July 23 (Bloomberg) -- The U.S. Securities and Exchange Commission rule requiring companies to disclose whether any “conflict minerals” are used in their products was upheld by a federal court in Washington.
“Finding no problems with the SEC’s rulemaking and disagreeing that the ‘conflict minerals’ disclosure scheme transgresses the First Amendment, the court concludes that plaintiff’s claims lack merit,” U.S. District Judge Robert Wilkins wrote, dismissing a challenge to the reporting requirement brought by three business groups.
The rule is part of the 2010 Dodd-Frank Act overhauling securities markets and applies to certain minerals, including gold, tin, tungsten and tantalum, mined in the Democratic Republic of the Congo and neighboring countries. It’s intended to help ensure that use of the minerals doesn’t benefit armed groups responsible for extreme violence in the region.
The National Association of Manufacturers, the Business Roundtable and the U.S. Chamber of Commerce claimed in their suit that being required to publish conflict-mineral disclosures on their own websites is compelled speech that violates the First Amendment. In writing the rule, the agency was arbitrary and capricious, they said.
“We are reviewing the court’s decision and our options going forward,” Jamie Hennigan, spokesman for the National Association of Manufacturers, said in an e-mail. “We continue to believe this rule, while well intentioned, is unsupported by the agency’s own record.”
“We are pleased the court found that the commission acted reasonably in drafting this congressionally mandated rule and conducted its economic analysis in an appropriate manner,” SEC spokesman Kevin Callahan said in an e-mailed statement.
The measure applies to companies with SEC-reporting obligations for whom the minerals are “necessary to the functionality or production” of an item they manufacture, the agency said in an Aug. 22 statement announcing the rule’s adoption.
It applies to Apple Inc., Boeing Co. and thousands of other U.S.-listed manufacturers whose products use the metals.
Wilkins’s ruling follows a July 2 district court decision throwing out another SEC rule, also required by Dodd-Frank, that mandated disclosure of payments by about 1,100 public oil, natural gas and mining companies to foreign governments.
That regulation was intended to increase transparency and thwart corruption by giving citizens of resource-rich countries information about their governments’ oil and mineral revenue.
The district court in that case said it wasn’t convinced that public disclosure of full reports of payments was required by law.
The conflict minerals case is National Association of Manufacturers v. U.S. Securities and Exchange Commission, 12-1422, U.S. Court of Appeals for the District of Columbia Circuit (Washington).
The payments case is American Petroleum Institute v. U.S. Securities and Exchange Commission, 12-cv-01668, U.S. District Court, District of Columbia (Washington).
To contact the reporter on this story: Andrew Zajac in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com