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Appellate Court Will Examine Feds’ Ability to Compel Disclosure of Information

Monday, April 14, 2014
Sandler, Travis & Rosenberg Trade Report

All 11 judges of the U.S. Court of Appeals for the District of Columbia Circuit will consider next month a constitutional question that could affect a wide range of information disclosures (e.g., on product labels) required by federal regulations. This issue is raised in a lawsuit against Department of Agriculture regulations that (a) require muscle cut covered commodities (steaks, pork chops, ribs, etc.) to be clearly labeled with the country or countries in which the animal from which the products are derived was born, raised and slaughtered and (b) prohibit the commingling of such commodities of different origins.

The USDA’s regulations, which were issued in May 2013 and took effect that November, reflect a World Trade Organization ruling that a 2008 law on mandatory country of origin labeling for specified agricultural products was inconsistent with U.S. obligations under the WTO Agreement on Technical Barriers to Trade to accord imported products treatment no less favorable than that accorded to domestic products. North American meat industry groups are challenging the COOL regulations in court, arguing among other things that they violate First Amendment protections by compelling speech that does not directly advance a government interest. Supporters of the regulations have responded that reducing consumer confusion is a sufficient government interest to justify the information disclosure requirement.

On March 28, a three-judge panel of the appeals court rejected a request for a preliminary injunction staying the rules’ effectiveness while the underlying litigation is ongoing, stating that the plaintiffs were unlikely to succeed on the merits of their claims in that case. The court explained that the COOL requirements provide a number of benefits that are not “so trivial or misguided as to fall below the threshold needed to justify the ‘minimal’ intrusion” on the meat industry’s First Amendment rights. These include allowing consumers to “apply patriotic or protectionist criteria in the choice of meat” and enabling “one who believes that United States practices and regulations are better at assuring food safety than those of other countries, or indeed the reverse, to act on that premise.” The court said another public interest factor is “allowing the United States’ effort to comply with the WTO ruling [against the COOL regulations] to take effect.”

On April 4, however, the appeals court vacated the March 28 ruling and agreed to the judicial panel’s suggestion to rehear the case en banc (i.e., by all the court’s 11 judges) in May. The purpose of this relatively rare step is to clarify whether a federal requirement to disclose “purely factual and uncontroversial” commercial information for reasons other than preventing deception is entitled to the same limitation on First Amendment protections as a requirement to disclose information to correct a deception (e.g., false advertising).

It thus remains possible that the courts could halt and even overturn the COOL regulations. Such an outcome could forestall billions of dollars’ worth of retaliatory sanctions by Mexico and Canada, which are pursuing the right to impose such sanctions if a WTO ruling expected by June finds that the May 2013 regulations did not bring the U.S. into compliance with its WTO obligations.

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