Supreme Court Adopts New Standard for Withholding Confidential Business Information under the Freedom of Information Act

If you provide confidential business information (CBI) to the federal government, there is cause for celebration. On June 24, 2019, the Supreme Court discarded the “likely to cause substantial competitive harm” standard the government has used since 1974 to determine whether CBI is exempt from disclosure under the Freedom of Information Act (FOIA). Describing the competitive harm standard as “a relic from a ‘bygone era of statutory construction,’” the Court instead held that the government must now protect CBI that is “customarily and actually treated as private by its owner and provided to the government under an assurance of privacy.” The days of being forced to prove substantial competitive harm are over.

The Old “Substantial Competitive Harm” Standard

FOIA Exemption 4 prohibits the government from disclosing “trade secrets and commercial or financial information obtained from a person [that are] privileged or confidential.” FOIA, however, does not define “confidential.” In 1974, the D.C. Circuit filled this gap, ruling that for information to be deemed “confidential” under FOIA, the submitting party must demonstrate disclosure is likely to cause it substantial competitive harm.1 The D.C. Circuit’s “competitive harm” test was subsequently adopted by most courts.

The New “Private” Information Standard

Recently, in Food Marketing Institute v. Argus Leader Media, the Supreme Court rejected the competitive harm test as inconsistent with the plain meaning of FOIA Exemption 4.2 The case concerned a newspaper that filed a FOIA request asking the United States Department of Agriculture (USDA) to provide the names, addresses, and redemption data of every retailer participating in the Supplemental Nutrition Assistance Program (SNAP). USDA partially complied, but refused to disclose store-level SNAP data. Applying the D.C. Circuit’s test, the district court concluded that although revealing the data would likely cause some competitive harm, the harm did not rise to the level of substantial. The Court of Appeals for the Eighth Circuit affirmed, and Argus appealed to the Supreme Court.

In its 6-3 decision, the Supreme Court found the competitive harm requirement “arbitrarily constricted Exemption 4 by adding limitations found nowhere in its terms.” Rather, under the Court’s new standard, business information is now protected from disclosure under Exemption 4 “[a]t least where 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.”

Takeaways

Based on this recent ruling, government contractors and others who submit CBI to the government should (1) continue using legends or footers to mark information that is customarily and actually kept private and confidential and (2) seek privacy assurances from the government. Significantly, the Supreme Court declined to decide whether CBI can only be withheld under FOIA Exemption 4 if the government provides privacy assurances, so the importance of these assurances is not yet clear. Nevertheless, pending judicial clarification, contractors should strongly consider always seeking privacy assurances and marking CBI as being submitted with the expectation it will be treated by the government as exempt from disclosure under FOIA Exemption 4.

For additional information, please contact Christian Robertson in our Government Contracts Group or Tom Dimond in our Environmental Group.

Summer associate Liz Morales contributed to this publication.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.