Criminal Defense Lawyers

What to Do When You Receive an FTC Civil Investigative Demand

What to Do When You Receive an FTC Civil Investigative Demand

So you just got a civil investigative demand (CID) from the Federal Trade Commission (FTC). Don’t panic! Here’s a plain English guide on what it is, what your rights and responsibilities are, and tips on responding appropriately.

What is a Civil Investigative Demand?

A CID is basically a subpoena that the FTC uses to obtain information during investigations into potentially unfair or deceptive business practices. It requires you to provide documents, written reports, answers to interrogatories, or oral testimony related to the investigation.The FTC doesn’t need to get a court order to issue a CID – they can serve one on their own authority. And you usually can’t quash or modify a CID, so compliance is mandatory unless there’s a legal basis for challenging it.

Why Did I Get One?

There’s a few reasons you may have received a CID:

• The FTC is investigating your company specifically for potentially violating the FTC Act or other consumer protection regulations. Common issues include false advertising, improper billing practices, data security failures, etc.
• Your company has information relevant to an FTC investigation into another company. For example, if you’re a vendor, service provider, or competitor of the main target.
• The FTC is conducting a broader industry-wide investigation into a particular practice, and wants information from key players.

Either way, don’t assume you’re in trouble yet. CIDs are a normal part of the FTC’s investigative process to determine if consumer harm occurred before deciding whether to initiate an enforcement action.

What Are My Responsibilities?

You must retain all relevant documents and suspend any routine destruction policies. This includes paper and electronic records, like emails.Assign a point person to handle the CID response. They’ll need to oversee the collection and review process across departments like marketing, IT, customer service, etc.You must respond fully and accurately within the deadline, which is typically 30 days or less. The FTC does not easily grant extensions.If you withhold or destroy requested materials, provide incomplete or evasive answers, or fail to meet the deadline, you risk facing an obstruction of justice charge with civil penalties or contempt of court.

What Are My Rights?

You have the right to challenge aspects of the CID if you believe they are unduly burdensome or outside the FTC’s authority. But the grounds for doing so are limited.For example, you may petition to quash or limit the CID if it requires revealing trade secrets or confidential information that is irrelevant to the investigation. But such petitions rarely succeed entirely, so expect negotiation at best.You also have rights when it comes to oral testimony. You can have an attorney present, get transcripts, and assert privileges.In some cases, you may be able to seek judicial intervention against aspects of the CID. But the courts tend to side with the FTC’s broad investigative powers.

Tips for Responding Appropriately

Here’s some key tips when served with an FTC civil investigative demand:Get organized immediatelyAs soon as you receive the CID, begin coordinating a response team including legal, IT, records management, and relevant business units. Suspend any routine document destruction policies. Start identifying where responsive materials reside while reviewing the specific requests.Assess possible exposuresHave counsel review the CID scope and determine areas of vulnerability related to your marketing claims, billing practices, data security, etc. Understanding potential legal risks will help guide the response strategy.Negotiate narrower requests if necessaryIf the CID seems overly broad or unduly burdensome, petition the FTC to narrow the scope. While success isn’t guaranteed, good faith negotiations can eliminate requests deemed irrelevant or disproportionate.Conduct a thorough yet efficient document searchCast a wide net across paper and electronic records to avoid charges of withholding documents. This includes searching personal files of key employees. But also use advanced analytics with keywords and data filtering to hone in on materials actually responsive to the CID.Carefully prepare interrogatory answersTreat interrogatories like a testifying witness would. Get all relevant stakeholders to review drafts. Check for consistency against document productions and other evidence. Incomplete or evasive answers may draw charges of obstruction.Consider voluntary cooperationIf violations occurred but were inadvertent or minor, self-reporting the issues and providing voluntary cooperation shows good faith. It may help secure a better settlement agreement or build credibility to push back against overreaching demands.Weigh the PR implicationsThe FTC tends to keep investigations confidential. But charges get publicized when complaints are filed. So consider developing a PR strategy in case the probe draws media attention, which could cause reputational damage even if the charges lack merit.

When is This Going to End?

CIDs usually lead to one of four outcomes:

1. The FTC closes the investigation after determining no enforcement action is warranted. This typically takes 6 to 12 months after issuing the CID, but can drag on longer.
2. You reach a settlement agreement resolving alleged violations before a complaint gets filed. Typical settlements impose changes to business practices, compliance monitoring, and significant financial penalties.
3. The FTC initiates an administrative proceeding or federal court action. Now you’re facing litigation with the Commission itself rather than just the investigation staff.
4. The FTC refers the case to the Department of Justice for civil or criminal proceedings. This is rare but happens for egregious or willful violations.

So if you received an FTC civil investigative demand, don’t stick your head in the sand. Take it seriously and ensure full compliance. But also understand it’s not necessarily an accusation. With proper legal guidance and an organized response, you can get through the probe intact even if changes to business practices are required. The key is avoiding missteps that turn a manageable investigation into protracted litigation.