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Shoes, Lies, and Litigation

The Supreme Court heard arguments the other day in Kasky v. Nike, a case about, among other things, free speech, lying, harm to others, corporate responsibility, fraud, and , of course, legal technicalities. As far as Your Humble Blogger understands it, here are the issues:

Nike was accused, in the popular press and the unpopular press, in conversations, in flyers, and on 48 Hours, of running sweatshops and other immoral business practices. For a while, it looked almost as if they might actually sell fewer shoes (and hats, and socks, etc., etc.) because the Swoosh stood, not for victory, but for exploitation. They retaliated, again in the popular press and other aspects of the Big Cultural Tohu Bohu, with various arguments which indicated that they were not, in fact, Bad Guys. Some of these arguments appeared as paid advertisements in newspapers, and others were in letters to influential people, letters to the editor, etc. It's just barely possible, just within the realm of credibility, that in all this discussion, there were statements made with intent to deceive.

I'm not saying there were, and I'm not saying there weren't. OK, I'm saying there were. The point is, it doesn't matter for the next bit. Just keep in mind that there are allegations of intent to deceive, and you'll be OK.

Anyway, a fellow out in California by the name of Marc Kasky (who, and may I add that foreshadowing is a legitimate literary technique, wouldn't buy a pair of Nike shoes if his, er, grandmother's feet were cold, or something) sued Nike under California unfair competition law, which bans (among other things) "unfair, deceptive, untrue or misleading advertising." Kasky's contention is that the letters and ads defending Nike's business practices were, in effect, ads for Nike products, and that therefore falsehoods and misleading statements in those letters and ads, were falsehoods and misleading statements in ads for Nike products, and therefore actionable. Nike's contention is that those letters and ads, in response to allegations about their company, were not ads for Nike products, and therefore do not fall under the jurisdiction of the law.

OK, that's all background, and so is this New York Times article, this editorial and this article from the Washington Post, this SF Chronicle article, the Nike website, and the California Supreme Court decision supporting Kasky. Whew.

As for who is right and who is wrong, I am totally uncertain. I think that lying in general is protected speech, at least until actual harm is shown. That is, if I say, in this blog, that I'm 6'4" tall, it's morally wrong (imao), but it isn't and should not be legally actionable. If, on the other hand, I say, in this blog, that I'm a tax-deductible charity organization, it is both morally wrong and legally actionable. If I sell you a car, and it turns out not to have an internal combustion engine, that's fraud and legally actionable. If I sell you a car that I say was hand-made by a team of Moravian midgets, and it turns out that one of the fifty workers was 5'1", and only moved to Moravia when she was five, that's not so much fraud. On the other hand, if I tell you that my grandmother is extremely cold, and I need to sell my Moravian-midget-built car to buy her some slippers, and the car turns out to in fact be everything I said it was, but my grandmother has been dead for years, is that fraud? Is it actionable fraud? If a McDonald's worker smiles at me but isn't actually happy, is that fraud?

Is Nike selling shoes or swooshes? Are they selling the idea of Nike, in which case everything they do is an ad for Nike-ness, or are they selling actual products, in which case the only fraud possible is misrepresentation of those products?

Also, and this is a side point which the Supreme Court has been asked to decide, how was Kasky hurt by the fraud, if fraud there was? If there was a fraud, surely in order to show there was a fraud you have to find some person who was at least potentially defrauded � and that person is not Marc Kasky. Kasky wasn't duped by Nike into buying anything, since he didn't believe anything Nike said for a minute, he wasn't even duped into having an erroneous perception of the universe. The California law specifically states that Kasky, or anybody, is allowed to sue on behalf of the public, but Bush's Solicitor General has filed a brief saying that that part of the law is unconstitutional, and should be struck down. The Bush Boys are doing it to, in general, make it harder for individuals to sue corporations (they have a pattern of that, and I'm agin it), but that doesn't make their argument wrong.

Here's my problem: Not only is Klasky a Good Guy, and Nike a Bad Corporation, but I do think that Nike has deliberately chosen to misrepresent their corporate identity, and that they have done that in order to sell shoes. I just don't know if that constitutes fraud.

OK, I'll stop there, and post, and see if y'all can sort me out.

Thank you,
-Vardibidian.

Comments

Well, I'll jump in. I would argue that a company cannot make statements about how its products are made, in space that they purchase in a newspaper for the purpose of making a public representation about how its products are made, without it constituting advertising.

It seems to me that you interpret the California law on unfair competition as unconstitutional, if you see lying as protected speech, unless actual harm is shown, and you then proceed to present examples of harm based upon fraudulent statements made to prospective customers that delude them into buying a product.

I'm not sure where I stand on lying in general as protected speech, but I think that you are misconstruing how harm should be identified under the California law. Nike not necessarily harming its customers (though it might be), but it is necessarily harming its direct competitors and the marketplace as a whole. If I'm in the business of making shoes, and I decide to make a righteous shoe assembled in the U.S. by union labor, or even if I decide to pay decent wages to my Malaysian employees, I want to be able to use those facts as an incentive for people to buy my shoes. If Nike is running sweatshops, is accused of that, and lies about so that people will still feel good about having the swoosh on their feet instead of my olive branch logo, then I'm being harmed by their lies. Even if there isn't a specific company who is attempting to compete with Nike using this angle, the public market in general suffers if companies are allowed to lie about matters pertainng to their products, because it's generally easier to lie than it is to make a better shoe, or pay better wages, etc. Unfair competitive practice laws make sense because it forces companies to compete for business in ways that push them to improve their products and their practices, rather than allowing them to compete primarily in the way they "spin" their products. They'll do that anyway, of course, but at least there is a check on that sort of thing, with this sort of law.

I think a higher standard of freedom has to obtain for political speech, because laws about lying and libel could be too readily abused in the political arena, but I wish that the press would not continually swallow monstrous lies from elected officials, such as the President, without noting the lies or suggesting that such lying might be immoral, even if it is legally protected.


Chris,

I think that individual lying is and should be protected, except in cases of harm (actual or intended). I don't necessarily think that the protection should be extended to corporations.

I'm not sure whether the California law is constitutional; sometimes I think it is, and sometimes I think it isn't. It's a murky area for me. I would like, ideally, to define certain areas of speech (commercial/political/social/public/private/corporate/individual) with fair consistency, and I haven't yet been able to do that, or agree with anyone who claims to have done it.

Also, I like your second point, about the immorality of lying even as part of protected speech, and the related offense of letting the lies, er, lie, rather than challenging them. I think the distinction between legality and morality is large, important, and underexamined.


Your comment on the possible distinction between free speech as a right for individual persons and free speech as a right for corporations is an interesting one. Could it be sustained in practice, since and speech made "by" a corporation is actually being made on its behalf by one or more individuals?


Chris,

I'm working this out myself, so bear with me...

A corporation is, essentially, a collection of resources, together with the people in charge of those resources. Restrictions on the use of those resources are, effectively, restrictions on corporations. The below examples aren't good policy necessarily, but just practical examples of how this can be done.

For instance, if we say that hard liquor can't be advertised on TV, in fact we are restricting the use of corporate money in particular ways (Digression: do hard liquor ads exist on the web? Have companies restricted from TV advertising (condoms, hard liquor, cigarettes, er, other stuff) put out web sites with short films advertising their products? End digression). The CEO of Old Grand-dad, Inc. can still go on Charlie Rose and talk about how great whiskey is, but the Inc. can't pay for the air time.

Similarly, individuals can put out press releases on any topic, but corporations can be restricted in their use of money, paper, ink, and labor for putting out press releases on restricted topics. Corporations could be restricted from paying individuals to give interviews on restricted topics, or could be restricted from using corporate-owned offices for restricted meetings (if we were not to grant them freedom of association or assembly).

Violations would, presumably, be met with fines, but could in theory be met with criminal charges against individuals who assisted the infringing (criminal charges against the corporation being absurd).

Thanks,
-V.


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