FTC Consumer Protection CID Investigation Procedures

Investigatory procedures, including use of compulsory process, may be used by Federal Trade Commission (FTC) lawyers in connection with the spectrum of activities that the agency is authorized or required to carry out.

For What Purposes May FTC Investigations be Carried Out?

FTC Investigations may be conducted in connection with:

• law enforcement investigations
• adjudicatory or rulemaking activities
• determinations of compliance with agency cease and desist orders
• penalty or redress matters prior to filing a judicial complaint, and
• economic and other studies

In the event that compulsory process is used in an investigation to determine whether any person is or has been engaged in any unfair or deceptive acts or practices, the special civil investigative demand (CID) procedures of Section 20 of the Federal Trade Commission Act must be followed.

Are FTC Investigations Public?

As a general rule, the existence of an FTC investigation initiated in order to determine whether a statute for which the FTC enforces is being violated generally is not public. However, disclosure is permitted to potential witnesses or other third parties to the extent necessary to advance the investigation

Note that the existence of an investigation may become public if a respondent files a motion to quash or otherwise – under certain circumstances – discloses the existence thereof.

Bureau of Consumer Protection Investigations

The FTC Bureau of Consumer Protection utilizes an evaluation committee tasked with assessing proposals for enforcement matters. The approval of the bureau director is required to authorize the opening of investigations.

Are There Different Stages of Investigations?

Yes.

For example, preliminary levels of investigations may not involve compulsory process and are designed to collect facts and inform the agency enforcement personnel about whether a matter should be pursued through a formal compulsory process. The foregoing could take the form of intelligence gatherings and review of public sources. In such cases, the potential target or subject of an investigation is typically not made aware the agency’s efforts.

The FTC also utilizes initial phase investigations in order to develop facts and evidence about potential legal regulatory violations. Here, the agency relies upon voluntary cooperation by third parties from whom information is sought, rather than compulsory process. Initial phase investigations are closed if the FTC determines that no violations of law enforced by the agency have occurred. Occasionally, the FTC may seek corrective assurances from third parties in the event that de minimis and unintentional legal regulatory violations are uncovered. The FTC may also be willing to negotiate the terms of a consent order.

In the event that a full and formal investigation is initiated, the existence and target thereof are typically not made public. However, in the event of an industry-wide investigation or a threat to public health/safety, a press release may be issued by the FTC.

Full and formal compulsory investigations may utilize the entire range of regulatory investigational measures, including, but not limited to, seeking voluntary responses, issuing interrogatories and document requests, noticing investigational hearings and seeking other documents, information and testimony.

How Do Formal Investigations Conclude?

For example and without limitation, a formal investigation may conclude with the execution of a stipulated consent agreement. FTC staff counsel may also recommend that the agency issue a formal judicial or an administrative adjudicative complaint, initiate formal rulemaking proceedings, or enact or enhance industry guidance.

In the event that the FTC believes that no violation of applicable legal regulations have taken place, or that enforcement is otherwise not warranted, the agency may close an investigation. Consult with a seasoned FTC investigation lawyer to discuss strategies designed to achieve optimal results.

What Happens to Documents Submitted to the FTC?

Documents submitted to the FTC may be returned upon the request of a respondent once an investigation is closed, or – if no proceeding is commenced – within a reasonable time after examination of the submitted materials. The FTC reserves the right to keep copies of documents that it makes, unless extraordinary circumstances can be established.

Takeaway: Consult with an experienced FTC CID lawyer promptly upon learning that your business is the subject of a Federal Trade Commission investigation. Doing so can potentially minimize negative publicity, legal regulatory implications and harsh monetary penalties.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.  Follow FTC defense attorney on X.

Informational purposes only. Not legal advice. May be considered attorney advertising.