FTC Reforms Aim For More User-Friendly Investigations

If your business has ever received a Civil Investigative Demand (CID) from the Federal Trade Commission, you know how time consuming it can be to gather the business records, organize them and draft a response.  The FTC is aware of how burdensome this process is, because back in April, it announced a goal for its Bureau of Consumer Protection: streamline the CID response process and improve transparency in investigations. On December 7th, the FTC held a lunch meeting and conference call to discuss the progress it was making on its reforms. The FTC admitted it has concerns that the investigation process places undue strains on legitimate business activities, particularly those of small businesses. The reforms discussed on December 7th include:

  • Providing plain language descriptions of the investigative demand process in cover letters that are sent along with the CIDs and on the FTC website;
  • Extending CID response deadlines from 21 to 30 days to improve the quality and timeliness of compliance by recipients;
  • Limiting the relevant time periods investigated by the agency to a three-year period absent extenuating circumstances;
  • Significantly reducing the length and complexity of instructions for providing electronically stored data; and
  • For current targets who have already complied with a CID, the FTC has implemented a practice of communicating the status of its investigations at least every six months to counsel for the business.
  • Adding more detailed descriptions of the scope and purpose of investigations to give companies a better understanding of the information the agency seeks;
  • Developing business education materials to help small businesses understand how to comply;

The FTC stated that its goal is to complete all investigations within one year, and it reported progress towards that goal, as it announced on December 7th that by end of 2017, 90% of all consumer-protection related investigations will be open less than a year.

For data breach investigations, the FTC stated its willingness to issue closing letters on case-by-case investigations. The FTC officials on the conference call seemed sympathetic to the fact that some companies are victims of data breaches despite not being negligent.

TAKEAWAY: Receiving a Civil Investigative Demand from the FTC will never be a welcome event, but the FTC is, at the very least, attempting to make the process of responding a little less painful for small businesses.

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