Washington Is Telling Secrets

And some of those secrets are your competitors'. The Freedom of Information Act gives you access to information that can help your business.

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Shrewd businessmen know that the federal government has information -- often about their competitors -- that can yield big dividends. More important, they know how to obtain it by using the Freedom of Information Act (FOIA). Some recent examples:

* A start-up manufacturer of home solar power systems obtained documents identifying potential Japanese competitors as well as their technical innovations.

* A $3-million medical devices manufacturer routinely learns about the marketing plans, new products, and clinical test results of its competitors.

* A small timber company regularly requests and receives government data about planned U.S. timber purchases.

Agencies compile information on thousands of companies every day, and FOIA enables businesses to pry much of it loose. Though the act is employed primarily by big corporations and journalists, some small companies are using it to improve their competitive stance with larger firms."We can't compete head to head with a giant," says the chief executive officer of the medical devices company. "But FOIA has helped us find the openings." Once he sought in vain for current and accurate information about his competitors and their products, but now he regularly finds information made available by the act.

What information do small businesses get? "Generally, whatever we ask for," says William D. Appler, the company's lawyer. "But we ask for the right things." The documents, which usually come from the Food and Drug Administration, take many forms: clinical test data for a competitor's new medical device, formal applications by other companies seeking to market a new product, and even minutes of FDA staff meetings.

"We use it to see whether the agency is treating us fairly, whether they're applying the same rules for judging our products as they do for those made by our competitors,' says the medical devices manufacturer. "We can find out if the giants in the business are too far ahead of us or are not yet out of the starting blocks." In short, he says, he can find out how his company stacks up against the competition, perhaps before they know his competitive position.

Not all the benefits of using FOIA are reserved for companies that manufacture regulated products. Solectric Co., a New Jersey designer of home solar systems, is a new entrant in a sophisticated but unregulated field. "We were really interested in finding out who our potential competitors -- probably Japanese -- would be," says Steven M. Harvey, the company's owner. "If there were none, we wanted to know that. If they were out there, we wanted to know everything about their technology. Could we use it? Could we be licensed?"

Harvey heard that a Japanese conglomerate had made big technical strides and was planning a "major assault" on the American solar market. He needed to find out more before risking money and time, so he started investigating through other routes such as the Japan Trade Center. "We couldn't get much information on their plans," Harvey recalls.

After learning about FOIA in business school, where he is a part-time student, Harvey had his lawyer make a FOIA request to the Department of Energy for information about any companies using solar techniques similar to ones his company was using.

The department responded with a list of companies and data that showed that only one firm was a probable competitor. It also revealed that the multi-billion-dollar Japanese company had not made as much technical progress as rumored. So much for the "massive assault."

As for complaints by the federal bureaucracy that the act should not be used for commercial purposes, Harvey points out that the government is doing all this research and data collection with taxpayers' money. "There's no reason to be shy about getting your dollar's worth," he says.

Getting your dollar's worth isn't always easy, but here are some guidelines that can help:

* Know which agency to query. The United States Government Manual can help you spot the right one.

* Try an informal phone call before filing a formal request for information -- it might produce a less hostile reaction from the agency, and it could help you narrow your request.

* Specify a dollar limit for photocopying to protect yourself from huge copying bills.

* Be prepared for delays, usually caused by the search for documents and the critical agency determination of whether the documents are protected from disclosure by one of the nine FOIA exemptions.

Of course, turnabout is fair play -- someone might be seeking information on your firm. To minimize the risk of information you supply to the government being released, you can stamp documents "CONFIDENTIAL" or "TRADE SECRETS." Use this with some discretion, since many agencies have found that everything is being stamped "CONFIDENTIAL," and they tend to ignore some labels. Also, if you want to remain anonymous in your own requests, make them through a third party.

When all the requests, copying, and mailing are over, you may find that you have received nothing of value or that the agency has nothing for you. One corporate planning manager of a medium-sized forest products company says he came up empty when he "took a flyer" to obtain information for a company project. But he says he's not discouraged, adding, "We've learned a lot since then."

Even if the government doesn't have the information, that fact alone might be significant.

EDITOR-NOTE:

Editors note: Congress recently began hearings aimed at restricting disclosures under the Freedom of Information Act by broadening at least three of the nine statutory exemptions.

The Reagan Administration wants to cut back on the release of documents involving national security and law enforcement. At the same time, some members of Congress want to set tougher standards for the release of a company's trade secrets or confidential business records. Sen. Orrin Hatch (R-Utah), chairman of the Senate subcommittee with jurisdiction over this issue, recently accused some business groups of abusing the law's original intent by seeking confidential information about their competitors.

In testimony before a House subcommittee on the same issue, the National Association of Manufacturers charged that government agencies administer the act with a decidedly "pro-disclosure tilt," and asked for new guidelines that would more closely regulate the release of trade secrets and sensitive business data.

The Justice Department is expected to present a series of amendments to FOIA early this fall.