California's Supreme Court has held that corporations may be liable under the state's consumer-protection laws for misleading advertising or public statements about their products or operations - including statements about working conditions and safety and health compliance.

The court ordered a trial court to proceed with a case brought by an activist who charged that Nike, Inc., made false statements about conditions in Asian factories used to produce its shoes and apparel in order to counter criticism that the company was using "sweatshop" labor.

The decision bolsters the growing "corporate accountability" movement because most major multinational corporations do business in California and are subject to its consumer-protection laws, and because more companies like Nike are using image marketing to promote products.

In a press release, Nike said it was "extremely disappointed" with the judgment which, it said, "sets a dangerous precedent by restraining companies... from making public statements about their business practices when challenged in the arena of public debate." Nike indicated that it was likely to appeal the case to the U.S. Supreme Court.

The company stressed that Marc Kasky, the principal plaintiff, and his attorneys would still have to prove in court that its statements were indeed misleading and a violation of the law.

Nike currently has contracts with some 700 plants in more than 50 countries around the world and is a prime target of labor and anti-globalization activists. To counter attacks, Nike has waged a public defense, stressing that its subcontractors are required to respect local labor, environmental, health and safety laws and regulations.

In 1998, Kasky filed suit claiming that Nike was making false statements about conditions in its Asian factories and, thus, was engaged in unfair business practices.