Latest updates - last updated 21 August 2023
21 August 2023 - We have added the Keeping internal consultations on FOI requests timely and transparent resource to the Further reading section.
About this detailed guidance
This guidance discusses section 43 of FOIA, the commercial interests exemption, in detail and is written for use by public authorities. Read it if you have questions not answered in the Guide, or if you need a deeper understanding to help you apply section 43 in practice.
- What exemptions are contained in section 43 of FOIA?
- How do we apply section 43(1)?
- How do we apply section 43(2)?
- What is the prejudice test?
- How do we apply the neither confirm nor deny provisions?
- How do we consider the balance of the public interest?
- What arguments in favour of disclosure should we consider?
- What arguments in favour of non-disclosure should we consider?
- What other legislation or guidance could we consider?
Section 43(1) provides an exemption from disclosure for information which is a trade secret.
Section 43(2) exempts information whose disclosure would, or would be likely to, prejudice the commercial interests of any legal person (an individual, a company, the public authority itself or any other legal entity).
Section 43(3) provides an exemption from the duty to confirm or deny whether you hold information, if doing so would, or would be likely to, prejudice the interests protected by section 43(2).
All of the exemptions are subject to the public interest test.
FOIA does not define the term ‘trade secret’. However, with reference to The Trade Secrets (Enforcement, etc.) Regulations 2018, the Commissioner considers that, to be a trade secret, information should:
- be secret, in the sense that it is not generally known among, or readily accessible to, people within the circles that normally deal with that kind of information;
- have a commercial value, because it is secret. Its disclosure should also be liable to cause real (or significant) harm to the owner or be advantageous to any rivals; and
- be subject to reasonable steps under the circumstances, taken by the owner, to keep it secret.
A trade secret is the property of its owner. Clauses in employment contracts often prevent an ex-employee from disclosing a trade secret.
A trade secret may be a technical secret or a business secret.
A technical secret might be:
- an invention;
- a particular way of doing something, such as a manufacturing process or technique;
- engineering and design plans and drawings; or
- a recipe or formula (common in food, pharmaceutical and cosmetic industries).
A business secret might be:
- costs information, such as how much money an organisation spends on product development;
- pricing information, such as how much a company plans to charge for a product it sells;
- sales statistics;
- supplier lists and contact details;
- customer lists;
- plans for new product development and discontinuing old products; or
- promotional strategies.
The above examples are not exhaustive. Furthermore, just because information falls into one of the above categories does not necessarily mean that it is a trade secret. In particular, a business secret is less likely to be a trade secret than a technical secret.
The First-tier Tribunal discussed the ‘trade secret’ definition in the case of the Department for Work and Pensions v IC EA/2010/0073, (20 September 2010). It quoted from previous court and Tribunal decisions which reviewed the nature of a trade secret.
The Tribunal noted that a trade secret was information, which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the secret’s owner. This assumed that the owner used the information in a trade or business and that they either limited the dissemination of the information or at least didn’t encourage or permit its widespread publication.
The Tribunal also noted that the concept of a ‘trade secret’ related to a particular kind and quality of information. In terms of ‘kind’, it considered this suggested “something technical, unique and achieved with a degree of difficulty and investment”. In terms of ‘quality’, the Tribunal indicated that the term ‘trade secret’ suggested the “highest level of secrecy”.
Section 43(1) is a class-based exemption. This means that if information is genuinely a trade secret, there is no additional requirement to consider whether its disclosure would result in harm or prejudice, for you to engage the exemption.
The Commissioner sets out the necessary qualities of a trade secret above and you should refer closely to them when determining whether section 43(1) applies. We advise you to obtain independent advice as to whether, in any particular case, the information you are asked to disclose is a trade secret.
You should also bear in mind that section 43(1) is subject to the public interest test.
There is no exclusion from the duty to confirm or deny whether you hold information which is a trade secret. However, under section 43(3), you may refuse to confirm or deny that you hold information which comprises a trade secret if doing so would, or would be likely to, prejudice your commercial interests or those of another party. The ‘neither confirm nor deny’ provisions are considered in more detail later in this guidance.
Section 43(2) is a prejudice-based exemption which says that information is exempt if its disclosure under FOIA would, or would be likely to, prejudice the commercial interests of any legal person (including the public authority holding it). There are many circumstances in which you might hold information which, if disclosed, has the potential to prejudice someone’s commercial interests.
What is a commercial interest?
A commercial interest relates to a legal person’s ability to participate competitively in a commercial activity. The underlying aim will usually be to make a profit. However, it could also be to cover costs or to simply remain solvent.
What does prejudice mean?
In legal terms, the word ‘prejudice’ is commonly understood to mean harm. To say that disclosure would, or would be likely to, prejudice someone’s commercial interests implies that it would (or would be likely to) harm those interests.
Do you hold commercial information?
The following are examples of activities which might cause you to hold commercial information. It is not an exhaustive list and there may be other reasons why you hold commercial information.
You may be involved in the purchase of goods and services, including services outsourced to private companies, to be delivered on your behalf. If so, you will hold a wide range of commercial information relating to the procurement process. This can include:
- information provided during a tendering process about both successful and unsuccessful bids;
- details of the contract agreed with the successful bidder;
- future procurement plans; and
- performance information about a contractor.
If you undertake regulatory activity (for example, if you issue licences or accreditations), you may hold commercially sensitive information obtained in the course of your investigations or related to your functions.
Your own commercial activities
Some public authorities, such as publicly owned companies, are allowed to engage in commercial activities in their own right and may generate their own income. Any information you hold about these activities potentially falls within the scope of the exemption.
You may hold commercial information to assist your development of policy in a particular area. For example, if you are formulating policy aimed at a particular industry, then you might ask businesses from within that sector to provide information to inform your thinking.
You may undertake commercial activity in order to pursue your own policies. For example, in order to encourage economic development, you might award grants to businesses. You may therefore hold information relating to your assessment of any proposals submitted to you for that purpose.
Private finance initiative or public private partnerships
You might work with private sector partners, who help to finance projects and deliver particular services. If so, you may hold a significant amount of information about the funding of the partnership, as well as more general information about the partner’s private business.
What other information might be covered?
While most commercial activity directly relates to the purchase and sale of goods and services, you might be asked for information which is indirectly linked to commercial activity. That information may also fall within the scope of this exemption.
In the case of University of Central Lancashire (UCLAN) v IC and Professor Colquhoun EA/2009/0034, (8 December 2009), the Tribunal found that the selling of courses was a commercial activity which enabled UCLAN to remain solvent.
The Tribunal considered that a body which depends on student fees to remain solvent has a commercial interest in maintaining the assets upon which the recruitment of students depends. These assets were the teaching materials UCLAN had produced for its degree courses.
The Tribunal accepted that UCLAN was operating within a competitive environment, in which other institutions of higher education were also seeking to sell similar products (undergraduate degree courses) to potential students.
The Tribunal therefore concluded that UCLAN’s interests in the teaching materials produced for its degree courses were commercial interests.
In the above example, UCLAN’s commercial activity was its provision of academic courses in a competitive environment. The requested information (its teaching materials) had an indirect link to that commercial activity.
If you hold commercial information, it does not necessarily follow that this information is exempt from disclosure under section 43(2). You must be able to show how and why its disclosure has the potential to prejudice someone’s commercial interests. This is known as the prejudice test.
The ICO has produced specific guidance on the prejudice test.
In order to apply section 43(2), you must be able to show that the disclosure of the information would, or would be likely to, prejudice or harm your commercial interests, or those of an individual, a company or any other legal entity. In conducting this test, you need to identify what the harm is and why it may occur as a result of disclosure.
You must decide the likelihood of prejudice arising on the facts of each case. Establishing the appropriate level of likelihood is important because it affects the public interest test, later.
- “would…prejudice” means that if you disclose the information, it is more probable than not that the harm you have identified would occur (ie there is a more than 50% chance of disclosure causing the prejudice, although it is not absolutely certain that it would do so).
- “would be likely to prejudice” is a lower threshold. It means that if you disclose the information, the probability of the harm occurring is less than 50%. However, the risk of prejudice occurring must be real and significant, and it must be more than hypothetical or remote.
It is not sufficient for you to simply argue that because information is commercially sensitive, its disclosure would, or would be likely to, prejudice commercial interests. You must be able to demonstrate a causal relationship between the disclosure of the information in question and the prejudice you envisage.
In the case of Hartlepool Borough Council v The Information Commission EA/2017/0057, (14 March 2018), the Tribunal found that both the Council, and a third party whose commercial interests the Council said would be prejudiced, failed to show a causal link between disclosure of the requested information and the claimed prejudice.
The request for information, made in 2016, concerned the transfer of ownership of Teesside International Airport in 2003. The airport had been owned by a group of local authorities. A private company then purchased a 75% share in it.
The Tribunal found that the parties failed to provide persuasive evidence of a link between disclosure and prejudice to the third party’s interests.
The Tribunal commented:
“…the onus rests with the party making the assertion that the exemption is engaged to make good its claim. So, for example, if a manufacturer of widgets were to claim that disclosure of information relating to its dealings with a particular commercial partner would or would be likely to prejudice its commercial interests, it would not be sufficient for it to say simply that the manufacture of widgets is a competitive business, that it enters into similar agreements as part of its business and will therefore suffer prejudice if the information became available to its competitors. It would need to demonstrate the link between the specific information in issue and the claimed prejudice. So for example, it might show that the information would disclose that it manufactures its widgets in a particular way that is cost effective, and that is not known by its competitors, or that it had structured its agreement in a way that is unusual in the industry by charging its widgets at an unusually low mark-up because of a commitment that it would provide training at a higher return than usual.”
Are commercial interests and financial interests the same thing?
In the UCLAN case, the Tribunal decided that the identified financial interests of the university were also commercial in nature. However, this is not always the case, and there is an important distinction to be made between commercial and financial interests. Public authorities may have financial interests in the information that they hold but these are not always covered by the commercial interests exemption. Whether a financial interest also comprises a commercial interest depends on the facts of the individual case.
In the case of Patterson v IC and Department of Education EA/2016/0103, (10 July 2017), the Tribunal considered whether a body which was set up as a special purpose vehicle (‘SPV’), for the purpose of entering into a single, highly specific, transaction (the holding of a loan book on behalf of third parties, whilst other companies undertook commercial activity in relation to the loan book) had its own commercial interests, capable of being prejudiced by the disclosure of the requested information.
On the question of whether the SPV was engaging in commercial activity, the Tribunal said that while the SPV clearly had identifiable financial interests, the Tribunal struggled to accept that it was an entity seeking to generate an income or to make a profit.
The Tribunal therefore concluded that, because the SPV was essentially a tool established solely for the purpose of holding the loan book on behalf of other parties, the SPV did not itself have commercial interests that were capable of being prejudiced.
How does the timing of a request have an effect?
In a commercial environment, the timing of a disclosure is of critical importance. You must apply section 43 based on the circumstances that exist at the time the request is made. Circumstances change, and with the passage of time, information which was exempt from disclosure may become eligible for release. For example, during a tendering process the information submitted is likely to be commercially sensitive while the process is ongoing, but its sensitivity may diminish once the contract is awarded.
However, it is not simply the case that the passage of time inevitably makes information less commercially sensitive. The extent to which its sensitivity is diminished depends on the nature of that information.
In the case of Willem Visser v Information Commissioner EA/2011/0188, (1 March 2012), the Appellant argued that the information was not commercially sensitive because it dated from 2007-2008.
The Tribunal noted firstly that the circumstances to consider were those that existed at the time the request was made, in 2009. At that point, the information was only two years old.
However, the Tribunal also argued that the information, which was particularly sensitive in this case, was the company’s approach to apportioning resources. It accepted that to reveal the details of this approach would have been as damaging commercially in 2009 (or even in 2012) as in 2007.
Therefore, in this case the requested information had not lost its sensitivity due to the passage of time.
Information about third parties
You don’t have to disclose information that a third party, such as a supplier or a contractor, provides to you if the disclosure would, or would be likely to, prejudice their commercial interests. However, you must follow the same process that you would when considering the impact of disclosure on your own commercial interests.
Furthermore, if you propose to withhold information because the disclosure would, or would be likely to, prejudice a third party’s commercial interests, you must have evidence that this accurately reflects the third party’s concerns. It is not sufficient for you to simply speculate about the prejudice which might be caused to the third party’s commercial interests. You need to consult them for their exact views in all but the most exceptional circumstances.
In the case of Derry City Council v Information Commissioner EA/2006/0014, (11 December 2006), Derry City Council operated Derry City Airport and had an agreement with Ryanair who ran a scheduled service. The complainant requested details about that agreement.
The Council withheld the requested information. It applied section 43 and argued that disclosure would prejudice the commercial interests both of itself and of Ryanair.
In submitting its arguments to the Commissioner, and then to the Tribunal, the Council did not ask Ryanair for its views concerning the identified prejudice, but provided its own.
As these were the views of the Council and not of Ryanair, the Tribunal discounted them and therefore did not consider them when reaching its decision. In doing so, the Tribunal pointed out:
“Although, therefore, we can imagine that an airline might well have good reasons to fear that the disclosure of its commercial contracts might prejudice its commercial interests, we are not prepared to speculate whether those fears may have any justification in relation to the specific facts of this case. In the absence of any evidence on the point, therefore, we are unable to conclude that Ryanair’s commercial interests would be likely to be prejudiced”.
The Derry approach has also been followed by a different Tribunal in the case of Keene v the Information Commissioner & the Central Office of Information EA/2008/0097, (14 September 2009). In this case the Central Office of Information (COI) argued that it would prejudice the commercial interests of the companies who submitted bids in a tendering exercise (to secure a reprographics contact) if the COI disclosed its evaluation of those bids. The Tribunal countered that:
“….none of the businesses which submitted tenders are parties to this appeal, and there is no evidence before us from any of them as to whether they would suffer any prejudice, much less as to what prejudice they would suffer”.
The Tribunal therefore discounted this argument.
It is important that you identify the relevant information and consult with any affected third party as soon as possible, in accordance with the obligation to respond to FOIA requests within 20 working days. You need to allow time to consider the matter and, if necessary, to formulate arguments within this timeframe.
You do not have to follow the third party’s views if you disagree with them. It is for you to take a final decision on disclosing information under FOIA, following any consultation.
If the information you are considering for disclosure relates to a large number of third parties, it may be appropriate to contact a representative organisation, or a sample of organisations who can express views.
There may occasionally be situations where it is genuinely not possible to obtain the third party’s views. For example, the time constraints for responding to a request may, for particular reasons, make consultation impossible. In these specific circumstances, you may present arguments regarding the likelihood of prejudice on the third party’s behalf, but they must be based on your prior knowledge of the third party’s concerns. You need to provide evidence that your arguments genuinely reflect the third party’s concerns.
Where consultation with a third party establishes that it does not have any concerns about disclosure prejudicing its commercial interests, you should not present speculative arguments or otherwise seek to apply section 43(2) on its behalf.
Requests for procurement information
We would generally recognise information about the procurement of goods and service as being commercially sensitive. This can include information provided during a tendering process and also details of a supplier contract or transaction.
Whether you may rely on section 43 to withhold such information depends on the likely outcome of disclosing it. For example, you might consider that disclosing information about your financial transaction with one supplier would undermine your ability to maintain a competitive negotiating position when transacting with another. In considering how likely it is that this may prejudice your commercial interests, you need to take into account both the nature of the information and the degree of similarity between the transactions.
It is important to recognise that if the transactions are not similar, it is less likely that disclosing the information would prejudice the related commercial interest.
In the case of John Connor Press Associates Limited v The Information Commissioner EA/2005/0005, (25 January 2006), the Tribunal ruled that the disclosure of financial information about the commissioning of artwork by the National Maritime Museum (NMM) from a named artist would not be likely to prejudice the commercial interests of the museum.
The NMM refused to disclose the information on the grounds that to do so would be likely to prejudice its bargaining position during contractual negotiations with other artists. The artwork was to be part of a series, and NMM explained that it could release financial information once it had completed its negotiations with the next artist in the series.
The Tribunal accepted that “the commercial interests of a public authority might be prejudiced if certain information in relation to one transaction were to become available to a counterparty in negotiations on a subsequent transaction”.
However, it explained that whether or not prejudice was likely “would depend on the nature of the information and the degree of similarity between the two transactions”.
In this case, the Tribunal did not judge the likelihood of prejudice to be sufficient. This was because of the nature of the information relating to the negotiations already disclosed, and because the types of work created by the named artist and the next artist in the series were so different that they could not be treated as comparable.
Furthermore, it is not sufficient for you to simply claim that disclosing details of a contract would, or would be likely to, prejudice someone’s commercial position, should that contract come up for retendering. You must be able to demonstrate that you are likely to retender the contract within a reasonable timeframe. If you expect a tendering exercise to take place too far in the future, information relating to the previous contract award may, by that time, no longer be relevant.
If you are arguing that disclosure would disadvantage the current contract holder when they come to retender for the contract, you need to be able to show that you expect them to retender.
If your concern is that disclosure might prejudice the current contract holder’s commercial interests when tendering for contracts with other organisations, you need to demonstrate:
- the likelihood of them engaging in other tendering exercises;
- the extent to which it would involve similar information; and
- why its disclosure would, or would be likely to, disadvantage them.
In the case of Cranfield University v the Information Commissioner EA/2011/0146, (5 March 2012), the complainant made two requests to Cranfield University for information, including the pricing of its Academic Provider Contract with the Ministry of Defence (MoD).
The University argued that if the contract to provide courses for the MoD came up for retendering, the disclosure of the disputed information would prejudice its commercial position. It argued that the information would allow competitors to work out its pricing mechanism.
The Tribunal accepted that the information was potentially commercially sensitive, but only if the MoD retendered the contract. It therefore went on to consider whether this was likely. It considered the various scenarios in which retendering could theoretically arise and found that it was unlikely. This was mainly due to the specific terms of the contract, which reflected the flexibility of the arrangement between the University and the MoD.
Having found that retendering the contract was unlikely, the Tribunal concluded that the information was not commercially sensitive.
Where the information requested is a contract, rather than applying section 43 in a ‘blanket’ fashion and viewing the contract as a whole, you need to consider each clause within the contract individually, with a view to identifying whether it may be disclosed.
In the case of Channel 4 v the Information Commissioner EA/2010/0134, (22 February 2011), the requester asked Channel 4 for correspondence, minutes of meetings and the agreement with Sky TV about E4. Channel 4 refused the request and applied section 43 to some of the withheld information.
The Commissioner decided that, apart from specific identified exempt information, Channel 4 should disclose the contents of nine documents. One of these documents was the digital distribution agreement relating to the distribution of E4 by Sky.
Channel 4 argued that the whole digital distribution agreement was exempt from disclosure. In particular, it argued there was no need to do a detailed analysis of the contract, extracting any clauses which could be disclosed and justifying the commercial prejudice likely to be caused by the disclosure of each clause. Channel 4 argued that such an exercise was disproportionate and the Commissioner could not insist upon it.
The Tribunal did not accept Channel 4’s arguments that the whole digital distribution agreement was exempt from disclosure and the whole contract document should be treated as one piece of ‘information’. The Tribunal explained:
“…there is a clear distinction between a document and the information in it” and that “a document may well contain many pieces of information some of which must be disclosed under the Act and others which need not be disclosed”.
The Tribunal therefore rejected Channel 4’s argument of disproportionality. It held that:
“…the route by which the Commissioner reaches his decision on a complaint under section 50 is a matter for his discretion and is not a matter for this Tribunal” and that “the fact that a public authority may be involved in time, expense and trouble as part of the appeal process under the Act is unremarkable and is the inevitable consequence of the system which Parliament has instituted”.
What effect do confidentiality clauses have?
A supplier may ask you to accept a confidentiality clause in a contract, to guard against the future disclosure of information. Such clauses may identify information you both consider to be confidential and which you do not want to be made public. They can be useful in identifying prejudice to a third party’s commercial interests and also in providing a framework for redress in the event of an unauthorised disclosure.
However, you cannot use a confidentiality clause as a substitute for consultation with the third party, following receipt of an information request. You must still ask them for their views on the impact of disclosure on their commercial interests before making your decision.
Having a confidentiality clause in place does not guarantee that information will not be disclosed under FOIA, and you should be wary of attempts to impose a blanket confidentiality clause on all the information contained in a contract. If a request asks for a copy of a contract, the whole contract needs reviewing. If the information in it is not commercially sensitive, a confidentiality clause won’t prevent its disclosure.
Public authorities cannot contract out of their statutory obligations under FOIA, and you should make your suppliers aware of this. At the outset of a procurement exercise, and in any contract agreement documents, it is good practice to make your suppliers aware that any information they provide (as part of the tendering process, or an ongoing relationship, or with respect to any agreed contracts) may, potentially, be disclosable under FOIA. This helps manage their expectations about what might happen to the information they provide to you.
If you outsource work or functions to third parties, this can involve information which may be commercially sensitive. When considering information about outsourced work, you need to establish who holds the information. The ICO’s guidance document Outsourcing and freedom of information provides detailed guidance on FOIA compliance and outsourcing.
Under section 43(3), you do not have to confirm or deny that you hold information, where to do so would, or would be likely to, prejudice either your, or a third party’s, commercial interests.
There is no specific exclusion from the duty to confirm or deny for information which comprises a trade secret. However, if confirming or denying that you hold information which is a trade secret would, or would be likely to, prejudice your commercial interests or those of another party, you may refuse to do so under section 43(3).
Section 43(3) is concerned with the consequences of confirming or denying that you hold particular information, rather than with the content of the withheld information itself. To issue a neither confirm nor deny response, you must be able to show that the act of confirming or denying would, in itself, be prejudicial to someone’s commercial interests.
Where you propose to neither confirm nor deny on the basis that doing so has the potential to harm a third party’s commercial interests, such as a supplier or contractor, you must have evidence that this genuinely represents their concerns. You need to consult them for their specific views in all but the most exceptional circumstances.
Section 43(3) is subject to the public interest test, meaning that you must be able to show that the public interest in neither confirming nor denying that you hold the requested information is stronger than that in confirming or denying.
Section 43 is a qualified exemption. This means that if the requested information is exempt from disclosure (either because the information is a trade secret or because of prejudice to commercial interests), you must consider whether the public interest in maintaining the exemption outweighs the public interest in its disclosure. For detailed information on this provision, please refer to the ICO’s guidance on the public interest test.
There is usually a strong public interest in openness, but this does not necessarily override all other arguments. We have set out below the sorts of factors that you should consider when assessing how to balance the public interest with regard to section 43. The examples are not exhaustive, but they indicate the types of public interest considerations which may be relevant.
The FOIA does not list factors that would favour disclosure. However, you may want to consider the following concepts.
Openness and transparency
You should bear in mind the strong case for openness and transparency in your affairs when balancing public interest arguments.
This is demonstrated in the case of Hugh Mills v Information Commissioner EA/2013/0263, (2 May 2014).
The complainant requested documentation from the Western Health & Social Care Trust about a tender process between the Trust and domiciliary care providers. He specifically requested documents on how the Trust decided on the advertised maximum hourly price.
The Tribunal found that disclosure would be likely to prejudice the Trust’s commercial interests and went on to consider the public interest balance. It outlined the following factors in favour of disclosure:
- It would inform the public of the activities carried out on their behalf, allowing for more user involvement and collaborative decision-making.
- It would enable the public to better scrutinise the public monies spent.
- It would ensure an open and transparent tender process.
- It would show that the Trust followed a fair and transparent process to calculate the ceiling rate.
- It would help to ensure clarity around fairness, equity, value for money and quality of care in the overall tender process.
- Disclosure of the disputed information to potential bidders would lead to better value for money for the Trust.
The Tribunal considered the factors in favour of maintaining the exemption and concluded these factors “should be given less weight than those in favour of disclosure particularly because no individual confidential information of existing suppliers is being requested. Also we find that the public interest in the quality of care that can be provided at the maximum rate per hour is of great weight. We therefore find that public interest balance favours disclosure”.
Transparency and openness were therefore key to this decision.
Accountability for the spending of public money
Disclosing commercial information makes you more accountable to the public for how you spend public money, such as when purchasing goods or services or awarding grants and contracts to private sector companies. Where the public has a clear understanding of how you spend public money, this can increase confidence in your integrity and your ability to effectively allocate public funds. It may also enable members of the public to engage with, and challenge you on, how you spend public money. In an FOIA context, both outcomes are desirable.
In the case of Michael Abbott v Information Commissioner and the Department for Business Innovation and Skills EA/2015/0189, (23 September 2016), the Tribunal noted the public interest in accountability as an outcome of disclosing commercial information.
The complainant requested a copy of a contract between the Department for Business, Innovation and Skills (DBIS) and the consortium delivering the Manufacturing Advisory Service (MAS) programme, which provided advice and support for manufacturing businesses. DBIS withheld some of the requested information under section 43(2).
The Tribunal found that section 43(2) was engaged in respect of the commercial interests of the consortium who delivered the scheme. It then went on to consider the public interest.
The Tribunal took into account the strong public interest in transparency about government contracting, concerns about overbilling in certain government contracts, the historic inadequacy of government monitoring of contracts and flaws in government procurement as set out in the National Audit Office (NAO) report on transforming government contract management. In particular, the Tribunal noted that the NAO report identified that there was a need to improve transparency over government contracting.
The Tribunal noted that whilst DBIS had published the majority of the contract document, this did not include a clear expression of service levels, monitoring information or performance. The Tribunal considered that DBIS should disclose further information so that it could be held to account. This should ensure value for money in future bids.
The Tribunal went on to consider the public interest in non-disclosure. However, it found that the public interest favoured the disclosure of some additional information.
Transparency and openness were therefore notable factors in supporting the public interest arguments for disclosure. Furthermore, the need to ensure value for money and to hold the public authority to account were also important considerations.
Promoting competition in procurement via transparency
There is a clear public interest in encouraging competition amongst private companies for public sector contracts. Greater transparency about the tendering process and the negotiation of public sector contracts may encourage more companies to take part in the process, and should help them to improve the quality and content of their bids. This ultimately should help you to obtain best value for money from tendering exercises. Being transparent and open with regard to tendering information is therefore beneficial to both parties and should not deter contractors from bidding for public sector contracts, particularly as the value of these contracts also provides a clear incentive to tender for the work.
Protection of the public
If you have regulatory functions, you may hold commercially sensitive information obtained via your regulatory activities (eg about the quality of a particular product or an organisation’s practices). There are strong public interest arguments in allowing access to information which helps protect the public from unsafe products or dubious practices. Depending on the circumstances, these arguments may be capable of overriding concerns about harm to the organisation in question’s commercial interests.
You must ensure that the public interest arguments in favour of maintaining an exemption relate specifically to that exemption and the particular factors relevant to that request. You may wish to consider the following concepts.
Although in many cases disclosure promotes competition, there is undoubtedly a public interest in allowing public authorities to withhold information which, if disclosed, would negatively affect their ability to negotiate or to compete in a commercial environment.
In the case of Willem Visser v Information Commissioner EA/2011/0188, (1 March 2012), the complainant requested a copy of the approved business plan between the London Borough of Southwark Council and a third-party company which delivered leisure services on its behalf. Part of the plan was withheld under section 43(2).
The Commissioner's decision was that the Council was entitled to apply section 43(2) and that the public interest supported maintaining the exemption in this instance.
The Tribunal agreed. It found that even though the company in question was not-for-profit, it operated in a competitive market.
It noted that prejudicing the commercial interests of one player in the market would distort competition in that market, which in itself would not be in the public interest.
As the Tribunal pointed out, in terms of the public interest test there is a public interest in protecting the commercial interests of individual companies and ensuring they are able to compete fairly:
“If the commercial secrets of one of the players in the market were revealed then its competitive position would be eroded and the whole market would be less competitive, with the result that the public benefit of having an efficient competitive market would be to some extent eroded”.
Reputational damage or loss of customer confidence
The disclosure of information may cause unwarranted reputational damage to you or to another organisation whose information you hold. This may in turn damage your commercial interests through loss of trade. Where the damage would clearly be disproportionate when compared against the reasons favouring disclosure, there may be a public interest in withholding the information.
Ability to generate income
It is part of the role and duties of some public authorities to generate income. However, it is not always in the public interest to place information which explains how you generate that income into the public domain. Doing so could provide competitors with commercially sensitive information which is not generally known and which may lessen any competitive advantage you hold. This may have a significant impact upon your ability to operate in the relevant marketplace and, ultimately, to obtain best value for money for the public purse.
The case of Council of the Borough and County of the Town of Poole v IC EA/2016/0074, (13 September 2016) was the first Tribunal case to consider a public authority’s commercial interests in relation to services it provided on a commercial basis, in order to maximise its income.
A requester asked the Council for information about the payroll and pension services it provided to schools. The Council applied section 43(2) to information detailing how much it charged schools for these services. It explained that it had to compete for the contract with other private sector contractors and other local authorities.
In reviewing the application of the public interest test, the Tribunal noted that most of the Council’s competitors were from the private sector. It also accepted the Council’s evidence that whilst in the short term, disclosure might lead to a decrease of costs, in the long term disclosure of price information would lead to an increase in costs.
The Tribunal therefore found that information detailing how much the Council charged schools for payroll and pension services was commercially sensitive and that the public interest favoured maintaining the exemption.
In coming to its conclusion, the Tribunal noted that most section 43(2) cases that come before it arise from circumstances in which the public authorities are the commissioners of services. It noted that the “strikingly different aspect” to this appeal was that the Council was acting here in the competitive market for the provision of services to others. The commercial interests identified were therefore those of the Council itself, acting in a competitive market with the purpose of maximising its income.
Transparency and accountability were not therefore the main factors in this appeal, but rather the “urgent need to maintain income to the Council in the highly pressurised financial circumstances that currently face local government”.
Revealing information such as a pricing mechanism can be detrimental to your negotiations on other contracts and procurements. If an organisation knows how you cost an item or service, for example, then it can exploit this for profit or other gain. There is a public interest in public authorities not being disadvantaged by their FOIA obligations when in commercial negotiations with the private sector.
Other legislation and guidance can impact on the disclosure of commercially sensitive information and, where relevant, the onus is on you to take this into account when considering what you can and should disclose.
If the general public can access the information under other legislation, then this may diminish the likelihood of any prejudice arising from disclosure under FOIA. For more information about this, please refer to the ICO’s guidance document, Information in the public domain.
There are various sector-specific codes, regulations and pieces of legislation which govern transparency as it relates to public spending. For example, the Local Government Transparency Code 2015 requires local authorities in England to publish the details of any item of expenditure that exceeds £500. The Commissioner reflects this in their Definition document for principal local authorities which provides guidance about publication schemes to local authorities. It recommends that a principal local authority should make financial information about projected and actual income and expenditure, procurement, contracts and financial audit available for at least the current and previous two financial years. This should include details of expenditure over £500, including costs, supplier and monthly transaction information.
Such information is unlikely to be prejudicial to the local authority’s commercial interests and is therefore unlikely to be exempt under section 43.
You can find more about the information we would expect particular types of public authority to routinely make available in our definition documents.
There are also other exemptions which may be relevant to the information likely to be considered under section 43, and you may want to read our guidance on these exemptions:
Section 29 (the economy) - where disclosing information about the economy of the United Kingdom, would or would be likely, to prejudice the economic or financial interests of the United Kingdom or any part of it.
Section 41 (information provided in confidence) - there is a clear link between this exemption and sections 43(1) and (2).
You may also want to read our guidance on:
- The prejudice test
- The public interest test
- When to refuse to confirm or deny information is held
- Outsourcing and freedom of information
- Intellectual property rights and disclosures under the Freedom of Information Act
Internal consultation resource - Keeping internal consultations on FOI requests timely and transparent