We frequently utilize the Freedom of Information Act (“FOIA”) as a tool for our clients. The FOIA, subject to several exceptions and exclusions, generally provides that any person has the right to request access to federal agency records or information.  In this Insight post, we explore an important FOIA exemption: the “trades secrets” or “confidential”-information exemption and the Supreme Court’s somewhat recent holding clarifying its scope.

In Food Marketing Institute v. Argus Leader Media, U.S. the Supreme Court reversed a long-held interpretation of an exemption to the Freedom of Information Act (“FOIA”) regarding the withholding of confidential business records. FOIA’s “Exemption 4,” found in 5 U.S.C. § 552(b)(4), allows the government to withhold “trade secrets and commercial or financial information obtained from a person [that are] privileged or confidential.”

In Food Marketing Institute, the Argus Leader newspaper made a FOIA request for information related to the Supplemental Nutrition Assistance Program (SNAP) program. Food Marketing Institute objected to disclosing certain information because it believed the information was “confidential” since Food Marketing Institute (1) customarily treated that information as private and (2) provided the information under an assurance from the government that it would keep the information private.

The Supreme Court, in analyzing the meaning of the FOIA exemption, looked to the “ordinary, contemporary, common meaning” of the term “confidential” when Congress enacted FOIA in 1966.  When FOIA was enacted, the word “confidential” meant “secret” or “private”—a meaning that has not changed.  Since its enactment, however, courts of appeal had largely imposed a second requirements: the “substantial competive harm” requirement.  Where did “substantial competitive harm” prong originate from?

In 1974, the D.C. Circuit Court in National Parks & Conservation Assn. v. Morton, 498 F. 2d 765 (1974), interpreted of the word “confidential” to include a requirement that the disclosure of confidential business records must result in “substantial competitive harm” to fall under the exemption. The Supreme Court, in Food Marketing Institute, disagreed with the National Parks court’s requirement of a “substantial competitive harm” showing.

The Food Marketing Institute court, in applying for FOIA exemption, found that the National Parks court improperly relied on legislative history rather than looking to the statute’s plain language.  The Food Marketing Institute court held that the records in question should be withheld under FOIA’s Exemption 4 (confidentiality exemption) regardless of whether their disclosure would result in no competitive harm to Food Marketing Institute.