United States: Supreme Court Expands Protections For Confidential Commercial And Financial Information Turned Over To Government Agencies

Last Updated: September 5 2019
Article by William P. Lewis

On June 24, 2019, the Supreme Court ruled in Food Marketing Institute v. Argus Leader Media, 2019 U.S. LEXIS 4200 (2019) that the Freedom of Information Act (FOIA) allows a federal agency to withhold from disclosure records submitted by a private entity when the entity submitting the information treated the records as confidential and the agency promises to keep the records private. The decision marks a departure from longstanding precedent that required government agencies to disclose private commercial and financial information in response to FOIA requests unless disclosing the information would cause "substantial competitive harm" to the business or entity that previously turned over the information.

FOIA generally requires the disclosure of information that the federal government collects, subject to certain exemptions. Exemption 4 provides that the disclosure requirements of FOIA do "not apply" to "confidential" private-sector "commercial or financial information" in the government's possession. 5 U.S.C. § 552(b)(4). Most Circuit Courts treat information as "confidential" for purposes of applying Exemption 4 if disclosure is likely to cause substantial harm to the competitive position of the person or entity that provided the information to the government. This came to be known as the "competitive harm" test.

In Food Marketing Institute, a South Dakota newspaper, the Argus Leader, submitted a FOIA request to the U.S. Department of Agriculture (USDA), seeking data that the USDA had collected from various grocery stores pursuant to the USDA's Supplemental Nutrition Assistance Program (SNAP). Citing Exemption 4, the USDA and various grocers that participated in SNAP opposed the FOIA request because it would disclose the grocers' confidential store data. Argus Leader sued to enforce its FOIA request, and the District Court ordered disclosure of the information.

Applying the "competitive harm" test, the District Court concluded that Exemption 4 was inapplicable because the grocers could not demonstrate that disclosure of the information would cause substantial harm to the grocers' competitive position. When the USDA declined to appeal, the Food Marketing Institute intervened and appealed to the Eighth Circuit, which affirmed the District Court's decision.

In a 6-3 decision authored by Justice Gorsuch, the Supreme Court rejected the "competitive harm" test for determining whether commercial or financial information was "confidential" for purposes of Exemption 4 under FOIA. According to the Supreme Court, the "competitive harm" test disregarded normal rules of statutory interpretation, which look to the "ordinary meaning and structure of the law itself." Relying on the dictionary definition of the word "confidential" at the time that Congress enacted FOIA in 1966, the Court held that "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, the information is 'confidential' within Exemption 4's meaning."

The Supreme Court's decision in Food Marketing Institute is significant because it broadens the reach of Exemption 4, making it easier for businesses and other private entities to prevent the disclosure of private commercial and financial records targeted by FOIA requests. A business submitting information to a government agency no longer needs to show that disclosure by the agency in response to a FOIA request would cause the business substantial competitive harm. Rather, to ensure the confidentiality of information provided to a federal agency, the business now only needs to demonstrate: 1) that the business treated the information as confidential; and 2) that the business received assurances from the federal agency that the information would be kept private.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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