VIII. Appendix B -- Confidential Business Information Case Law Analysis

    In assessing whether Exemption 4 applies to required submissions the Government must examine whether the disclosure is likely to impair the Government's ability to obtain necessary information in the future or is likely to cause substantial competitive harm to the submitter. Substantial competitive harm can arise when the information has significant commercial value to competitors, such as: from revealing fundamental data (such as price, cost or other proprietary business structure); from revealing information that would otherwise require investment, through reverse engineering or other means, to obtain; or from revealing business strategies by making information that otherwise would be unobtainable available to competitors.   

    The National Parks test also recognizes that the Government requires the submission of certain information because it is needed to serve an important government function. In describing this aspect of Exemption 4, the court in National Parks noted that: 

    The ‘financial information' exemption recognizes the need of government policymakers to have access to commercial and financial data. Unless persons having necessary information can be assured that it will remain confidential, they may decline to cooperate with officials and the ability of the Government to make intelligent, well-informed decisions will be impaired. Id. at 767.

    The D.C. Circuit nonetheless decided that the information at issue -- financial information of concessionaires in national parks -- did not qualify as confidential under the impairment prong because it was required by government regulation and therefore the government's ability to obtain it in the future would not be impaired by its disclosure. The court remanded the case to the district court for a determination of whether the data would cause competitive harm if released.

    That the National Parks test was intended in part to ensure the proper functioning of government business was further made clear in Washington Post Co. v. HHS, 865 F.2d 320 (D.C. Cir. 1989). In remanding the case for the development of a more complete record, the court emphasized that it had no intention of undermining the impairment prong of National Parks. Instead, the Washington Post court prognosticated that the impairment prong would tend to focus on protecting the reliability of data, rather than the availability of data. Id. at 328. Thus, the court reiterated the fundamental concept that the receipt of valid information on which the government can rely in performing its programmatic functions is a critical component of considering Exemption 4 claims.

    The D.C. Circuit once again considered its policy of encouraging the submission of information to the government in Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871 (D.C. Cir. 1992) (en banc). In Critical Mass, the court distinguished between information the government compels and that which is voluntarily submitted to help further governmental functions, such as rulemakings. The court held that information voluntarily submitted to the government should be treated as confidential under Exemption 4 as long as the submitter can show that it is not customarily released to the public. Id. at 880. In contrast, information compelled by the government would continue to be considered under the two prongs enunciated in National Parks.

    The Exemption 4 jurisprudence in the aftermath of Critical Mass makes clear that the determination of whether information should be protected under Exemption 4 may include additional considerations, but only to the extent that those considerations relate to the government functions for which the information is sought. Underpinning the jurisprudence surrounding Exemption 4 has been the acknowledgement that "it is intended to protect the interests of both the Government and the individual," including advancing the efficiency of government operations. National Parks, 498 F.2d at 767. The concern that disclosure policy should not impair government programs remains strong whether the information is compelled (and its disclosure governed by the two prongs of National Parks) or voluntarily submitted (and its disclosure governed by the Critical Mass test). See CAS v. NHTSA, 244 F.3d at 148 (D.C. Cir. 2001) (explaining that "[w]hen the Government obtains the information as part of a mandatory submission, the Government's access to the information normally is not seriously threatened by disclosure; the private interest is the principal factor tending against disclosure, and the harm to the private interest must be significant to prevent public access to information") (emphasis added).

    For example, the government may withhold information that, if disclosed, would diminish the effectiveness of a licensing program even when the basis for disclosure would arguably advance an underlying public interest. See Public Citizen Health Research Group v. National Institutes of Health (PCHRG v. NIH), 209 F. Supp. 2d 37, 46 (D.D.C. 2002) (finding certain royalty information confidential under Exemption 4 because "disclosure of the royalty information would impair the efficient and effective performance of [the government's] licensing program").

    It is not sufficient, therefore, to argue that some public need unrelated to the government's function warrants the disclosure of information under Exemption 4. Public Citizen Health Research Group v. Food & Drug Administration (PCHRG v. FDA), 185 F.3d 898 (D.C. Cir. 1999) (rejecting the argument that a company's clinical studies, which were required to be submitted to the FDA, should be disclosed because disclosure would allow the public to learn from the company's experience). As the D.C. Circuit stated in PCHRG v. FDA:

    It is not open to Public Citizen, however, to bolster the case for disclosure by claiming an additional public benefit in that, if the information is disclosed, then other drug companies will not conduct risky clinical trials of the drugs that Schering has abandoned. That is not related to "what the [ ] government is up to" and the Court has clearly stated "whether disclosure of a . . . document . . . is warranted must turn on the nature of the requested document and its relationship to the basic purpose of the Freedom of Information Act to open agency action to the light of public scrutiny . . . rather than on the particular purpose for which the document is being requested. . . . In other words, the public interest side of the balance is not a function of the identity of the requester . . . or of any potential negative consequences disclosure may have for the public . . . nor likewise of any collateral benefits of disclosure. Id. at 904 (citations omitted).

    In most of the cases discussing the National Parks test, the courts were considering the kind of commercial information that would be created independent of any government mandate, and thus the courts have generally considered the inquiry under the impairment prong to focus on the reliability, rather than the availability, of the data. Yet, the courts have carefully maintained the vitality of the impairment prong as applied to compelled submissions and, in doing so, have maintained an analytic framework within which to ensure that the disclosure of information does not unduly impair the government's functions by reducing both qualitatively and quantitatively the data available to the government. Thus, as in CAS v. NHTSA, the Court was careful to state that "when the Government obtains the information as part of a mandatory submission, the Government's access to information normally is not seriously threatened by disclosure," and in PCHRG v. NIH, the impairment of the government's program served as an independent basis for the court's refusal to require disclosure.