terms and the legislative history of the Exemption." Nothing in the FOIA or the Act's legislative history reflects any intent by Congress that Exemption 4 should apply to information which is inherently confidential in nature and which has been reasonably and legitimately treated as confidential only if it can be concretely shown that disclosure of such information would cause substantial competitive injury; indeed, proof of competitive injury as a test of confidentiality was simply not considered in the legislative deliberations on Exemption 4.12 Instead, the legislative history of the FOIA reveals that Congress intended that information which customarily and rationally has been treated as confidential 13 by the party who submits it to the Government, or which would adversely affect a business' interests if disclosed, should be exempt from the disclosure provisions of the FOIA regardless of whether disclosure would result in competitive injury."

The National Parks test of confidentiality is undesirable in several respects. First, it establishes a standard for exemption which is far more rigorous than Congress prescribed or intended, and under which important private interests will be lost. For, the National Parks test imposes a nearly impossible burden of proof on the party seeking to bar disclosure by requiring it to make a concrete showing, within a period of ten days, that substantial injury will result when the submitter may not know whether the information will be used by a competitor or, if so, how.15

In this regard, it cannot always be demonstrated prospectively that information whose disclosure is sought will, if disclosed, competitively injure the submitter. As commentators and courts have acknowledged in the context of reverse FOIA actions, disclosure of a mere fragment of information, which alone might not cause competitive injury, may ultimately cause substantial competitive injury if combined with other data which the computer has been able to secure from other sources. Consequently, businesses which are unaware of the other data which their competitors have collected may be hard pressed to concretely demonstrate under National Parks that disclosure will cause substantial competitive injury even though they know that the likelihood of such harm at a future date is sufficiently great to justify the standard business practice of not disclosing the information.

Second, the National Parks test imposes upon agencies and courts the undesirable responsibility of making speculative judgments as to whether, if such information were to be disclosed and if such information were to be used by a competitor, disclosure would cause substantial competitive injury. Such a decision obviously involves a substantial element of crystalball gazing and represents a questionable means, at best, for determining if information is confidential.

11 See Patten and Weinstein, Disclosure of Business Secrets Under the Freedom of Information Act: Suggested Limitations, 29 Ad. L. Rev. 193, 195–202 (1977) (hereinafter "Patten and Weinstein").

12 See Patten and Weinstein, supra, 29 Ad. L. Rev. at 198.

13 Black's Law Dictionary 370 (4th ed. 1968) defines "confidential" as: "Entrusted with the confidence of another or with his secret affairs or purposes; intended to be held in confidence or kept in secret."

14 See Patten and Weinstein, supra, 29 Ad. L. Rev. at 197: "It seems clear that Congress intended Exemption 4 to maintain the status quo: business information which industry customarily held in confidence would continue to be exempt from mandatory disclosure under the FOIA."

15 Id. at 199. To make matters worse, some agencies, such as EPA. have imposed an even more stringent standard of confidentiality than that prescribed in National Parks. See Note, The EPA's Proposed Rule for Freedom of Information Act Disclosures: A Model for Orderly Agency Determinations, 1975 Utah L. Rev. 943, 956.

10 In Westinghouse Electric Corp. v. Schlesinger, 542 F. 2d (4th Cir. 1976), the U.S. Court of Appeals for the Fourth Circuit, in acknowledging the complexity of determining what information will, if disclosed, injure the competitive well being of a business, quoted the following passage from Note, A Review of the Fourth Exemption of the Freedom of Information Act, 9 Akron L. Rev. 673. 683-4 (1976) (hereinafter "Note"):

"[T]he industrial sector is still highly competitive. Corporations have varying numbers of market and financial specialists who continually search out fragments of information about competitors and markets from any available source; published government statistics and information, various legislative documents, analyses and surveys performed by corporate specialists, information continually obtained and reported by sales personnel, or disclosures by government agencies. Since government-derived information is often submitted according to statutory or regulatory requirement, it is usually more credible than information from other sources; the latter usually depends on what a company decides, for its own carefully considered reasons, to make available. An additional reliable 'fragment' of information may be enough to bring the whole picture into much clearer focus and could conceivably mean the difference between success or failure in certain contract bidding situations." (Emphasis added).

Finally, the National Parks test focuses only on competitive injury but ignores other kinds of injury which disclosure of confidential commercial information might cause such as employee unrest, damage to goodwill, exposure to vexatious litigation, etc. These too are equally real, immediate and compelling forms of commercial injury which warrant, and were intended by Congress to result in the treatment of information as confidential under Exemption 4.17

What have been the consequences of this judicial revision of Exemption 4? Whereas confidential private information was originally intended by Congress to be protected from disclosure, such information now is available to anyone who wants to peer into the private affairs of companies which are regulated by or do business with the Government. The requesters include competitors, suppliers, customers, analysts, potential and existing adverse litigants, union organizers, and even mere "crackpots" with a grudge against a particular company. While none of these would otherwise be entitled to or have a means of securing much of the private information which businesses submit to the federal government, the Freedom of Information Act, as construed in National Parks, gives such persons carte blanche to rummage through these private records.

A particularly sorry example of the undesirable effects in which the courts' narrow interpretation of Exemption 4 has resulted is the use of the FOIA to circumvent the carefully drawn Federal Rules of Civil Procedure and the "discovery" rules of various agencies. The Act increasingly has been used by both existing and potential litigants to obtain discovery against their adversaries which may not be allowed by judicial and administrative discovery rules. The use of the Act for that purpose, particularly when discovery is sought against private parties for private documents, is impossible to reconcile with the indisputable purpose of the FOIA of better informing the electorate how its government operates."

18

Moreover, the National Parks test has forced courts, agencies, submitters and requesters alike to engage in complex, cumbersome and costly economic analyses of documents which, at best, lead only to speculative conclusions regarding injury and, at worst, burden the courts, agencies, parties and the public. Indeed, the National Parks standard has in fact made the protection of Exemption 4 available only, if at all, to the very largest businesses. For, due to the extreme burden of proof imposed by National Parks and the resulting need to undertake extensive economic analysis and to employ expert witnesses, as well as the necessity of commencing litigation in the first place, reverse FOIA lawsuits simply are not feasible for most companies even though faced with the threatened disclosure of confidential private data. Surely, Congress could not have intended to trigger such an inquiry each time a request was made for business records under the FOIA. And, that would not be the case if Exemption 4 were construed and applied by agencies (and by courts) in the manner which Congress originally intended.

Is this what Congress intended? Does this better inform the electorate about its government? Does this make the Government, as opposed to private businesses, more accountable? Was the FOIA intended to reverse traditional legiti mate notions of business privacy? The answer to each of these questions is an emphatic NO!

Exemption 4 should be amended to make clear that substantial competitive injury is not the test of confidentiality under Exemption 4. Where documents whose release is sought are private in nature, where they do not directly reflect government conduct, and where the documents contain the type of information which objectively a company would not disclose, they should not be subject to disclosure under the FOIA regardless of whether disclosure can be shown to cause "substantial competitive" injury or any kind of injury. In those limited situations where private commercial documents do directly reflect upon government actions, they should be subject to disclosure only if (1) there is no alterna

"[T]he reach of the exemption. . . is not necessarily coextensive with the existence of competition in any form." Washington Research Project, Inc. v. HEW, 504 F. 2d 238, 244 (D.C. Cir. 1974), cert. denied, 421 U.S. 963 (1975). See also Ditlow v. Shultz, supra, 370 F. Supp. at 329 (recognizing likelihood of harm to "legitimate private interests" as a foundation of confidentiality); and see Patten and Weinstein, supra, 29 Ad. L. Rev. at 197. 18 See, e.g., Title Guarantee Co. v. NLRB, 534 F. 2d 484 (2d Cir.), cert. denied, 429 U.S. 834 (1976); and see Statement of Gerald P. Norton, Deputy General Counsel, Federal Trade Commission, Before the Subcommittee on Administrative Practice and Procedure of the Committee on the Judiciary, September 15. 1977, at 6 (hereinafter "FTC Statement'). 19 See Patten and Weinstein, supra, 29 Ad. L. Rev. at 194.

tive source of information which can be disclosed without identifying the submitter, and (2) disclosure would not be likely to harm the company in some commercial sense (as opposed to only substantial competitive injury).

IV. EXEMPTION 4, WHEN APPLIED TO PRIVATE INFORMATION, IS NOT MERELY
"PERMISSIVE" IN NATURE

Considerable debate also has been waged over whether Exemption 4 is "permissive" or "mandatory" in nature. While some courts 20 have held that the exemption is only permissive-and that agencies may, despite the applicability of the exemption, disclose confidential information-other courts have held that agencies cannot choose to disclose information which falls within the protective terms of Exemption 4."

Those courts which have held that agencies may not choose to disclose information which is found to fall within Exemption 4 have placed considerable weight on the Senate Judiciary Committee Hearings, where it was said:

"[N]ot only at a matter of fairness, but as a matter of right, and as a matter basic to our free enterprise system, private business information should be afforded appropriate protection, at least from competitors."

On the basis of this language, the U.S. Court of Appeals for the Fourth Circuit, in Westinghouse Electric Corp v. Schlesinger, observed that:

"The Act was intended, to use the language of the Senate report, to set up workable standards for what records should and should not be open to the public for inspection.''

23

Thus, where information is shown to fall within the protective terms of Exemption 4, the Government should not be permitted to disclose such documents in utter disregard of the Exemption's terms and of the harm which disclosure might precipitate; for, such an approach "makes the statutory exemption meaningless and flies in the face of the protective purpose of the exemption as enunciated in the Senate and House Reports . . ."

99 24

V. A PROPOSED SOLUTION TO THE CONTROVERSY OVER THE SUBSTANTIVE MEANING OF EXEMPTION 4

The continuing debate over the permissive vs. mandatory nature of Exemption 4, and over the National Parks test, could be quelled by legislatively recognizing the important distinction between government records on the one hand and private documents on the other.

While the FOIA was intended to foster full disclosure of government information to the public, the exemptions to the Act were specifically designed to create categories of information which Congress intended would not be disclosed. Consequently, while the FOIA exemptions should be narrowly construed concerning disclosure of information relating to a government “agency's actions, plans, and policies", the exemptions should be given a considerably greater breadth with respect to disclosure of information concerning the "‘actions, plans and policies' of private parties." " This is because the FOIA "was not enacted for the purpose of enabling the public to obtain information about individuals and corporations, about what those individuals or corporations are doing, or about what their activities and policies are ***;" rather, "[t]the purpose of the *** Act was to protect the people's right to obtain information about their government, to know what their government is doing, and to obtain information about government activities and policies." 20

25

30 See. e.g., Charles River Park "A", Inc. v. H.U.D., 519 F.2d 934 (D.C.Cir. 1975). 21 Westinghouse Electric Corp. v. Schlesinger, 392 F.Supp. 1246 (E.D.Va. 1974), United States Steel Corp. v. Schlesinger, 8 FEP Cases 923 (E.D.Va. 1974), both aff'd sub nom Westinghouse Electric Corp. v. Schlesinger, supra; McCoy v. Weinberger, 386 F.Supp. 504 (W.D.Ky. 1974); Neal-Cooper Grain Co. v. Kissinger, 385 F.Supp. 796 (D.D.C. 1974).

23 Hearings on S. 1666 Before the Subcomm. on Admin. Practice and Procedure of the Senate Comm. on the Judiciary, 88th Cong., 1st Sess. 199 (1964) (hereinafter "Hearings on S. 1666") (emphasis added).

23542 F. 2d at 1210-11 (footnote omitted).

24 Westinghouse Electric Co. v. Schlesinger, supra, 392 F. Supp. at 1250.

25 Westinghouse Electric Corp. v. Schlesinger, supra, 542 F. 2d at 1197 n. 10 (emphasis added), quoting with approval Levin, In Camera Inspection Under the Freedom of Information Act, 41 U.Chi.L. Rev. 557 n. 9 and n. 10 (1974).

28 Westinghouse Electric Corp. v. Schlesinger, supra, 542 F. 2d at 1210 n. 64 (emphasis added), quoting Note, supra, 9 Akron L.Rev. at 694,

Most of the documents whose threatened disclosure has given rise to reverse FOIA actions have concerned the actions, plans and policies of private parties, and not those of the government. The FOIA was not intended to serve as a vehicle for the "envious competitor or the curious busybody . . . [to obtain] access to that private information . . ." ." and, therefore, a claim of exemption for private information should be given a much more hospitable reception than a claim of exemption for a government document.

Indeed, recognizing that the underlying purpose of the FOIA was to enable the electorate to inform itself on the manner in which its government was functioning, it is questionable whether members of the public should be entitled to obtain private documents at all. While federal statutes defining "government records" are quite broad, confidential private documents and information do not lose their basic private character merely by virtue of the fact that those documents have been submitted to an agency either pursuant to a mandatory filing requirement or voluntarily in an effort to comply with a regulatory program. As one commentator has stated, there is a―

28

"philosophical distinction between exemption (4) and Government information generally; the general public has no claim to a business' secret or a financial ledger, as it might to a Government-generated highway map or agency interpretative bulletin. [T]here is a significant policy justification for not 'giving away for free' what private industry, not Government, has paid for. Government's duty to reveal its inner workings provides no similar justification for the disclosure of private parties' operations." "

At a minimum, requesters who seek to obtain private commercial documents which are shown by the submitter to be confidential in the traditional sense of the term should have the burden of demonstrating that they seek those documents for the purpose of learning how the Government is functioning, that the documents will in fact directly serve that purpose, that disclosure will not injure the submitter or expose him to possible injury in any meaningful sense, and that there are no alternative types of government documents which would adequately reflect the Government's performance without breaching the privacy of persons or companies who have submitted information to the agency."

In this latter regard, some federal agencies such as the Department of the Census and the Department of Labor's Bureau of Labor Statistics routinely collect private information from business across the nation. These agencies guarantee that, the confidentiality of those data will be maintained and that disclosure will not occur unless the data is aggregated with data from other companies in a form in which the submitter cannot be identified." If in fact there is a public need to know more about the nature of private activities in order to determine whether the Government is properly administering its responsibilities, such data should be disclosed only on an aggregate basis in which data cannot be identified by company. This approach has been applied on an ad hoc basis by some courts 32 and is even contemplated, although not frequently utilized, by some agencies' disclosure regulations.

The key to resolving the controversy over the substantive meaning of Exemption 4 thus lies in returning to the pre-National Parks interpretation of the Exemption, and in recognizing the important distinction between private and goverment documents. Absent legislative action which accomplishes both of these goals, the debate over Exemption 4 can be expected to continue.

Westinghouse Electric Corp. v. Schlesinger, supra, 542 F.2d at 1213. See also Hearings on S. 1666, supra, at 174 ("We can see no reason for changing the ground rules of American business so that any person can force the Government to reveal information which relates to the business activities of his competitor.")

See Note. Would Macy's Tell Gimbel's: Government Controlled Business Information and the Freedom of Information Act, Forwards and Backwards, 6 Loyola L.J. 594, 611 (1975) (hereinafter "Would Macy's Tell Gimbel's").

O'Reilly, Government Disclosure of Private Secrets Under the Freedom of Information Act, 30 Bus. Lawyer 1125, 1134 (1975) (hereinafter "O'Reilly").

30 See Sterling Drug, Inc. v. FTC, supra, 450 F.2d at 709, where the court of appeals acknowledged "the private citizen's right to be secure in his personal affairs which have no bearing or effect on the general public."

21 See, e.g., 13 U.S.C. § 8(b).

32 See Grumman Aircraft Eng'r. Corp. v. Renegotiation Bd., supra; Penzoil Corp. v. F.P.C., 534 F.2d 627, 632 (5th Cir. 1976); GTE Sylvania, Inc. v. Consumer Prod. Safety Comm'n., 404 F.Supp. 352, 374 (D.Del. 1975).

See, e.g., 21 C.F.R. § 20.111 (c) (3) (V), and 40 C.F.R. § 2.202(f).

VI. EXISTING AGENCY PROCEDURES INADEQUATELY PROTECT THE RIGHTS OF SUBMITTERS OF CONFIDENTIAL INFORMATION

Problems also abound in the procedures which are employed by federal agencies in ruling upon claims of confidentiality and in processing requests for disclosure of confidential information.

Release of the confidential, private documents would often injure, and possibly destroy, a submitter's property rights in the commercial information contained in those documents. While the formality and procedural requisites may vary, it is nevertheless well settled that the Fifth Amendment requires that notice must be given and some form of hearing must be held before an order depriving a person of property may become effective." Unfortunately, neither the FOIA nor virtually any agency disclosure regulations satisfy these requirements.

A. Lack of formal notice requirement

The Freedom of Information Act contains no requirement that the submitter be notified by the agency that its documents are to be disclosed. Nor do virtually any agency regulations contain such a requirement," although some agencies gratuitously provide such notice to submitters. Those agency regulations which do provide for notification to the submitter of a request for disclosure make such notification discretionary, conditioning the giving of such notice on an agency's own preliminary views regarding the disclosability of the document. For example, the EPA provides notice of an FOIA request only if it believes that the information is of the type likely to be considered confidential by the business. Yet, the fallacy of this procedure is that agency personnel are often unaware of the significance of information whose disclosure has been requested and, consequently, may not notify the affected business that its documents are to be disclosed.

38

As both courts, commentators and even agencies themselves" have observed, agencies seldom have the special knowledge of the business or the particular industry to determine whether disclosure would be harmful; and since the disclosure of even mere fragments of information can often have significant consequences, competitive and otherwise, to be affected business," an agency may simply be unaware of the presence of valuable information in a document which it proposes to release. Compounding these problems is the fact that many, although not all agencies, have no incentive to protect the confidentiality of private information I and are, in fact, predisposed towards disclosure" thus, the possibility that notice may not be given and that confidential information may be unknowingly disclosed becomes even more imminent.

42

B. Inadequate time to comment

Where notice is provided, the submitter is generally afforded not more than five days, and in some cases as few as one day, to submit written objections to disclose. For example, in Armco Steel Corp. v. Marshall," where a number of companies have sued to enjoin the release of assertedly confidential, private information, the government agencies gave only five days to some of the companies to object to disclosure; as little as one day to one of the companies; and, in fact, did not notify another of the companies until the prescribed time for objection to disclosure had already passed.

Mathews. Eldridge, 47 L.Ed.2d 18, 41 (1976): Opp Cotton Mills v. Administrator of Wage and Hour Division of the Department of Labor, 312 U.S. 126 (1941). At least one court has held that no such notice is required. Pharmaceutical Mfrs. Ass'n. v. Weinberger, 411 F.Supp. 576 (D.D.C. 1976).

38 Would Macy's Tell Gimbel's, supra, 6 Loyola L.J. at 610.

37 40 C.F.R. 8 2203 and 2.204 (d) (1) (1) (Environmental Protection Agener); see also, e.g., 32 C.F.R. 8.285.7(b) (7) (Defense Supply Agency); 43 C.F.R. §2.13(h) (Department of the Interior); 21 C.F.R. § 4.45 (Food and Drug Administration).

3 See, eg., Westinghouse Electric Corp. v. Schlesinger, supra, 542 F.2d at 1212-13. See, eg., O'Reilly, supra, 30 Bus. Lawyer at 1134; Note. Rererse-Freedom of Information Act Suits: Confidential Information in Search of Protection, 70 Northwestern L. Rev. 995, 998-9 (1976) (hereinafter "Reverse FOIA Suits").

40 See, e.g., Statement of Michael James, Deputy General Counsel. Environmental Protection Agency. Before the Subcommittee on Administrative Practice and Procedure of the Senate Committee on the Judiciary, September 15, 1977, at 7-8 (hereinafter "EPA Statement"); and FTC Statement, supra, at 3.

41 Westinghouse Electric Corp. v. Schlesinger, supra, 542 F. 2d at 1213; Note, supra, 9 Akron L. Rev. at 683-4.

42 Westinghouse Electric Corp. v. Schlesinger, supra, 542 F. 2d at 1212: O'Reilly, supra, 30 Bus. Lawyer at 1134.

43 Patten and Weinstein, supra, 29 Ad. L. Rev. at 204.

44 No. 77-121 (E.D.Ky., filed Aug. 2, 1977).