Changes in Treatment of Confidential Info.

Author:Barnett, Kevin
Position:Government Contracting Insights

* In June, the Supreme Court significantly altered how government agencies will treat confidential commercial information protected from disclosure by Exemption 4 of the Freedom of Information Act (FOIA)--an issue that recurs repeatedly with respect to information submitted by contractors to government agencies.

In Food Marketing Institute v. Argus Leader Media, the court overturned 45 years of lower-court precedent requiring that the submitter show both that the information was not publicly disclosed, and that its release would cause substantial competitive harm. The court's decision seemingly expands the scope of Exemption 4 by removing the "substantial competitive harm" requirement. However, the effect of this apparent expansion is unclear, because the court did not resolve whether the exemption also requires a showing that the submitter's information was provided under an assurance by the government that it would keep the information confidential.

Nevertheless, Food Marketing points the way to steps that contractors can take to protect their commercial and financial information under the new interpretation of Exemption 4.

The exemption protects from disclosure under FOIA "trade secrets and commercial or financial information obtained from a person [that are] privileged or confidential." In 1974, the D.C. Circuit held that this language meant contractors must show that the disclosure of the information would cause substantial competitive harm. To meet this test, contractors generally submitted affidavits explaining how competitors could use the information to cause the company competitive harm. In 1992, the D.C. Circuit limited the test to mandatory submissions. For voluntary submissions, it held that the submitter need only show that it does not customarily release the type of information in question to qualify for Exemption 4 protection.

In Food Marketing, the Supreme Court rejected these tests. It reviewed the dictionary definition of "confidential" and found two potential conditions: information "customarily kept private, or at least closely held," by the submitting party; and information disclosed when the receiving party provides "some assurances that it will remain secret."

The court concluded that the first condition must always be established, because Exemption 4 should not treat something as secret or private if the information's owner does not. But it declined to answer a second question--whether confidential information could...

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