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When Civil Investigative Demands Lead to Expanded FTC Industry-Wide Investigations
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When Civil Investigative Demands Lead to Expanded FTC Industry-Wide Investigations
The Federal Trade Commission (FTC) has broad authority to investigate potential violations of consumer protection and antitrust laws. One of the key investigative tools at the FTC’s disposal is the civil investigative demand (CID).
A CID functions similarly to an administrative subpoena. The FTC can use CIDs to compel companies and individuals to provide documents, testimony, and other information relevant to an investigation. The recipient of a CID is legally required to comply or face potential enforcement action.
The FTC’s investigative authority stems from Section 6 of the FTC Act. This provision empowers the FTC to gather information and conduct inquiries into businesses that affect commerce. The FTC can also invoke this authority through the International Antitrust Enforcement Assistance Act for certain antitrust investigations.
Pre-complaint FTC investigations are generally non-public. However, if the investigation uncovers evidence of violations, the FTC has several options:
- Negotiate a consent order with the target
- Initiate an administrative proceeding
- File suit in federal court
- Refer the case to the Justice Department for civil or criminal prosecution
The Civil Investigative Demand
CIDs allow FTC investigators to obtain evidence without filing a complaint. The FTC can issue CIDs to investigate suspected violations of laws and regulations within its purview. This includes consumer protection laws as well as antitrust statutes such as the Sherman Act and Clayton Act.
According to an article by law firm Orrick, CIDs typically seek:
- Documents such as emails, corporate records, strategic plans
- Data including sales and pricing information
- Written answers to interrogatories
- Oral testimony
The recipient of a CID must respond within the timeframe specified, which is often only weeks or months. The FTC may also issue additional CIDs as an investigation progresses.
From Specific Investigation to Industry-Wide Review
In some cases, a CID sent to one company can trigger a broader industry-wide investigation. There are a few ways this expansion can occur:
- The initial CID uncovers evidence of widespread violations within a sector, prompting the FTC to scrutinize other players.
- The documents and data provided in response to the initial CID give the FTC insight into common industry practices.
- Information sharing with other agencies leads to a coordinated, multi-agency investigation into an entire market.
For example, in 2021 the FTC issued several resolutions designed to expedite investigations into areas like repair restrictions, manipulative online conduct, and common ownership. By expanding scrutiny of these practices across sectors, the FTC laid the foundation for industry-wide inquiries.
Case Study: Tech Platform Investigations
A prime example of how a specific investigation snowballed into a sprawling industry probe involves the FTC and state attorneys general investigating major technology firms. Here’s a brief timeline:
- June 2019 – House Judiciary Committee launches bipartisan antitrust probe of Google, Facebook, Amazon, Apple
- September 2019 – Attorneys general from 50+ states and territories announce antitrust investigation into Facebook
- February 2020 – FTC examines past acquisitions by major tech companies like Alphabet, Amazon, Apple, Facebook, and Microsoft
- December 2020 – FTC and over 40 states sue Facebook for anticompetitive conduct
- March 2022 – FTC seeks to block Meta acquisition of VR company Within Unlimited
This timeline shows how scrutiny of Facebook’s market power led to FTC and state investigations into other tech giants. The industry probes are still ongoing as of early 2024.
Avoiding CIDs and Investigations
For companies that want to steer clear of FTC investigations, this article by FederalLawyers.com offers some tips:
- Implement a compliance program to prevent violations
- Stay aware of emerging enforcement priorities like privacy and “dark patterns”
- Train employees on responding to investigations
- Consult counsel experienced with the FTC
However, as the tech platform example shows, companies may get swept up into an industry-wide probe even without specific wrongdoing. In those cases, cooperation and transparency are critical.
The bottom line is that FTC investigations demand serious attention. While an initial CID targets one entity, it can quickly snowball into an existential threat to an entire sector.
For more on this topic, check out the following references: