When Are Corporate Public Statements Commercial Speech?

Published: July 01, 2002, By Sheila A. Millar, Attorney-at-Law, Keller & Heckman, Washington, DC

On May 2, the California Supreme Court issued an important opinion concluding statements by Nike Inc. regarding its labor practices were not protected by the First Amendment.

The 4-3 decision essentially concluded representations of fact about a company's own business operations for the purpose of promoting product sales constitute commercial speech. Of interest to the converting industry, the decision has implications for the burgeoning “corporate responsibility” or “corporate social responsibility (CSR)” movement, since the court concluded the letters to university presidents, press releases, and the like regarding its wages, labor practices, and working conditions were issued to maintain and increase sales and profits.

Nike, in response to public criticism of its labor practices, had initiated actions to address labor issues internationally, and it commissioned a report from GoodWorks Intl. LLC, which prepared a report based on an investigation by former Ambassador Andrew Young finding no evidence of illegal or unsafe conditions at Nike factories in the Far East.

Nike, and some of its officers and directors, publicized this report in press releases, letters, paid advertisements, and other materials distributed to the public. Plaintiff, an individual California citizen, challenged the claims under California's unfair competition law, contending the statements were false and misleading, and seeking disgorgement of all monies acquired through any act found to violate the unfair business practice laws, injunctive relief mandating a corrective advertising campaign, reasonable attorneys fees, and costs. Nike and the individual defendants defended on First Amendment grounds.

In rejecting Nike's argument that its comments were noncommercial, the Court also said that simply because Nike was attempting to respond to a debate on a matter of public interest did not make the speech noncommercial. Nike's ability, in the Court's view, to verify the facts of its own statements seemed to be a key factor.

It also rejected Nike's contention that regulating its speech would disfavor one point of view (Nike's) and favor the opposing view, saying differential treatment of speech about products and services based on the identity of the speaker “is inherent in the commercial speech doctrine,” a point with which the dissenters vehemently disagreed. Indeed, one of the dissenters invited the US Supreme Court to revisit the issue.

Careful attention to substantiating the truth of all factual statements in press releases, posted information on a corporate or brand Web site, and in letters to editors and others is, of course, necessary to maintain corporate credibility and consumer confidence.

Corporate communications from members of the converting industry increasingly involve public dissemination of information about a company's labor, environmental, and social activities.

However, at a time when companies face growing criticism from non-governmental organizations (NGOs) and a growing movement to force more transparency into the CSR process, this decision raises concerns. It stands for the proposition that, at least in California, NGOs can initiate lawsuits targeting companies and their individual officers and directors and force companies to defend the truth of any factual reference in corporate responsibility statements without a parallel obligation to substantiate their claims about corporate irresponsibility.

Nike filed a petition for rehearing on May 17, so further judicial evaluation of these issues is possible.

Sheila A. Millar, a partner with Keller and Heckman LLP, counsels both corporate and association clients. Contact her at 202/434-4143; This email address is being protected from spambots. You need JavaScript enabled to view it.; PackagingLaw.com