Corporations Hiding Behind the Constitution to Keep Secrets

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Do corporations have the constitutional right to keep secrets, just because the information might be embarrassing or hurt their reputation if it became public?  Our friends at Global Witness and Free Speech for People have just filed an important amicus brief that answers this question with a resounding “no.”

The amicus brief defends Section 1502 of the Dodd-Frank Act, a law that requires companies to report on their use of “conflict minerals” coming from the Democratic Republic of Congo.  It’s worth a read, because it does a great job of undermining companies’ argument that the government violates their First Amendment freedom of speech rights when it requires them to disclose factual information about their operations.

In response to a lawsuit by the National Association of Manufacturers, the powerful D.C. Circuit ruled earlier this year that most of Section 1502 of the Dodd-Frank Act was constitutional.  However, it struck down a part of the law that requires companies to declare whether their products are “DRC conflict-free,” reasoning that this requirement violated the corporations’ constitutional right under the First Amendment to not speak. This was based on prior D.C. Circuit decisions that had set a very high constitutional bar for most rules that require corporations to disclose information to the public. Under this rule, unless requiring the disclosures was the narrowest possible means for the government to pursue a very important public interest, then companies could seek to have them overturned under the “compelled speech” doctrine, which is meant to prevent authorities from forcing people to say things that that they don’t want to say.

Just a couple of months later, however, the D.C. Circuit changed the rule and made it easier for the government to require companies to make commercial disclosures in the public interest.  In doing so, it brought its legal test in line with every other federal appellate court that had ruled on the issue.  In the American Meat Institute case (yes, there really is a lobbying group called the American Meat Institute, and yes, it really did file a lawsuit against the government to stop rules making meat producers label their products with the country of origin) the court decided that the government may require companies to disclose factual and uncontroversial information without triggering strict First Amendment scrutiny.

In the fight over Section 1502, the crux of the argument revolves around what it means for information to be “factual and uncontroversial.”  The manufacturers who oppose Section 1502 say that the “DRC conflict-free” designation is controversial (and is therefore protected by the First Amendment) because it mires them in a political debate about using metals from rebel-held areas in the Congo.

Global Witness argues otherwise – information isn’t controversial simply because the truth might lead some consumers to stop buying your products if they prefer not to support the commerce that supplies war criminals with the cash needed to continue committing atrocities.  If that were true, then the government would also have to bend over backwards to justify requiring companies to disclose their executive compensation policies, their track record of safety violations, or the chemicals and other ingredients in their products, because all these issues could affect a company’s reputation or spark a controversy.  In fact, disclosures are controversial only when the accuracy of the information is in doubt.  In other words, The First Amendment protects companies from having to speak information that may not be true, but they can’t hide behind the Constitution just to avoid the reputational hit that comes from disclosing indisputable but damning facts.

This amicus brief is important because companies are increasingly using the First Amendment as a shield to avoid public scrutiny, including in a parallel challenge to Section 1504 of the Dodd-Frank Act, which requires extractive companies to disclose the payments they make to governments.  (ERI is counsel for Oxfam America in its litigation strategy to secure strong transparency rules and defend them from attacks by the oil industry.)

Obviously, most of the information that the government might require a company to disclose is information that could provoke a public controversy – otherwise, we wouldn’t have to force them to disclose it!  So, kudos to Global Witness and Free Speech for People for laying bare yet another absurd argument that companies are using to undermine accountability and stop the public from learning the truth about their operations.

This post was written by Jonathan Kaufman, former staff.

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