The Impact of Trade Secrecy on Public Transparency

Abstract:     
Trade secret law is fixed at the intersection of government and the private sector. Private businesses are increasingly displacing government in providing and operating public infrastructure, but utilizing commercial law standards and norms to do so, including the key tool of trade secrecy. Regulated industries, like the defense and energy worlds, are using trade secret exemptions in open government laws to prevent the public from accessing basic information about the use of taxpayer money. Governments are funding private-sector research, or even providing the facilities in which the research is conducted, and the public cannot access the results of that research because of trade secrecy doctrine. Indeed, countless examples of modern infrastructure, from telecommunications in the form of the Internet, to traditional government operations in the form of voting machines, are now being provided by the private sector, and the list of industries that are regulated by or in direct partnership with government continues to expand. Because of these shifts, trade secrecy doctrine has intruded into activities that traditionally have been conducted in the relatively open realm of public institutions like government.

This chapter examines the specific impact of trade secrecy law on public transparency. The impact of trade secrecy on transparency manifests itself primarily in three particular scenarios: (a) the private provision of public infrastructure (its arguably most significant impact), (b) through publicly-funded research conducted by the private sector and its related contracting, and (c) the use of trade secrecy as an exemption to the Freedom of Information Act by regulated entities. Through analysis of specific examples, this chapter seeks to show that meaningful public debate, the ability of government officials to explain their decisions based upon evidence (and for the public to demand same), and the resultant benefits of full and informed consideration and implementation of policy options and alternatives, is suppressed when trade secrecy is utilized in contexts for which the doctrine was not designed.

Number of Pages in PDF File: 30

Keywords: trade secrets, FOIA, transparency, accountability, Diebold, Federal Reserve, Bloomberg, government, deliberative democracy

JEL Classification: H11, K39

Accepted Paper Series