Case number: OIC-134435-C8H4F4

Whether the Agency was justified in its decision to partially grant access to records relating to a licensing agreement affecting the interests of Company X and a relevant local authority

 

21 December 2023

 

Background

This review arises from a decision made by the Local Government Management Agency (LGMA) to part-grant a request to which section 38 of the FOI Act applies. Section 38 applies to cases where, at some stage in the decision making process, the public body has formed the view that the record(s) in question qualify for exemption under one or more of the relevant exemptions in the FOI Act (i.e. sections 35, 36 and 37 – relating to information that is confidential, commercially sensitive, or personal information relating to third parties, respectively) but that the records should be released in the public interest. Where section 38 applies, the public body is required to notify an affected third party before making a final decision on whether or not the exemptions, otherwise found to apply, should be overridden in the public interest. The requester, or an affected third party, on receiving notice of the final decision of the public body, may apply directly for a review of that decision to this Office.

In this case, Galway City Council (the Council) received a request from Company Y (the applicant) on 8 November 2022 for access to records concerning a specified licensing agreement which the Council had in place with Company X. The FOI request was re-directed by the Council to the LGMA as the relevant record holder in respect of the licensing agreement. The Agency identified ten records as relevant to the request.

On 18 November 2022, the Agency notified Company X and the Council of the request and provided copies of the redacted records that it proposed to release in the public interest. The LGMA informed the parties that it was considering granting access to the records in the public interest, apart from certain information it was proposing to redact under section 33 of the Act, which is concerned with security, defence, and international relations. On 7 December 2022, the Council indicated that it had no issue with the release of the redacted records as proposed. On 8 December 2022, Company X made submissions on the matter. It argued that the request should be refused in its entirety and in the event that the LGMA did not agree, it proposed certain further redactions to the records

On 9 January 2023, the LGMA informed Company X that it had decided to release the records subject to the application of the redactions it had identified and the further redactions proposed by Company X. It decided to grant partial access to records 1, 3, 4, 5, 8, 9 and 10, withholding information from the records under sections 33, 35, 36 and 37. It granted access to all other records in full. On 12 January 2023, it notified the applicant of its decision to part-grant the request. On 30 January 2023, the applicant applied to this Office for a review of the LGMA’s decision to redact certain information from the records at issue.

I have now completed my review in accordance with section 22(2) of the FOI Act.  In carrying out my review, I have had regard to the correspondence between the parties as described above and to the communications between this Office and the applicant, the LGMA, the Council, and Company X, on the matter. I have also had regard to the contents of the records at issue. I have decided to conclude this review by way of a formal, binding decision. In referring to the records at Issue, I have adopted the numbering system used by the LGMA in the schedule of records it prepared when processing the request.

Scope of Review

Section 38(1) of the Act provides that a request to which section 38 applies means a request to which section 35(3), section 36(3) or section 37(5)(a) applies and which, apart from section 38, would fall to be granted. In essence, the section requires an FOI body to notify affected third parties that it is proposed to grant the request in the public interest and that the FOI body will consider any submissions from the third parties before deciding whether to grant or refuse the request. In its submissions to this Office, the LGMA indicated that it refused access to the information redacted from record 1 under section 33 of the Act. Such a decision is not a decision on a request to which section 38 applies as it cannot be said that, apart from section 38, the request for the information in record1 would fall to be granted. The effect of this is that the FOI Act does not provide for a right to apply directly to this Office for a review of that part of the overall decision. Instead, it is open to the applicant to apply to the LGMA for an internal review of the decision to redact information from record 1 under section 33 of the Act. If it does, and it remains dissatisfied with the internal review decision, it can, at that stage, apply for a review by this Office of the LGMA’s internal review decision in respect of that information. Accordingly, I will give no further consideration to record 1 in this review.

During the review, the applicant confirmed that it is not seeking access to any information that the LGMA redacted from the records pursuant to section 37 of the Act. While it seems to me that much of that information is not exempt under section 37(1) of the Act, in light of the exclusions to the definition of personal information in section 2, I will give no further consideration to the specific information that was redacted from records 4 and 10 under section 37. As all of the information redacted from record 10 was on the basis of section 37, I have no need to consider that record further.

Moreover, during the review the Investigator noted that the copy of record 4 that was provided to this Office for the purposes of the review contained additional redactions that did not appear to correspond with the redactions that were proposed by company X and accepted by the LGMA in its decision. She sought clarification from the LGMA as to whether it had decided to make additional redactions to the record over and above those proposed by Company X. In response, the LGMA indicated that the additional redactions should not have been made. Accordingly, I will give those redactions no further consideration on the basis that the LGMA intends to release the information.

I also wish to note that record 8 contains information relating to the licensing agreements of other local authorities as well as information relating to Galway. Taking into consideration the wording of the applicant’s request I consider any information which does not specifically relate to the Galway agreement to be outside the scope of the request and I will not consider it in this review.

Accordingly, the scope of this review is focused on whether the LGMA was justified in withholding, under sections 35 and 36 of the FOI Act, certain information from records 3, 4, 5, 8, and 9.

Preliminary Matters

Before I address the substantive issues arising, I would like to make a number of preliminary comments. First, it is important to note that under section 22(12)(b) of the Act, a decision to refuse a request is presumed not to have been justified unless the public body shows to the satisfaction of the Commissioner that the decision was justified. In this case, therefore, the onus is on the LGMA to satisfy this Office that its decision to redact certain information from the records at issue was justified.

.Secondly, it is important to note that a review by this Office is considered to be “de novo”, which means that in this case, it is based on the circumstances and the law as they pertain at the time of the decision and is not confined to the basis upon which the LGMA reached its decision.

Thirdly, although I am obliged to give reasons for my decision, section 25(3) requires all reasonable precautions to be taken in the course of a review to prevent disclosure of information contained in an exempt record. Accordingly, the extent to which I can describe the contents of the records in my analysis and reasoning is somewhat limited. Finally, it is relevant to note that the release of records under FOI is, in effect, regarded as release to the world at large given that the Act places no constraints on the uses to which the information contained in those records may be put.

Analysis and Findings

The records at issue

The records at issue relate to a software licensing agreement between the LGMA, on behalf of a number of local authorities including Galway City Council, and Company X. The applicant is specifically seeking information relating to the licensing agreement between Galway City Council and Company X. The records at issue include certain agreement details, agreement amendments, a discount transparency disclosure form, and a product selection form. They contain information on licensing numbers, specific annual pricing/discounting structures and details on licence orders with respect to specific products, quantities and pricing groups.

Section 36

As I consider section 36 to be the most relevant exemption I have decided to consider its applicability first. Certain information has been withheld from records 3, 4, 5, 8 and 9 on the basis that it is commercially sensitive, both Company X, Galway City Council, and the LGMA maintain this view.

Section 36(1) provides that an FOI body shall refuse to grant a request if the record concerned contains:

a. trade secrets of a person other than the requester concerned,

b. financial, commercial, scientific or technical or other information whose disclosure could reasonably be expected to result in a material financial loss or gain to the person to whom the information relates, or could prejudice the competitive position of that person in the conduct of his or her profession or business or otherwise in his or her occupation, or

c. information whose disclosure could prejudice the conduct or outcome of contractual or other negotiations of the person to whom the information relates.

Section 36(2) provides that section 36(1) does not apply in certain circumstances, as described in paragraphs (a) to (e). Section 36(3) provides that section 36(1) does not apply where the FOI body considers that the public interest would, on balance, be better served by granting rather than by refusing the request. The LGMA argued that section 36(1)(b) applies to the records, while Company X argued that both subsections (1)(b) and (1)(c) apply. Galway City Council also argued that certain information was exempt under both subsections.

Section 36(1)(b)

The essence of the test in section 36(1)(b) is not the nature of the information, but the nature of the harm which might be occasioned by its release. The harm test in the first part of section 36(1)(b) is that disclosure "could reasonably be expected to result in material loss or gain". This Office takes the view that the test to be applied is not concerned with the question of probabilities or possibilities but with whether the decision maker's expectation is reasonable. The standard of proof in relation to the second limb of section 36(1)(b) is low; all that is required is the possibility of prejudice with the only requirement being that disclosure "could prejudice the competitive position" of the person concerned. In the case of University College Cork v The Information Commissioner [2020] IESC 58, the Supreme Court indicated that it is not sufficient for a party relying on section 36(1)(b) to merely restate the provisions of the section, list the documents and say that they are commercially sensitive. A party opposing release should explain why disclosure of the particular records could prejudice its competitive position.

The Council argued that the release of the information redacted from record 3 could be detrimental to the robustness of the national procurement and tendering process, and could prejudice future competitions for the purchases of similar licenses for the Council. It argued that the release of the information could reasonably be expected to result in a material financial loss for Company X.

In its submissions, the LGMA, said records 3, 4,5, 8, and 9 contain information regarding termination of contract, pricing information regarding reduction in users, information regarding additional discounting, pricing information regarding users depending on sign-up date, information about tenant and tenant administrators, enrolled affiliates, discount details, volume licensing details, categories of customer and affiliates, and pricing and licensing information. It argued that private sector companies have a right to expect that their commercial details are protected, including how they arrive at their overall price, pricing structure, unit price and discount percentages. It argued that the release of such information would enable competitors to anticipate the price / pricing structure and methodology for service delivery that Company X is likely to put forward in respect of the satisfaction of the Enterprise Agreement. It said the information is valuable as it is current and will be relevant to future negotiations in respect of the Agreement. It argued that if released to the public, this would allow commercial rivals gain an unfair advantage over Company X, not only in how it approached negotiations in respect of this Agreement but in its approach to other contracts.

Company X argued that with respect to records 3, 4, 5, 8 and 9, the release of specific pricing information, discount rates, licence orders including details with respect to specific products, quantities and pricing groups or information relating to pricing and user numbers, is commercially sensitive, as it is unavailable and confidential service information. It said specific contractual terms, including in particular details of minimum order requirements and specific modifications to the agreement is also unavailable service information. It argued that if released, this information would be of immense and practical use to a competitor and give them a competitive advantage. It argued that the pricing information which forms part of the records are of material value to the company. It said considerable time and effort had been spent collating a pricing structure with a view to providing services to the LGMA. It argued that release of any such information could reasonably be expected to result in material and financial loss, and would benefit its competitors.

Company X added that the commercial market for providing licensing services is extremely price sensitive and accordingly, the cost of services is one of the most influential factors in being awarded a contract of this nature. It argued that the release of such information would provide a minimum benchmark to competitors at which to pitch for future work, with a view to beating it on price. It said that in leveraging this information to its advantage, commercial rivals would gain an unfair advantage, in respect of how Company X may approach commercial negotiations and other contracts. It further argued that the release of conditional discounts would enable competitors to anticipate the price and aggregated discount structure which Company X has put forward in respect of the Agreement. It argued that as the pricing information is current given that it was recently negotiated, it will be relevant in the context of enterprise agreements going forward.

The applicant pointed to certain publicly available documents in support of its argument that both the Irish Government and Company X have been more open about their licensing arrangements and certain discounting structures used by Company X in some of its contracts than the LGMA’s decision would suggest. Regarding the assertion that more price transparency will create a less competitive market for public contracts, it argued that this is contradicted by basic economic theory which, it alleged, shows that price transparency does not cause commercial prejudice but in fact boosts market efficiency.

The records that are being considered as part of this review, all relate to a specific agreement with Galway City Council, as part of the wider Enterprise Agreement. The value of the wider Enterprise Agreement is available online, while details of specific plans for corporate and government licensing worldwide are available on Company X’s website. However, the specific information at issue in this case is far more detailed than the information that is publicly available.  It includes specific unit costs breakdowns, discount structures and pricing information which relate to the termination of contracts. I accept that if this specific pricing and deal values, quantities in conjunction with pricing, discount information, contractual terms and conditions and year on year amendments which are set out in records, 3, 4, 5, 8 and 9 was to be released, potential competitors could use this detail to their advantage in dealing with public bodies, and across other private contractual areas, thus prejudicing Company X’s competitive position. I also accept that the information is current, thus increasing its sensitivity. I find, therefore, that section 36(1)(b) applies to the information redacted from the records at issue.

Section 36(2) and 36(3)

Section 36(2) provides for the release of information to which section 36(1) is found to apply in certain circumstances. I am satisfied that none of the circumstances identified at section 36(2) arises in this case.

Section 36(3) provides that section 36(1) does not apply to a case in which the FOI body considers that the public interest would, on balance, be better served by granting than refusing to grant the request.

In considering where the balance of the public interest lies in this case, I have had regard to section 11(3) of the Act which provides that in performing any functions under the Act, an FOI body must have regard to, among other things, the need to achieve greater openness in the activities of FOI bodies and to promote adherence by them to the principles of transparency in government and public affairs and the need to strengthen the accountability and improve the quality of decision making of FOI bodies. However, in doing so, I have also had regard to the judgment of the Supreme Court in The Minister for Communications, Energy and Natural Resources and the Information Commissioner & Ors [2020] IESC 57 (“the Enet case”). In that case, the Supreme Court found that a general principle of openness does not suffice to direct release of records in the public interest and “there must be a sufficiently specific, cogent and fact-based reason to tip the balance in favour of disclosure”.

According to the applicant, it is currently involved in litigation with Company X. The applicant said it has taken proceedings against Company X for allegedly breaching statutory competitions rules by engaging in practices that restrict competition, including the provision of discounts, designed to deter customers from reselling their old perpetual licenses to companies such as the applicant. I understand that in the course of the litigation, Company X has denied that it has breached competition law. The applicant argued that the practices identified reduce competition, impede the development of the secondary segments of the relevant markets, and raises prices for consumers. It said they deny public bodies a viable and economic alternative to sourcing the relevant software. It argued that by refusing to disclose the information requested, the LGMA is preventing the applicant from entering into negotiations with the public bodies for the sale of pre-owned licences and it argued that this hinders fair competition and precludes other potential competitors from competing with Company X to offer its software to public bodies. It said the failure to disclose the information sought prevents the potential assessment and offer of cost-effective alternatives to public authorities.

The applicant also argued that if Company X is aware that its current pricing offering is public, then it will also be aware that it can be undercut. It said the LGMA and Company X cannot both suffer as the result of the disclosure of information to the public. It argued that either Company X’s margin’s suffer or the public interest suffers. It argued that an open price auction with price transparency can only encourage competition for contracts, which can only service the public interest. It argued that the above circumstances raise issues concerning openness and transparency and accountability of public bodies, and that these public interest factors need to be taken into consideration.

The LGMA said it acknowledges that there is a public interest in openness and transparency of the dealings between public and private entities in respect of State spending. It said it believes the public interest in not better served by granting the request as it considers this would serve only the interests of a competitor with a narrow interest. It said there is a public interest in the delivery of the Enterprise Agreement and an even more significant public interest in suitable contractors being willing to enter contractual arrangements with public bodies. It said it is concerned that releasing commercially sensitive information may cause private entities to be less willing to participate in public service contracts, resulting in less competition and increased cost to the State.

Company X said it does not believe that the public interest weighs in favour of releasing the redacted information on the basis that any such release by the LGMA would severely prejudice future submissions to the LGMA and other public authorities (by Company X/its competitors) in the context of similar licensing agreements, if parties knew such information would be released. It said this would thereby hinder the ability of technology companies to operate in an already challenging and volatile market environment. Moreover, it added there can be no benefit to the ‘public interest’ in the disclosure of information which gives rise to an invasion of privacy vis-á-vis Company X’s customers.

While it said it acknowledged that there is a public interest in openness and transparency of the dealings between public and private entities and in respect of State spending, it argued that the harm which could be occasioned by the release of the information is wholly disproportionate when compared against any 'public interest' in its release. It further argued that the release of referenced pricing (and other contract) information may allow competitors and/or other third-parties to benchmark the baseline for any future contract. It said that if this information is released, it may lead to difficulties for the LGMA at future renewal times as other contractors may be more likely to base their figures on the amounts in the current Company X proposal rather than submitting the most economically advantageous contract which would not be in the public interest.

Section 36(1)(b) is an express recognition of the fact that there is a public interest in the protection of commercially sensitive information. As a general principle, I do not believe that the FOI Act was designed as means by which the operations of private enterprises were to be opened up to scrutiny. I fully accept that there is a significant public interest in enabling democratic accountability and allowing for public scrutiny of public expenditure.

Indeed, it seems to me that the disclosure of the price at which goods or services are supplied to a public body is a significant aid to ensuring effective oversight of public expenditure, to ensuring the public obtains value for money, to preventing fraud and corruption and to preventing the waste or misuse of public funds. However, this does not mean that all such information should be released. The public interest in favour of disclosure has to be balanced against the harm which might be caused by disclosure. As I have indicated above, the value of the wider Enterprise Agreement is available online, while details of specific plans for corporate and government licensing worldwide are available on Company X’s website, which serves, to some extent, the public interest in allowing for public scrutiny of public expenditure. However, the specific information at issue in this case is far more detailed than the information that is publicly available. In my view, the release of the more detailed information such as is at issue in this case could, indeed, cause more significant harms to service providers and to the procurement of goods and services. It is not in the public interest to enhance transparency in public spending regardless of potential impact.

I have also considered the applicant’s arguments concerning an alleged breach of competition law and the potential fall out for the exchequer on that basis. It is important to note that it is not a matter for this Office to determine if Company X has, in any way, breached statutory competition rules and I note that it claims it has not. Any such allegations are a matter for the courts to determine. In any event, it seems to me that the applicant’s concerns relate more to the practices in which the Company has engaged as opposed to the specifics of the prices and discounts at issue in this case. Nor do I accept that the failure to disclose the information sought prevents the potential assessment and offer of cost-effective alternatives to public authorities. While the applicant may consider that it is hampered in its abilities to compete with Company X, I fail to see how the withholding of the information might have the more general, wider effect of preventing other competitors from offering cost-effective alternatives.

Accordingly, I do not consider the applicant’s arguments to comprise “a sufficiently specific, cogent and fact-based reason to tip the balance in favour of disclosure”. In conclusion, therefore, I find that the public interest would, on balance, be better served by refusing to grant access to the information at issue. Having found section 36(1)(b) to apply, I do not need to consider the applicability of any other exemption to the information at issue.

Decision

Having carried out a review under section 22(2) of the FOI Act, I hereby affirm the LGMA’s decision to refuse access to certain information from records 3, 4, 5, 7, 8 and 9 under section 36(1)(b) of the Act.

Right of Appeal

Section 24 of the FOI Act sets out detailed provisions for an appeal to the High Court by a party to a review, or any other person affected by the decision. In summary, such an appeal, normally on a point of law, must be initiated not later than four weeks after notice of the decision was given to the person bringing the appeal.

 

Stephen Rafferty
Senior Investigator