Hopes for Court Action on Conflict Minerals Set Back by Recent U.S. Court of Appeals Ruling

The July 29 U.S. Court of Appeals ruling on a food industry challenge to federal meat labeling requirements was being carefully watched by industries affected by U.S. Securities and Exchange Commission (SEC) rules on conflict minerals. Industry representatives had previously challenged the SEC’s conflict minerals rules on free-speech grounds.

Legal experts believe that the rationale embraced by the court could apply in other cases in which business interests object to regulations on free speech grounds, such as the SEC requirements that companies disclose whether the conflict minerals in their products could be determined to have financed violence in the Democratic Republic of the Congo (DRC) and adjacent countries.

In April, the same appeals court ruled that parts of the SEC’s conflict minerals rule violated free-speech protections, but the SEC asked for a rehearing by the full court.  The appeals court upheld other aspects of the law, such as requiring companies to check their supply chains to see whether minerals from the Republic of the Congo region were being used, and to file reports to the SEC. In their appeal, the SEC cited the potential relevance of the meat labeling case.

The appeals court judges reheard the meat labeling case to interpret a 1985 Supreme Court precedent on what is known as “compelled commercial speech.” The question before the judges was whether the government can only require disclosures when its aim is to prevent deception or whether it has broader authority that would cover other types of speech. Embracing the latter interpretation, the appeals court ruling potentially gives the government more freedom to compel speech in different contexts.

2 Comments

  1. Posted August 5, 2014 at 12:00 pm | Permalink

    Dear Ms Abrams,
    As a privately held supplier to large publicly traded customers, we are between a rock and a hard place on the Conflict Minerals front.
    We need more pressure placed to revoke this ill-conceived social legislation that will cost industry more than any benefit derived. Backdoor approaches like ‘freedom of speech’ will keep lawyers busy but do not address the proble,
    I note in today’s NY Times a photo of Kerry at a news conference with the DRC dictator. Maybe they can make nice and have this go away (???)
    Regards, Arthur

  2. Posted August 7, 2014 at 8:36 am | Permalink

    Dear Arthur
    Thanks for your comments.
    I hear frequently from companies concerned about the burden of complying with conflict minerals regulations.
    The lawsuit mentioned above covered many aspects of the conflict minerals rule beyond the compelled speech issue discussed in my blog. However, the US Court of Appeals upheld the vast majority of the rules requirements in April, as noted in this and previous blogs.
    While I agree the legislation while well-intentioned was ill conceived, I do not believe their is political interest in repealing such a rule given its ostensible goal of addressing a well-publicized human rights issue.


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