LABOUR-US: Nike Brought to Court Over False Ads

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Apr 21 1998 (IPS) - Nike, the world’s giant sports-shoe and apparel manufacturer, is being sued for allegedly misrepresenting conditions in its overseas factories which employ some 300,000 workers.

The lawsuit, which was filed in San Francisco superior court Monday by attorneys who prevailed last year in a six-year effort to ban RJR Tobacco’s ‘Joe Camel’ character from all company advertising, is based on California’s Business and Professions Code. It prohibits “unfair, deceptive, untrue or misleading advertising.”

“Nike has failed to tell Californians the truth about their business practices,” said Alan Caplan, the lead attorney from Bushnell Caplan and Fielding. “They misrepresented the conditions in their factories and the wages they pay to protect their profits, and that’s illegal.”

Philip Neumark, who is associated with Caplan, told IPS that the suit will rely in part on precedents in which California courts have ruled against companies for misrepresenting their products’ country of origin. “This is the first time a case is being brought on misrepresenting working conditions,” he said.

If plaintiffs prevail, Nike could be prevented from making certain claims in a state which is more populous than Canada or it could be obliged wage a public-information campaign to correct past, inaccurate claims. A judge could also order it to pay back money which he or she believes was gained through false advertising.

Nike spokesman Vada Manager said the company will “treat this matter seriously.” He added that an initial review indicated that the complaint “raises no new claims” that have not been previously addressed by Nike.

The company, which last year spent almost one billion dollars on promotion and advertising, is known for aggressively recruiting star athletes and teams to promote its products. Recently, for example, it paid the Brazilian National Soccer Team more than 100 million dollars to become a “Nike team,” among other things, by wearing Nike gear on the field.

The lawsuit is the latest in a series of developments which have tarnished Nike’s winning image and its global symbol, the “swoosh.” Plagued by an oversupply of shoes and the Asian financial crisis, Nike’s stock has fallen almost 50 percent over the past year – from 76 dollars to about 43 dollars last week. In recent months, it has laid off workers and cut production in Asia.

In addition, its share of the US athletic-shoe market – almost 50 percent – has prompted “big-brand backlash,” which has resulted in its losing ground to competitors like Adidas and New Balance. According to a recent survey, Nike is no longer seen as one of the “coolest” brands by a majority of US teens, its biggest market.

The company also has been hurt by growing public concern over working conditions in developing countries, particularly in Asia, where Nike manufactures most of its shoes and apparel. Because of its domination of the market and the image it has tried to project as an exemplar of corporate responsibility, the Oregon-based company has been a major target of labour-rights activists since 1996.

A flurry of reports on labour conditions in Nike factories in Vietnam, Indonesia, and China found that Nike workers in some plants were subject to corporal punishment and overexposure to various hazardous chemicals and denied adequate pay and the protection of local laws and regulations governing wages and hours. All of these plants are not run by Nike itself, but by foreign subcontractors.

Shaken by these charges, Nike hired former civil rights leader and Atlanta Mayor Andrew Young to conduct an independent assessment of conditions in the company’s 350 plants around the world early last year. After brief visits to several factories, Young found that Nike was “doing a good job” – a finding which Nike featured in full-page ads taken out in major US daily newspapers. Nike critics, however, condemned Young’s study as its “superficial” because it failed to deal with key issues, such as wages.

The episode actually backfired against Nike, and controversy about working conditions mushroomed again last November when an internal audit completed in Jan. 1997, by Ernst and Young, a major accounting firm, was leaked to the New York Times. It found that many plants were not complying with Nike’s own corporate ‘code of conduct.’ The issue has continued to stir controversy, even as Nike has insisted that it has tried to correct problems as they became known.

The California lawsuit focuses on Nike’s own representations about its own requirements for subcontractors to do business with it. A 1992 code of conduct, for example, requires manufacturers to comply with local wage regulations, including overtime pay; and with applicable health, safety and environmental regulations. It also requires that no worker be put “at risk of physical harm.”

Nike itself has advertised that it considers these conditions to be “legally binding” and subject to “daily observation by staff members who are responsible for mandatory adherence,” according to the complaint, which stresses that the company has also insisted that it takes “full responsibility for working conditions wherever its products are produced.”

“This case alleges that Nike has deliberately misrepresented the conditions under which its products are made, and the reason for this misrepresentation is to sell more of its products,” said Neumark. “Nike knew that consumers wouldn’t buy its products if they knew the truth.”