How to Prevent FTC Abuses of Power During Investigations

How to Prevent FTC Abuses of Power During Investigations

The Federal Trade Commission (FTC) plays an important role in protecting consumers and promoting competition. However, there have been concerns throughout its history about potential abuses of power during investigations. This article will discuss how companies and individuals can defend themselves against overreach by the FTC.

Know Your Rights

The first step is understanding your rights during an FTC investigation. The FTC has broad authority to investigate potentially unfair or deceptive practices under Section 5 of the FTC Act. However, there are still limitations on their powers:

• The FTC cannot bring criminal charges – they can only pursue civil penalties.
• They must follow appropriate legal procedures for obtaining records and testimony.
• There are protections against self-incrimination in the Constitution.

Consult a lawyer to fully understand your rights before responding to any FTC inquiries. Do not assume the FTC has unlimited power to demand information.

Question Broad Requests

The FTC will typically start an investigation by issuing a Civil Investigative Demand (CID) seeking a wide range of records and testimony. However, companies have the right to question requests that seem overly broad or unduly burdensome:

• Petition the FTC to modify or quash the CID if it covers extraneous materials or imposes excessive compliance costs.
• Force the FTC to justify each request and explain how it relates to their investigation.
• Offer to provide more limited records focused on the specific practices under investigation.

Pushing back on broad CID requests can force the FTC to narrow their inquiry and prevent fishing expeditions.

Claim Legal Protections

Certain materials are shielded from disclosure to the FTC under legal privileges and protections:

• Attorney-client privilege covers confidential communications between a company and its lawyers.
• Attorney work product provides protection for materials prepared in anticipation of litigation.
• Trade secrets can sometimes be withheld if not central to the investigation.

Companies should carefully review any FTC requests and withhold privileged materials. This can limit the information available for the investigation.

Avoid Oversharing

Even if not protected by privilege, businesses are not obligated to provide more information than legally required:

• Answer questions fully but succinctly to avoid offering extraneous details.
• Do not speculate or volunteer information that goes beyond the scope of the request.
• Stick to objective facts rather than subjective opinions.

Providing more information than necessary can allow the FTC to expand the scope of their investigation.

Get Representation

Having experienced legal counsel is essential when dealing with an FTC investigation. Counsel can:

• Ensure the company complies with lawful requests while resisting overreach.
• Assert legal protections and defenses such as privilege or trade secrets.
• Negotiate with FTC staff to narrow the scope of inquiries.
• Advise on potential litigation risks and defense strategies.

Skilled counsel makes a major difference in limiting the FTC’s ability to obtain information during an investigation.

Seek Public Support

If the FTC’s demands seem excessive, companies can rally public and political support:

• Issue press releases to raise awareness of FTC overreach.
• Garner media coverage portraying the company as the victim of regulatory abuse.
• Lobby members of Congress to intervene and restrain the FTC’s investigation.
• Cultivate relationships with FTC Commissioners who may oppose the investigation.

Adverse publicity and political pressure can sometimes force the FTC to back down from aggressive investigative tactics.

Take Legal Action

If talks with the FTC break down, companies can challenge investigative actions in court:

• File a petition to modify or set aside a CID if it is overly broad or unduly burdensome.
• Seek declaratory judgement that requested materials are privileged or protected.
• Request injunction against an unlawful subpoena or demand for testimony.
• Sue for abuse of process if the FTC exceeds its legal authority.

Courts can place important limits on the FTC’s powers and block overreaching demands.

Accept Some Compromise

While it is important to defend against FTC overreach, some compromise may be necessary to resolve the investigation:

• Offer limited access to certain records to satisfy FTC inquiries.
• Agree to provide additional information focused only on key issues.
• Commit to modifying specific business practices the FTC finds objectionable.
• Consent to monitoring and reporting requirements on problematic areas.

A reasonable settlement allows the investigation to conclude while avoiding protracted litigation.

Conclusion

The FTC has an important mission, but must exercise its powers responsibly. Companies have multiple options for defending themselves against unreasonable investigations and reaching an acceptable resolution. With proper preparation and legal advice, businesses can limit the potential for FTC abuses during an inquiry.