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Law360 (May 26, 2020, 3:08 PM EDT )
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| Rebecca Engrav |
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| Janis Kestenbaum |
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| Erin Earl |
Then you get a civil investigative demand, or CID, or letter from the Federal Trade Commission informing you that your company is under investigation for privacy or other consumer protection issues. It also says you must meet and confer with the FTC within 14 days and answer a series of interrogatories and document requests in 30 days.
This scenario is not unrealistic. The staff of the FTC, who is working from home, has been active in initiating and pursuing investigations, particularly those against companies whose practices concern the pandemic.
How do you respond to the FTC, keep your company out of trouble, and minimize disruption to the business, while juggling the demands of this challenging time and without breaking the bank on legal spending?
Practical Suggestions for Responding to the FTC
Responding to a government inquiry is always a serious task, and FTC consumer protection investigations are often very demanding in the early stages. But there are practical and effective steps a company can take to meet its obligations while also minimizing burden and streamlining the process in light of the challenges posed by the coronavirus pandemic. We suggest the steps below.
Reach out right away to the FTC staff attorney.
Have counsel place an initial call to the staff attorney(s) listed on the CID. Counsel can introduce the constraints your company is facing because of the pandemic and explain that you are working to prepare a plan for responding to the CID.
Determine the agency's highest priorities.
In order to best deploy strategies designed to minimize burden (discussed below), you will need to first determine the agency's priorities. Sometimes press coverage of your company or related issues precede the CID and make clear what issue(s) the FTC is most interested in, or counsel experienced in FTC practice may be able to determine the agency's main objectives from the CID or letter. If not, or even if so, frequently it is helpful to have counsel ask the staff attorney(s) upfront on the initial call or at the meet and confer what their highest priorities are.
Assess whether there is ongoing impact to consumers in the FTC's eyes.
In planning your response strategy, it will also be useful to focus on any issues that could be perceived as causing ongoing impact to consumers. The FTC puts a premium on pursuing practices it perceives as causing continuing harm to consumers.
This is especially true for any practices that concern the pandemic, such as messaging or marketing relating to the pandemic, or a product or service being more widely used now due to the pandemic and stay-at-home orders, such as remote learning platforms, videoconferencing, social media, sale or delivery of essential goods or services, or other online technologies that are lifelines for so many during these times.
Consider whether your company wants to voluntarily change any of its practices or its consumer-facing messaging.
In these times, the FTC may be willing to focus on solving immediate issues for consumers. Especially if the CID appears focused on current practices that are of concern because of the pandemic, proactively offering changes to those practices may be an effective way to convince the agency to forego or narrow some of the requests in the CID and thereby spare its limited resources for more pressing matters (as well as save on your own legal expense if this approach is successful).
Consider whether an initial briefing could address the FTC's concerns.
An early meeting between the FTC and business people or engineers may go a long way to assuage the agency's concerns, potentially persuading the staff to limit or even drop an inquiry. In our experience, the likelihood of success of this strategy will depend on the particular facts and circumstances, but it is worth considering the pros, cons and expense of offering such a meeting (which at present would be conducted remotely) at the outset.
Let the FTC know of specific pandemic-related challenges you face.
After considering the options above or in combination with them, the first step in preparing to respond to the requests in the CID is to meet and confer with the FTC to discuss proposed changes to the scope of the CID and a schedule for the response. Citing the coronavirus pandemic as a reason not to submit any response will not be effective.
However, in our experience, and including during the pandemic, the FTC is willing to consider reasonable modifications, especially if your counsel articulates why the modifications are reasonable and necessary while still enabling the FTC to gain the information it needs.
As the head of the FTC Bureau of Consumer Protection has recently explained,[1] the FTC:
understand[s] that [companies may be under financial and other stresses during the pandemic] and we're accommodating that as able. But we do need to continue the work of the Commission particularly where there's ongoing injury to consumers.
To the extent that your company is facing specific challenges because of the coronavirus pandemic, your counsel should be prepared to explain them and why they may warrant modifications to the CID or the response schedule.
Develop a tailored response plan.
Be prepared in the meet and confer to propose limitations on the CID and a schedule that will ease your company's burden while allowing the FTC to conduct a meaningful investigation. For example, consider proposing a partial but targeted response to key CID requests sooner, rather than complete information at a later date. The agency may be more open now than in the past to flexible approaches, such as assessing key materials first and following up for additional materials if needed.
Do not hold back from proposing ways to narrow specifications or modify definitions to reduce burden or expense — but as always, these requests are best coupled with an explanation of why what is being produced falls in the heartland of what the FTC is looking for. In developing your plan, do not let the perfect be the enemy of the good, now more than ever.
Spending 30% of the resources to get 90% of the benefit is efficient and good value, so long as you are transparent with the FTC about choices you are making such as which document repositories you do or do not plan to search and other aspects of e-discovery, which can be expensive.
Build in backup staffing plans.
Even company personnel who can continue working will frequently be less available than in pre-coronavirus days. Many are strapped with additional tasks related to the pandemic and changes to business operations, and/or have less time to do any work at all due to child care, elder care, home schooling, or other changes to routines.
These aspects of business team members' lives could change, illness could develop in their families, or there could be other disruption. Plan for this possibility from the outset by including a range of business team members in fact-gathering and document collection so that if a change occurs, you are not starting over from the ground up.
Be upfront and proactive about scheduling challenges and changes.
In our experience thus far during the pandemic, the FTC has been responsive and understanding regarding scheduling challenges resulting from stay-at-home orders, travel restrictions and decreased workforce hours. When initially planning the response schedule for a CID, be as realistic as possible about what limitations you face and how long you need for each phase of the response and ask for that time from the agency. If conditions change and you need more time, ask for it as soon as possible with a brief description of why additional time is needed.
Keep pandemic-related restrictions in mind when considering meetings, presentations and the like.
Until travel and in-person meetings become feasible, it will be important to assess early (and revisit) how those restrictions may impact your strategy for aspects of CID defense that usually occur in person, such as meetings with or presentations to the agency and investigational hearings (depositions). There is no one-size-fits-all approach, but thinking through these issues in advance will help ensure minimal disruption, as well as make sure that legal fees incurred to prepare will not be wasted.
Conclusion
Managing an FTC investigation is a challenging and resource-intensive process even in the best of times, let alone in our current unusual and uniquely difficult circumstances. The practical steps outlined above will facilitate an effective response that puts your company in a positive light, minimizes both the burden on the business and legal expense and also ensures that the FTC receives the information necessary to complete its investigation.
Rebecca S. Engrav and Janis Kestenbaum are partners, and Erin K. Earl is counsel, at Perkins Coie LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] ABA Antitrust Law Section, Agency Update with the FTC Bureau Directors, YouTube (Apr. 20, 2020), https://www.youtube.com/watch?v=TflWh3eGf-w&=&list=PLUOd_3xoffjMZq-J_Yg2MKHay12dOVhrt&=&index=13 (quote of Andrew Smith, Director of the FTC's Bureau of Consumer Protection).
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