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H.R. 2021 proposes changes on the procedural front,

but does not address the substantive issues discussed above

concerning the need for clarification of the "confidentiality" standard contained in Exemption 4 and for affirmation that

Exemption 4 is mandatory in nature.

On the procedural side,

H.R. 2021 represents a move in the right direction but, unfotunately, one which does not go far enough. Thus, while the

bill would formalize submitters' right to notice of, and an

opportunity to object to, a disclosure request, it would

continue the bias which now exists against submitters in

FOIA proceedings both at the agency level and in court.
For example, requesters would continue to be given a right

to de novo review of an adverse agency disclosure decision,

while submitters would be afforded only a more limited

review based on the agency record; given the importance

of submitters' rights and interest in the confidentiality

of business information, this discrimination against sub

mitters does not seem justifiable.

The bill's preference

to the requester's choice of venue over the submitter's,

when both parties have sued regarding the identical

records, is equally unfair and unwarranted. Finally, the bill provides only ten days within which a submitter may file objections to disclosure and makes no provision for an oral hearing where requested and warranted by the

circumstances.

In contrast, s. 1247 does enlarge the time for

filing objections to disclosure, does make provision for an informal oral hearing where warranted by the circumstan

ces, and does not discriminate against submitters with respect to either choice of venue or standard of review. More importantly, S.1247 tackles the substantive issues

which are at the heart of this problem by declaring (1)

that Exemption 4 shall apply to information which would not customarily be disclosed by the submitter (regardless of any showing of competitive injury), (2) that Exemption 4 shall be applied on a mandatory basis unless it is shown that withholding would cause substantial injury to an overriding public interest, and (3) that the Trade Secrets Act, 18 U.S.C. $1905, shall be deemed to be a statute des

cribed in Exemption 3 of the FOIA, 5 U.S.C. $552 (b) (3).

S.1247 should be enacted.

By accomplishing the

substantive and procedural reforms described above, it would provide to submitters of confidential business

information the protection which such information deserves,

and eliminate the discrimination against submitters which

the present Act embodies. Moreover, by erasing the perception that agencies will not preserve the confidentiality of business records, the bill would foster renewed cooperation by those persons upon whom agencies are dependent in obtaining information necessary for the effective performance of their regulatory functions. Finally, enactment of s. 1247

to resolve the many questions left unanswered by the Supreme

Court in Chrysler Corp. v. Brown, questions which, in the final analysis, require a legislative rather than a judicial

solution.

Mr. RADER. Mr. Pulley.
STATEMENT OF JACK I. PULLEY, SENIOR ATTORNEY, DOW

CORNING CORP., MIDLAND, MICH.
Mr. PULLEY. Thank you.

Dow Corning Corp. is a specialty chemical manufacturing firm headquartered in Midland, Mich. Our products are broadly referred to as silicones and are used in every major industry, including automotive, aerospace, medicine, and electronics.

Generally, I handle Dow Corning's environmental legal affairs; however, I am also responsible for insuring the protection of Dow Corning technology that has been submitted to various health and environmental agencies.

As you will see from my examples, I have had experience in responding to public requests for documents Dow Corning has submitted to the Government. Even though my comments today are somewhat critical of FOIA as it now exists, I must emphasize that we support the underlying public purpose of this act—that is, an open government.

In a democracy, the public has a right to know how its government operates. However, this right must be balanced against the rights of those who have a vested interest in the information they have given the Government.

My basic point this morning is that there are serious ambiguities in the present statute which encourage those who would use FOIA to serve their own private economic interests, whether they be foreign or domestic.

This abuse adds unwarranted risks and costs to our business. Further, we believe these ambiguities can be legislatively corrected without undermining the basic purpose of FOIA.

The risk of losing proprietary information through FOIA abuse was clearly illustrated to me by two recent events. The first was a publication of an article entitled "The Freedom of Information Act; Strategic Opportunities and Threats,” in the winter 1978 issue of the "Sloan Management Review."

In this article, the authors described how FOIA could be used to gain-and I use their words-a differential competitive advantage.

Here is one of America's most prestigious business journals teaching the world how FOIA can serve private economic interests.

The second event which showed me the reality of this abuse was a series of four requests over a period of about 13 to 2 years for copies of all environmental permits and supporting documents for Dow Corning's two basic U.S. manufacturing facilities.

These documents not only described the character of the environmental discharges, but they also contained production capabilities, construction cost figures, and certain critical process operating de tails.

Initially, one may think these requests would be the ultimate public purpose--a citizen reviewing the Government's environmental decisions. However, three of the four requests were filed by large metropolitan law firms on behalf of an unknown client, and the fourth by an environmental consulting firm acting on behalf of an anonymous client reportedly in the same line of business as Dow Corning.

We will probably never know who was seeking our documents. For several reasons, which I will describe in my written testimony, it does not appear that they were concerned environmentalists.

It is my opinion that the requester was in each case one of our present or future competitors-possibly a foreign competitortrying to gather information regarding our facilities but much more anxious to preserve its own anonymity.

The problems with FOIA, as it is now written, are both procedural and substantive. Together they create an unacceptable degree of unpredictability in the handling of our trade secrets.

Procedurally, we have a confused situation in which it is very difficult to determine whether a given agency at a given time will or will not protect proprietary information. Let me give you another example.

A while back, Dow Corning was considering filing an application for a refund of the duty we had paid for importing a certain raw material. The U.S. Customs allowed such a refund to the extent the raw material was used in producing exports. The refund is referred to as a duty drawback.

Unfortunately, the duty-drawback application called for a detailed description of the process in which the raw material was used. To Dow Corning, these details were highly confidential and considered very valuable.

Since the agency did not have regulations completely defining their procedures for handling such requests, I telephoned the 'agency and eventually talked to the attorney in charge of FOIA affairs. She immediately assured me that the agency would not disclose confidential information-that is, information that the agency considered confidential.

Quite naturally, I asked how the agency would handle a situation in which the applicant considered the information confidential but the agency did not.

It took almost 1 month to get a response, and I am sure that you understand that by that time, as far as I was concerned, the response was irrelevant.

I advised Dow Corning not to file the application and risk losing this technology.

My reason was that if it took the FOIA attorney-an articulate and apparently competent individual-almost 1 month to find an answer, I had no assurance that the frontline employees actually responding to FOIA requests would be aware and sensitive to this problem.

Our loss was about $10,000 from the duty drawback and a few thousand more in lost time, effort, and energy. This is an unnecessary cost caused by FOIA's failure to require a uniform and complete procedure for all agencies to follow.

The substantive ambiguity lies in the competitive harm test of the national parks case. This places an often impossible burden on the original submitter to prove that the release of the information is likely to cause competitive harm. Again, an example.

There are many pieces of information, such as plant capacity, process rates, production rates, and certain process operating parameters which are neither patentable nor within the traditional definition of a trade secret, but which we consider very confidential.

The reason for our concern for such information is that our competition may be able to use this information to unfairly reduce the normal risk of doing business, but this is a very difficult thing to prove-even more difficult for us to learn about.

Our competition does not tell us what they know of our operating processes. It is not evident in their product, and it is not evident from any single act that they may take.

In summary, we believe that S. 1247 corrects both the procedural and substantive laws in FOIA-again, without undermining its basic purpose.

I plan on submitting a more detailed written statement, but I would be happy to answer any questions you may have at this time.

Mr. RADER. Thank you very much.
[The prepared statement of Mr. Pulley follows:)

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