valuable and often complex matter. . .",65 the Court has reasoned that it is essential that a submitter who is confronted with an agency decision to disclose be afforded access to the courts for de novo review of his claim of exemption from disclosure: "There is always the real risk that the agency itself will be deliquent in asserting the rights of the private party. After all, it could not care less about protecting the competitive position of a supplier of information. That is no part of its responsibility. Neither does it have, as has already been observed. in most instances, sufficient knowledge to assert properly the private party's right to confidentiality. And it must not be forgotten that the protection of a competitive position is both a valuable and often complex matter, dependent upon full proof, and one 'basic to our free enterprise system.' Should not the person who is threatened with harm through a disclosure, which the Congress has indicated clearly is against the public policy as expressed in the FOIA itself, be the proper one to assert that right to protection from disclosure assured him under Exemption 4, in an equity action in which he can have a de novo trial? The envious competitor or the curious busybody demanding access to that private information has the right to such a de novo trial. The Act gives it to him. But is not the same right to be implied, when the supplier, with a right that Congress gave him 'not only as a matter of fairness but as a matter of right', seeks what may be regarded as correlative relief?" 67 Similarly, it must also be recalled that many agencies are not characterized by an institutional bias in favor of disclosure which may render these agencies insensitive to businesses' claims of confidentiality and may well impair the agency's ability to develop a fair and adequate record of the administrative action. Just as Congress recognized that de novo review of an agency decision not to disclose was necessary to "prevent [judicial review] from becoming meaningless judicial sanctioning of agency discretion", de novo review of a decision to disclose must likewise be ensured. Accordingly, the Freedom of Information Act should be amended in order to provide for a right to de novo judicial review of an agency decision to disclose. X. DISCLOSURE OF PRIVATE INFORMATION WILL HAVE AN ADVERSE EFFECT ON SUBMISSION OF INFORMATION TO THE GOVERNMENT By offering protection under Exemption 4 to confidential commercial information. Congress hoped to encourage individuals and businesses to provide this type of information to the Government." Unless federal agencies are held to a strict standard of conduct in passing upon disclosure requests, businesses are bound to decrease their free flow information to the Government. In losing that important source of information, government regulatory programs would suffer." Most regulatory programs administered by government agencies rely heavily upon cooperation of the regulated companies in reporting as well as in compliance. Cooperation is significant not only where information is submitted on a wholly voluntary basis, but also where information is furnished pursuant to requirement; for even though the Government possesses the power to collect the information, cooperation by the submitter may improve both the quality and quantity of information which is supplied." These governmental functions would be severely inhibited, and the success of the programs gravely imperiled. if private documents, including competitively damaging or embarrassing information, were to be publicly disclosed. Disclosure would directly discourage compliance and would disperse a crucial source of industry information to the Government if the sense of integrity with which it was given was not respected. 65 Westinghouse Electric Corp. v. Schlesinger, supra, 542 F.2d at 1213. The Fourth Circuit, quoting several commentators, observed that "the agencies cannot always be relied upon to protect adequately the confidentiality of that information. * Counsel for the agency has little or no incentive to protect the secrets of the business community. *** It may be bad for appearances in a period of “openness" and "honesty" for an agency to refuse disclosure from its files." In contrast. "the individual is more aware than the agency of the potential competitive harm he will suffer should information be released." 542 F 2d at 1212. See O'Reilly, supra, 30 Bus. Lawyer at 1134; Reverse FOIA Suits, supra, 70 Northwestern U.L. Rev. at 998-9. 67 542 F.2d at 1213. es S. Rep. No. 813. supra. at 8; see 5 T.S.C. § 552 (a) (3). Soucie v. David, 449 F. 2d 1067, 1078 (D.C. Cir. 1971). 70 Would Macy's Tell Gimbel's, supra, 6 Loyola L. J. at 603–5. " Id. at 604. A number of agencies have formally recognized this proposition, though their adherence to it in practice has been less than complete. For example, the Depart"ment of Labor has recognized that "[d]isclosure of information obtained [in] confidentiality would hamper operating programs by reducing the quantity and reliability of the information which we received..." Similarly, in FAA Administrator v. Robertson," where the Supreme Court held that information provided to the agency by commercial air carriers was not disclosable, the Court adopted the agency's argument that, even though 14 C.F.R. § 121.681 et seq. required that the information be submitted to the agency and provided sanctions for noncooperation, agency disclosure "would surely undercut the Federal Aviation Administration's ability to properly fulfill its investigative duties ... [since] . . frank and full voluntary disclosure" was essential. The agency argued, and the Court recognized, that disclosure would adversely affect airline cooperation and, as a result, the program would be "seriously impaired."TM And, just recently, the Environmental Protection Agency has stated in Senate FOIA oversight hearings that disclosure of information submitted voluntarily by government contractors would impair the agency's ability to obtain such information from the contractors in the future." Despite statements such as the foregoing, many federal agencies assert that disclosure of private information will not disrupt the flow of data to them. Apart from the basic conflict of such a contention with common sense, the fact that a number of courts have found that disclosure of documents will in fact impair the agencies' ability to collect data from the public. 76 In fashioning any amendments to, or guidance under, Exemption 4, Congress should consider the effect which disclosure of confidential business information must necessarily have on the future submission of such information to government agencies. Absent such an accommodation, the certain effect of disclosure will be the impairment of the Government's ability to obtain information necessary for the effective implementation of important regulatory programs. CONCLUSION The Freedom of Information Act was conceived as a means of remedying rampant government secrecy regarding matters which Congress believed should be subject to public scrutiny. The Act was designed to bring these matters within public reach, view and criticism, and thereby to make government more responsive to the citizenry. The goal of the Act was laudible; and, while not without problems, the Act has during its first decade achieved that goal to a remarkable degree. The Freedom of Information Act was not, however, intended to affect long standing and well founded practices of business secrecy. The legislative history and the exemptions themselves reflect that Congress did not intend, in increasing public access to information concerning how the Government operates, to invade the privacy of businesses which submit information to the Government showing how they operate. Yet, as reviewed in this testimony, this is precisely what has happened in recent years as a result of the insensitive reception which courts and agencies have given to legitimate business concern over the disclosure of confidential commercial information. The FOIA has become a bonanza for competitors, special interest groups and indeed for anyone who desires to inspect private business files which he would otherwise have no right or opportunity to examine. This development does not comport with the purposes of the Act and, in my opinion, represents one of the low points in the ten year history of the FOLA. I urge the Subcommittee to consider amendment of the FOIA in order to make clear that the Act should not be available as a means of acquiring private, as opposed to government, documents. In particular, Exemption 4 should be 72 Hearings on S. 1335 Before The Senate Committee on the Judiciary, 89th Cong., 1st Sess..436-437 (1965); see also Government Operations Committee Hearings, supra, at 73422 US. 255 (1975). 1619. 74 See the FAA's Supreme Court Brief on the Merits, at 26, in FAA Administrator v. Robertson, supra. 75 EPA Statement. supra, at 9. 78 E.g., United States Steel Corp. v. Schlesinger, supra; Dickerson v. United States Steel Corp., 12 E.P.D. & 11095 (E.D. Pa. July 16. 1976): Porter County Chap. v. U.S. Atom. Energy Commission, supra, 380 F. Supp. at 634; Sanday v. Carnegie-Mellon University, 12 FEP Cases 101 (W.D. Pa. 1975). amended to make clear that the National Parks construction of the Exemption is not consistent with congressional intent and to provide comprehensive protection of private business documents from public disclosure. Finally, I urge this Committee to confirm the rights of submitters to the fair agency procedures suggested above and to de novo judicial review of adverse agency disclosure decisions. These recommendations, I believe, will serve to protect the important private interests which Congress sought to safeguard through Exemption 4 without impairing or obscuring the basic purpose of the Freedom of Information Act to open government processes to greater scrutiny. [Exhibit 12] STATEMENT OF I. AUSTIN LYONS, JR., I am J. Austin Lyons, Jr., Senior Vice-President, General Counsel and Secretary of Metropolitan Life Insurance Company. This subcommittee is considering the procedural problems posed by reverse Freedom of Information Act (FOIA) cases, suits brought by submitters of information to prevent disclosure by agencies to third parties, and considering whether the intent of the FOIA is being subversed by the extensive use of the Act for commercial purposes. I ask that this subcommittee consider the statement presented herein in making its determinations on the future of the FOIA. My statement is supported by considerable experience in dealing not only with the FOIA but also in dealing with the general problem of protecting business information form disclosure to competitors. Although I have represented and advised Metropolitan Life Insurance Company in regard to many aspects of its business information practices, the views presented herein are my own. This subcommittee has stated that its purpose in conducting formal oversight hearings on the Freedom of Information Act is to continue "Congressional vigilence of implementation of the Freedom of Information Act" in order to continue to open up government information to the public I enthusiastically endorse this purpose but wish to remind this subcommittee of the important distinction between advocating abolition of secrecy in government and advocating elimination of the protection due confidential information filed with the government. Information determined to be disclosable under the FOIA is disclosable to anyone regardless of the motive of the requester, be it competitive, predatory, or idly curious. I examined the Statement of Burt A. Braverman, before the Government Information and Individual Rights Subcommittee of the Committee on General Operations, which recommends certain changes in and clarification of the FOIA, and endorse the views expressed and analysis contained therein and recommend this statement to this subcommittee for careful consideration. In addition, I wish to express my views concerning the relationship of the Trade Secrets Act, to exemption (b) (3) of the FOIA.“ The Trade Secrets Act. Congress in enacting the Sunshine Act passed a "conforming amendment" to exemption (b) (3) of the Freedom of Information Act, 1 Opening Statement, Freedom of Information Act Hearings, September 15, 1977. See p. 1 of the hearing text. 2 It is my belief that Mr. Braverman's statement has been furnished to this subcommittee. See p. 293 of the appendix. 3 18 U.S.C. § 1905. 45 U.S.C. § 552 (b) (3). 518 U.S.C. § 1905 provides in pertinent part: "Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information which... concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identify, confidential statistical data, amount or source of any income, profits, losses, or expendi tures of any person, firm, partnership, corporation, or association; shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment." (italic added) P.L. 94-409, 90 Stat. 1241, approved September 13, 1976, codified as 5 U.S.C. $552b. 7 This amendment did not become effective until 180 days after September 13, 1976 (on or about March 13, 1977). which provides that the FOIA does not apply to matters that are: "(3) specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld." The clear language of this amendment includes statutes such as the Trade Secrets Act which does not provide any discretion to disclose documents which fall within its scope. Moreover, since qualification for exemption (b) (3) is phrased in the disjunctive, the Trade Secrets Act also qualifies as a (b) (3) statute in that it refers to particular types of matters to be withheld, for example, trade secrets, amount or sources of any income, profits, or losses. Despite the plain language of exemption (b) (3), confusion has arisen concerning the legislative history of the Sunshine Act. However, careful analysis of this history demonstrates that because the language and meaning of the exemption were changed at several points in the legislative process, the only reliable indication of congressional intent is the Conference Report. Reference to early versions of the Act and explanation of these rejected versions are misleading. I believe that this subcommittee should endorse the consensus of both Houses as expressed in the Conference Report which states: "Section 5(b) of the conference substitute amends the third exemption in 5 U.S.C. 552(b) to include information specifically exempted from disclosure by statute (other than new section 552b), if the statute either (a) requires that the information be withheld from the public in such a manner as to leave no discretion on the issue, or (b) establishes particular criteria for withholding or refers to particular types of information to be withheld. The conferees intend this language to overrule the decision of the Supreme Court in Administrator, FAA v. Robertson, 422 U.S. 255 (1975), which dealt with section 1104 of the Federal Aviation Act of 1958 (59 U.S.C. 1504). Another example of a statute whose terms do not bring it within this exemption is section 1106 of the Social Security Act (42 U.S.C. 1306)." Sen. Conf. R. No. 94-1178, 94th Cong., 2d Sess. 24-25 (1976). Endorsement by this subcommittee of the consensus of both Houses will demonstrate, beyond further discussion, that the House Report,' which appears to limit the availability of the protection of the Trade Secrets Act, obviously refers only to the revision of the (b) (3) amendment then before the committee and, as a reference to an early effort at drafting a complicated law, clearly is not authoritative. 10 [Exhibit 13] STATEMENT OF NATIONAL COUNCIL OF TECHNICAL SERVICE INDUSTRIES, NATIONAL COUNCIL OF TECHNICAL SERVICE INDUSTRIES, Hon. JAMES ABOUREZK, DEAR MR. CHAIRMAN: Pursuant to your staff's request, the National Council of Technical Service Industries (NCTSI) is pleased to offer its views on the Subcommittee's pending inquiry into the Freedom of Information Act. NCTSI is a non-profit organization, consisting of 17 members directly involved in support service contracting for the United States. Since NCTSI member companies have extensive experience in the Federal Procurement area and are in virtually daily contact with Federal agencies, we believe that we are in a unique position to offer views on the experience of Government contractors See Note, The Effect of the 1976 Amendment to Exemption Three of the Freedom of Information Act. 76 Colum L. Rev. 1029. 1042, and nn. 76-78 (1976) which endorses as authoritative the Conference Report and the congressional debates that preceded each House's approval of the Conference Committee's version of the bill. H.R. Rep. No. 880 94th Cong., 2d Sess., Part I. 10 (1976). 10 (3) required to be withheld from the public by any statute establishing particular criteria or referring to particular types of information.. under the Freedom of Information Act and particularly under Exemption 4 to the Freedom of Information Act. In NCTSI's view, there are a number of serious problems which exist in the interpretation and administration of Exemption 4. This Exemption, which ostensibly protects against the disclosure of "trade secrets and commercial or financial information obtained (by Government) from a person and privileged or confidential" has not, in our view, been applied in a manner sufficient to protect the interests of those providing legitimately confidential information to the Government. We note that, on September 15, 1977, Mr. Charles W. Stewart, President of the Machinery and Allied Products Institute (MAPI), testified before the Subcommittee as to the views of the Institute and its members on this important question. NCTSI fully endorses and supports the views and positions taken by MAPI in its testimony. We believe that the Institute has identified a number of significant issues which the Subcommittee should consider in its review of the Act. In this regard, we wish to call the Subcommittee's attention specifically to the following: First, as indicated by MAPI, one of most serious shortcomings in the present Freedom of Information Act is that a private party submitting confidential information to the Government is not assured of advance notice when the Government makes a determination to release that information. NCTSI believes that such notice is essential. Quite frequently, if given notice, a party providing confidential information may be able to persuade Government officials that the information in question should not properly be disclosed. In any event, such notice allows a party providing information to the Government to exercise its legal remedies before information is actually disclosed. For these reasons, NCTSI believes that the Act should be amended to require such advance notice in all cases where a party has submitted information covered by Exemption 4 to a Government agency. Second, NCTSI supports MAPI's position that documents submitted by a private party in confidence to a Government agency should retain their private status even though they are in the hands of the Government and should not be considered Government documents for purposes of the Freedom of Information Act. What this means, in our view, is that the presumptions in the Act favoring the disclosure of Government information-an objective which NCTSI supports-should not apply to such private documents in the Government's hands. Third, NCTSI agrees with MAPI's conclusion that the courts and the Justice Department appear to have deviated from the intent of Congress with respect to Exemption 4. While Congress intended that Exemption 4 would act to prevent the disclosure of information not customarily made public by the person who has submitted it to a Government agency, the legal analysis in MAPI's testimony makes clear that this Congressional intent has not been followed. Instead, as MAPI has described, the legal standard governing the release of confidential information has been changed to one in which disclosure is precluded only if the party submitting the information or the Government agency can prove that competitive harm would result from such disclosure. NCTSI believes, as does MAPI, that this new standard governing the release of confidential information places an impossible burden of proof on a party submittting information to the Government. In our view, the original intent of Congress as to when disclosure of such information is inappropriate should be restored. For the foregoing reasons, NCTSI urges the Subcommittee to examine the present operations of Exemption 4 to the Freedom of Information Act. NCTSI member companies submit confidential information to the Government constantly. Obviously, in order to perform its business, the Government requires the disclosure of this confidential information. NCTSI believes that appropriate steps must be taken to ensure that the confidential nature of this information is preserved while in the hands of the Government. NCTSI is grateful for the opportunity to present these views to the Subcommittee. Sincerely, EDWARD C. LEESON, Executive Director. |