Organic Consumers Association

More on Nike & Corporate America's "Right to Lie"

Published on Friday, June 27, 2003


Saving Corporations from Themselves?

by Jeff Milchen and Jeffrey Kaplan

If big business hopes to regain the dwindling trust of Americans, demanding a right to lie is hardly the way to do it. So perhaps the U.S. Supreme Court helped save corporate America from itself on Thursday (at least temporarily) by declining to rule on the Nike Corporationıs claim of a constitutional right to lie. Nikeıs lawyers hoped the Court would overturn a California Supreme Court decision that denied Nike the privilege of ³pleading the First² (Amendment) when charged with violating state anti-fraud laws. But the Court unexpectedly dismissed Nikeıs appeal on technical grounds without issuing a substantive ruling.

This allows the case go to trial in California state court, where Nikeıs claims will be exposed to the scrutiny its managers so badly wanted to avoid. In the face of much unfavorable publicity in 1996-1997, Nike conducted a public relations blitz to convince people it had cleaned up its subcontractors' notorious ³sweatshop² labor practices in Asia. But California citizen Marc Kasky didnıt buy it.

He sued Nike under state consumer protection laws for allegedly making false assertions about wages, corporal punishment of workers, and other issues during that PR campaign. Kasky seeks to force Nike to take the estimated profits it gained in California as a result of its PR campaign and use those funds to correct the record publicly. Rather than attempting to refute Kaskyıs charges, Nikeıs lawyers challenged the legitimacy of the truth-in-advertising law itself.

They argued that since Nikeıs communications partly addressed political issues, not just company practices, that the PR was fully-protected political speech, not less-protected commercial communication. To hold Nike to accuracy, they claimed, would unconstitutionally chill the companyıs "speech.² But Nike is not, as its publicists imply, being sued for misleading people about corporate globalization. Kaskyıs allegations concern misinformation about specific conditions under which its products are made. Whining by Nikeıs supporters about businesses being ³silenced² by a ban on lying lacks credibility since corporations already are obliged by law to issue accurate statements to investors. Companies that withhold important information or deceive investors can be sued, and the responsible executives can be held personally liable.

If Nike contested the constitutionality of those standards, Wall Street and the mass media would respond with derision and prompt dismissal. So why should deceiving the public on other issues be permitted? Nike simply could have challenged Mr. Kaskyıs standing to sue, since he alleges no personal harm‹a precedent that creates legitimate concerns about potential abuse of the law. Instead, Nike ventured beyond itıs direct interests to attempt a subversion of our Constitution.

The word "corporation" is absent from our Bill of Rights and Constitution--and for good reason. We have rights as human beings because we exist whether or not we have governments. Corporations, on the other hand, are creations of the state and have privileges, not rights. The privileges of incorporation, such as unlimited lifespan and limited liability, permit corporations to amass power far beyond what an individual can attain. Corporations can and do use those privileges to harm people for profit.

For years, tobacco company officials claimed -- even in testimony before Congress -- that smoking was safe. Of course, those executives were lying, but ultimately the law required that they compensate society for a portion of the public costs created by their deception. If the Court rules for Nike, kiss that accountability goodbye. Corporations need not be held to perfect accuracy, but allowing corporations to deliberately deceive is a recipe for disaster.

The Supreme Court justices need to reverse the decades-long trend of granting greater legal powers to corporations and make clear that the Bill of Rights was written to protect human liberty, not to shield business from accountability. Milchen and Kaplan are director and volunteer, respectively, with, working to restore citizen authority over corporations and revitalize democracy. See for the full ruling and a comprehensive collection of information and opinion on all sides of the issue. ###

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