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Does Pulling Nike's Subsidies in Arizona Over Shoes Violate First Amendment?

a picture of many people's different tennis shoe styles
By Andrew Leonatti on July 12, 2019

Just in time for the Fourth of July, Nike announced that it was stopping production of a sneaker featuring the Betsy Ross version of the American flag because of protests led by Nike spokesman Colin Kaepernick.

The move, predictably, set off a firestorm of protests, counter-protests, and social media raging. Kaepernick’s and others’ protests over the shoe stemmed from the use of the “Betsy Ross flag” by extremist groups and the country’s legacy of slavery. Conservative politicians announced that they were boycotting Nike for giving into political correctness and failing to honor the Founding Fathers.

Governor Announces End of Subsidies

In the midst of the political storm, Arizona Governor Doug Ducey, in a late-night Twitter thread, ordered the Arizona Commerce Authority to revoke all subsidies promised to Nike for the upcoming construction of a factory in the town of Goodyear. The agency followed suit, announcing that Nike was losing out on a $1 million grant.

The Goodyear City Council, however, struck its own agreement with Nike for up to $2 million in cash. The mayor said the council would honor its agreements.

Can Government Revoke Subsidies?

People can, and will, continue to argue over whether governments should even offer taxpayer money to giant corporations and whether Nike should continue to make the shoes. But Ducey’s announcement raises another important question: Can he revoke subsidies over what is essentially an ideological disagreement?

Yale law professor Stephen L. Carter points to the recently decided Brunetti case. He argues that, just like the government cannot deny a trademark because it is “scandalous” or “offensive,” Ducey’s decision amounts to “viewpoint discrimination.”

UCLA law professor and libertarian writer Eugene Volokh mostly agrees, but cites the 1996 Umbehr decision, which prevents the government from canceling a contract based on a contractor’s First Amendment activity. He argues that Nike would qualify as a contractor in this case.

For its part, the Arizona Commerce Authority says that the grant it is revoking is discretionary. And $1 million is not going to make the difference in keeping the lights on at Nike. But it will be interesting to see if the company decides to sue the state over an alleged First Amendment violation.

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