General Foods Corporation

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IN THE MA TIER OF GENERAL FOODS CORPORATION Docket 9085. Inf,erWcWr Chr, March 10, 1980 Order denying respondent' s motion for review of ALJ's order of Sept. 6, 1979 removing certain exhibits from in camera status. ORDER General Foods Corporation applies for review of the administrative law judge s order of September 6, 1979, removing certain exhibits from in camera status. Pursuant to Commission Rule Section 3.23(b), tbe law judge certified this appeal to the Commission. General Foods contends that certain exhibits which disclose cost and profitability information for 1971--1977 for brands of General Foods coffee, a cost accounting manual and an accounting and financial manual used by General Foods constitute trade secrets or confidential commercial information, and that their disclosure is prohihited by Section 6(f) of the Federal Trade Commission Act, 15 U. C. 46(f). Even if they are not trade secrets within the meaning of Section 6(f), General Foods contends that the documents contain confidential information which 18 U. C. 1905 forhids the Commission from disclosing unless the disclosure is authorized by law. General Foods argues that the Commission has disclaimed Section 6(f) as a source of authority for disclosures in adjudicative proceedings, citing our opinions in Brist/J Myers Company, 90 F. C. 455 (1977), and H.P. Hood Sons, Inc. 58 F. C. 1184 (1961). Finally, General Foods claims that even if disclosure is not prohibited by Section 6(f) of the FTC Act or 18 U . C. 1905, applicat.ion of the crit.eria in Bristol-Myers and Hood warrants in camera treatment.

We hold t.hat the exhibit.s at issue do not. cont.ain "trade secrets within the meaning of Section 6(f). As we have recent.y stat.ed, the legislative history and purposes of the FTC Act. demonstrate t.hat the phrase "trade secrets" is primarily limited to secret formulas, processes, and other secret technical information. See Statement Concerning Nonpubtic Disclosure to State Att.oneys Genera of Information Obtained by the Commission in Int,erco, Inc. D. C-2929, at. 12-20 (November 9 1979); Hood, supra 58 F. C. at 1188-9. See also Interco I7I v. FTC Civ. Action No. 78--2486 (D. C. December 21, 1979), where the court accepted the Commission s interpretation of "trade secrets" within the meaning of Section 6(f).1 , In !Jny event, we reiterate here that the prohibition on disclosure of " tro", a.ret:" containedin Section 6(f) does lIotapply!. adjudieative pfU,dings,Bri wl-Myers 90 F. C. at 45 n. 2;Hoo 58 i". C. at 11866 and n. 1. GENERAL FOODS CORP.

352 Interlocutory Order It is also doubtful that this information falls within 18 U. C. 1905. Both the House Committee on Government Operations and the Justice Department have stated that Section 1905 should not be construed more broadly than the three relatively narrow statutes that were consolidated into Section 1905. Accordingly, they have stated that Section 1905 applies only to narrow categories consisting of tax information, trade secrets, and confidential information acquired for statistical purposes. See H.R. Rep. No. 95-1382, 95th Cong., 2d Sess. 58 (1978); Supplemental brief for defendants-appellees at 1- , filed in Chrysler Corp. v. Brown No. 76-1907 (3d Cir.) on July 17, 1979. Thus these exhibits do not appear to come within Section 1905. We need not reach a definitive resolution of the Section 1905 question, however, since Section 1905 only prohibits disclosure of information "to any extent not authorized by law. Chrysler Cor. Brown 441 U.S. 281 (1979). The FTC Act, 15 U. C. 41 et seq. provides inherent autbority for disclosure of information in the course of adjudicative proceedings. See E. Grffiths Huglws, Inc. v. FTC 63 F. 362 (D.C. Cir. 1963). For example, Section 5(b) of the Act allows interested parties to intervene and requires the Commission to report its findings in adjudicative proceedings. Because disclosure of evidence is necessary to carry out our duties under Section 5 of the FTC Act such disclosures are authorized for purposes of 18 U. C. 1905. General Foods ' alternative claim is that these exhibits warrant camera treatment. The administrative law judges have broad discretion in determining what information should be placed in canwra and we do not ordinarily disturb their determinations "except on the basis of a showing of abuse. Eaton, Yale Towne 79 F. C. 998, 1001 (1971); Hood 58 F. C. at 1185.

The ALJ denied in canwra treatment to a number of charts prepared by an expert witness and to General Foods documents showing profits, breakdowns of various costs, sales, and assets relating to several brands of General Foods coffee for the years 1971-1977 (data are provided through March 1977). General Foods contends that these data were compiled at great expense and that they would give competitors significant insights into General Foods' strengths and weaknesses. However, as the law judge correctly noted, we place a greater burden on a respondent when the information is old; here most of the information is more than three years old. The Commission has usually denied in camera treatment for data of that vintage. General Foods does not make a convincing showing that such data . Se, Cro Cak Sea! Company, 71 F. C. 1714, 1715 (1967) (two-and-a-half to six-Yea-old lei data dCJlied in camera tratment); Columb B'Tasting Syste, 1m. 72 F. C. 177-180, 33'i (1967) (in a1Jtratment for sales data, espedally five-yea-old data, criticiz by Commi98ion); RenH. Done!!e Cmio 9079 (order of Oct. 25, 1977) (in came treatment of relevant two-year-old revenue data denied); se alsoUnit (Gminued) Interlocutory Order 95 F. would provide significant insight into its strengths and weaknesses. Indeed, General Foods consented to placement on the record of similar data for 1971 through 1973.

With regard to detailed profit and expense information for 197&- 1977, there is evidence that estimates of these figures may be available to competitors from outside sources, and that General Foods has access to similar data about its competitors.3 It is possible that General Foods might have made a sufficient showing to warrant in camera treatment for a temporary period had it provided more detailed information concerning the following factors 1:nter alia: (1) Whether General Foods knows what estimates of its sales profits, and costs are available: and generally how accurate those estimates arc.

(2) What degree of detail may be obtained from public sources, such as General Foods' financial statements or estimates based on known frequency of and rates for public media advertising. (3) How many employees have how much information about current financial data, and whether such employees have recently left General Foods' employ.

With regard to General Foods' financial and accounting manuals respondent' s showing is rather conclusory. Certainly if these manuals represented a significant work product, compiled at great expense disclosure of which would give other companies the benefit of General Foods' labors in camera treatment might be warranted. Bristol- Myers 90 F.'l. C. at 456. Weare unable to discern from the evidence before us whether similar procedures are likely to be employed by other companies or, if there are significant differences, whether these procedures arc so uniquely adapted to General Foods' operations that they would be of little use to other companies. Id. Thus, we cannot disagree with the ALJ' s determination on this issue. States v. /nterItwnal Bwr1USS Machirws Car- 67 F.RD. 40, 47 49 (S. Y., 1975) (in camera Lratment denied for three-year-(Jd venuc, sal"" and manufacturing dala). General Foos' asrtion of confidentiality bas on complaint counsel' s belief that the data are relevant is frivolous. , General Foos arj,rules that the fact that romplaint counsel wu ht information directly from it rather than relying on generally available information demon3tra that such information is not useful to oompetito We do not believe, however, that (kneral Foo would disagre that sound administrative pnutice may reuire that a Commission order b€ bas when posible on information that is more accurate than estimate upon which a competitor might reasonably rely in condoctin its business. . Where ""riol," competitive injury may result from disdosut(, or even where the ;miue is a clos cal!, a u3eful produre that may be employed is to grant in conwra treatment for a period of yearn unless C3licr public disclosure is deemed relevant in an opinion on the merit . Se g. Brunsk Cor. (DkL 9028, oroer of Jan. 12, 1977. The Commission also noted the availabilty of this proedureBriro-M-y/JBin pr, at 457. 5 We note that many corporations are now obliged brek down their financial information by broad product category rather than publishing only data for the whole company. See Financial Accounting Standard Board Statement of Financl Acwunting Sf.ndo:ms No. 1., Fina',lrl Reing far Segment of a Bu.ness Enterp (De. 1976).

" An administrative law judge may provide that such showings may be made in came if the discu3Tions themselves would be tantamounl to revealing the allegedly injul'Ol.ls information at is.ue. li!'N!'ItL FUNDS CORP. 355 352 Interlocutory Order We note that there may be some uncertainty about our statement in Bristol-Myers concerning the elements of the "clearly defined, serious injury " that must be shown in order to warrant in camera treatment and it seems appropriate to take this opportunity to clarify the Bristol- Myers test. We reaffirm here that the showing required to warrant cam€ra protection is the Hood standard, i.e., that public disclosure of the information in question wil result in "clearly defined, serious injury." 58 F. C. at 1188. In Sristol-Myers we stated that such serious injury requires that the information in question is secret and material to the applicant's business and would be less likely to be produced if it were known that the information had to be publicly disclosed. 90 F. at 456. It is this latter, third prong of the Bristol-Myers standard that we believe, raises troublesome problems of application. In Bristol-Myers the purpose of this third factor was to effect a balance between the need for a public record and the interest of businesses in avoiding disclosure of sensitive information. Id. It seems however, that this balance can be struck without attempting to ascertain whether businesses wil be less likely to produce and retain the kind of documents for which in cam€ra treatment is sought if the contents of such documents are disclosed to competitors. Since many records that may be of value to competitors are essential to a firm operations, it is unlikely that this consideration wil adequately serve to differentiate which information should be granted in cam€ra protection and which should not be so treated. In our view, if disclosure of confidential business information is likely to cause serious competitive injury, the principal countervailing consideration weighing in favor of disclosure should be the importance of the information in explaining the rationale of our decisions. It is unnecessary and not particularly helpful to require as an additional consideration an assessment of the likelihood that businesses wil continue to produce that type of information even if disclosed. For these reasons, we hereby modify the Bristol-Myers standard by eliminating the third criterion of the test set forth in that decision. In all other respects, we reaffirm the Bristol-Myers order. Thus, in determining future requests for in cam€ra treatment, AWs should require applicants to make a clear showing that the information concerned is sufficiently secret and sufficiently material to their business that disclosure would result in serious competitive injury. Bristol-Myers lists several particular factors that should be weighed by ALJs in determining whether the required showings of secrecy and materiality have been met. If there is doubt as to whether particular kinds of business records deserve in cam€ra treatment, the AWs may also find it useful to refer to recent court decisions dealing with the ).

Interlocutory Order 95 F. scope and subject matter of Exemption 4 of the Freedom of Information Act, 5 U. C. 552(b)(4) ("FOIA" Natiorul Parks & Conservation Ass v. Mort.on 498 F.2d 765 (D. C. Cir. 1974). Categories of business records that courts have judged to be exempt from mandatory disclosure under the FOIA may be suited to in camera treatment, although a final determination must, of course, be made on the adequacy of the applicant's showings in light of the "serious injury" standard set forth in Bristol-Myers and Hood where we noted that confidentiality is not itself sufficient to warrant in camera treatment. 58 F. C. at 1189. Conversely, court decisions holding that specific types of business records are not exempt from mandatory disclosure should help ALJ's to quickly identify records that are presumptively inappropriate for in camera protection. We reiterate that the Hood/Bristol-Myers standard best serves the overall public interest because it strikes the balance between the need for a public understanding of the Commission s adjudicative actions and the interest of business in avoiding competitive injury from public disclosure of information.

Accordingly, General Foods' motion is denied. This order is without prejudice to the administrative law judge s discretion to revise his order should General Foods make a more detailed showing or to consider the effect of our clarification of Bristol-Myers. r Rccogni ing that in some instnnCJs theAU or Commj ifm C"'liot know that a ccrtn piec of information may be critical to the public undcJ'uulding of agency action ufltil the Initial Deeision or the Opinion of the Commiljion i. issued, the Commission and the ALJs retain the puwcr to areas8S priorin came rulings at the time of publication of decisions.

357 Complaint