## Facts

- FCC rules required Regional Bell Operating Companies to maintain detailed local telephone plant accounting records, including descriptions, locations, and costs.
- The FCC conducted audits using statistical sampling of “continuing property records” to identify equipment “not found or not verifiable” and to estimate possible cost overstatements.
- In a Notice of Inquiry concerning the use of statistical sampling in these audits, competitors sought disclosure of the raw audit data underlying the sampling results.
- Qwest opposed disclosure, asserting the raw data contained sensitive business information, could cause competitive harm, and was protected from disclosure by the Trade Secrets Act, 18 U.S.C. § 1905.
- The FCC ordered disclosure to competitors under a protective order, citing a policy of providing special protection to audit information but permitting disclosure when required by the public interest and when it would not cause competitive injury or impair future audits.
- Qwest petitioned for review of the disclosure order in the D.C. Circuit.

## Issues

1. Whether § 220(f) of the Communications Act provides “authorization by law” permitting the FCC to disclose audit data that may constitute trade secrets, notwithstanding the Trade Secrets Act, 18 U.S.C. § 1905.
2. Whether the FCC adequately explained how disclosing Qwest’s raw audit data was consistent with the agency’s stated policy giving special protection to audit information, including consideration of competitive harm and effects on future audits.

## Decision

- The court held that Communications Act § 220(f) supplies sufficient statutory authorization for FCC disclosure of trade secrets, so § 1905 did not bar the order.
- The court held the FCC failed to provide an adequate explanation of how releasing the particular raw audit data satisfied (or permissibly departed from) the FCC’s confidentiality policy for audit information.
- The court remanded to the FCC for further proceedings and explanation.

## Legal Principles

- The Trade Secrets Act permits disclosure of protected business information when disclosure is “authorized by law.”
- Communications Act § 220(f) grants the FCC discretion to disclose information from carrier records when disclosure is required in the public interest, which can constitute sufficient authorization to satisfy § 1905.
- Under the Administrative Procedure Act, an agency must provide a reasoned explanation showing it considered relevant factors and applied its stated policy to the facts; an unexplained inconsistency with agency policy may be arbitrary or capricious.
- Where an agency has a policy of specially protecting audit information, it must explain why disclosure serves the public interest and why it will not cause competitive injury or undermine future audits, particularly when disclosure involves granular raw data.

## Conclusion

The D.C. Circuit confirmed the FCC’s statutory authority under § 220(f) to disclose even trade-secret audit data without violating the Trade Secrets Act, but required the FCC on remand to justify the specific disclosure by addressing its confidentiality policy and the asserted risks of competitive harm and impairment of future audits.


Qwest Commc'ns Int'l, Inc. v. FCC, 229 F.3d 1172 (D.C. Cir. 2000)