Question 1

Does getting a CID mean the FTC thinks we broke the law?

Accepted Answer

A CID starts an inquiry rather than accusing anyone. The CFPB says plainly that the existence of an investigation does not mean that the subject has violated the law. FTC staff made the same point in the AFR Financial matter, explaining that the CID "does not accuse, suggest or presume any wrongdoing" and instead seeks information to help staff evaluate whether any wrongdoing has occurred. In its enforcement petition concerning LabMD, the FTC put it this way: a CID can only compel information necessary for an investigation, and the investigation may or may not result in allegations of a law violation. A court has likewise observed that many FTC investigations involving a CID conclude without litigation, so the issuance of a CID does not make litigation "probable."

Question 2

Does the FTC need evidence that we broke the law before it can send a CID?

Accepted Answer

The Commission is not required to show that a violation is likely before it issues one. In its enforcement petition concerning LabMD, the FTC argued that the Commission is not required, as a precondition to conducting a law enforcement investigation, to make a showing that it is likely that a law violation has occurred. That follows from Morton Salt: the FTC may investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not.

Question 3

Does the CID have to tell us exactly what we are accused of?

Accepted Answer

It has to state the nature of the conduct under investigation and the law that applies, but not much more. The statute requires each CID to state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation. The Commission's rules add that a copy of the Commission resolution authorizing the process is sufficient to give notice of the purpose of the investigation. In the Wyndham matter, the Commission found that an authorizing resolution describing the subject matter as consumer privacy and/or data security, with a citation to Section 5 of the FTC Act, adequately delineated the purpose and scope of the investigation. It added that there is no need to state the purpose of an investigation with greater specificity or to tie the conduct under investigation to any particular theory of violation.

Question 4

Can we get a CID even if we are not the company being investigated?

Accepted Answer

A company that is not the target can be served, because the Commission is not required to exhaust its efforts to gather materials from the target before it issues process to third parties. In the Volkswagen "Clean Diesel" investigation, the Commission issued CIDs to Volkswagen USA and to various third parties, including a number of car dealerships.

Question 5

Can the FTC send us a CID to help a foreign consumer-protection agency?

Accepted Answer

Yes. The Commission has issued CIDs under Section 6(j) of the FTC Act, which the U.S. SAFE WEB Act of 2006 added to the Act. In the Aegis Mobile matter, the Commission issued a CID at the request of the Competition Bureau Canada, which alleged in Canadian litigation that Canadian companies had engaged in the deceptive marketing of premium text messaging and digital content services. Aegis petitioned to quash, and the Commission stayed that petition while it exercised its authority under Section 6(j)(2)(B) to institute a proceeding under 28 U.S.C. § 1782.

Question 6

Does a pending NAD or other self-regulatory review excuse us from answering an FTC CID?

Accepted Answer

A parallel self-regulatory review does not limit an FTC inquiry. The Commission held that, even if the National Advertising Division's review and the FTC's investigation were identical in scope, an advertiser's participation in a parallel self-regulatory program cannot limit an FTC inquiry.

Question 7

How long do we have to challenge a CID?

Accepted Answer

A petition to modify or set aside is due within 20 days of service, or before the return date if that comes first, unless an investigator extends the time in writing. The Commission will not consider a petition without a pre-filing meet-and-confer session and, absent extraordinary circumstances, will consider only issues raised there.

Question 8

How quickly does the Commission rule on a petition to limit or quash?

Accepted Answer

The Commission will issue an order ruling on a petition to limit or quash within 40 days after the petition is filed with the Secretary. A timely petition stays the remaining time for compliance as to the challenged portions, and if the petition is denied in whole or in part, the ruling specifies new terms for compliance, including a new return date.

Question 9

If staff extend our return date, does the deadline to petition to quash move with it?

Accepted Answer

Not automatically. In the New Seasons Market matter, the Commission denied a petition to quash because it was filed after the deadline. The company had received extensions of the return date, but the Commission explained that an extension of the time to comply does not automatically extend the time within which a petition to quash must be filed. The Commission also treated the last extension, which had been granted only orally, as not cognizable, because the CID by its own terms does not permit oral modifications.

Question 10

If we file a petition to limit or quash, can we stop responding to the whole CID?

Accepted Answer

No. Only the portions of the CID that the petition challenges are paused; the recipient must comply with the rest. The statute says the compliance period does not run while a petition is pending, except that the recipient shall comply with any portions of the demand not sought to be modified or set aside. The Commission applied that rule to Bachi.Tech, which challenged slightly more than half of the specifications in its CID but then responded to none of them: the company was obligated to begin responding to the requests it was not challenging, and by failing to do so it was in default of its production obligations.

Question 11

Does the 20-day petition deadline mean we have to produce everything in 20 days?

Accepted Answer

The deadline is for deciding whether to comply, not for producing. In the CFPB's rulemaking, the Bureau explained that recipients are not required to comply fully within twenty days; they are required simply to decide whether they will comply with the demand at all.

Question 12

Can we state our objections in our response instead of filing a petition to limit or quash?

Accepted Answer

Objections written into the response do not replace a timely petition. In the Tracers Information Specialists matter, the court did not consider the recipient's objections because it failed to exhaust its administrative remedies. The court also rejected the argument that the instructions on the back of the CID allowed objections instead of a petition, holding that the instruction form is not the law and does not replace the administrative procedure provided under the statute and the implementing regulations.

Question 13

Will FTC staff narrow a CID if we just tell them it is too broad?

Accepted Answer

Not on general objections alone. In the Wyndham matter, staff told the company's counsel that they were unable to modify the CID absent specific proposals for modification beyond mere general objections to duplication and overbreadth and an arbitrary cap on the number of interrogatories. Where staff could construe a specific request for modification, they addressed it and said they remained open to a more specific dialog about the outstanding concerns.

Question 14

Do settlement talks end the investigation or the CID?

Accepted Answer

Not by themselves. In the Wyndham matter, the FTC suspended its investigation at the company's request to explore settlement, and staff later told counsel that the FTC had repeatedly said it would resume its investigation if a settlement was not reached.

Question 15

Can we stop preserving documents once we have responded to a CID?

Accepted Answer

Not on a response alone. Under the FTC's rule, a recipient that has not been notified that the investigation has been closed or otherwise concluded is relieved of any obligation to continue preserving information, documentary material, or evidence for purposes of responding to the Commission's process only after twelve months following the last written communication from the Commission staff to the recipient or its counsel. Even a closed matter can be reopened: the rule says a matter may nevertheless be further investigated at any time if circumstances so warrant. The CFPB's rule is to the same effect: a closed investigational file may be further investigated at any time if circumstances so warrant.

Question 16

Can a witness bring a lawyer to testimony under a CID, and what can the lawyer do?

Accepted Answer

Yes. Under the FTC's rule, any witness compelled to appear in person in a deposition or investigational hearing may be accompanied, represented, and advised by counsel. The lawyer's role is limited, though: counsel may instruct a witness not to answer only when necessary to preserve a claim of protected status. The CFPB's rule likewise allows a witness compelled to appear in person at an investigational hearing to be accompanied, represented, and advised by counsel, subject to its own limits on how counsel may participate.

Question 17

Can a confidentiality agreement with a client or vendor excuse us from producing records?

Accepted Answer

No, a private contract does not shield records from a federal inquiry. In the WAM matter, the Commission noted that the debt collector cited no case law suggesting that a company can shield information from a federal inquiry by entering a non-disclosure agreement with a private party, even if its contract, properly construed, so provided. It rejected WAM's contention that HIPAA, other federal statutes or rules, or WAM's client contracts justified redacting non-privileged confidential information from its CID responses.

Question 18

Can we skip documents by saying they are all privileged?

Accepted Answer

A blanket assertion does not work; privilege is asserted through a log. In a CFPB enforcement appeal, the court noted that the proper way to address claims of privilege in response to a CID is for the objecting party to submit a privilege log. The FTC's rule likewise requires a detailed log of the items withheld, attested by the lead attorney or the attorney responsible for supervising the review, and a log that is not sufficient to support the claim may lead to its denial.

Question 19

Do we have to answer an informal request for information the way we would a CID?

Accepted Answer

A voluntary request carries no sanction, but declining it can lead to a CID. The CFPB's notice to recipients states that there are no sanctions for failing to provide all or any part of the requested information, and that if the information is not provided the Bureau may choose to send a CID or subpoena.

Question 20

Can we ignore a CID and raise our objections later in court?

Accepted Answer

Ignoring a CID forfeits most objections, because a party that fails to exhaust the FTC's administrative remedies waives the objections it could have raised there. Redwood Scientific filed no administrative petition to limit or quash and disclaimed having any such objections.

Question 21

Can we go to court to stop a CID before the FTC tries to enforce it?

Accepted Answer

Generally not. In a motion to dismiss for lack of jurisdiction over a request for pre-enforcement review of agency investigative process, the FTC argued that the recipient of administrative investigative process cannot short circuit a statutorily prescribed process for obtaining judicial review by instituting an action for declaratory or injunctive relief. The route is the one the statute sets: CIDs are not self-enforcing, and Congress has authorized the FTC to seek judicial enforcement of its CIDs in federal district court.

Question 22

Can we refuse a CID because we think the agency has no jurisdiction over us?

Accepted Answer

Only if it is patently clear that the agency lacks the jurisdiction it asserts. In denying MV Realty's petition to set aside a CFPB CID, the Bureau stated that the recipient of a CID generally may not raise "disagreements over an agency's authority" to resist complying with a CID. Rather, in the words the Bureau quoted from the D.C. Circuit, "[u]nless it is patently clear that an agency lacks the jurisdiction that it seeks to assert, an investigative subpoena will be enforced." The same decision also denied MV Realty's petition as untimely, noting that it was filed approximately two and a half months after the deadline and without a request for an extension.

Question 23

Can a nonprofit refuse a CID because the FTC could not sue it?

Accepted Answer

A CID can go to any legal entity, so the FTC's inability to sue a recipient is not a reason to refuse. The statute defines a "person" to include any partnership, corporation, association, or other legal entity. The Commission applied that rule to a nonprofit, finding that regardless of whether it may enforce the antitrust laws against the recipient, the recipient is subject to the Commission's investigatory jurisdiction and may properly be issued a CID. In a telemarketing investigation, the Commission reached the same result for a charity: it can require production from an entity that is not subject to its enforcement authority if the material furthers its investigation of possibly illegal conduct by entities that are, such as for-profit telefunders making calls on the charity's behalf.

Question 24

Can the owner refuse to hand over company records because they might incriminate him?

Accepted Answer

A corporate officer's personal privilege against self-incrimination does not prevent the production of corporate records, even when the officer is the sole shareholder and the only person authorized to manage the business. The same Commission order addressed petitions by Cellmark and Lexium to limit or quash CIDs, which attached a target letter that the U.S. Attorney's Office for the Middle District of Florida had sent to Mr. Vest. Interrogatories work differently because an individual who properly asserts the privilege cannot be compelled to answer them, but the company is still obligated to respond, and must do so by selecting an officer, employee, or agent who could furnish the information without fear of self-incrimination.

Question 25

Can our company refuse to send a witness for testimony because its owners face a criminal investigation?

Accepted Answer

No. A company has no Fifth Amendment privilege, so it must designate a representative who faces no such risk to testify on its behalf. The Commission applied that rule to two direct-mail supplement marketers that sought to stay its investigations and quash testimony CIDs pending related criminal investigations, and it denied the petition. The Commission also rejected the companies' argument that they could not be required to testify in Florida, because both had previously stated that their principal addresses were there.

Question 26

If we have already given the FTC documents and written answers, can it still demand testimony from the company?

Accepted Answer

Yes. In the Shire ViroPharma matter, which involved a subpoena ad testificandum under the entity-testimony rule, the Commission explained that testimony elicited at an investigational hearing is qualitatively different from documentary evidence and written discovery. The subpoena in that matter was one the company asked to quash. The Commission added that the effort of identifying and preparing witnesses to testify for a corporation does not excuse the corporation from the obligation to provide relevant testimony.

Question 27

Do we have to hand over records held by our vendors or stored overseas?

Accepted Answer

Yes, if the company has possession, custody, or control of them. The CID in the Spread Technologies matter covered documents and information in the recipient's possession or under its actual or constructive custody or control, including documents held by its attorneys, accountants, directors, officers, employees, service providers, and other agents and consultants. In its order denying Spread's petition to quash, the Commission described "control" as including the legal or practical ability to obtain responsive materials, including those possessed by a party's agent or maintained by a third party on the party's behalf. The same order held that the Commission may compel entities subject to its jurisdiction to produce responsive materials within their possession, custody, or control even if those materials are located abroad.

Question 28

Will what we send the FTC stay confidential?

Accepted Answer

Largely, but not entirely: the material is shielded from public-records requests, but it can be shared with other law enforcers, and a petition to quash is public. By statute, material the Commission receives in an investigation through compulsory process is not required to be disclosed under the Freedom of Information Act or any other provision of law, except as provided in paragraph (2)(B) of that section. Sharing with other agencies has a condition: the material is not to be made available to a federal law enforcement agency until the custodian receives certification from an officer of that agency that the information will be maintained in confidence and used only for official law enforcement purposes. The FTC's standard cover notice says it will not disclose the information under FOIA, but that it may disclose the information in response to a valid request from Congress or from other civil or criminal federal, state, local, or foreign law enforcement agencies for their official law enforcement purposes. In its order denying a nonprofit's petition to quash, the Commission noted that unauthorized disclosure of information obtained by the FTC is a criminal offense for FTC officers and employees. A petition to limit or quash is different: the Commission's rules make all such petitions and the Commission's orders on them part of the Commission's public records.

Civil Investigative Demand (CID)

Definition

Key legal rules

Why these rules exist

Enforcement examples

FTC v. Dinamica Financiera LLC (mortgage foreclosure-rescue services)

FTC v. Ian Chi (online sale of hCG weight-loss products)

In re HealthyLife Sciences, LLC (Healthe Trim weight-loss supplements)

FTC v. Redwood Scientific Technologies, Inc. (TBX-FREE and Eupepsia Thin film strips)

FTC v. Kushly, LLC (online CBD products)

In re Intuit Inc. (online tax preparation marketing)

CFPB v. Block, Inc. (Cash App payment services)

In re Amazon.com, Inc. (Prime subscription enrollment and cancellation)

In re Leader Automotive Group (auto sales and financing)

CFPB v. Purpose Financial, Inc. (payday and small-dollar lending)

Exposure

FAQs

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