WASHINGTON — Nike is off the hot seat, at least with one activist, but as a result, a larger issue of whether corporations enjoy constitutional free-speech protections has been left unanswered.
A $1.5 million settlement in the case against the global sportswear and footwear maker was announced Friday, bringing to an end San Francisco activist Mark Kasky’s challenge using California’s strict truth-in-advertising laws. The money will go toward improving factory monitoring at Nike’s contractors.
Kasky sued in 1998 after reading about a confidential Ernst & Young report issued to Nike about below-par conditions at a contractor in Vietnam. The report was leaked to newspapers and it angered Kasky, who saw it contradicting Nike’s positive public pronouncements about factory conditions.
The settlement was a disappointment to consumer product, media, advertising and public relations firms, which hoped Nike would prevail against Kasky. Although the parties are no longer warring, remaining is a California Supreme Court decision favoring Kasky and upholding state law that disallows misleading statements made by corporations.
As a result, “there will be a chill over any corporate communication that might possibly be received by California residents,” said Bruce Johnson, a Seattle attorney who represented three-dozen media companies that filed a friend-of-the-court brief in the case after Nike appealed Kasky’s state victory to the U.S. Supreme Court.
Nike is also nervous about how its corporate speech will be interpreted in California. “Due to the potential difficulties posed by the application of California [advertising] Statute 17200, Nike has decided not to issue its corporate responsibility report externally for its fiscal year 2002 and will continue to limit its participation in public events and media engagement in California,” Nike said in a statement.
Patrick Coughlin, Kasky’s attorney, said in a statement that his client “is satisfied that this settlement reflects Nike’s commitment to positive change where factory workers are concerned.”
The $1.5 million Nike that will spend over three years to improve monitoring at contractor factories will be deployed through the Fair Labor Association, an apparel and footwear industry contractor-monitoring program based in Washington, of which Nike is a member. In addition, Nike agreed to collaborate with other sectors through the FLA “to advance a common global standard to measure and report on corporate responsibility performance among companies.”