In a binding opinion, the Public Access Counselor (“PAC”) found that a city violated the Freedom of Information Act when it withheld a nondisclosure agreement that the city entered into with a private company that was planning a development project in the city. The city denied the FOIA request by citing Section 7(1)(g) of FOIA, which exempts the following from disclosure: “trade secrets and commercial or financial information obtained from a person or business where the trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged, or confidential, and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business…”
Here, the PAC found that the nondisclosure agreement was “commercial information” because it related to a commercial project. The PAC also concluded that the agreement contained a clause stating that the existence of the agreement was confidential, so it was obtained by the city under a claim that it was confidential. The PAC concluded, however, that city did not demonstrate how the disclosure of the agreement would cause competitive harm to the company. In coming to this conclusion, the PAC emphasized that Section 7(1)(g) requires that the public body demonstrate that disclosure “would” (as opposed to “could”) cause competitive harm. The company had already publicized the development, so the disclosure of the agreement would not reveal the existence of the development. While the PAC acknowledged that the nondisclosure agreement may be intended to protect confidential or proprietary information, there was no indication that any information in the agreement itself could be exploited by a competitor of the company to gain an advantage. Because the city could not demonstrate the third element of the Section 7(1)(g) exception, it improperly denied the FOIA request.
Under FOIA, public records held by government bodies are presumed open for inspection or copying. This opinion highlights the narrow scope of the “trade secrets” exception to FOIA. To withhold a record pursuant to Section 7(1)(g) of FOIA, a public body must be able to demonstrate that all three of the following elements apply to the record: (1) it contains a trade secret, commercial or financial information, (2) it was obtained from a person or business where the trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged, or confidential, and (3) that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business. Before denying a FOIA request on this basis, public bodies should analyze whether they can prove with clear and convincing evidence that the record meets all three of the elements of Section 7(1)(g) of FOIA.
Source: Public Access Opinion 23-05
