In a significant decision for Government contractors, the Supreme Court has expanded the types of “commercial or financial information” that are “confidential,” and therefore exempt from disclosure under the Freedom of Information Act (FOIA). The case is Food Marketing Institute v. Argus Leader Media, 588 U.S. ___ (No. 18-481, June 24, 2019).
FOIA’s Exemption 4 shields from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” [1] To prevent disclosure, under previous lower-court decisions, information that was required to be submitted to the Government was only exempt if disclosure was likely to cause “substantial competitive harm.”
In a 6-3 decision, the Supreme Court held instead that whenever commercial or financial information is “both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4.” [2] Justice Gorsuch wrote the majority opinion; Justice Breyer wrote an opinion concurring in part and dissenting in part that was joined by Justices Ginsburg and Sotomayor.
The Supreme Court Decision Eases Proof Needed to Prevent Disclosure.
The decision completely upends law under Exemption 4. Under the previous standard, companies faced difficulty in proving “substantial competitive harm.” That standard, the so-called National Parks standard, dated back to a 1974 decision by the federal appellate court in DC, National Parks & Conservation Ass’n v. Morton. [3] Agencies must notify a company upon receipt of a FOIA request for previously-submitted information. Companies then have an opportunity to explain (under tight time deadlines) which data should be protected under Exemption 4.
Under the National Parks standard, companies had to justify exemption, by showing release was likely to cause substantial competitive harm, which in turn could involve detailed descriptions of the relevant market and the ways in which competitors might use the information.
Under the previous decisions, agencies (and courts, if agency decisions are challenged) had started from the standpoint that all or part of requested information could be disclosed, unless companies succeeded with the somewhat difficult proof of substantial competitive harm. [4]
By contrast, under the new rule, companies no longer need to engage in descriptions of competitive harm, if they can demonstrate the two criteria enunciated by the Court: that the information (1) is customarily and actually treated as private, and (2) was provided to the Government under an assurance of privacy. A company will more often be able to show compliance with these tests than under the previous application of the rule. So the initial expectation may well become that information is exempt from disclosure under FOIA.
Over the years, other federal courts around the country had also adopted the National Parks test. [5] After the Supreme Court decision, a large number of decisions following National Parks will cease to be relevant.
Competitive Harm Now Irrelevant, But New Unresolved Questions Loom.
Indeed, after the decision in Food Marketing Institute, competitive harm, whether “substantial” or otherwise, appears to be irrelevant. [6] This remarkable development contributes to the landmark impact of the...
