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Court Upholds Feds’ Ability to Compel Information Disclosures; Ruling Could Broad Effect

Friday, August 01, 2014
Sandler, Travis & Rosenberg Trade Report

The U.S. Court of Appeals for the District of Columbia Circuit issued July 29 a ruling that appears to strengthen the federal government’s ability to require a wide range of information disclosures, including country of origin labels and conflict minerals reports. In a split decision with three dissensions, the court ruled that 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 against compelled speech as a requirement to disclose information to correct a deception such as false advertising.

The decision came 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. These 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 argued that the COOL regulations violate First Amendment protections by compelling them to issue statements (the country of origin labels) that do not directly advance a government interest. The court, however, found that reducing consumer confusion is a sufficient government interest to justify the information disclosure requirement.

The court’s decision leaves open the possibility of 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 in the near future finds that the May 2013 regulations did not bring the U.S. into compliance with its WTO obligations.

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