A civil investigative demand (“CID”) is the instrument by which the Federal Trade Commission exercises its compulsory process authority in connection with investigations. CIDs may require the production of documents – including electronically stored information – or tangible things, the provision of testimony, and the providing of written responses to questions.
A CID must state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation. This will be set forth via a section entitled “Subject of the Investigation” and in the “Resolution(s) Directing Use of Compulsory Process” that accompany the CID. The FTC is not required to disclose whether the recipient of a CID is a target or to explain the circumstances that prompted the investigation.
FTC civil investigative demands are often extensive and broad. A skilled FTC CID attorney may be able to narrow the scope of information and documentation being sought, and/or the time frame within which to comply, and thus modify the breadth and cost of the investigative process.
The recipient of CID is required to “meet and confer” with FTC staff counsel within a very tight timeframe. During meet and confer sessions, many CID recipients and their counsel object to one or more areas of inquiry without possessing an accurate understanding of the legal standards and thresholds underlying the objection(s).
For example, threadbare objections such as relevance, burden, cost and breadth are unlikely, by themselves, to persuade staff counsel or FTC Directors. When attempting to modify or narrow the scope of a CID, FTC CID lawyers should be prepared to amply demonstrate, as the case may be and without limitation, why a specific specification is outside the scope of the investigation, unnecessary and abusive in breadth, lacks of reasonable time frame within which to comply, threatens disruption and serious hinderance of business operations, includes voluminous records searches, involves increased costs and lost manpower, does not further the FTC’s legitimate inquiry into matters of public interest, involves unreasonable diversion of personnel and financial resources, and/or seeks disclosure of confidential or proprietary information.
Some common objections include relevance, undue burden and over breadth.
An objection premised upon the CID improperly seeking irrelevant information must set forth persuasive facts that the information being sought is objectively outside the scope of the FTC’s investigation.
FTC compulsory process is permissible “if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant.” The standard for judging relevancy in an agency investigation is more relaxed than in an adjudicatory” proceeding. At the investigatory stage, the FTC can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not. The requested material, therefore, need only be relevant to the investigation – the boundary of which may be defined quite generally.
Put another way, the requested information must not be plainly incompetent or irrelevant to any lawful purpose’ of the agency. The agency’s own appraisal of relevancy must be accepted so long as it is not obviously wrong. It is a CID recipient’s burden to show that the information is irrelevant.
The FTC will possess a great deal of discretion on the issue of relevance because the agency is not required to explain all the nuances of its investigation to a recipient.
The gist of an undue burden or overbreadth objection is that the disclosures sought are unreasonable and indefinite.
FTC investigation process is not unduly burdensome unless compliance threatens to unduly disrupt or seriously hinder the normal operations of a recipient’s business. A CID recipient bears the burden to show how a CID interferes with its ability to operate its business. For example, a recipient that may wish to challenge one or more specifications contained within a civil investigative demand by evaluating the time and expense associated with compliance, and whether compliance threatens to unduly disrupt or seriously hinder normal business operations.
A challenger must be prepared to set forth facts underlying such a conclusion. Courts may reject a claim of undue burden where a recipient fails to enunciate how a CID constitutes a fishing expedition. CID recipients that fail to produce factual support to substantiate contentions that compliance would result in the virtual destruction of a successful business (e.g., affidavit or other documentation) are unlikely to persuade FTC staff counsel to modify or narrow a request. Mere statements by FTC defense practice counsel do not provide factual support.
Importantly, absent a showing of disruption, the sheer amount of responsive materials does not demonstrate undue burden (or overbreadth). Often CID recipients unsuccessfully attempt to merely allege that because a CID calls for thousands of documents that constitutes an undue burden. Some burden on CID recipients is, of course, to be expected and is considered necessary in furtherance of the agency’s legitimate inquiry and the public interest.
Any civil investigative demand places a burden on the person to whom it is directed. Time must be taken from normal activities and resources must be committed to gathering the information necessary to comply. Nevertheless, the presumption is that compliance should be enforced to further the agency’s legitimate inquiry into matters of public interest.
In terms of an overbreadth objection, broadness alone is not sufficient justification to refuse enforcement of and compliance with FTC compulsory process. Courts have held that the FTC should be accorded extreme breadth in conducting its investigations. Courts have struck down overbreadth challenges where no showing was made that the inquiries sought any information beyond that necessary to determine whether recipients have engaged or are engaging in unlawful acts or practices.
Further, broad CIDs have been justified in comprehensive investigations, particularly where that breadth is in large part attributable to the magnitude of the subject’s business operations.
If you or your company have received an FTC CID, consult with an experienced FTC defense lawyer from the start to position your response for an optimal resolution.
Richard B. Newman is an FTC compliance lawyer at Hinch Newman LLP. Follow FTC defense lawyer on National Law Review.
Informational purposes only. Not legal advice. This article is not intended to and should be construed as legal advice. May be considered attorney advertising.
