For the last 55 years nearly all federal agencies and courts tasked with determining whether a contractor’s “commercial or financial” information is “confidential” for purposes of exemption from public disclosure under the Freedom of Information Act have had to evaluate – among other things – whether disclosure of the information likely would cause substantial harm to the competitive position of the person from whom the information was obtained. In Food Marketing Institute v. Argus Leader Media, 588 U.S. ___ (2019), the Supreme Court rejected this decades-long “competitive harm” test, concluding that where both the submitter of information customarily keeps such information private and the government gives some assurance that the information, once received, will be kept in confidence, the information is “confidential” and is exempt from disclosure under Exemption 4 of FOIA.
The competitive harm test originated with the D.C. Circuit’s 1974 decision in National Parks and Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974). There, the circuit court considered certain legislative history (including draft bills that never were enacted into law) to ascertain the legislative purpose underlying Exemption 4. The circuit court ultimately formulated the competitive harm test: “…commercial or financial matter is ‘confidential’ [only] if disclosure of the information is likely … (1) to impair the Government’s ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained.” Id. at 770.
In Argus Leader, a majority of the Supreme Court was critical of the circuit court’s approach, concluding that the statutory text of Exemption 4 was clear on its face and that the circuit court therefore overstepped its authority by considering the law’s legislative history. In this regard, the Supreme Court observed that “Exemption 4 shields from mandatory disclosure ‘commercial or financial information obtained from a person and privileged and confidential.’” Argus Leader, 588 U.S. at ___. Because the “competitive harm” test fabricated by the D.C. Circuit was derived by the lower court’s erroneous conclusion that the statute was not clear on its face and was in need of extrinsic interpretive aid, the Supreme Court rejected the test, concluding that where the submitter of information customarily keeps such information private and the government gives some assurance that the information, once received, will be kept private, the information is “confidential” under Exemption 4 and will not be disclosed. (The Court left for another day the question whether Exemption 4 confidentiality can attach where only the first element exists, that is where the information received from a person is customarily treated by that person as private but the government gives no reciprocal assurance that once received it will continue to be treated that way.)
The Argus Leader decision makes it much easier for contractors to shield from public disclosure information that could cause competitive harm because it alleviates the need for contractors actually to prove any degree of competitive harm is likely to ensue if the information is publicly disclosed. Indeed, Argus Leader holds that so long as a contractor customarily treats as private information submitted to the government and the government gives some assurance that, once received, the information will be kept private, the information is “confidential” and is exempt from disclosure under FOIA. Contractors are therefore well advised to take measures to restrict access (even internally) to competitively-sensitive information that likely will be required for submission to the government during bidding and/or contract performance. And, if the solicitation or resulting contract does not contain specific provisions governing the confidential treatment of such information, the contractors should inquire through pre-bid RFIs whether competitively-sensitive information of that type will be treated as confidential.