specifically, information would qualify under the exemption if its disclosure would "impair some other legitimate governmental interest."

While some consider the National Parks test to be a misinterpretation in view of the "customary release" test espoused in Exemption 4's legislative history," it is the frequently applied judicial test of confidentiality. However, we are of the opinion that the DOD regulations should also reflect the most recent action in the National Parks litigation, which deals with the amount of proof necessary to show substantial competitive harm.

The National Parks case noted above, hereinafter referred to as National Parks I, was remanded by the U.S. Circuit Court of Appeals for the District of Columbia to the lower court with instructions to apply its "substantial competitive harm" test of confidentiality. On remand the U.S. District Court for the District of Columbia, applying the National Parks test, held that most of the requested information was "confidential" and therefore protected from voluntary agency disclosure by Exemption 4. The FOIA requester appealed again to the District of Columbia Circuit Court of Appeals. The issue presented in this second appeal, which we refer to as National Parks II, is the level of proof necessary to meet the "substantial competitive harm" test enunciated in National Parks I. Insisting that the "substantial competitive harm" test was, and is, the correct test of confidentiality, the Court nevertheless expressly rejected the FOIA requester's contention that a showing of substantial competitive harm “... require[s] the kinds of evidence more usually associated with elaborate antitrust proceedings. . . ."' More specifically, the Court stated as follows:

No actual adverse effect on competition need be shown, nor could it be, for the requested documents have not been released. The Court need only exercise its judgment in view of the nature of the material sought and the competitive circumstances in which the concessioners do business, relying at least in part on relevant and credible opinion testimony."

We believe that the inclusion of the level of proof standard as set forth in the National Parks II case in the proposed DOD regulations would reduce the number of disputes between agency personnel and information suppliers as to the proof necessary to show substantial competitive harm. More specifically, the regulations might state as follows:

DOD personnel need not require information suppliers to submit a detailed economic analysis of the competitive harm they would suffer if requested documents are released in order to justify nondisclosure. DOD personnel need only exercise their judgment in view of the nature of the material sought and the competitive circumstances in which the information supplier does business, relying at least in part on relevant and credible opinion.

Reexamine the propriety of the test for "confidentiality" under Exemption 4 which uses the language "impair some other legitimate governmental interest.”As previously discussed under the National Parks test, information is deemed "confidential" if its disclosure would either cause substantial competitive harm to its supplier or impair the government's ability to obtain necessary information in the future. Under both the present and proposed DOD regulations, information would also qualify if its disclosure would "impair some other legitimate governmental interest." This legally questionable DOD language appears to be an example of what Congress intended to eliminate when it enacted FOIA in 1966. FOIA's predecessor as the U.S. public information statute was widely criticized as not in fact being a public information statute because, among other things, in strikingly similar language it permitted withholding of information where "the public interest" required secrecy. We believe DOD should reexamine this test of confidentiality, which seems to be contrary to FOIA statutory language, established case law, and legislative intent.

Conform the DOD interpretation of “obtained from a person" to judicial interpretation. The proposed DOD regulations differ from the present regulations in their interpretation of the Exemption 4 statutory language "obtained from a person." Under the proposed regulations information "obtained from a person"

5 House Report No. 1497. 89th Congress. 2d Session. p. 10 (1966); Senate Report No. 813, 89th Congress. 1st Session, p. 9 (1965): Patten and Weinstein. Disclosure of Business Secrets Under the Freedom of Information Act: Suggested Limitations, 29 Ad. Law Rev. 193 (1977).

National Parks and Conservation Association v. Kleppe, 547 F.2d 673 (1976).

7547 F.2d at 681.

8547 F.2d at 683.

9

is that "which a Component receives from a source outside the Component," while under the present regulations it is that "received from a person." With rare exception, the cases bearing on this issue hold that information "obtained from a person" is that obtained from a person outside of government rather than merely "from a source outside the Component.' The rationale for this rule, as stated in the legislative history providing the basis for this judicial interpretation, is to prevent agencies from using inter- or intra-agency mail as a tool for exempting information from disclosure.10 We recommend that DOD conform its interpretation of the Exemption 4 language "obtained from a person" to judicial interpretation. This could be accomplished by retaining the present language in the regulation and adding the words "outside of government." Conform the Proposed Regulations' Treatment of Trade Secrets to Judicial Interpretation

In order to qualify for Exemption 4 protection under the proposed DOD regulations, it must be shown as to "trade secrets" as well as "commercial or financial information" that disclosure would either substantially harm the competitive position of its supplier, impair the government's ability to obtain necessary information in the future or "impair some other legitimate governmental interest." As previously discussed, this test, with the exception of its questionable addition of the words "impair other legitimate governmental interest" is a DOD promulgation of the prevailing judicial test of confidentiality known as the National Parks test.

Courts have given Exemption 4 its literal meaning. Thus, information can be withheld only if it is (1) a trade secret or (2) information that is (a) commercial or financial, (b) that was obtained from a person, and (c) is privileged or confidential." Thus the heavy burden of proving that information is "confidential" is applicable only to "commercial or financial information" and not to "trade secrets." Although a "trade secret" must by its own terms be "secret," this term is used in its everyday sense and does not require proof that its disclosure would result in substantial competitive harm. We, therefore, recommend that DOD change the proposed regulations' treatment of "trade secrets" so as not to require proof of "substantial competitive harm" as justification for their nondisclosure.

Miscellaneous Points

There are a few miscellaneous observations which we would like to make before stating a general conclusion. Particularly for the reader accustomed to scanning a document, the title of paragraph 286.6 (a) (4) (v) which reads "exemptions are permissive" may create misunderstanding to some extent. It is conceded that Exemption 3 is mandatory. There is even some debate about Exemption 4. Hence, the shorthand language "exceptions are permissive" may be misleading and should be corrected in some manner.

Under the proposed regulation, it seems clear that records can be released at a multiple and lower noncentralized level than at the "initial denial authority" (IDA) level. To release or withhold is part of the same decision-making process and should be performed at the same level, in our opinion. Otherwise, there might be a tendency to undercut the proper exercise of the exemptions, particularly by lower level employees.

Finally, the proposed regulation states that a nongovernment originator of records will be advised of an intended release and the originator's comments shall be considered in determining releasability. In our judgment, a further protection should be provided the submitter of information or data. This would be a requirement that the component authority subsequently advise the submitter of its decision (release or withhold) after the comments of the submitter have been considered and a decision reached.

Consumers Union v Veterans Administration, 301 F. Supp. 796 (S.D.N.Y. 1969), appeal dismissed as moot 436 F.2d 1363 (2d. Cir. 1971); Grumman Aircraft Engineering Corp. v Renegotiation Board, 425 F.2d 578 (D.C. Cir. 1970).

10 Senate Report No. 813, 89th Congress. 1st Session at p. 9 (1965); House Report No. 1497. 89th Congress, 2d Session at p. 8 (1966).

11 Consumers Union v Veterans Administration, supra; Getman v NLRB, 450 F.2d 670 (D.C. Cir.) stay denied 404 U.S. 1204 (1971); National Parks and Conservation Associa tion v Morton (National Parks I), supra; Tax Analysts and Advocates v IRS, 362 F. Supp. 1298 (D.D.C. 1973) modified on other grounds 505 F.2d 350 (D.C. Cir. 1974); Brockway v Department of Air Force, 518 F.2d 1184 (8th Cir. 1975); Rabbit v Department of Air Force, 383 F. Supp. 1065 (S.D.N.Y. 1974).

CONCLUSION

The Freedom of Information Act presents DOD, as well as other federal agencies, with the challenge of striking a delicate balance between the public's right to know on one hand, and governmental efficiency and the legitimate rights of private persons, including business, on the other. The extraordinary administrative burden on government, short FOIA time limits, and the threat of Civil Service Commission disciplinary action for what in the opinion of a court is "arbitary" nondisclosure encourage agency personnel to perfunctorily disclose, rather than meet this challenge, where only private interests in confidentiality are involved. We commend DOD for not taking this easy way out and for attempting to resolve the difficult questions posed by FOIA in its regulations and day-to-day administrative practice.

This completes our comments on the proposed DOD FOIA regulations appearing in the August 10, 1977 Federal Register. If we can be of any further assistance in connection with your work in this area, please let us know.

Cordially,

CHARLES STEWART, President.

STATUTES

[Exhibit 20]

EXCERPT FROM FEDERAL FOOD, DRUG AND COSMETIC ACT

(21 U.S.C. § 301-392)

SUBCHAPTER III-PROHIBITED ACTS AND PENALTIES

§ 331. Prohibited acts

The following acts and the causing thereof are prohibited:

(j) The using by any person to his own advantage, or revealing, other than to the Secretary or officers or employees of the Department, or to the courts when relevant in any judicial proceeding under this chapter, any information acquired under authority of section 344, 348, 355, 356, 357, 360b, 374, or 376 of this title concerning any method or process which as a trade secret is entitled to protection.

[Exhibit 21]

EXCERPT FROM FEDERAL TRADE COMMISSION ACT

(15 U.S.C. 41-51)

§ 46. Additional powers of Commission

The Commission shall also have power

Investigation of corporations

(a) To gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any corporation engaged in commerce, excepting banks and common carriers subject to the Act to regulate commerce, and its relation to other corporations and to individuals, associations, and partnerships.

Reports by corporations

(b) To require, by general or special orders, corporations engaged in commerce, excepting banks and common carriers subject to the Act to regulate commerce, or any class of them, or any of them, respectively, to file with the Commission in such form as the Commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. Such reports and answers shall be made under oath, or otherwise, as the Commission may prescribe, and shall be filed with the Commission within such reasonable period as the Commission may prescribe, unless additional time be granted in any case by the Commission.

Investigation of compliance with antitrust decrees

(c) Whenever a final decree has been entered against any defendant corporation in any suit brought by the United States to prevent and restrain any violation of the antitrust Acts, to make investigation, upon its own initiative, of the manner

in which the decree has been or is being carried out, and upon the application of the Attorney General it shall be its duty to make such investigation. It shall transmit to the Attorney General a report embodying its findings and recommendations as a result of any such investigation, and the report shall be made public in the discretion of the Commission.

Investigations of violations of antitrust statutes

(d) Upon the direction of the President or either House of Congress to investigate and report the facts relating to any alleged violations of the antitrust Acts by any corporation.

Readjustment of business of corporations violating antitrust statutes

(e) Upon the application of the Attorney General to investigate and make recommendations for the readjustment of the business of any corporation alleged to be violating the antitrust Acts in order that the corporation may thereafter maintain its organization, management, and conduct of business in accordance with law.

Publication of information; reports

(f) To make public from time to time such portions of the information obtained by it hereunder, except trade secrets and names of customers, as it shall deem expedient in the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of its reports and decisions in such form and manner as may be best adapted for public information and use.

Classification of corporations; regulations

(g) From time to time to classify corporations and to make rules and regulations for the purpose of carrying out the provisions of sections 41 to 46 and 47 to 58 of this title.

Investigations of foreign trade conditions; reports

(h) To investigate, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable.

§ 2607.

[Exhibit 22]

EXCERPTS FROM TOXIC SUBSTANCES CONTROL ACT

(15 U.S.C. § 2601-2629)

(b) Inventory.-(1) The Administrator shall compile, keep current, and publish a list of each chemical substance which is manufactured or processed in the United States. Such list shall at least include each chemical substance which any person reports, under section 2604 of this title or subsection (a) of this section, is manufactured or processed in the United States. Such list may not include any chemical substance which was not manufactured or processed in the United States within three years before the effective date of the rules promulgated pursuant to the last sentence of subsection (a)(1) of this section. In the case of a chemical substance for which a notice is submitted in accordance with section 2604 of this title, such chemical substance shall be included in such list as of the earliest date (as determined by the Administrator) on which such substance was manufactured or processed in the United States. The Administrator shall first publish such a list not later than 315 days after January 1, 1977. The Administrator shall not include in such list any chemical substance which is manufactured or processed only in small quantities (as defined by the Administrator by rule) solely for purposes of scientific experimentation or analysis or analysis or chemical research on, or analysis of, such substance or another substance, including such research or analysis for the development of a product.