What is the Federal Trade Commission’s (FTC) Investigative Authority?
The FTC’s enforcement authority is related to its power to prosecute any inquiry necessary to its duties in any part of the United States, pursuant to FTC Act Sec. 3. With some exceptions – pursuant to FTC Act Sec. 6(a), the FTC may investigate the organization, business, conduct, practices and management of any person, partnership or corporation engaged in or whose business affects commerce.
Generally speaking, pre-complaint investigations are non-public.
FTC investigation legal powers are defined in Sections 6, 9, and 20 of the FTC Act. Without limitation, the foregoing permits the authorization of investigations.
Section 9 of the FTC Act authorizes the Commission to subpoena the attendance and testimony of witnesses, and the production of all such documentary evidence relating to any matter under investigation. Oaths may be administered, witnesses may be examined and evidence may be received.
FTC Rule 2.7 provides that a subpoena may be objected to via a petition to limit or quash.
Failure to Comply with a Subpoena
The failure to comply with a subpoena can result in the FTC seeking enforcement thereof in any U.S. district court with jurisdiction over the matter. This comes in the form of a lawsuit and can result in a judicial order requiring compliance. The failure to comply with a court order can result in penalties for contempt of court.
The subpoena provisions of Section 9 are used by the Bureau of Competition to investigate alleged unfair methods of competition. Section 20 of the FTC Act is used by the Bureau of Consumer Protection uses civil investigative demands to investigate unfair or deceptive acts or practices. The Bureau of Competition also uses CIDs.
Civil Investigative Demands (CIDs)
Civil investigative demands (CIDs) differ from a subpoena, in scope. Each can be used to obtain existing documents and testimony. However, a CID can, and often does, require a recipient t file written reports and answer interrogatories. Additionally, Section 20 provides for service of CIDs on entities that are outside of the territorial jurisdiction of any court of the United States.
CID recipients can also consult with an FTC defense attorney to file a petition to limit or quash. Similarly, the failure to comply with a CID can result in the initiation of judicial enforcement proceeds in federal court.
Sometimes, the FTC opts to seek information and initiate investigations “informally” via access letters. Access letters are distinguishable from CIDs in that the provide, relatively speaking, greater flexibility because they cannot be judicially enforced. Ignoring access letters, however, is not advisable because the Federal Trade Commission could simply choose to issue a civil investigative demand. If this happens, the respondent will likely be perceived as uncooperative.
U.S. Safe Web Act
Section 21 of the FTC Act protects information provided by foreign regulatory bodies from public disclosure if confidentiality is a condition for providing it. Additionally, the FTC is permitted to share confidential information in consumer protection matters with foreign law enforcement agencies.
Section 7A of the Clayton Act provides, in part, that if either of the parties is of a certain size or if the proposed transaction is of requisite significance, the parties are required to report the transaction to the government prior to completion of the corporate acquisition. In the event that the FTC or the U.S. Department of Justice concludes that further investigation is justified, additional information may be sought.
The failure to comply with a request for additional information renders completion of the transaction unlawful. In such event, the FTC is permitted to seek injunctive relief and civil penalties.
Contact an experienced FTC investigation lawyer if you or your company has been served with a CID or access letter.
Richard B. Newman is an FTC defense attorney at Hinch Newman LLP.