A U.S. appeals court on Monday struck down parts of a regulation that forces public companies to disclose if their products contain "conflict minerals" from a war-torn part of Africa, saying it violates free speech rights.
The ruling by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit marks a partial victory for the three business groups that had filed the original lawsuit, which claimed that the regulation violated companies' free speech rights under the U.S. Constitution's First Amendment by in essence forcing them to condemn their own products.
The appeals court upheld other parts of the U.S. Securities and Exchange Commission rule, which requires publicly traded manufacturers to disclose to investors whether any tantalum, tin, gold or tungsten used in their products may have originated from the conflict-ridden Democratic Republic of Congo.
The case is one of several in recent years in which industry groups have, with mixed success, made free speech objections to government regulations. Others include challenges to meat labeling requirements and a rule that required extractive industries to disclose payments to foreign governments.
The same appeals court is due to issue a key ruling on the free speech issue when it rehears the meat labeling case next month.
If the federal government requests it, that case could be consolidated with a rehearing of the conflict minerals case, the court indicated in Monday's ruling.
Alternatively, the appeals court said the SEC's case could be remanded back to a lower court for further proceedings. If the SEC pursued that option, a district court judge would need to decide whether wording in the SEC's rule itself, or wording in the actual law, is at the root of the free speech problem.
An SEC spokeswoman said the agency was still reviewing the court's decision.
The part of the conflict minerals rule that the appeals court found fault with requires companies to state that their products are not "DRC conflict free" if their internal investigations lead to that conclusion.
Human rights groups had worked to persuade Congress to include the conflict minerals provision in the 2010 Dodd-Frank Wall Street reform law, saying the disclosures would help consumers who want to avoid products that encourage mining in areas gripped by rebel violence and humanitarian conflict.
But the appeals court questioned why the SEC is forcing companies to make such statements, suggesting it might make more sense for the government to collect the data on conflict minerals and publish a list itself.
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