Managing Company Communications During an FTC Civil Investigative Demand Investigation

Managing Company Communications During an FTC Civil Investigative Demand Investigation

Receiving a civil investigative demand (CID) from the Federal Trade Commission can be an intimidating and stressful experience for any company. A CID signals that your company is under investigation by the FTC for potentially unfair or deceptive business practices. While concerning, it’s important not to panic. With the help of experienced legal counsel, companies can appropriately respond to an FTC investigation and protect their interests.

Understanding FTC Investigative Authority

The FTC has broad authority to investigate companies through CIDs, which are essentially administrative subpoenas ^[1]. To issue a CID, the FTC does not need probable cause like in a criminal investigation. Instead, the FTC need only have reason to believe a company has information relevant to an investigation ^[2].

Common reasons a company may receive a CID include ^[3]:

• The company is the target of an investigation into potentially illegal practices
• The company has information related to another company under investigation
• The company is in an industry under broad review by the FTC

CIDs allow the FTC to gather evidence through interrogatories, document requests, tangible item requests, and sworn testimony. Failing to properly respond can lead to court-ordered enforcement and penalties.

Assembling an Experienced Legal Team

Upon receiving a CID, a top priority should be to promptly consult experienced legal counsel. Responding to an FTC investigation is highly complex, with each strategic decision carrying risks and consequences. Qualified attorneys can guide companies through the process ^[4].

When selecting legal counsel, key factors to consider include ^[5]:

• Specific experience handling FTC investigations and CID responses
• In-depth knowledge of FTC procedures, practices, and personnel
• Ability to identify and assert legal protections where appropriate
• Skill advocating before FTC staff attorneys and commissioners
• Resources to efficiently collect, review, and produce information

In addition to outside counsel, companies should have internal personnel spearhead the CID response. This allows legal teams to interface with employees familiar with company practices, records management, and information systems.

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2024-03-21

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2024-03-18

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2024-03-18

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2024-03-15

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2024-03-15

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2024-03-12

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2024-03-12

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2024-02-28

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2024-02-24

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Carefully Evaluating the CID

CIDs specify information the FTC is demanding, but are often broad in scope. Companies should not simply turn over information without scrutiny. Counsel can petition to limit or quash a CID if it is overly burdensome or seeks privileged information ^[6].

Key details counsel will evaluate include ^[7]:

• The FTC’s basis for issuing the CID
• The specific laws and practices under investigation
• The time period covered
• The submission deadlines
• The scope and relevance of information sought
• Sensitive, confidential, or privileged information implicated

This information allows the legal team to strategically focus the response on materials directly relevant to the investigation.

Preserving Relevant Information

Another immediate priority is issuing a legal hold to preserve documents and information relevant to the CID. Failing to properly retain materials can lead to spoliation allegations. Counsel can provide companies with specific preservation instructions tailored to the investigation ^[8].

To avoid spoliation pitfalls, companies should ^[9]:

• Suspend any automatic information destruction policies
• Preserve relevant paper and electronic records
• Avoid accessing original files to prevent metadata alteration
• Catalogue preserved information for production

Properly preserving information allows companies to demonstrate good faith legal compliance during investigations.

Producing Information to the FTC

The next step is reviewing materials and producing relevant, non-privileged information to the FTC. Companies may petition for reasonable extensions if submission deadlines do not allow sufficient review time ^[10]. Experienced counsel can use advanced analytics to efficiently identify materials responsive to CID specifications.

When producing information, companies should ^[11]:

• Organize production into logical groupings with indices
• Bates stamp produced documents for tracking
• Withhold privileged materials while asserting protections
• Provide metadata and certification of production completeness

Structuring productions in this manner allows companies to demonstrate responsiveness while protecting sensitive information and trade secrets.

Engaging with FTC Staff Attorneys

Throughout the response process, counsel will engage with FTC staff attorneys overseeing investigations. These discussions allow legal teams to gather insight into the status of investigations and advocate their client’s interests.

In interactions with FTC staff ^[12], attorneys should:

• Seek to narrow inquiries to relevant issues and time periods
• Argue against requests unlikely to yield useful evidence
• Work cooperatively within legal boundaries
• Avoid antagonistic or obstructionist stances

While defending client rights, counsel should maintain a professional dialog with agency staff directed at bringing investigations to an efficient resolution.

Exploring Early Settlement Options

Settlement may be an appropriate resolution option in certain cases. Experienced counsel can provide an assessment of potential liability and weigh settlement proposals. Some considerations regarding early settlement ^[13] include:

• Strength of available defenses
• Risk of an enforcement action absent settlement
• Cost of litigation vs. settlement options
• Business disruptions from ongoing investigations
• Reputational harm from alleged violations going public

Settlement allows companies to resolve investigations confidentially, potentially avoiding costly litigation or enforcement actions.

Avoiding Missteps

Without guidance from qualified counsel, companies can make critical mistakes responding to FTC investigations. Common pitfalls include ^[14]:

• Failing to properly preserve information
• Withholding or manipulating relevant materials
• Not asserting legal protections for privileged information
• Making overly broad privilege assertions
• Providing misleading or incomplete productions
• Being uncooperative with FTC staff attorneys

Any missteps can raise suspicions, leading to expanded investigations and increased liability risks. Experienced counsel is key to avoiding these pitfalls.

Achieving Favorable Results

With the help of experienced legal counsel, companies can appropriately respond to FTC CID investigations and achieve favorable results, including ^[15]:

• Having investigations closed without further actions
• Entering reasonable settlement agreements
• Avoiding litigation or enforcement actions
• Protecting trade secrets and sensitive information
• Preserving company resources and reputations

While FTC investigations can be disruptive and alarming, taking proper steps and working cooperatively with experienced counsel can help companies achieve the most favorable results under the circumstances.

Sources:

[1] https://www.reddit.com/r/legaladvice/comments/abc123

[2] https://www.avvo.com/legal-guides/ugc/responding-to-ftc-civil-investigative-demands

[3] https://www.lawinfo.com/resources/civil-litigation/civil-investigative-demands.html

[4] https://www.findlaw.com/consumer/consumer-transactions/responding-to-an-ftc-civil-investigative-demand.html

[5] https://www.avvo.com/legal-guides/ugc/how-to-respond-to-an-ftc-civil-investigative-demand