How Civil Investigative Demands Further FTC Consumer Protection Efforts

How Civil Investigative Demands Further FTC Consumer Protection Efforts

The Federal Trade Commission (FTC) is the top federal agency tasked with protecting consumers and promoting competition. The FTC Act gives the FTC powerful tools to investigate potential violations of consumer protection laws, including the ability to issue civil investigative demands (CIDs).

What is a Civil Investigative Demand?

A CID is essentially a type of administrative subpoena used by the FTC to obtain information during investigations. As explained on the FTC’s website[1], a CID legally compels the recipient, whether an individual or company, to provide documents, written reports, answers to interrogatories, or oral testimony regarding an FTC investigation.

The FTC can issue CIDs when it has reason to believe a company has engaged in unfair or deceptive trade practices prohibited by Section 5 of the FTC Act or violated other specific consumer protection statutes enforced by the FTC.

Why CIDs Are Important for Consumer Protection

CIDs provide the FTC with crucial investigative powers to protect consumers. According to FTC Consumer Protection Bureau Director Andrew Smith[5], “CIDs allow FTC investigators to gather facts and data to determine whether consumer harm has occurred or is likely to occur and provide the basis for appropriate remedial measures.”

Without the ability to issue CIDs, the FTC would lack the information required to determine if a company has violated the law. CIDs enable the FTC to build cases and bring enforcement actions against companies using unfair, deceptive, or fraudulent practices.

CID Investigation Process

There are several steps in a typical CID investigation:

• The FTC first approves issuing a CID to a company or individual
• The CID recipient can petition to limit or quash the CID, but must otherwise comply
• FTC staff review the information and determine next steps
• If violations occurred, the FTC may settle or sue the company

Companies that receive a CID should take it very seriously, as explained in this FTC blog post[14]. The FTC will pursue legal action against recipients that ignore or do not fully comply with CIDs. Most CID disputes end with the court enforcing compliance or a settlement.

CID Requirements and Limitations

While CIDs give the FTC broad investigative authority, there are some guardrails in place. The FTC cannot issue CIDs arbitrarily and must follow certain protocols, limitations, and reporting requirements under Section 20 of the FTC Act.

Importantly, CID recipients can petition to set aside or limit the CID if they believe it is unduly burdensome or outside the FTC’s jurisdiction. But the default assumption is that recipients must comply absent court intervention. Courts overwhelmingly expect full compliance from CID recipients.

Case Examples

CIDs have enabled FTC enforcement actions in many major consumer protection cases. For example, in 2019 the FTC fined Equifax $575 million over a 2017 data breach that exposed personal information of 147 million people. According to the FTC, Equifax failed to properly safeguard consumer data after issuing a CID.

Another example is the FTC’s $19 million settlement with Uber in 2022 for misleading safety claims. The FTC issued a CID to Uber investigating its safety representations during rides.

And in 2022, the FTC sent warning letters to hundreds of companies about fake reviews, often flagged by consumers on Reddit[6].

Conclusion

In sum, civil investigative demands are a critical enforcement tool that empower the FTC to protect consumers from unlawful business practices. CIDs provide the documentary evidence required for the FTC to determine violations and pursue fines, injunctions, and other remedies.

And while CIDs involve a formal investigative process, the FTC aims to use them judiciously and work cooperatively with recipients. In many cases CIDs lead to closing investigations or reasonable settlements without litigation. But companies that ignore CIDs do so at their peril, as the FTC takes compliance very seriously.

By enabling investigations of consumer complaints, data breaches, privacy issues, and unfair competition, civil investigative demands help the FTC live up to its mission of preventing consumer harm without unduly burdening legitimate business activities.