What To Do When the FTC Contacts You

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blogpost4-12We have previously discussed on this blog what to do when the state attorney general contacts you.  While the stakes are typically higher and the cases usually larger when the Federal Trade Commission (“FTC”) contacts you, many of the same strategies must be employed, immediately, in order to protect your business and yourself and to obtain the best possible outcome.

The first communication that you receive the FTC may come in a number of different forms: a phone call, a letter, a subpoena, the service of a complaint or even service of a Temporary Restraining Order (“TRO”).  Worth noting, a TRO generally includes both asset restrictions and conduct restrictions.  The first steps you take after hearing from the FTC are critical.   Here is a brief list of the “do’s” and “don’ts”:

First, do not panic.   You will get through the ordeal, and get the best possible result, if you stay calm and take the appropriate steps.  Many companies and individuals have been down this road before you.  On the other hand, you should understand that any formal communication from the FTC is a very serious matter, and must be treated accordingly.  Your fate will often be determined by your initial response.

Second, resist the temptation to create or destroy documents.   In our digital age, document tampering or spoliation will generally be uncovered during the discovery portion of the action.  Not only will this dramatically increase the FTC’s interest in the underlying case, but such activities can create an entirely distinct and additional basis for the FTC to pursue the company as well as the individuals involved.  The cover-up often is worse than the crime.

Third, resist the temptation to overreact.  The issuance of overly defensive press releases, or any form of attack on the FTC, will almost certainly bring unwanted negative attention to your organization.  It will also likely damage your ability to work cooperatively with your adversary, the FTC.  Remember, a large part of your defense could include an attempt to educate the FTC about the nuances of your business practices, and why they are compatible with existing laws and regulations.  To that end, building trust, and a receptive audience, is of paramount importance.

Fourth, or perhaps first, contact experienced counsel immediately upon hearing from the FTC.  The FTC commences investigations for a wide variety of reasons.  Perhaps the FTC is seeking information about, or is investigating, your industry as a whole.  Or, perhaps, the FTC’s attorneys are attempting to determine who the good or bad actors are in a particular industry.   It is also possible that the FTC is seeking information about a third-party with whom you may have done business.  Experienced counsel can help determine what is at the core of the investigation and who the real targets are – which can help limit the investigation or point it in the proper direction.

If the investigation does in fact target your business, experienced counsel can help prevent an investigation from turning into a lawsuit.  If a lawsuit has been commenced, the goal is to get the quickest, most cost effective and painless resolution.  If that resolution involves a written settlement, which it almost always does, it is critical that the injunctive provisions therein be properly and narrowly crafted, not only to allow your company, and you personally, to participate in all lawful business, but also to contemplate future technologies, business models and business interests to ensure they are not foreclosed.   Unfortunately, there are countless examples of attorneys who, through inexperience, improper approach, lack of foresight or lack of industry knowledge, turn winnable cases into costly, protracted litigation or inadvertently foreclose future business lines for their clients.

Finally, a penny of prevention is worth a pound of cure.  The best way to succeed in any FTC investigation or action is to never appear on their radar screen in the first place.  Retaining counsel that is knowledgeable and experienced in Internet practices and online marketing, that knows the red flags that the FTC will look for, could save you substantial time and money, as well as allow you to avoid the distraction of dealing with a regulatory inquiry or action.

This topic should be of interest to any company or individual engaging in a commercial venture within the United States, especially those involved in the online and offline marketing, data collection and/or consumer product industries.

If you are interested in ensuring that you are compliant with current regulations or if you are facing an investigation from the FTC or other regulatory agency, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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