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Mon, Mar 14th 2022 03:56pm - Tim Cushing

Private companies have a lot of people to answer to. When you ask them, they’ll claim its either shareholders or customers that they owe their ultimate duty to. Ask them a couple of more times and they may admit they’re only accountable to their shareholders.

But there’s more to it than this. The term “private” may suggest the only true accountability is to the market, however it presents itself. But this willfully ignores the reality of the situation. Many industries are heavily regulated, which requires frequent interactions with government agencies. Thousands, if not millions, of private companies secure government contracts, making them de facto extensions of government agencies.

Despite this, the average American citizen cannot approach private companies and demand access to communications, contracts, or regulatory compliance activities. Instead, they have to approach it obliquely, asking government agencies for permission to view (some) of this (secondhand) information. This is rarely successful. Corporations love tax dollars but they have almost zero interest in being honest with taxpayers. Private companies have inserted themselves into court proceedings to prevent people accused of crimes from examining the (private company-supplied) evidence used against them. And when FOIA requesters come knocking on federal or local government doors, corporations swear on all that is profitably unholy that any information leak might destroy their competitive advantage.

That should stop us from demanding answers from corporations closely entwined with government interests — whether it’s via regulation or lucrative contracts laden with NDAs.

A recently published research paper [PDF] by Christopher Morten for the University of Pennsylvania Law Review argues the public has a right to this information. Corporations are the biggest beneficiaries of FOIA laws. Why, then, is it assumed the street doesn’t run both ways?

Federal regulatory agencies in the United States hold a treasure trove of valuable information essential to a functional society. Yet little of this immense and nominally “public” resource is accessible to the public. That worrying phenomenon is particularly true for the valuable information that agencies hold on powerful private actors. Corporations regularly shield vast swaths of the information they share with federal regulatory agencies from public view, claiming that the information contains legally protected trade secrets (or other proprietary “confidential commercial information”). Federal agencies themselves have largely acceded to these claims and even fueled them, by construing restrictively various doctrines of law, including trade secrecy law, freedom of information law, and constitutional law. Today, these laws—and fear of these laws—have reduced to a trickle the flow of information that the public can access. This should not and need not be the case.

Corporations that have secured government contracts shouldn’t be allowed to act like private parties while spending tax dollars. Industries subject to regulation should not be allowed to pretend their interactions with federal and local agencies are “trade secrets” too valuable to be shared with the public that is asked to support their ongoing existence with their tax dollars.

That’s the thrust of this paper, which argues much of what’s shared with public agencies is public. That much would seem obvious, but the government (at all levels) has chosen, far too often, to defer to the interests of the private companies they do business with.

It didn’t always use to be this way. The paper opens with a couple of anecdotes showing regulators and government agencies doing business with private companies used to consider the public their most important stakeholders.

In 1941, a drug manufacturer (Winthrop Chemical Company) was harming users by cutting corners in its manufacturing process by streamlining packaging in a way that made cross-contamination possible, leading directly to deaths by unsuspecting customers. The FDA stepped in, and rather than shield the proprietary packaging process from the public, chose to make its findings public.

After the inspection, Winthrop assured FDA that it could eliminate contamination quietly and resisted publicity of the problem. Despite Winthrop’s efforts to keep its manufacturing processes and problems secret, FDA elected to publicize them. Through a press release widely covered by the news media, the agency informed the public of Winthrop’s deadly contamination and disclosed specific details of Winthrop’s manufacturing processes that had encouraged the accidental contamination (including the inadvisably placed tableting machines). The resulting scandal prompted Winthrop to reform its manufacturing processes (and to replace many executives).

This was an indisputable public good. But, as the years went on, the government increasingly decided it was subservient to companies, rather than the public, resulting in the problems we see today: increasing government and corporate secrecy and private companies repeatedly escaping accountability for their actions.

Here’s how things went down in 2019:

In 2018 and 2019, hundreds of people died, tragically, in two separate crashes of Boeing’s 737 MAX passenger jet. After the first crash but before the second, regulators at the Federal Aviation Administration (FAA) determined that the cause of the crash was the 737 MAX’s flight control system, the Maneuvering Characteristics Augmentation System (MCAS), a combination of hardware and software designed to correct, automatically, the plane’s trajectory when the plan was at risk of stalling.

After the first crash, the president of a major commercial pilots’ union stated, “what we need now is to make sure there is nothing else Boeing has not told the companies or the pilots” about the 737 MAX. Yet Boeing and FAA withheld documentation of MCAS from pilots’ unions, independent experts, watchdog groups, the public at large, and even Congress—and continue to withhold that documentation as of writing—on the theory that those details contain protected trade secrets

A Congressional investigation showed the second crash could have been prevented if the results of the first FAA investigation had been publicized and disseminated to all affected parties. Instead, regulators chose death over transparency.

“But if we’re open and transparent, we’ll no longer be competitive,” I hear companies complain. That may be true in an incredibly small percentage of cases. If you can’t be honest with the public, you shouldn’t have access to the public’s money. The same goes for regulators who choose to cover up problems rather than address or publicize them in response to baseless conjecture about theoretical harm to a company’s bottom line. Regulation and government contracts means your ultimate obligation is to the public. Arguments that “trade secrets” supersede obligations to the public are, in a word, horseshit. There is no legal basis for these assertions.

It is simply untrue, as a matter of law, that trade secrecy law must prevent the sovereign U.S. government from communicating urgent information to its citizens. For an agency to choose to “break” a private trade secret and share it with the public is no more shocking and no less legal than agencies’ well-established powers to exercise eminent domain over real property, or to use privately patented inventions on the public’s behalf.

There is no blanket exemption for so-called “trade secrets,” not when the safety and security of the public is on the line. To be sure, there are limitations to the federal government’s power, as the paper points out, but much of what has been assumed to be applicable in recent years simply isn’t an honest or accurate reading of the law. Instead, government agencies have been deferring to private companies when it comes to information releases instead of making their case and expecting companies to justify their opposition to transparency.

Morten’s paper doesn’t irresponsibly suggest government agencies blow the doors off corporate secrecy in all cases. Instead, it notes the status quo is unacceptable. The government does have the power to lift the lid off of corporate secrecy to ensure the public is not only safe, but fully informed. That it has chosen to side with corporate interests far too often is symptomatic of a problem, but one that can be reversed by regulators and government agencies. All it would take is a more thorough examination of private companies’ secrecy claims and the willingness to weigh those assertions against the interests of the public. The latter party is the one the government is supposed to serve and those interests should be given greater weight than they have been in recent years. The government owes us, not the companies it oversees or does business with. It’s long past time to change the calculus on corporate transparency when corporations do business with public servants.

Filed Under: christopher morten, foia, governments, secrecy, transparency