FTC Investigation Process - Federal Lawyer
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FTC Investigation Process

Find Out What to Expect During an FTC Investigation

Elizabeth Stepp
Attorney Elizabeth K. Stepp
FTC Investigation Team Lead
Partner & Yale Graduate

The U.S. Federal Trade Commission (FTC) investigates companies and individuals for a broad range of statutory and regulatory offenses. In doing so, it relies on a variety of investigative tools and tactics, and it works alongside other federal agencies in many cases. As a result, successfully defending against an FTC investigation presents several challenges, and understanding the process is one of the first steps toward executing a strategic defense.

We defend companies and individuals nationwide during FTC investigations. Our attorneys have extensive relevant experience—including prior experience as federal white-collar prosecutors in many cases. We are familiar with all aspects of the FTC’s investigative process, and we rely on this familiarity to develop and execute effective defense strategies for our clients.

5 Key Facts About FTC Investigations

If the FTC is targeting you or your company, what do you need to know? Here are five key facts about FTC investigations:

1. FTC Investigations Can Target a Broad Range of Alleged Violations

As we mentioned in the introduction, FTC investigations can target a broad range of alleged violations. While the Federal Trade Commission Act (FTC Act) serves as the FTC’s main source of investigative authority, its enforcement jurisdiction covers dozens of other statutes and regulations.

Broadly, the FTC investigates two main categories of alleged violations: (i) antitrust violations, and (ii) consumer protection violations. But, within each of these categories, FTC investigations can target numerous specific offenses. This can make successfully defending against an FTC investigation a challenge; and, as we discuss below, one of the keys to asserting a successful FTC defense is to quickly identify the specific allegation (or allegations) at issue.

2. The FTC Has a Variety of Investigative Tools at Its Disposal

When conducting investigations, the FTC uses several different types of investigative tools to gather information. These include interviews, target letters, civil investigative demands (CIDs), and administrative subpoenas—among others.

However, the FTC is not able to use all of these tools in all circumstances. For example, it must initiate a “formal” investigation in order to trigger its administrative subpoena power. Additionally, as the FTC explains, its Bureau of Competition “routinely uses the subpoena provisions of Section 9 to investigate alleged unfair methods of competition and other antitrust violations.” But crucially, as the FTC goes on to further explain, “the Bureau of Competition also may use ‘civil investigative demands’ (‘CIDs’) for investigations of possible antitrust violations. However, the Bureau of Consumer Protection may use only CIDs, rather than subpoenas, to investigate possible ‘unfair or deceptive acts or practices.'”

With this in mind, when facing an FTC investigation, it is important to work with defense counsel who understands the limits on the FTC’s investigative powers—and who can challenge efforts that exceed these limits effectively. It is also important to work with defense counsel who can effectively assist with understanding, negotiating, and timely meeting your (or your company’s) response obligations.

3. Informal FTC Investigations Can Quickly Become Formal

The FTC has the authority to conduct both “informal” and “formal” investigations. Most FTC investigations are informal initially—and many maintain this classification until their resolution.

However, informal FTC investigations can also quickly become formal in nature. This triggers the FTC’s administrative subpoena power, and it also signifies that the FTC is invested in seeing the investigation through to its end. When an FTC investigation becomes formal, civil penalties become significantly more likely, and there is also a greater chance that the investigation will lead to a criminal referral to the U.S. Department of Justice (DOJ).

4. Mistakes During FTC Investigations Can Lead to Enforcement Action

Regardless of the veracity of the allegations underlying an FTC investigation, mistakes during the investigative process can lead to enforcement action. This includes mistakes such as failing to timely respond to a CID or failing to produce all relevant documentation in response to an administrative subpoena.

While the FTC has the administrative authority to issue these types of information requests without judicial approval, they are still subject to judicial enforcement. So, even if the FTC’s investigation is completely misguided, failing to take a CID or administrative subpoena seriously can still have serious consequences.

5. FTC Investigations Can Lead to Various Outcomes

In all circumstances, FTC investigations can lead to various outcomes. Engaging experienced defense counsel promptly can mitigate the risk of adverse outcomes while setting the stage for a specific favorable and targeted result. Broadly, the potential outcomes of an FTC investigation include:

  • Termination of the investigation without civil or criminal enforcement action
  • Settlement between the targeted party and the FTC
  • Issuance of a warning letter or a request for a “special report” (which could lead to additional scrutiny)
  • Issuance of a Notice of Penalty Offenses
  • Imposition of an injunction
  • Imposition of restitution and/or civil monetary penalties (CMP)
  • Referral to the DOJ for criminal prosecution (which could lead to criminal fines and federal imprisonment)

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

5 Key Defense Strategies for FTC Investigations

Given the substantial risks involved with facing an FTC investigation, targeted companies and individuals need to work with experienced defense counsel to resolve their investigations as favorably as possible. While every investigation presents its own challenges and opportunities, some examples of fundamental defense strategies that will prove effective in most cases include:

1. Quickly Gaining an Understanding of the FTC’s Focus and Intent

Due to the numerous issues that can potentially underlie an FTC investigation, when facing scrutiny from the FTC, it is imperative to quickly gain an understanding of the Commission’s focus and intent. Once you know what the FTC is investigating and why, then you can begin the process of formulating a targeted defense strategy.

2. Conducting a Comprehensive (and Privileged) Risk Assessment

Formulating a targeted defense strategy also requires an accurate understanding of the true facts at hand. By conducting a comprehensive risk assessment with the oversight of outside defense counsel, targets of FTC investigations can safely discern what the FTC is likely to find—and then they can structure their defenses accordingly.

3. Negotiating the FTC’s CIDs and Administrative Subpoenas

The FTC often uses CIDs and administrative subpoenas to demand voluminous records from investigation targets. This can present extraordinary burdens, and timely compliance can be a real issue. However, it will be possible to negotiate the scope of these requests in many cases, and doing so can help set the stage for productive communications throughout the investigative process.

4. Preserving All Applicable Privileges and Protections

When facing scrutiny from the FTC, targeted companies and individuals must be careful to preserve all applicable privileges and protections. Once waived, these privileges and protections often cannot be regained—and this can substantially increase the challenges involved in presenting an effective defense.

5. Focusing on a Favorable Pre-Charge Resolution

In nearly all cases, the most advantageous approach to an FTC investigation will be to target a favorable pre-charge resolution. This provides control over the outcome, and it avoids the additional costs (and inherent uncertainty) of facing civil or criminal litigation.

FAQs: Avoiding Unnecessary Consequences During an FTC Investigation

How Do I Know if the FTC is Investigating My Company?

 

In most cases, you will find out that the FTC is investigating your company when you are contacted by the Commission. This contact could come in the form of a call, letter, CID, or administrative subpoena. If you have concerns that the FTC might be looking into your company (or might look into your company in the future), you should consult with experienced defense counsel promptly.

What Violations Can Trigger an FTC Investigation?

 

The FTC investigates violations of federal antitrust and consumer protection laws. This encompasses everything from anticompetitive mergers and acquisitions to consumer fraud and inadequate data security. When facing an FTC investigation, discerning the investigation’s trigger is a crucial first step toward executing an effective defense.

How Often Do FTC Investigations Lead to Charges?

 

It’s difficult to say how often FTC investigations lead to charges, because many investigations are resolved quietly without charges or via confidential settlements. However, what we can say is that the risk of facing charges is very real, and avoiding unnecessary consequences requires experienced legal representation.

What Should I Do if I Have Received a Target Letter or CID from the FTC?

 

If you have received a target letter or CID from the FTC, your next step should be to engage experienced federal defense counsel.

Do Companies Need Outside Counsel to Handle FTC Investigations?

 

Due to the risks involved with facing an FTC investigation and the challenges involved in presenting a successful defense, companies that are targeted by the FTC should engage outside counsel to represent them. At Oberheiden P.C., we have extensive experience handling FTC investigations and related enforcement proceedings, and we rely on this experience to efficiently pursue favorable resolutions for our clients.


Schedule a Call with a Senior Federal Defense Attorney at Oberheiden P.C.

If you need to know more about the FTC investigation process, we encourage you to contact us promptly. To schedule a call with a senior federal defense attorney at Oberheiden P.C., call 888-680-1745 or request a complimentary consultation online today.

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