Nike case pivotal to marketing world

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The marketing industry is closely watching the Nike case that comes before the Supreme Court this week, as it could play a critical role in determining how far the government can go in regulating advertising and corporate free speech.

Nike is challenging a decision by the California Supreme Court that its public relations statements, letters to the editor, press releases and image advertising, in addition to product advertising and marketing, may have to comply with state consumer-protection laws. Oral arguments are slated for April 23.

The case stems from criticism of Nike in 1995 over pay and production conditions for its Southeast Asian workers and Nike's response to critics. After Nike defended its actions, consumer activist Marc Kasky sued, contending some of Nike's statements were erroneous and violated state consumer-protection laws. Whether Nike violated the laws hasn't yet been determined.

clear line

The current case concerns the California court's decision to proceed to trial, and the California court's rejection of Nike's claim that the comments were not advertising or marketing and therefore are not subject to consumer-protection laws.

In a number of friend-of-the-court briefs filed with the Supreme Court, business, marketing and media groups contend there is a clear line between speech aimed at completing "a commercial transaction" based on misleading information and corporate public-policy comments-even, in some cases, those presented in ads.

They also argue that opening Nike up to a suit for commenting could have a dramatic effect on dialogue in democracy, effectively allowing opponents to level criticisms while putting corporations at legal risk for responding.

The result, they warn, would be that companies would sharply curtail their willingness to talk to the press, a move that would hurt the give-and-take of discussion on public issues. They also warn that any curb on corporate political comments could drastically restrict other kinds of corporate speech.

`chilling effect'

The decision would have a "chilling effect [that] will deprive the public of access to important news stories" and "deprive the public of vital information," said one brief filed by 40 newspapers, media companies and related professional organizations

Three major advertising associations-the American Advertising Federation, the American Association of Advertising Agencies and the Association of National Advertisers-in another friend-of-the-court brief argue that the California court's interpretation is unusually broad.

"Corporations are left with totally inadequate guidance as to what is and what is not actionable. The result is that advertisers and their advertising agencies will be forced to steer far wide of this `unlawful zone' of speech."

The ad groups also asked the court to make clear that the question shouldn't be whether the speech is advertising, but whether a statement, whatever it's form, misleadingly promotes a sale.

"For corporate speakers, advertising is not only a way to promote a particular product, but also a way to add their unique voices to the chorus of debate," said the groups.

Mr. Kasky, however, argues that despite Nike's attempt to distinguish its comments from speech aimed at selling a product, its comments were in fact "speech proposing a commercial transaction."

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