Corporations can’t hide behind First Amendment
It’s not surprising that manufacturers are fighting a 2010 law that requires them to disclose whether the materials in their products may be linked to African warlords. What’s surprising is how they’ve fought the requirement, how successful their strategy has been so far, and what the story says about the alarming trends in First Amendment law.
Instead of lobbying Congress to change the law, the National Association of Manufacturers and other business groups went to court and argued that the rule trampled firms’ First Amendment rights by compelling them to speak — specifically, to say whether they use “conflict minerals” mined in the Democratic Republic of the Congo. Incredibly, a majority on a divided three-judge panel bought it, and struck down the rule in 2014 and again last year.
This unfortunate tactic — citing the First Amendment to wriggle out of disclosure requirements — is making a comeback. The tobacco industry used the First Amendment to get out of printing graphic health warnings on cigarettes. In another case, employers convinced a federal appeals court that mandatory workplace rights disclosures were tantamount to forced speech. The conflict minerals case is on hold for now, as the Securities and Exchange Commission considers its options, but if the ruling stands, it would be a sweeping expansion of corporate free speech rights.
The notion that the government can’t compel speech is a sound one — it’s the reason citizens can’t be forced to say the Pledge of Allegiance, for instance. But the apparent willingness of some judges to apply that concept to factual disclosures by commercial entities threatens a huge swath of consumer and investor protections. Former White House official Cass Sunstein, writing about the conflict-mineral case, warned that siding with the companies would call into question a range of mandatory requirements, from fuel-economy labels on cars to disclosures on credit card bills.
The attack on the conflict-mineral rule is part of a larger effort to co-opt the First Amendment into an antiregulatory tool. And the Obama administration’s Justice Department can help stop it by appealing the three-judge panel’s flawed ruling to the Supreme Court by the April 7 deadline.
The companies are seeking to curtail two longstanding, common-sense legal concepts. First, the understanding that although there are some limited protections for commercial speech, it can be regulated much more strictly than personal speech. An individual can legally lie about whether he or she has won military medals, for instance, but a company can be punished for false SEC filings.
Second, courts have held that compelling disclosure of accurate information should be viewed differently than preventing speech. Food makers can be required to put calorie labels on food, for instance, even if those labels make consumers less likely to choose Ben and Jerry’s. Companies may have to disclose to shareholders if their CEO gets into legal trouble, and other bad news that could affect stock prices.
The counterattack in the conflict-minerals case deploys a few different arguments aimed at closing the gap between an individual’s rights and a corporation’s. The companies contend, for example, that the conflict-minerals disclosures would force them to “inject themselves into a contentious debate over the causes of a foreign conflict.” Because not everyone agrees that the mineral trade fuels wars in Africa, the companies claim that making the required disclosure would be tantamount to taking a side, while also forcing them to confess to ethical responsibility for the bloodshed.
But that line of reasoning would seem to preclude other things like calorie labels, as the judge who dissented in the conflict-minerals ruling, Sri Srinivasan, wrote. Not everyone believes calories cause obesity, or that carbon dioxide causes global warming. Even the arrest of an executive might represent a controversial decision by prosecutors — would that mean a company shouldn’t have to disclose to shareholders whether it disagrees with the prosecutors? Such is the chain of logic that Judges David B. Sentelle and A. Raymond Randolph, the majority on three-judge panel, seem to have opened up.
Critics of the labeling rule have also argued that “humanitarian” disclosures aren’t “commercial in nature” and, as such, shouldn’t fall into the category of commercial speech the same way other information does. But why shouldn’t an investor who doesn’t want to support war in Congo have the same right to ask Congress to protect their interests as one motivated by profit?
None of which is to say that the conflict-minerals disclosures are necessarily a good idea. Whether the 2010 law is still good policy is certainly grounds for debate — in Congress. As a legal issue, though, the fact that the matter is even in dispute shows how parts of the federal judiciary have run amuck misapplying the First Amendment to corporations. The public needs to have the power to compel companies to disclose, even when they don’t want to, and even if the results might make them look bad.