a statement of the benefits that agencies believed to flow from the Act. The summary of the agency responses, which is appended to this statement, is enlightening. The respondents described a large number of benefits, many of them relating to improving citizen participation in government, but a great number of them somewhat less obvious. Interestingly enough, among the benefits listed were a number of gains to the government growing not out of citizen participation but out of the simple need to comply with the Act. For example, respondents reported they had experienced "improved record quality", "improved record access", "improved documentation relating to decision-making", and "improved security classification assignments", as well as a number of other improvements in agency functioning that do not leap to mind as consequences of a statute such as the FOIA. To turn for a moment to the sort of advantages that Congress intended to flow from the FOIA, a classic example is found in increased access to health and safety testing data received by agencies such as the Food and Drug Administration. This is not the place for a complete catalogue of those benefits. For an excellent enumeration and elaboration, I commend to your attention an article in a recent number of the Harvard Law Review* which, after weighing the benefits of disclosure of such data against the costs, concludes: "[A]n analysis of the competing policy con- The release of sensitive business information of the kind discussed in this article has been, as you are well aware, the focus of a great deal of attention in discussions of the costs of the FOIA to the economy. I would like, however, to advance the radical suggestion that, in many cases, the release of certain kinds of business information creates substantial benefits to the economy. Indeed, a moment's thought compels the conclusion that there must be some benefits to the economy from the release of the kind of information about which business has complained so strongly. The complaints are based on claims that the information will give an advantage to competitors. If this is true and in many cases *McGarity and Shapiro, The Trade Secret Status of Health and Safety Testing Information: Reforming Agency Disclosure Policies, 93 Harv. L. Rev. 837 (1980). **Id. at 840. it probably is -- the immediate result can only be lower prices, which will benefit consumers and taxpayers. In more general terms, economic theory teaches us that in a competitive economy the rapid dissemination of information enhances competition and is therefore beneficial. There are at least two reasons for this: First, the spread of information tends to increase the overall rate of technological progress of the society; and second, it enhances the vigor of competition by tending to eliminate market imperfections. This analysis does not, of course, go far enough. There are important drawbacks to the disclosure of business information. The most obvious is that a certain degree of secrecy is necessary to protect incentives to innovate. A business is far less likely to engage in research and development if it knows that its competitors will have immediate access to the results of these efforts and can therefore prevent it from reaping the benefits. This does not necessarily mean, however, that guaranteeing secrecy is always economically efficient in all situations. Exactly how much secrecy and for how long will maximize the economic welfare of the society is a matter of disagreement among economists. This is not the place for a discussion of that problem. Suffice it to say that disclosure is, in this context, neither all good nor all bad; its effects are mixed. Given our uncertainty about the matter and the importance of incentives for business research and development, it is necessary to be careful not to weaken those incentives unduly as a result of the disclosure of technological information through the Freedom of Information Act. On the other hand, while some measure of protection is undoubtedly needed, there is nothing that indicates that the protection furnished by the law in its present state is inadequate. Let me again urge you not to react too quickly to charges that the FOIA is undermining incentives for research and development simply because those charges are made with such frequency. We have yet seen no sound evidence of the truth of those charges. The second objection to the disclosure of confidential information is based not on the effects of such disclosure on the system of incentives as a whole but on considerations of equity. There is a certain element of unfairness in disclosing the business secrets of one company to competitors who are not subject to the same treatment. In general we ought not to do so. Even here, however, so long as the incentives for socially productive behavior that are provided by a certain amount of secrecy are not destroyed, society, at large, may reap economic benefits from disclosure. A simple analogy will illustrate why even here we are not dealing with absolutes of right and wrong. The patent system offers a reward to innovators in the form of a limited monopoly over qualifying inventions. As a condition of that reward, however, the law requires the inventor to disclose his secrets in order that the rest of society may benefit from the resulting dissemination of technology. No one suggests that this is "unfair". The same analysis may be applied to other rewards offered by the government, such as, for example, a profitable contract or a license to sell a new drug. It would be no more "unfair" for the law to require, as a condition of awarding such a benefit, that the recipient divulge certain information to the public than it is to require that a patent applicant publicly disclose the details of his invention. There are reasons of public policy the possibility that the government would be limited in its ability to procure high quality goods, for example why we might wish to afford some degree of protection (as indeed we do) for the commercial secrets of those who deal with the government. But there is no absolute principle that demands absolute protection. - I do not mean to suggest by what I have said that the federal government ought to put itself in the business of handing out commercial secrets to all comers. What I do suggest, however, is that the position that business confidentiality should be elevated to some sort of a sacrosanct status the merest invasion of which threatens dire consequences for the economy is a gross exaggeration. Critics of the functioning of the FOIA in this area talk of the use of the FOIA as a "tool for industrial espionage." The pejorative connotation of that phrase is simply unwarranted. The characterization would be considerably closer to the truth if it spoke of "industrial intelligence". Every well-managed business is constantly engaged in gathering information about the economy, the markets in which it operates, and the activities of its competitors. There is absolutely nothing evil or harmful about this sort of behavior. It is of the essence of a free market economy. Indeed, the economy would function very badly without it. It cannot be denied that businesses use the Freedom of Information Act regularly as a tool of industrial intelligence. This is, in fact, one of the major uses to which the statute is currently being put. It is also undoubtedly true that Congress did not have this use of the statute in mind at the time of its passage. As any lawyer knows, however, it is a common occurrence in the law for a rule of law originally developed for one purpose to be adapated to a different one. There is nothing malign in this sort of development. As often as not the unintended consequence of the rule of law is a beneficial one. I urge you, therefore, in considering the role of the Freedom of Information Act in allowing the public disclosure of certain kinds of business information, to bear in mind all of the consequences, both good and bad, not merely those that might originally have been intended. One of those consequences, I would be so bold as to suggest, is that in some cases the FOIA serves as a device that improves the competitive functioning of the economy both by encouraging more vigorous competition and by fostering the dissemination and production of technological knowledge. The Administration of the Act My final point relates to the way in which the Freedom of Information Act is administered. As you are no doubt well aware, the FOIA is looked on in many parts of the government as an unwated stepchild. Agencies are often reluctant to allocate the resources necessary to comply fully with the mandate of the Act to what they consider at best a secondary function. Assignment to FOIA compliance is perceived by many government personnel as a career dead end. Agencies have often given little thought to the manner in which they organize themselves to deal with FOIA matters. The resulting structure is in many cases the product of historical accident rather than careful planning. Personnel who manage FOIA matters are too often poorly-trained and poorly-motivated. Under these conditions it is hardly surprising that the performance of many agencies in FOIA matters is less than ideal. Statutory deadlines are missed, documents that should be released are not, documents that should not be released are, and a great deal of time and money is wasted in disputation and litigation. There is no way to eliminate all of the problems that are likely to arise under the FOIA by mere administrative change. There may, however, be a means of reducing them somewhat. As you are not doubt aware, one of the consequences of the "Age of Information" of which I spoke earlier is that businesses, particularly large ones, are paying increasing attention to the problems of information management or information resources management. The field is evolving rapidly, and there is no general consensus as to what exactly "information management" means. It would, however, be generally agreed that it involves a comprehensive examination of the manner in which an organization collects, assembles, stores, communicates, and otherwise deals with the information necessary to its functioning. Last year Congress, aware of this trend and its importance to government, took a major step toward putting this emerging philosophy into practice in the federal government when it passed 87-749 O 82 15 the Paperwork Reduction Act. Although the legislative history contains references to the Freedom of Information Act, the statute, itself, does not mention it. I would be so bold as to suggest that that was an error. If there is any law that is central to the federal government's information activities, it is the FOIA. It seems less than entirely logical that a statute designed to coordinate these activities should omit the FOIA from its coverage. From the point of view of information resources management, one of the principal features of the Paperwork Reduction Act is that it requires each agency to appoint a single official who is responsible for the coordination and management of the agency's information activity. Nothing would be more appropriate than that this official be given responsibility for the agency's compliance with the Freedom of Information Act. It is interesting to note that in the Justice Department's survey alluded to earlier, a number of agencies reported that they found that the Act had the effect of improving the qualify of agency records, access to records, and record retention standards. It seems only sensible that a statute that has these effects should fall under the aegis of an office within each agency whose responsibility it is to improve the way in which the agency manages its information resources. Not only would this be likely to benefit the information management function but it should improve the manner in which the agency handles FOIA matters. Instead of being a stepchild, FOIA compliance would become a part of an integrated information management program. This would enable the agency to develop a staff of trained professionals to deal with FOIA and other information problems who would no longer see dealing with the FOIA as a career dead end but would see it as a career opportunity. Compliance with the FOIA along with other information management activities would take its place among the more important functions of the agency rather than being given the low priority from which it now suffers in many agencies. From a broader perspective, there would be more coordination among agencies on FOIA matters and, eventually, we could expect to see the present uneven patchwork of regulations and administrative practices replaced with a more or less standard system that varied only in its details from one agency to another. As the government enters the Age of Information, it should proceed facing forward with its eyes open rather than backing blindly into the coming period of rapid change in the way in which information is used and managed. There is no better place to start than with the Freedom of Information Act. |