ARTICLES

[Exhibit 36]

JUSTICE WANTS SECRECY LABEL ON FUEL DATA

[From the Washington Star, July 20, 1977]

(By Stephen M. Aug, Washington Star staff writer)

The Justice Department joined the Federal Trade Commission today in the unusual position of opposing a view long supported by consumer groups. Justice said it is supporting a proposal by electric utilities to keep secret the information they report to the government on the cost of fuel.

The views of the two agencies would seem to put them squarely in opposition to those of consumer organizations which, about five years ago, strongly fought utilities efforts to keep the price information private.

Since 1972, electric utilities have been reporting monthly to the FPC the cost and quantity of fuel they have used. The information is routinely made public. Last autumn, Alabama Power Co. and 11 other utilities asked the FPC to abolish the form or, alternatively, to keep the information private. Their argument apparently is that they frequently are able to obtain favorable prices from fuel suppliers in private arrangements, but if fuel prices are made public this could embarrass the suppliers-who may be charging different prices to different utilities and the result might be more costly fuel.

The FTC supports the utilities—at least in part. In a letter to the FPC, Michael Pertschuk, FTC chairman, said the power commission should continue to require the utilities to provide the information, but that it should be kept confidential. He suggested, however, that the FPC share the information with state regulators. Pertschuk said his own agency had found the data useful in looking into possible price-fixing and in analyzing the effects of vertical integration by utilities-utilities acquiring their own fuel supplies without buying from fuel companies.

Today, John Shenefield, acting assistant attorney general for antitrust, added his support. "The antitrust division shares the FTC's concern that the public dissemination of detailed price information could have harmful anticompetitive effects," Shenefield said in his letter.

He suggested that the detailed data could be used in stabilizing fuel prices; suppliers who might normally lower their prices to compete would lose incentive to do so since their competitors could easily discover the amount of any discounts offered, denying the supplier the opportunity to increase his share of the market. Further, Shenefield says individual utilities which might aggressively seek lower prices in the marketplace would be discouraged from shopping for lower prices. "Public disclosure of fuel costs also could encourage price-fixing among suppliers by giving them an easy way to enforce a price-fixing agreement,' Shenefield wrote.

Shenefield said that requiring the utilities to continue filing the information with the FPC-and sharing it with state regulators-would "strike a useful balance; such an approach protects the public from the risk of anticompetitive behavior which could result from full disclosure while maintaining scrutiny of cost data by appropriate federal and state agencies.'

Not so, says the executive director of the American Public Power Association, which represents municipally-owned electric companies.

Alex Radin, the APPA executive director, told a reporter that his group and consumer groups have been arguing in favor of continuing to make the information public. The municipal electric companies are also required to report the fuel costs data to the FPC.

"We think that by keeping it public you can see what other companies are paying for fuel, and it puts you in a better competitive bargaining position"

with suppliers, he said. He said that virtually all APPA member companies "are required to buy fuel on the basis of competitive bids that are publicly known anyhow, so what we report is public knowledge."

He said, too, that consumer groups have been concerned over keeping this information public. The fuel escalation clauses in various utility rates, he pointed out, have become a matter of considerable controversy, and having available the cost of utility fuel helps consumer groups compare the escalations to what various utilities are paying for fuel.

[Exhibit 37]

THREE MAJOR FIRMS WIN ROUND ON DISCLOSURE OF HIRING DATA

[From the Washington Post, May 17, 1977]

(By Morton Mintz, Washington Post staff writer)

Three major corporations seeking to prevent disclosure of equal employment information they file with the government won an important victory yesterday in the Supreme Court.

The court refused a government request to review a ruling that limits the discretion of federal agencies to grant requests under the Freedom of Information Act (FOIA) for data submitted by private parties.

The action was a surprise because the court usually grants petitions by the Solicitor General to review decisions in important cases.

The ruling is effective only in the Fourth U.S. Circuit-Maryland, North Carolina, South Carolina, Virginia and West Virginia. But dozens of other socalled "reverse" FOIA cases are pending elsewhere and may produce contrary rulings in other circuits. If this happens, the Supreme Court likely will try to resolve the conflict and set a policy applicable throughout the country.

Yesterday's action developed from lawsuits brought by Westinghouse Electric, General Motors and United States Steel Corps.

As a condition of doing business with the government, contractors are required by a White House executive order to treat all employees equally, without regard to factors such as race and sex, and to take affirmative action to eliminate discriminatory practices.

Labor Department regulations implement the order by requiring each contractor doing annual business of $50,000 or more with the government to file an annual report on employment of minorities and women and to make available the firm's affirmative action plan.

In the information law, Congress expressed its intent to afford "the fullest possible disclosure." To implement this intent, the regulations require that the report and the plan be available for inspection and copying to "any person," except for exemptions provided in the FOIA.

A group called Concerned Workers in East Pittsburgh, Pa., and the Legal Aid Society of Alameda County, Calif., asked the Defense Supply Agency (DSA) for data on Westinghouse and its Fraser & Johnson Co. subsidiary. The National Organization for Women (NOW), the Consumer Federation of America, the Gary, Indiana Commission for Human Relations, and the Urban League of Youngstown, Ohio, sought data filed by GM and U.S. Steel.

The companies resisted, contending that their reports contained confidential proprietary information that, if released, would adversely affect their business interests. When the DSA overruled them, the firms sued, won in trial courts and were affirmed by the Fourth U.S. Circuit Court of Appeals.

The appellate court relied on an exemption in the FOIA for trade secrets and privileged or confidential commercial or financial information and on another law prohibiting federal employees from disclosing trade secrets.

Similar reasons for nondisclosure were cited in the 78 "reverse," FOIA suits filed last year and by the Prudential, Metropolitan Life and John Hancock Mutual Life Insurance Cos. In suit lost to the Washington, D.C. chapter of NOW in District Court here. Although the firms' appeal is pending in the Court of Appeals, they filed an unusual petition to the Supreme Court for review. Yesterday, the high court turned them down.

In unsuccessfully seeking review of the decision in the Westinghouse, GM and U.S. Steel case the Justice Department said that ruling reflected "a misunderstanding" of what Congress termed the "dominant objective" of the FOIA: "the fullest responsible disclosure."

Lawyers for U.S. Steel said that tens of thousands of government contractors who file "an endless array" of materials with the government have stakes in the FOIA regulations. Ten makers of television sets, for example, have filed four separate suits to try to stop the Consumer Product Safety Commission from releasing data on accidents caused by color TVs.

[Exhibit 38]

TELLING TALES HOW LAW IS BEING USED TO PRY BUSINESS SECRETS FROM UNCLE SAM'S FILES

[From the Wall Street Journal, May 9, 1977]

(By Burt Schorr, staff reporter of the Wall Street Journal)

Washington. In August 1975, Air Cruisers Co., a unit of Signal Cos., was told that its design for a 42-person inflatable life raft for commercial aircraft had been approved by the Federal Aviation Administration. It was the largest raft to gain the agency's approval, and it gave Air Cruisers a clear competitive advantage over its rivals.

But only six months later the company received some bad news: The FAA was about to hand over to a competitor, Switlik Parachute Co., the confidential data that Air Cruisers had submitted with its application.

Switlik had telexed its request for the data. And the agency felt it couldn't take the request lightly because it had been filed under the Freedom of Information Act, a law that increasingly threatens disclosure of business secrets entrusted to Uncle Sam's files.

Like many companies with secrets to guard, Air Cruisers was to learn that the act often can be used as an avenue to the heart of corporate confidentiality. The information being sought may be as slight as a company's plans for hiring women and minorities. But it may be as valuable as a nuclear reactor design that has involved heavy investment.

SEEKING AN ADVANTAGE

Sometimes the information is being sought by reporters or public-interest groups. But usually the seekers are other companies, like Switlik, that are out to gain a market advantage over their competitors.

In the case of its life raft, Air Cruisers learned only at the last moment that the FAA's New York City office was about to give Switlik a foot-and-a-half stack of technical documents. The pile included results of performance tests of the new Air Cruisers raft and even designs for its construction. With this information, Switlik could "shortcut the very detailed testing and certification procedures" necessary to build its own comparable raft, an Air Cruisers official later asserted in an affidavit.

Air Cruisers was able to block the release of documents planned by the FAA. But to do so it had to file suit in federal court. And it had to accept the release of certain documents to settle the case.

The papers that were released under this settlement included buoyancy calculations for the Air Cruisers raft and a diagram of its floor area. Switlik's director of research and development, Stanley Switlik, says this information helped his company design its own large raft and to win an important European contract that it was competing for against Air Cruisers. "It's amazing what a $2 telex message will do," says Mr. Switlik of the company's request to the FAA for the

information.

THE LAW'S INTENT

The law specifically bars federal officials from turning over "privileged or confidential" commercial or financial information. But businessmen grumble that it happens all too often because administrative and court interpretations of the information act have strayed from the intent of Congress.

No one knows how many corporate secrets have been released through information act requests. But the torrent of requests received by some agencies suggests that certain companies need to be continually on their guard. The Food and Drug Administration, for example, got nearly 22,000 applications under the act last year for files on companies that it regulates. That represented a 70 percent jump

from the 13,000 applications in 1975, when amendments to the act greatly increased the leverage of information-seekers.

One document fished from the FDA files was an agency inspector's report on conditions in the Midwestern plant of a large pharmaceutical company. The Washington lawyer who requested it, presumably on behalf of a rival drug company, was able to pass along to his client such trade secrets as a description of proposed new products, manufacturing capabilities and sterilization procedures at the inspected plant.

"Some of the stuff in the bosom of the government is mighty damned sensitive," asserts Robert Sayler, one of a number of Washington lawyers who shield corporate clients from information act thrusts and who use the law themselves to probe for data for their clients.

REQUESTS FROM NEWSPAPERS

The extent to which business confidentiality can be threatened under the information act is evident in recent decisions by the Securities and Exchange Commission and by the Interior Department.

At the SEC, requests under the act by newspapers (including The Wall Street Journal) now confront more than 350 companies that have voluntarily disclosed bribes and other illegal or questionable payments. These companies gave the SEC such sensitive information as the identities of the foreign countries and domestic localities where payments were made and the identities of the recipients. Concealment of this information had been allowed by the SEC as the carrot to induce voluntary disclosure. But beginning this month, potentially embarrassing SEC files on a number of the companies are due to be made available to the requesting newspapers.

At the Interior Department, Secretary Cecil Andrus has decided in favor of environmentalists, local landowners and others who want to identify the coal companies that have proposed to lease 936 tracts of federally owned coal deposits in eight states. A number of the bigger companies have protested the disclosure, but one of the information-seekers, the Northern Plains Resource Council, is delighted. Knowing that a big, well-financed coal company is interested in a particular tract "would help us to marshal our forces," says a council staff member. The organization of Montana and Wyoming farmers and ranchers is seeking to alert its members and local governments to strip-mining projects that could affect them.

Both the SEC and the Interior Department decisions could, of course, be appealed in federal court. If that happens, probably there will be still more confusing guidance from federal judges.

"More litigation is likely in the future," says Jeffrey Axelrad, the Justice Department lawyer in charge of defending Uncle Sam from plaintiffs who charge he is relinquishing too much information and from those who charge he is relinquishing too little. Counting both categories, companies currently are involved in approximately 300 information act court cases, Mr. Axelrad estimates.

The principal antidisclosure defense for businessmen whose secrets are entrusted to the government is the information act exemption that bars government release of "trade secrets and commercial or financial information obtained from a person (or company) and privileged or confidential." However, as one legal commentator has written, this provision is "pregnant with ambiguities."

One company that might agree is Allied Chemical Corp., which under a 1971 Federal Trade Commission order, must file annual reports with the agency on purchases of automobile seat-belt webbing. Although Allied had requested confidentiality for the reports, the FTC turned them over to one of Allied's webbing suppliers, Charley Co., which had filed an information act request.

The reports disclosed that Allied's webbing purchases from Charley Co., during 1972-74 were well below the 45% of Allied's supplies required by a contract between the companies. That information prompted Charley Co., to negotiate the right to audit Allied's purchases for a later contract, says Tom Sharpe, Charley Co.'s executive vice president. (An Allied spokesman says the "shortfall" reflected Charley Co.'s inability to fill Allied's needs during certain high-demand periods.)

Federal judges have come up with their own varied interpretations of the tradesecrets exemption, and one decision by the U.S. Court of Appeals for the District of Columbia has narrowed the exemption significantly, experts on the information act say.

The appeals court upheld a lower-court ruling against release of financial information submitted to the National Park Service by certain holders of concessions in national parks. In doing so, however, the court states that the trade-secrets exemption applies only if disclosure is "likely to impair the government's ability to obtain necessary information in the future; or to cause substantial harm to the competitive position of the person from whom the information was obtained."

Unless the Supreme Court rules otherwise, that interpretation remains law in the District of Columbia, where many freedom-of-information suits are brought. One apparent beneficiary of this judical view is Reuben Robertson, a Ralph Nader lawyer who won an initial procedural victory in a suit to make the Defense Department turn over plans filed by General Motors Corp. for hiring and promoting women and minorities at two GM plants.

But Mr. Robertson's case isn't going anywhere for now because of a judicial conflict: GM has filed its own suit in Alexandria, Va., across the Potomac River from Washington, and has obtained a court order barring the Pentagon from release of the affirmative-action plans. The U.S. appeals court in Richmond upheld the lower-court ruling, but the Justice Department has appealed that decision to the Supreme Court.