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April 20, 1998
SAN FRANCISCO - Public statements by Nike defending wages and conditions at its Asian factories are misleading and violate California's false-advertising laws, a group of consumer and business lawyers said in a lawsuit filed Monday April 20, 1998. A Code of Conduct that the world's largest athletic shoe maker promoted in the media was intended to entice consumers who do not want to purchase products made in sweatshops, the suit said. The code should be considered the equivalent of false advertising claims, subjecting Nike to potentially huge damages, said the lawsuit, filed in Superior Court. Attorneys for the plaintiff, include Bushnell, Caplan & Fielding, LLP, of San Francisco, and Milberg Weiss Bershad Hynes & Lerach LLP of San Diego. Plaintiff in the suit on behalf of the General Public of the State of California is Marc Kasky, Executive Director of the Fort Mason Foundation, San Francisco. "Nike has failed to tell Californians the truth about their business practices," said Alan M. Caplan, lead attorney in the suit. "They misrepresented the conditions in their factories and the wages they paid to protect their profits, and that's illegal." Although Nike has come under close public scrutiny in recent years for alleged sweatshop abuses in its Asian factories, this is the first time the shoe giant has faced legal action over its labor policies. The suit contends that Nike's advertising and public statements present a deceptive image of the company, and that Nike falsely claimed to protect workers through a Code of Conduct and Memorandum of Understanding.
The most damning evidence against
the company is contained in a 1997 Ernst &
Young internal audit. Despite
Nike's claims in a January 1996 letter that its Memorandum of
Understanding certifies compliance with "applicable government
regulations regarding occupational health and safety [and] environmental
regulations," Ernst & Young's inspection of a Vietnamese
Nike shoe plant found evidence of widespread health and safety
violations. These included the exposure of workers - most of whom
are young women aged 18-24
to reproductive toxins like
toluene at levels up to 177 times the legal limit.
The Ernst & Young report
was completed on January 13, 1997, but Nike did not
disclose its findings. The audit
was leaked by a disgruntled employee, landing on the front page
of the New York Times in November 1997.
The lawsuit filed Monday charges
that Nike "made the following misrepresentations by the use
of false statement and/or omissions of fact:"
* false claims that workers who make NIKE products are protected from and not subjected to corporal punishment;
* false claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wage and hours;
* false claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;
* false claims that NIKE pays average line workers twice the minimum wage in Southeast Asia;
*false claims that workers who produce NIKE products receive free meals and health care;
* false claims that the Good Works International (Andrew Young) report proves that NIKE is doing a good job and "operating morally;" and
* false claims that NIKE guarantees a "living wage" for all workers who make NIKE products.
The suit seeks repayment of
all sums Nike made by illegal business
practices - an amount that
should equal all its profits in California,
said Philip Neumark, a consumer
lawyer taking part in the suit. He said the
money could be paid to workers
or consumers, as determined by the trial
judge. The suit also seeks a
company-funded ``public information campaign''
to correct past untruths and
a ban on future misrepresentations.
Plaintiffs' lawyers said the
suit was the first in the United States over
Nike's labor policies. Their
legal weapon is a broad state law that forbids unfair business practices and
false or deceptive advertising.The same lawyers invoked the
same law in an earlier suit against the Joe Camel advertising campaign on
the grounds that it promoted illegal
cigarette sales to minors. R.J.
Reynolds denied the allegation but dropped
the ads and settled the suit.
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