Mr. NORTON. I think, from our standpoint, that might be desirable. But, from a requester's standpoint, that still means that, if you are just a person with limited means or a small company elsewhere, you have to get a lawyer in Washington. There could still be some inhibiting factor with that.

Senator ABOUREZK. In your view, what is the best solution?

Mr. NORTON. Maybe some provision that would require that similar lawsuits be consolidated if they involve the same questions. The requester would also have to be bound by the results. If there is only one request and one lawsuit, the fact that it might be filed someplace else is less important to us because it does not present the same problems. There is another measure that might alleviate the reverse lawsuit problem. A lot of the companies have argued that, if something is covered by the exemption, then the agency's authority to release it is limited. So, if the Commission, for example, decides that a particular document or information is not confidential, commercial or financial information, as construed by the courts and if the Commission is wrong, the companies claim they are entitled to enjoin us. Or if the Commission decides as a matter of discretion to release information, the companies say that the act permits them to block that.

Now, the Commission has very broad authority under section 6 of the FTC Act to make public any information it gets.1 So it is in a situation that maybe some other agencies are not. But, if it were clear that the FOIA does not limit an agency's authority to make information public, a basis for many of these reverse suits would be eliminated. Then you would be left with whatever other restrictions might exist with respect to the release of information.

Senator ABOUREZK. Most exemptions are premissive; they are not mandatory. It applies to all agencies.

Mr. NORTON. That is what the agencies say, and that is what some of the courts have said. But other courts have suggested that, if you are within the exemption, that is a mandatory restriction on disclosure.3

We think that is wrong and that a better view is that it is simply a permissive authorization.

Senator ABOUREZK. Mr. Gardner, do you have an observation on the venue question in reverse cases?

Mr. GARDNER. I think that that is the kind of problem that would pose difficulties for a number who request information from our agency. Requesters typically-safety and effectiveness information for new drugs, for example-are individuals or consumer groups who are concerned with the impact on public health and safety and want access to that sort of information or other kinds of information.

Those groups typically are not well funded, although they might be located here in Washington. So, selecting and centralizing where those suits could be brought would be one issue. But, even if that were held in Washington, it would still raise a problem for the requesters, to be able to fund their participation in litigating that sort of a suit.

1 See exhibit 21. p. 324 of the appendix.

2 See Chrysler Corp. v. Schlesinger, No. 76-1970, Slip Op. at 25-29 (3d Cir., Sept. 26, 1977); Pennzoil Co. v. FPC, 534 F. 2d 627, 630 (5th Cir., 1976); Charles River Park “A” v. HUD, 519 F. 2d 935, 941 (CD.C. Cir., 1975); S. Rept. No. 93-854, 93d Cong., 2d sess. 6 (1974).

3 See Westinghouse Electric Corp. v. Schlesinger, 542 F. 2d 1190 (4th Cir., 1976), cert. denied sub nom Brown v. Westinghouse Electric Corp., 45 USLW 3574 (May 15, 1977).

I think that would present a number of them a great deal of difficulty. We have a petition before us for more general funding of consumer groups participating in agency procedures, apart from freedom of information matters. It is that sort of background and information that leads me to speculate that we would raise the same sort of problems in this matter that we are dealing with.

Senator ABOUREZK. You do not have any answers as to where venue should be?

Mr. GARDNER. I do not have an answer as to where. But I think that we get requests from Washington and from other places in the country. I am simply pointing out that the people who request very frequently are not able to fund participation in the suit. So, the place might make it more difficult for some of them. Regardless of that, it would still present a funding problem for most of them.

Senator ABOUREZK. Mr. Norton?

Mr. NORTON. I have one observation about the regular FOIA suit that is somewhat related conversely to the problem I just discussed before.

At present there is no obligation on the person that submitted the confidential information or assertedly confidential information to participate in the litigation if the agency decides to withhold it and is then sued by the requester. We had one case recently in which there were some documents that had been submitted as part of an investigation. I believe they related to General Motors. Applying the standards based on information we had, we concluded that they were exempt and were sued by the requester.

General Motors sat on its hands, and we had to litigate to try, in effect, to defend its interests. As it turned out, we lost and had to turn over the information. I gather it was not any great problem for them ultimately.

Some requirement that the person whose documents or information is in issue has to participate or try to defend the assertion of the exemption might well be useful. If they fail to do so, the exemption could be deemed waived. That might ease some of these problems.

Finally, Mr. Chairman, I would like to make one brief observation about a particular instance mentioned in your opening statement about FTC's response to a Federal Power Commission information form. It has been the subject of some misinformation in press stories that I have seen. It might be useful just to clarify what happened in that instance.1

The Power Commission has required utilities to file form 423 every month, which sets forth information about their fuel costs and identifies suppliers, prices, and other information. A question was raised by the utilities whether this form should be continued or whether the information should continue to be made public; it is all made public. In commenting on that form, the Commission took the position that it should be continued and that the information was useful, and that the information should continue to be made available to Government agencies which are interested in this information even for law enforcement, antitrust, or rate regulations, or whatever purposes. But, at least in

1 See pp. 315 and 423 of the appendix and p. 2 of hearing text.

some instances, it should not all be made immediately public because this kind of very specific current information about prices to particular customers from particular suppliers could be used in an anticompetitive fashion by the suppliers, suppressing price competition. Any effort to cut prices would immediately be evidence to the competitors. They could either take retaliatory action or whatever other actions that they might be inspired to consider.

That is the limited nature of the Commission's suggestion that at least some of the information ought not to be made immediately public with all of the details, although we did suggest average cost information could still be made public. Perhaps the Power Commission could determine that, as to particular suppliers, there was no risk of this possibility and that there would be no problem with immediate publication.

I have no further comment.

Senator ABOUREZK. I do not want to spend very much time on this particular issue, but that strikes me as being very strange. By maintaining the secrecy of those reports, what you are doing is allowing some utilities to buy higher priced fuel. I do not see where the competitive issue enters into it. Utilities pass on the costs they have to the customer. If they make arrangements to buy cheaper fuel from some companies, from fuel suppliers, would not it be to the advantage of the consumer to have all the fuel at that same low price, if it is indeed lower?

What you are doing is protecting the supplier by keeping this information secret. You are protecting the supplier who might be charging more to one utility than he is to the other.

So, it seems that this argument favors the maintaining of higher prices in some cases.

Mr. NORTON. I suppose sometimes there is a tension between what is in the interest of antitrust enforcement and what may be in the interest of other public policies. But the ready availability of information about current prices to specific customers has been held by the Supreme Court to be a serious potential problem under the Sherman Act. It is this interest that we were reflecting as an antitrust enforcement agency.

If our mission were to monitor prices to the consumers, a different perspective might well be justified.

Senator ABOUREZK. I would think so.

Do you have anything more on this?

Mr. NORTON. No.

Senator ABOUREZK. Thank you very much.

Your entire prepared statement will be inserted into the record. [The prepared statement of Mr. Norton follows:]

PREPARED STATEment of GERALD P. NORTON

I am Gerald P. Norton, Deputy General Counsel of the Federal Trade Commission, and I appreciate this opportunity to discuss with the subcommittee the problem posed for the Commission by exemption 4 of the Freedom of Information Act. The views I express, however, do not necessarily reflect the views of the Commission or of any Commissioner.

As you know, that section exempts from the act's mandatory disclosure requirements matters that are "trade secrets" or "commercial or financial information obtained from a person that is privileged or confidential." The trade secrets

part of the exemption has not been a problem for the Commission since section 6(f) of the Federal Trade Commission Act (15 U.S.C. § 46 (f)) already limits the power of the Commission to make trade secrets public.1 Courts have rarely been required to construe the trade secrets portion of exemption 4, probably because of their belief that a trade secret is a fortiori confidential commercial or financial information.

The primary difficulty in dealing with exemption 4 is the uncertainty that has arisen as to both the definition of confidential commercial or financial information and the meaning of court rulings interpreting that language. In attempting to set out guidelines for agencies to follow in interpreting the exemption, the court in the leading case of National Parks and Conservation Ass'n v. Morton, 498 F. 2d 765 (D.C. Cir. 1974) [National Parks I] held that the main consideration in determining the application of this exemption was whether release of the information would be likely to cause substantial harm to the competitive position of the submitter. That test thus required a case-by-case, document-by-document analysis. Indeed, the history of the National Parks controversy itself reveals the difficulties inherent in the test. While the court in National Parks and Conservation Ass'n v. Kleppe, 547 F.2d 673 (D.C. Cir. 1976) [National Parks II], suggested that to meet this requirement, the information must be likely to give valuable insights into the submitter's overall operational strengths and weaknesses, that case itself has involved numerous evidentiary hearings and has been remanded twice by the Court of Appeals, thus indicating that no bright line standards can be drawn. Indeed, the fact that these cases, all involving the same companies in the same industry, have generated so much judicial and administrative energy points to the conclusion that the exemption, as written, may not be amenable to general application.

Thus, each request for information calls for an individual and often an original analysis involving a series of dynamic factors. In determining whether release will cause substantial competitive harm, an examination of such factors including the make-up of the industry, the submitter's position therein, the age of the documents in question, and the ability of competitors to glean such information elsewhere will often be required. Aside from the fact that this exemption is not susceptible to ready application and calls for a burdensome and time-consuming series of evidentiary analyses, a further problem arises. The processors of Freedom of Information Act requests are not industry analysts or financial experts and therefore often lack the expertise required to perform an analysis akin to those undertaken in the National Parks cases, particularly in the limited time allowed under the act, even if the required information were readily available.

Most Freedom of Information Act requests to the Commission that involve the issues raised by exemption 4 are requests for documents submitted to the Commission, either voluntarily or pursuant to compulsory process, by companies under investigation by the Commission. Thus much time is expended with reference to documents that are not generated by the agency, but are merely corporate or business records that are being inspected by the agency.

The Courts have construed exemption 4 extremely narrowly, and have refused to deny access based solely on agency grants of confidential treatment. As a result, companies who are concerned with the confidentiality of their documents are reluctant to submit them to the Commission.

The Commission's general policy is to entertain requests for "confidentiality" as requests for advance notice prior to any disclosure of the documents in question. If such an assurance is granted, the person submitting the documents will receive notice of any impending release in response to a Freedom of Information Act request and will generally be afforded an opportunity to convince the Commission that disclosure of the documents is not required by exemption 4.

Despite the Commission's broad power to compel the production of information, collateral arguments over the confidentiality of documents to be produced have proved burdensome and time consuming. Such resistance has persisted despite recent court decisions holding that the question of confidentiality is not a defense to the production of information. See, e.g., FTC v. Teraco, Inc., 555 F. 2d 862, 883– 85 (D.C. Cir.) (en banc), cert. denied, 97 S. Ct. 2939 (1977).

Similarly, a number of persons have filed pre-enforcement suits which seek to challenge the Commission's issuance of compulsory process before the Commission itself brings an enforcement suit. The bringing of these pre-enforcement suits

1 See exhibit 21, p. 324 of the appendix.

adds an extra burden to our task in that it requires the Commission to spend time and resources becoming involved in two suits (the pre-enforcement and the standard enforcement suits) often in two different forums that involve identical material. A major issue in such suits is, once again, the confidentiality of the information to be submitted. (See, e.g., Exxon Corp. v. FTC, No. 77–61 (Ď. Del. Aug. 19, 1977)).

A final point in this regard is that since the exemption as construed by the courts may only apply to a very small category of financial or commercial information, which the company submitting would rather keep confidential, a further burden is placed on the Commission in that it must process a large number of requests for material that the submitters consider confidential but must be released since the stringent requirements for invoking exemption 4 have not been met. These requests for material that is not otherwise available are often made to either circumvent or supplement administrative or judicial discovery. See e.g., Gifford-Hill, Inc. v. FTC, 1975-2 Trade Cas. ¶ 60674 (D.D.C. Jan. 13, 1976); Thrifty Drug Stores, Inc. v. FTC, 40 Ad. L.2d (Pike & Fisher) 108 (D.D.C. Dec. 17, 1976). As numerous courts have pointed out, the Freedom of Information Act was not enacted to enable parties to a suit to supplement discovery (see, e.g., Title Guarantee Co. v. NLRB, 534 F. 2d Cir.), cert. denied, 429 U.S. 834 (1976)), and the use of the act to do so, again, unnecessarily diverts the agency's resources from its underlying mission. In the first half of 1977, for example, of the 375 Freedom of Information Act requests received by the Commission, 273 came from businesses or corporations or their lawyers.

The other major problem of exemption 4 is the filing of so-called reverse FOIA suits. A reverse suit arises when a person who has submitted information to an agency seeks to enjoin the agency from releasing the information to requester under the FOIA. Just as an FOIA appeal involving material that may be exempt under exemption 4 presents an agency with problems not found in other appeals, a reverse suit produces complexities not present in regular Freedom of Information Act litigation. One problem is that some courts have suggested that exemption 4 not only permits an agency to withhold documents within its scope, but requires an agency to do so, thus unnecessarily restricting agency discretion. (See Westinghouse Electric v. Schlesinger, 542 F. 2d 490 (4th Cir. 1976) cert. denied, 45 U.S.L.W. 3749 (May 7, 1977); contra Charles River Park, 519 F. 2d 935 (D.C. Cir. 1975).)

Another difficulty presented by a reverse suit lies in the choice of forum by the submitter. The forum may be chosen so as to be so inconvenient for the requester that the requester will be unable or unwilling to intervene; this is particularly true where the requester is an individual or public-interest group that cannot afford the expense of retaining counsel in some distant city. Where there are multiple plaintiffs (because the information requested had been submitted by several persons), there is the possibility of an agency being confronted with lawsuits in different parts of the country although the questions presented are essentially the same. This exact situation has recently happened to the Commission. Five reverse suits resulted from a single freedom of information request. Three of the companies brought suit in Washington, D.C., one sued in Dallas, and the fifth company sued the Commission in Los Angeles.1 The Commission was unsuccessful in seeking to have the cases in Dallas and Los Angeles transferred to Washington and must now defend these cases on three different timetables and with the involvement of three separate U.S. Attorney's offices.

Third, and perhaps the most important problem presented by a reserve suit, is the difficulty an agency has in litigating such suits. Part of the problem is a result of the agency's interest in the outcome: while the agency is usually only a stakeholder, with the actual contest being between the requester and the submitter, the agency is often forced to assert the claims of the requester who is unwilling or unable (e.g., because of lack of finances) to become a party to the litigation. In the five reverse cases mentioned earlier the requester has refused to intervene in any of the cases. Indeed, this can also be a problem in the standard Freedom of Information Act suit where the submitter of the information does not intervene to protect its confidentiality. As if this confusion of roles were

1 Liberty Homes, Inc. v FTC, Civil Action No. 77-406 (D.D.C. 1977); Moduline Inter. national, Inc. v. FTC, Civil Action No. 77-407 (D.D.C. 1977); Skyline Corp. v. FTC, Civil Action No. 77-403 (D.D..C_1977); Redman Industries, Inc. v. FTC, Civil Action No. 3-77-0322 (N.D. Tex. 1977); Fleetwood Enterprises, Inc. v. FTC, No. CV 77-0897-RJK (C.D. Calif. 1977).