California Supreme Court Holds State Unfair Practices And False Advertising
Laws Can Be Applied To Corporate “Image” Advertising
Are “Happy Cows” Next?
a 4-3 decision the California Supreme Court has reinstated a private
attorney’s general lawsuit against Nike alleging that Nike’s
public communications concerning its labor practices are false and misleading
in violation of both the state’s strict liability unfair practices
and false advertising statutes. Both a trial court and a state court
of appeal had previously dismissed the action on First Amendment grounds.
majority opinion in Kasky v. Nike determined that Nike’s public
statements concerning its labor practices constituted commercial speech
and based upon current United States Supreme Court decisions were not
entitled to the absolute First Amendment protection. The majority used
a three part test that looked at the identity of speaker, the speaker’s
intended audience and the content of the message. The Court based its
conclusion on the fact that the speakers were Nike officers and directors
who were acting in furtherance of the company’s commercial interest,
the intended audience included purchasers of Nike’s products and
the company’s statements concerned its own business operations.
While conceding that commercial speech frequently addresses issues
of public policy, the majority concluded that speech is still commercial
if it is likely to influence consumers in their commercial decisions.
justices dissented. The dissents disagreed with the majority’s
conclusion that Nike’s statements about its labor practices were
commercial speech. The dissents stated that even if Nike’s statements
had a commercial aspect, they were so intertwined with public debates
on globalization and labor practices that non-commercial aspects had
to outweigh any restrictions that might be imposed on them as commercial
speech. The dissenters also noted that the decision means that the playing
field in public policy debates will now be uneven with business critics
enjoying the First Amendment’s absolute protection while businesses
will be subject to an onerous strict liability standard.
has stated that it intends to seek review of the decision by the United
States Supreme Court.
the parties filing friend of the court briefs were California Attorney
General Bill Lockyer and the Sierra Club on behalf of Kasky and the
ACLU on behalf of Nike.
Unless and until the United States Supreme Court reverses the decision
in Kasky v Nike, companies doing business in California should recognize
that the State Supreme Court decision has effectively eliminated any
distinction between the advertising of products and services and statements
pertaining to company business practices. In addition to being subject
to actions by private parties as well as public agencies, plaintiffs
in Unfair Practices and False Advertising actions do not need to prove
either that consumers relied upon a defendant company’s public
statements or that they were damaged by purchasing the defendant’s
products. Furthermore, because of the statute’s strict liability
standards, conventional methods of documenting information, sometimes
referred to as a “paper trail,” may not be adequate.
Zackler & Associates provides
legal services concerning all aspects of marketing and is available
to review with you any communications that may raise issues under
Of Origin Labeling Requirements Expanded
2002 Farm Bill has substantially revised and expanded country of origin
labeling requirements. Of particular concern to retailers will be
the bill’s record keeping requirements.
the new law, beef, lamb, pork, fish, peanuts and fresh produce will
have to be labeled at retail with the product’s country of
origin which includes the United States. For example, under prior
law only imported pre-packed produce had to be labeled by country
of origin. Grocery stores will now have to also post signs identifying
the country of origin (including the US) for produce received in
bulk that is unpacked and not sold directly from its container.
The bill directs the Secretary of Agriculture to issue voluntary country
of origin labeling guidelines by September 30, 2002 and mandatory labeling
rules by September 30, 2004. Grocery stores must maintain country of
origin records and suppliers are required to provide retailers with
county of origin information. Grocers could be fined up to $10,000 for
violations of the regulations.
The country of origin labeling requirement is one small part of the
492 page Farm Bill which formalized the effective repeal of the short-lived “Freedom
to Farm Act.”
Zackler & Associates provides
advice on labeling, distribution and similar issues subject to
USDA regulation and can review with you how the Farm Bill might
affect marketing and labeling of your products.
ORGANIC LABELING RULES TO GO INTO EFFECT
provided in the final rules that were published by the USDA on December
21, 2000, effective October 21, 2002 all packaged food products sold
as organic must comply with the labeling requirements of the National
Organic Program (“NOP”). The only exception is for products
that have already entered the “chain of commerce.” Consequently,
any unshipped organic food products that have not been labeled in compliance
with NOP standards as of October 21 will have to be relabeled prior
The labeling requirements for
organic foods depend upon whether the product is “100% Organic,” “Organic,” or made
with identified organic as well as non-organic ingredients. In each
case, the organic certifier must be identified on the label by name.
The certifier’s address, Internet address or telephone number
may also be included on the label. Products that can be labeled as “100%
Organic” or “Organic” may also use the USDA “Organic” seal.
After years of waiting and wrangling the U.S. finally has national
organic standards. Zackler & Associates can assist you in determining how
to advertise and label your products that are “100% organic,”
“organic” or contain organic ingredients. We can advise
you about alternative nomenclature for products that cannot be labeled
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