The new Trade Secrets Act - a threat to the good public procurement?

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Newsletter

Published 05 May 2021
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By David Brambani

Norwegian public procuring entities annually make procurements for near NOK 600 billion. The public procurement regulations are intended to ensure that taxpayers' tax payments are utilized as best as possible, and that the public procurements contribute to a competitive business sector. An important part of the procurement regulations is the right to get information on the content of other bidders' offers. The new Norwegian Trade Secrets Act came into force 1 January 2021. The Act is intended to strengthen the protection of trade secrets and make it easier for the trade secret holders to protect their rights and to sanction unlawful use of trade secrets, but does the new Act imply that the right to information and access to other bidders' offers has been reduced?

For most businesses, trade secrets are important to protect, also when participating in public procurement procedures. The bidders should be able to submit offers in competitions without risking their offers' description of trade secrets being revealed to their competitors. However, each of the bidders' interest in keeping their trade secrets confidential, will often be in direct conflict with the other bidders' interest of getting access to information on their bids and thereby being enabled to verify whether the procuring authority has made its award decision on the right basis.

In public procurement procedures, the bidders are entitled to gain access to the other bidders' offers as soon as the award decision has been made. This right has an important function as it makes it possible to verify that the award decision has been made on a correct factual basis. The access right is also important for suppliers for them to have confidence that the competitions are conducted in accordance with basic requirements for equal treatment, and that no decisions are made based on nepotism/corruption or other external considerations.

In our experience, several procuring entities withhold information from access to a much greater extent than what is permitted. Requests for access are often answered by disclosing offers in a version where virtually all information about the actual content of the offers has been censored. The reality seems to be that for several such cases, little or no independent assessment has been made on the part of the procuring entity of what should be censored. For the supplier requesting access, this is often perceived as provocative, and is not rarely interpreted as if the procuring entity seeks to prevent assessments and justifications from being verified. In itself, this is unfortunate as it can lead the suppliers to suspect that the public procurement rules are violated and that the award decision is not based on correct and prudent assessments, regardless of whether or not this is in fact the case. In several cases, the censorship ends up resulting in that the suppliers are not being given sufficient opportunity to carry out a proper verification of the implementation of the competition. Such a practice should be abolished, as it may result in suppliers choosing not to devote resources to participate in public procurement procedures.

The right of access is restricted by the Freedom of Information Act (offentlighetsloven), cf. the Public Administration Act (forvaltningsloven), which imposes a duty of confidentiality on information concerning "technical devices and procedures, as well as operational or business matters which for competition reasons it is important to keep secret in the interests of the person whom the information concerns". This information is often referred to as trade secrets. However, the new Trade Secrets Act does not use the same wording as the one cited from the Public Administration Act. Instead, the new Act states that a trade secret exists if the information a) is secret, in the sense that the information is not as a whole, or as it is put together or arranged, public known or readily available, b) has commercial value because it is secret and c) that the holder has taken reasonable measures to keep secret. It remains to be seen if the differences in the wording of the provisions in practice will lead to a change in the procuring entities practice on the suppliers' right to information. However, the procuring entities should be aware that according to the preparatory work of the new Trade Secrets Act, the Act is not intended to extend the duty of confidentiality pursuant to the Public Administration Act. In our view, the procuring entities should, on the contrary, focus on their duty to independently assess whether access should be denied, and strive to ensure that the purpose of the procurement regulations is safeguarded by not accepting that information that do not constitute trade secrets are exempt from access.