The Supreme Court in Food Marketing Institute v. Argus Leader Media, No. 18-481 (U.S. June 24, 2019) recently relaxed the standard for withholding confidential information under Exemption 4 of the Freedom of Information Act (“FOIA”)—a major win for contractors that regularly submit sensitive business information to the government.
Exemption 4 protects from disclosure trade secrets and commercial or financial information that is privileged or confidential. For the past 45 years, courts have been guided by the stringent “competitive harm” test first enunciated in National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974). This test allowed an agency to withhold information as “confidential” only if disclosure would (1) impair the government’s ability to obtain necessary information in the future, or (2) cause substantial harm to the competitive position of the person from whom the information was obtained. Many businesses objected to this test as overly burdensome and causing confusion about the showing required to establish substantial competitive harm.
The Supreme Court rejected the competitive-harm test in favor of a more flexible standard encompassing a broader definition of “confidential” information. Under this new test, it is no longer necessary to show that disclosure would harm the private-sector submitter. Rather, information will be considered “confidential” within the meaning of Exemption 4 “at least” where (1) commercial or financial information is both customarily and actually treated as private by its owner and (2) provided to the government under an assurance of privacy. The Court made clear that the first part of this test must always be met. However, the Court left open the possibility that disclosing information without obtaining a government assurance of privacy could cause otherwise confidential information to lose its protected status.
The Court’s holding is good news for government contractors and businesses in regulated industries that are frequently required to provide confidential information to agencies. The Court’s new Exemption 4 test will make it easier to keep these private records from public disclosure.
To take full advantage of the Court’s holding, companies doing business with the government should keep in mind the following practical tips:
- Carefully document all efforts to keep information private. This includes updating internal policies on maintaining the confidentiality of company records, increasing security features limiting access to certain sensitive data, and providing additional training to employees on how to properly handle confidential business information.
- In submissions to the government, clearly indicate which information is to be kept confidential. This includes marking the data with a protective legend identifying it as subject to Exemption 4 protection. Be aware that certain statutes and regulations may require specific language to be used.
- To the extent possible, obtain written assurances from the agency that the information will be kept confidential and will not be released to third parties absent the contractor’s consent. Contractors may also be able to negotiate contractual provisions protecting the data to be submitted to the government.