On Monday, April 14, 2014, the U.S. Circuit Court of Appeals for the District of Columbia partially struck down Securities and Exchange Commission ("SEC") regulations enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring publicly traded companies to report on their use of "conflict minerals." Specifically, the opinion strikes down the requirement that companies state that their products are not "DRC conflict free" if they contain certain minerals (gold, tin, tantalum, and tungsten) mined in war-torn regions of central Africa in and around the Democratic Republic of Congo.
The Court found such a requirement violated the First Amendment by essentially requiring companies to morally condemn their own products. The Court found that compelled disclosures of commercial information are protected by the First Amendment unless the compelled disclosures are limited to "purely factual and uncontroversial information" and reasonably related to a substantial government interest, preventing consumer deception. Accordingly, the Court struck down the requirement that companies declare that products are not "DRC conflict free" because the SEC offered no evidence that its rule was narrowly tailored to satisfy a substantial government interest,
The Court's ruling is limited to this specific disclosure requirement. Companies are still required to investigate whether their products include the minerals and file public reports on their investigations. The SEC has not yet indicated how it intends to proceed following the Court's ruling. However, the Court has agreed to rehear the case "en banc," meaning all the court's judges will participate. Oral arguments are scheduled for May 19, 2014.
For the moment the Court's ruling stands for the proposition that the SEC's power over commercial speech is limited to factual and uncontroversial information. The SEC cannot force companies to make statements influencing consumers to behave in a manner which it desires.