What to Expect During an FTC Business Investigation Process

Companies across the board can get investigated by the Federal Trade Commission (FTC). This federal agency is responsible for enforcing a wide variety of consumer protection laws, making it difficult to comply with all of the rules that it oversees.

If you learn that the FTC is set to investigate your company, you likely have questions about what to expect during an FTC investigation process and you want to know how to defend your business. Dr. Nick Oberheiden is an FTC investigation attorney at the national law firm Oberheiden P.C. Here are some questions that he is often asked and a few defense strategies that he has used to protect clients in the past.

FAQs About FTC Investigations

1. What are Some Laws that the FTC Enforces?

The FTC has jurisdiction to enforce numerous laws across the United States. Some of these laws are very narrow, like the:

Others, however, are extremely broad, like the:

The Federal Trade Commission Act is particularly wide-reaching. The FTC Act authorizes the Commission to use compulsory processes in its investigations. It also forbids all business practices that are “unfair or deceptive.” This gives the FTC the ability to investigate nearly anything in the market that is novel or even remotely suspicious, and also share confidential information with other appropriate enforcement agencies, subject to appropriate limitations and confidentiality assurances.

2. How are FTC Investigations Initiated?

FTC investigations can get triggered in a wide variety of ways. However, two of the most common are:

  1. Whistleblower claims

  2. Discrepancies in public documents and disclosures

If the FTC learns that a whistleblower has brought potentially incriminating evidence to another law enforcement agency, it will likely get involved in the case and conduct its own investigation. This can be especially frustrating for you and your business because whistleblowers often have an ulterior motive for filing their complaints. In many cases, they are ex-employees, angry clients, or even outright competitors who want to see your company fail and are willing to use the legal system to do it.

The FTC may also initiate an investigation based on signs of wrongdoing that the agency’s personnel has found in public documents or disclosures about your company. However, these cases often stem from discrepancies found by the agency’s data mining programs, which are rife with inaccuracies that create false-positive results because they do not take the context of the suspicious transactions into account.

3. Are FTC Cases Civil or Criminal?

The FTC can actually start three different types of cases:

  1. Criminal

  2. Civil

  3. Administrative

However, it can only pursue civil and administrative cases in federal district court. If the FTC uncovers evidence of potentially criminal conduct, it will refer the case to the U.S. Department of Justice (DOJ), which can then conduct its own investigation and file criminal charges in federal court.

But even civil or administrative enforcement actions can carry huge fines and other penalties that can hurt your company for years to come.

4. What Penalties Can I Be Facing?

The penalties will depend on the alleged legal violations and on whether the case is pursued as a crime or not. 

In the worst cases, where an FTC investigation uncovers evidence of criminal conduct and the case gets referred to the DOJ, you could face over a decade in jail for certain charges.

Even if the case does not escalate into a criminal charge, though, the penalties that come with a finding of civil liability can be enough to cripple your company. While the precise details depend on the specific allegations, you will often have to disgorge unlawfully obtained funds and pay a civil penalty for each violation.

Defense Strategies for FTC Investigations

1. Hire an Experienced FTC Investigation Lawyer

One of the most important things that you can do to protect yourself and your company during an FTC investigation is to hire an experienced FTC investigation attorney to provide you with advice and guidance. This investigation has the potential to escalate into serious criminal charges. Only with the help of a lawyer can you make an informed decision about how best to defend your business.

2. Figure Out Who Is Under Investigation

This might seem like a strange defense strategy, but the FTC is known for issuing subpoenas or civil investigative demands (CIDs) to not just the target of their investigation, but also to anyone who may have information that is relevant to the case. It is not uncommon for businesses to get one of these formal requests for information when they are not under investigation by the agency.

While you should be careful, regardless, your interests should change if you are the target of the investigation or not. Figuring out if you are is not always easy, and often takes a close and informed reading of the document request and the context in which you received it.

3. Extend the Deadline to Conduct a Review of Your Disclosure

FTC investigations generally begin with a civil investigative demand (CID) or subpoena, to obtain existing documents and to request huge amounts of data, files, and other information, and giving very little time to provide it. In many cases, it is nearly impossible to collect all of the information that the agency wants to see. Requesting an extension is usually in your best interests.

Requesting an extension should generally be one of the first things that you do at this stage of the process. Even if it is feasible to disclose in the time allotted, you should make a point of reviewing all of the information before handing it over. This can take time.

As FTC investigation lawyer Dr. Nick Oberheiden explains, “By reviewing the disclosure package before providing it to the FTC, you can see what information they are about to get and give yourself the opportunity to control it. If there is something incriminating, you may be able to justifiably withhold it, usually using a privilege like the attorney-client privilege, or argue that it is outside the scope of the request. If there is no avoiding the damning disclosure, you can at least prepare your next step of defense and can try to include an explanation about why the evidence is not as bad as it seems.”

Oberheiden P.C. © 2022
National Law Review, Volume XII, Number 297