and permanent resident aliens by specifically allowing those individuals to request information about themselves that may

be contained in agency files.

Sec. 7. Discovery and Litigation

a. Virtually all agencies engaged in litigation have experienced the abuse of the FCIA by attorneys attempting to circumvent the Federal Rules of Civil or Criminal Procedure through requests for records normally sought from the government through discovery. While government agencies are obligated to operate under standard discovery rules during the course of any litigation, their opponents are free to make FOIA requests which often yield far more information than would be allowed under such rules. Moreover, such FOIA requests often of necessity must be processed by the agency personnel directly involved in the litigation, thereby affording the private party a distinct litigation advantage even where no valuable information is disclosed. Such results certainly were neither contemplated nor intended at the time the Act was passed, and the first amendment proposed in this subsection seeks to put the government back on an equal footing with the opposing party when it is involved in litigation, including the settlement thereof, by providing an exemption from disclosure for records the production of which would interfere with litigation or settlement in these sorts of ways.

The second amendment proposed in this subsection similarly addresses a related problem. Internal agency documents produced in an effort to settle legal actions to which the United States is a party should not be subject to disclosure under the FOIA. This sort of information is routinely protected as confidential, under traditional rules of evidence in litigation, as part of a policy encouraging the settlement of suits whenever possible.

Disclosure of such information

under the FOIA serves to undermine that policy and also

places the government at a potential litigation advantage.

As such a result is not necessary to the disclosure policy of the FOIA, and is indeed harmful in these respects, this amendment appropriately exempts all settlement information.

b. As the volume of FOIA requests has increased in recent years, so has the frequency of requests involving massive numbers of documents, often consisting of hundreds of thousands of pages or more and quite frequently proceeding to litigation. This amendment is designed to authorize and encourage greater judicial flexibility in the adjudication of such massive FOIA cases through the use of efficient evidentiary techniques, such as representative sample or categorization affidavits. The use of such techniques can preserve valuable administrative and judicial resources while at the same affording the same de novo review protection contemplated by the Act.

Sec. 8.

Amendment Concerning Wrongful Removal of Agency Records.

This amendment is proposed to deal with the problem arising out of the Supreme Court's recent decision in Kissinger v. Reporters Committee for Freedom of the Press, 445 U.S. 136 (1980), in which the Court held that even though the records sought were agency records within the meaning of the FOIA, once those records were removed from the agency, there was no obligation on the agency to seek to recover the records, and the requester had no basis for proceeding against the private party then in possession of the records. Even where records have been wrongfully removed from the possession of a government agency, there is presently no way in which a requester can directly gain access to those records, regardless of the applicability of the FOIA. This situation is incongruous. To rectify it, the proposed amendment provides specific authorization for a court to join a party in possession of the records under such circumstances for the purpose of determining if the records were wrongfully removed and, if

so,

to provide for the return and regular processing of the records by the agency under the disclosure provisions of the FOIA.

Senator HATCH. Our next witness is Prof. Russell B. Stevenson, Jr., from the National Law Center, George Washington University. Professor Stevenson graduated from the Harvard Law School and practiced law here in Washington, D.C. He has written a book on "Corporate Information and Disclosure Under the Freedom of Information Act," and he recently presented a study for the administrative conference of the United States entitled "Protecting Business Secrets Under the Freedom of Information Act, Managing Exemption Four."

Mr. Stevenson, I am particularly interested in what you and our final witness, Mr. John Marthinsen, a professor of economics at Babson College, have to say here. Unfortunately, I really do have to go meet that appointment. However, I commit to you that I will read your statement and that of Mr. Marthinsen and that they will play an important role in this process.

If you could forgive me then, rather than interrupt you in the middle of your statement, I am going to leave now. I understand that there are a number of media people over there who want to see me before I go to my meeting. I had better leave now, but if you will forgive me, I want to express my gratitude to you and Professor Marthinsen for being here.

Staff will take the rest of the testimony and they might want to ask you some questions as well so that we can build this record as well as we possibly can.

STATEMENT OF RUSSELL B. STEVENSON, JR., PROFESSOR OF LAW, GEORGE WASHINGTON UNIVERSITY

Mr. STEVENSON. Thank you, Mr. Chairman. I appreciate your reasons for having to leave and I appreciate also your interest in what I have to say.

I am delighted to be here this morning to talk about a subject whose importance has been stressed by the witnesses that have gone before me and the importance of which I would only underline myself.

I have submitted a written statement for the record. I thought I had mailed it in ample time to arrive in advance of the hearings. I understand, however, that it is still floating around in the recesses of the congressional mailrooms. I regret that you have not had a chance to look at it in advance of my testimony.

In the interest of time, I propose to summarize informally and fairly briefly some of the major points which I have made in that statement. Then I would be glad to respond to any questions.

I would like to make four points this morning. First, in considering the reform or amendment-whether with a crowbar, a screwdriver, or a scalpel-of the Freedom of Information Act, it is important that we not overestimate the costs of the act. Second, it is equally important that we not underestimate its benefits. Third, I believe there is a mechanism that falls short of major restructuring of the act that would assist in dealing with one particular category of costs. Fourth, I believe that there is a readily available mechanism for dealing with some of the administrative problems of the act to which I would hope the Congress and the administrative agencies would give due attention.

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COST-BENEFIT ANALYSIS

I thought for a moment in listening to the testimony of Mr. Saloschin this morning that he had mistakenly picked up a copy of my testimony and was reading from it when he began to talk about the problems of conducting a so-called cost benefit analysis of any particular public policy.

After listening to him for a short while, however, I realized he was saying it better than I had said it in my prepared testimony. I would only wish to associate myself with his remarks this morning, remarks that I have amplified in my prepared testimony.

One of the difficulties of cost benefit analysis is that it contains an alluring fallacy into which far too many people who are considering questions of public policy tend to fall. That is, where the costs or benefits of a particular course of action are reasonably concrete and easily graspable, there is a tendency to seize on that side of the balance to the neglect of the other side of the balance, where the costs or the benefits are often somewhat more difficult to describe or to understand. That is a particular problem for the Freedom of Information Act.

COST-BUSINESS INFORMATION

This morning I would like to consider some of the costs that have been attributed to the release of business information possessed by the Government. In the course of my study that I prepared for the Administrative Conference, I had the occasion to attempt to ascertain the truth of the all-to-familiar charges that the Freedom of Information Act has been used as a tool for industrial espionage. I began by searching the public record to see if I could ascertain any particular instances in which the Freedom of Information Act had led to the release of confidential business information which ought to have been withheld. I was somewhat surprised, given the vociferousness of the criticism of the act in this area, that I found practically none. In fact, upon further investigation, the few examples that were cited in the public record turned out not to have been examples of the unwarranted release of confidential business information at all.

In most cases, they involved a good faith dispute between a submitter and a Government agency about the applicability of exemption 4. Frequently, this dispute was ultimately submitted to a court which, more often than not, largely accepted the position of the agency, saying that the information had to be released under the act. I would suggest that is not precisely a case of an abuse of the Freedom of Information Act, at least as it is now drafted. In the absence of much hard evidence in the record, I decided to ask the Administrative Conference to post a notice in the Federal Register soliciting specific examples of cases in which confidential business information had been released under the FOIA. There were some two dozen responses to that request. Again, I was surprised to find that only a handful of those responses contained alleged cases in which there had been an abuse of the act in this respect. Again, on closer scrutiny, the majority of those cases turned out to have involved a good faith dispute over the applicability of exemption 4. In several others the information in question

was clearly not within the exemption and therefore had to be released by the agency.

What does one make of this evidence? I suppose that depends on where one locates the burden of proof. I, for one, find myself provoked to a certain degree of skepticism about the widespread and vocal charges that have been made against the operation of the act with respect to business information. At the very least, I would suggest that the study does not lead one to conclude that the charges in this area have been proved. If one is skeptical, and would pose the burden of proof on the critics of the act, the study might lead one to conclude that perhaps the problems are not as severe as has been suggested, and that there may be a good deal more smoke than fire here.

In summary, I would urge that the committee pay careful attention to specific examples and press those who criticize the operation of the act in this and other areas for specific instances in which there have indeed been problems and not bow to the widespread criticism of the act simply because it comes from a number of quarters.

BENEFITS-ENHANCED COMPETITION

It is easily possible to understate the benefits of the act. The benefits that grow from open government have been discussed by a number of other witnesses here. I need not elaborate on them. I would, however, suggest that there are a number of benefits growing out of the act that are perhaps unexpected and unintentional. Let me make the somewhat radical suggestion that if the act does occasionally result in the release of business information that businesses would rather not have released, and I am quite certain that it does, this may itself have economic benefits that were perhaps unintended by the Congress when it passed the statute but should nevertheless be considered in any so-called cost benefit analysis. A moment's reflection suggests that the very objection of businesses to the release of information to their competitors indicates that the result of the release is likely to be more effective and efficient competition as a result of reductions of market imperfections. This is a considerable benefit.

In addition, there are substantial advantages that grow out of the dissemination of technological information through the FOIA. Let me suggest that you consider, as a simple analogy, the effect of the patent system. The patent system says, to an inventor in effect, "You may have a Government benefit in the form of a limited monopoly, but in order to obtain that Government benefit, you must first disclose your invention so that others may make use of it and build on it in their own technological work." The same principle might be applied to other Government benefits, as for example, license from the Food and Drug Administration or valuable Government contracts.

There is no principle that would require us to say that there is something absolutely wrong with the Government's saying to such a seeker of benefits: "You may have the benefit, but only if you agree to disclose certain information to the Government and, in turn, through the Freedom of Information Act to the public."