A Federal court has just killed off Dodd Frank on conflict minerals
Given the complaining I've been doing about the costs of implementing the Dodd Frank rules on conflict minerals* this sounds like very good news. The DC Court of Appeals has just pretty much killed off the law on the grounds of the First Amendment rights of companies.
The full judgement is here and is quite clear in its reasoning. You can compel a company to say things via, say, SEC listing requirements and regulations, but only on the grounds of preventing deception of consumers. So you can be forced to say whether your new Soylent Green is people or algae and can be forced to say whether the company is financially sound. But what you can't do is use securities law to compel people to say whatever you might want them to say. That is, you can't insist that a company declare a product to be "conflict free."
At all events, it is far from clear that the description at issue—whether a product is “conflict free”—is factual and nonideological. Products and minerals do not fight conflicts. The label “conflict free” is a metaphor that conveys moral responsibility for the Congo war. It requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups. An issuer, including an issuer who condemns the atrocities of the Congo war in the strongest terms, may disagree with that assessment of its moral responsibility. And it may convey that “message” through “silence.” See Hurley, 515 U.S. at 573. By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech under the First Amendment.Whether companies should have first amendment rights is somewhat controversial to some (it's the cornerstone of the Citizen's United case for example, where donations are political and thus protected speech, meaning that companies as persons get to donate to political campaigns) but it does seem logical enough.
Corporates are not natural persons, they're legal persons. And we do want them to be legal persons because we want to be able to sue them. And you can only sue something/one that is a natural or legal person. You cannot sue my dogs because they are neither, although you can sue me for the actions of my dogs as I am deemed to be the person (legal or natural) responsible for their behaviour (under English law at least you cannot sue me for the actions of my cat as the law, probably correctly, assumes that I have no control over a cat). Not being a legal or natural person means that thing cannot be sued in a court. So, obviously, given that we like suing companies they've got to be legal persons: this also gives them the right to sue us of course, which we're all also pretty OK with as we're aware that they do need some method of being able to screw out of us the money we owe them.
And then along with being a legal person comes all these other things like free speech and other constitutionally protected rights (although I'm pretty sure that the Second Amendment doesn't cover IBM or Apple, thankfully).
There's a deeper impact of this ruling as well, assuming that it will stand. It means that an awful lot of things that people are demanding companies be forced to reveal, usually on the grounds of corporate social responsibility, become illegal to demand by using the law. We can all keep badgering Apple to tell us about the conditions in those Foxconn factories, that's fine, but Congress can't then force Apple to reveal that information under the guise of listing requirements or anything else that isn't about preventing consumer deception. We can all insist that corporates (often Apple again strangely) reveal what they do to prevent slavery in their supply chains. But the government cannot force them to do so, it's got to be our citizen pressure that does so. For, as you'll recall, the First Amendment is all about Congress shall make no laws...
- A small note to the Bloomberg headline writers. As of this moment their headline reads: "The First Amendment Lets Companies Keep Quiet About Blood Diamonds". And we could indeed call blood diamonds conflict minerals except this case is about Dodd Frank which very specifically says that conflict minerals are columbo-tantalite, wolframite, cassiterite and gold ores. That is, blood diamonds are not conflict minerals.