A Civil Investigative Demand (“CID”) is a discovery tool utilized by regulatory bodies. It is essentially an administrative subpoena to obtain documentary materials, and other information that may be in your possession, custody, or control. Such information may be relevant to a regulatory investigation into possible business practice violations.
You may first hear from the Federal Trade Commission (“FTC”) or an Attorney General (“AG”) by phone, letter, or service of a CID, inquiring about your business practices or those of a third party. In other cases, you may not hear from the FTC or AG at all until after a lawsuit is filed. Regardless of the initial communication, how – and through whom – you make your initial response is critical.
Most important: Do not panic.
The unexpected receipt of a Civil Investigative Demand can often send businesses scrambling to respond, resulting in unforced errors and negative outcomes. Any investigation, especially one by a federal regulatory body, presents consequential ramifications from both legal and public opinion standpoints. It is imperative to be prepared well in advance of receiving a CID and to have the correct legal team already in place as the process unfolds.
There are many steps to take before, during and after learning that your business is the subject of an investigation. Taking the appropriate action ahead of time, can mitigate or avoid negative publicity, legal implications, and, most importantly, hefty monetary fines.
Civil Investigative Demand Response Best Practices
Generally, it is important to be proactive instead of reactive. Hindsight is 20/20 when it comes to determining if your business is compliant with federal and state guidelines in your respective field. Oftentimes, businesses can be “caught with their pants down” upon receiving a CID and by that time the damage may already be done.
First, if you do not have the correct legal team already advising you, retain them immediately. The best way to deal with a Civil Investigative Demand is to avoid inquiry altogether.
Next, have an experienced attorney respond on your behalf. When the time comes, seasoned counsel will know what to say, how to say it, what to ask, and when to say nothing at all.
Last, preserve: Do not create or destroy documents. As technology continues to engulf every industry, tampering and spoliation issues are becoming more prevalent and obvious. By engaging in such conduct, a business will further fuel the interest of the inquirer, likely prolonging any investigation. More importantly, this creates an entirely new set of issues for both the business and individual(s) involved in the conduct.
Who to Turn to for Guidance?
If you are served with a Civil Investigative Demand, experienced counsel will help to immediately identify the focus of the investigation and steer it away from your business. If your business is the subject of the investigation, experienced counsel will determine how best to respond to the inquiry and get the quickest, most cost-effective, and painless resolution.
If you engage in Internet marketing or utilize any form of third-party marketing (Internet, email, text, telemarketing, etc.) it is critical to retain counsel that is knowledgeable and experienced in all things marketing law long before you hear from the FTC or an AG. Counsel should know the ins and outs of regulatory compliance as well as the red flags to look for. This could save you substantial time and money, as well as allow you to avoid the distraction of dealing with a regulatory inquiry or an action against your business or you, personally.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.