NIKE SETTLES FREE SPEECH CASE

To Pay $1.5 Million to Labor Group, Avoids Calif. Trial

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WASHINGTON (AdAge.com) -- Nike has agreed to pay $1.5 million to settle a lawsuit brought against it by a California activist who sued the sports apparel giant for false advertising in a case that made it to the U.S. Supreme Court.

Nike and plaintiff Marc Kasky said Nike

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agreed to pay $1.5 million to a Washington group, the Fair Labor Association, which monitors oversees labor practices to settle the case, saying the investment was more beneficial than prolonged litigation.

Labor practices
The case stemmed from public claims Nike made in defense of allegations it used sweatshops overseas to manufacture its famous sports apparel and products. Mr. Kasky argued that Nike's public statements, not just its advertising, were open to challenge under California's consumer protection laws, saying that letters, press releases, op-ed pieces and other statements the company made defending its labor arrangements abroad misled consumers.

Nike attempted to block the suit, claiming that its First Amendment right to speak out and defend itself was endangered. The case worked its way to the Supreme Court, which heard from major businesses, media companies and advertising associations that argued corporations had a right to political speech as well as commercial speech. The court on June 27 sent the case back for trial, saying the case hadn't proceeded far enough to determine whether Nike's statements were in fact political or commercial speech.

First Amendment issues unresolved
The settlement leaves many of the First Amendment issues unresolved and could leave other companies doing business in California open to lawsuits.

The Beaverton, Ore.-based Nike said that because of California's law, it would cut back on its media activities in the state and no longer publicly issue a report on its corporate responsibility.

"Due to the potential difficulties posed by the application of [the California law], 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," the company said in a statement.

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