This exemption is designed to protect “trade secrets,” such as customer lists and secret formulae, and sensitive internal commercial information about a company which, if disclosed, would cause the company substantial competitive harm. The exemption covers:

trade secrets and commercial or financial information obtained from a person and privileged or confidential.

A “trade secret” is given a fairly limited meaning: information which is generally not known in the trade, commercially valuable, secretly maintained, and is used for the making, preparing, compounding or processing of trade commodities. It must also be the end product of either innovation or substantial effort.⁴²

To withhold documents as “commercial or financial information,” the government must be able to prove the information is “confidential.” However, a mere promise of confidentiality to the one who supplied the information does not merit use of this exemption. Courts have said that information is “confidential” only if its disclosure would be likely either (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.⁴³

The exemption may protect voluntarily submitted information even when the government could, but chooses not to, require its submission for regulatory or other purposes, so long as the disclosure would cause the submitter to be less likely to give it up voluntarily in the future.⁴⁴

The “substantial competitive harm” test requires the government to show more than just a likelihood that a business might suffer some embarrassment or commercial loss if its records are disclosed. Records held to “cause substantial harm” if disclosed include data revealing assets, profits, losses and market shares as well as detailed information filed to qualify for loans and government contracts.

Remember, this exemption applies only to information supplied to the government by individuals or private business firms. Government-prepared documents about a person or private firm based primarily on information the government generates itself or gathers from outside sources generally are not exempt under this provision.

Information that has been publicly disseminated or is readily available from other sources also may not be protected by this exemption.

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