The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
This morning, a divided panel of the U.S. Court of Appeals for the D.C. Circuit again concluded that the Securities and Exchange Commission's "conflict minerals" disclosure requirement violates the First Amendment. The court had initially struck down the disclosure rule in April of last year, but agreed to reconsider the decision in light of the D.C. Circuit's en banc decision upholding the U.S. Department of Agriculture's meat country-of-origin labeling requirements in American Meat Institute v. USDA.
The majority opinion striking down the SEC rule in National Association of Manufacturers v. SEC was authored by senior judge Raymond Randolph and joined by senior judge David Sentelle. Judge Sri Srinivasan dissented.
Under the SEC's rule, companies must declare whether products containing specified minerals are "DRC conflict free." According to Judge Randolph, whether or not this disclosure is considered to be "commercial speech" (and there are good reasons why it might not be, including the fact that it is not presented to consumers in the context of selling regulated products) it fails First Amendment scrutiny. Among other things, Judge Randolph noted that the government offered little more than speculation about the potential effects of such disclosures on conflict in the Congo, and that the First Amendment requires more than speculation before speech can be compelled. Further, the mandated disclosure—a confession of sorts as to whether a given company has blood on its hands—is a far cry from the sort of factual and non-controversial mandated disclosure routinely upheld under Zauderer and its progeny (including AMI). Another tidbit: Judge Randolph's majority opinion manages to quote Charles Dickens's "A Tale of Two Cities," Arthur Koestler's "Darkness at Noon" and George Orwell's "1984".
Judge Srinivasan's dissent emphasized that the mandated disclosure—one of a "mine-run" of disclosure requirements to which publicly traded companies are subjected—involves truthful, factual information: whether a given product satisfies the statutory definition of "conflict-free." That companies would prefer not to disclose such information to consumers and investors, Judge Srinivasan concludes, does not alter the underlying analysis. Working in his own literary reference, Judge Srinivasan wrote: "requiring a company to disclose product information in the commercial marketplace is not the same as requiring Hester Prynne to 'show [her] scarlet letter in the [town] marketplace.'"