "Corporations are artificial entities - they're created by the state - that receive all sorts of benefits from the state. ... In return, they should be entitled to greater regulation."
Whether the court adopts that view will be known near the end of its term this summer.
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