In 1996, Nike’s was accused of mistreating and underpaying workers at a foreign facility. Nike’s decided to answer these accusations in various ways. These included press releases, writing letters to editors of various newspapers around the country (USA) and mailing letters to university presidents and athletic directors. A report by former ambassador to the United Nations Andrew Young on the labour conditions at Nike’s production facilities was also published. In the report Young commented positively on the working conditions and found no evidence of the said accusations.
In April 1998, respondent Marc Kasky, a California resident, sued Nike’s for unfair and deceptive practices under California’s Unfair Competition Law. Kasky argued that Nike’s, in order to maintain and/or increase its sales made a number of false statements and/or material omission of facts concerning the working conditions under which the products are manufactured. Kasky claimed no harm or damages regarding himself individually but brought up the suit on behalf of General Public of State of California.
Nike’s filed a demurrer, meaning, it accepted the facts of the allegations but argued that its response was protected by the First Amendment. The trial court upheld Nike’s argument while making the statement that “form[ed] part of a public dialogue on a matter of public concern within the core area of expression protected by the First Amendment.” Kasky argued that the trial court made an error in handing out its decision. The California Court of Appeal however also rejected this argument of Kasky, reasoning that, there was no possibility that the complaint could be amended to accused facts that would justify any restriction, in court’s view Nike’s response was non-commercial.
The appeal was further made to California Supreme Court. The court reversed the decision of lower court and remanded for further proceedings. The court made the statement that because the messages in question were directed by a commercial speaker to a commercial audience, and because they made representations of fact about the speaker’s own business operations for the purpose of promoting sales of its products, the messages are commercial. However, the court emphasized that the case is still at preliminary stage and whether any false representations were made is a disputed issue that is yet to be resolved. The California Supreme Court however held its observations and ruled that the Nike’s speech was commercial.
In 2003, following the California Supreme Courts ruling, Nike appealed to US Supreme Court, but the Supreme court issued a decision in this case stating that it had granted certiorari improvidently and dismissed the case, which effectively let the California Supreme Court’s decision stand.
Several months after the decision, Nike and Kasky settled the case for $1.5 million. The settlement included investments by Nike to strengthen factory worker programs and worker monitoring.