In an important free-speech case for businesses, the United States Supreme Court will consider on Wednesday whether Nike Inc can be sued for false advertising over a publicity campaign to defend itself against accusations that Asian sweatshops made its footwear.

The court will hear arguments on whether Nike's statements about its labour practices deserved full First Amendment protection under the US Constitution and whether the lawsuit against it should be dismissed or go forward.

The closely watched case, which has attracted a large number of briefs on both sides, could help determine the extent of free-speech protection for businesses when companies issue news releases or make other statements to defend themselves.

The case began in 1998 when Marc Kasky, a consumer activist in San Francisco, sued Nike under California law and claimed the company misled the public about working conditions for its Vietnamese, Chinese and Indonesian labourers.

The lawsuit claimed Nike knew workers were subjected to physical punishment and sexual abuse, endured dangerous working conditions and were often unable to earn a 'living wage,' despite workdays that could be 14 hours long.

It claimed the Beaverton, Oregon-based company mounted a false advertising and public relations campaign, portraying itself as a 'model of corporate responsibility' in an effort to boost sales.

Nike denied the accusations and argued the case should be dismissed because all the statements cited in the lawsuit were protected as free speech.

It said its statements were part of an international media debate on issues of public interest.

But the California Supreme Court ruled that Nike's corporate statements could be regulated as commercial speech, allowing the lawsuit to proceed to trial.

At the nation's high court, Nike has been supported by a number of big corporations and business groups, the news media, public relations executives, the American Civil Liberties Union, and the AFL-CIO, the nation's largest group of unions.

Kasky has been supported by California and 17 other states, by four members of the US House of Representatives and by environmental, consumer and human rights groups that oppose sweatshop conditions.

Solicitor General Theodore Olson, who will argue in support of the company, said the First Amendment prohibited people who have suffered no harm from suing over allegedly false statements.

He said the First Amendment barred Kasky's lawsuit, which rested on a 'novel legal regime' that can inhibit free speech.

Paul Hoeber, a San Francisco lawyer, will represent Kasky. In a written brief, he argued that Nike's statements were subject to the laws regulating false or misleading commercial messages, and said the lawsuit should be allowed to proceed.

After the arguments, the Supreme Court will deliberate, with a ruling expected by the end of June.