Consumer Protection Investigations: Is Your Defense Strategy Solid?

A Civil Investigative Demand is a formal legal process issued by the FTC to compel the production of documents, data, written reports, and oral testimony from any person or company that the FTC believes may have information relevant to a consumer protection investigation, and it does not require judicial approval. Upon receipt of a CID, the company must immediately implement a litigation hold, retain experienced consumer protection counsel to review the scope of the demand and assess any available legal objections, and develop a production plan that protects privileged communications.

Consumer protection disputes and regulatory compliance counsel can advise on the specific legal obligations triggered by the CID, assess the scope of the document production requirements, and develop the CID response and privilege protection strategy.

A regulatory subpoena issued by a state attorney general compels the production of documents, data, and testimony under the authority of the applicable state consumer protection statute, and the company's obligations in responding to a state AG subpoena are generally similar to its obligations in responding to an FTC CID, including the obligation to preserve all potentially responsive documents, to assert any applicable privilege claims in a privilege log, and to produce all non-privileged responsive documents within the time specified in the subpoena. The company should also assess whether the investigation is limited to the state that issued the subpoena or whether it is part of a multistate investigation.

Consumer protection law and regulatory risk management counsel can advise on the specific procedural requirements applicable to the FTC or state AG investigation and develop the comprehensive investigation response strategy.

Consumer protection disputes and civil litigation evidence counsel can advise on the specific legal obligations triggered by the regulatory subpoena, assess the scope of the required production, and develop the subpoena response and privilege protection strategy.

Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce, and the FTC has broad authority to investigate and take enforcement action against any company engaged in unfair or deceptive conduct, including false or misleading advertising, deceptive pricing practices, unauthorized billing, and negative option marketing that does not clearly disclose the terms of a subscription. The FTC can resolve an investigation through a consent order that requires the company to stop the challenged practices, pay civil monetary penalties, provide consumer redress, and submit to compliance monitoring.

Consumer protection law and unfair competition law counsel can advise on the FTC Section 5 liability exposure and develop the FTC enforcement defense strategy.

State attorneys general have broad authority under state consumer protection statutes, commonly known as Little FTC Acts, to investigate and prosecute consumer fraud, deceptive advertising, and unfair business practices, and many state AG investigations are conducted in coordination with the FTC or with other state attorneys general as part of a multistate investigation that can result in a multistate consent decree binding the company in all participating states. State AG consumer protection investigations can be triggered by consumer complaints, media reports, referrals from federal agencies, or whistleblower tips.

Consumer protection disputes and false advertising lawsuit counsel can advise on the state attorney general consumer fraud investigation, assess the state UDAP exposure, and develop the state investigation defense and resolution strategy.

A consent decree is a court-ordered agreement between the FTC or state AG and the company that resolves the investigation without a formal adjudication of liability, and it typically requires the company to stop the challenged practices, pay civil monetary penalties and consumer redress, implement a compliance program, and submit to monitoring by the agency or an independent compliance auditor. The company should approach consent decree negotiations with the goal of limiting the scope of the injunctive relief to the specific practices that are the subject of the investigation.

Consent decrees and settlement negotiation counsel can advise on the consent decree negotiation most appropriate for the specific enforcement action and develop the consent decree negotiation and compliance strategy.

An investigative hearing is a formal proceeding in which the FTC or state AG questions a company witness under oath about the company's business practices relevant to the investigation, and the testimony given at an investigative hearing can be used against the company in any subsequent enforcement action, making thorough witness preparation the most important step. The company's counsel should prepare the witness to answer questions accurately and completely and develop a clear and consistent narrative that demonstrates the company's good faith.

Consumer protection law and internal investigation services counsel can advise on the investigative hearing preparation and develop the witness preparation and investigative hearing strategy.