This page explains federal law for companies and individuals in New York that receive a civil investigative demand (CID) from the Federal Trade Commission: the statute, 15 U.S.C. 57b-1, and the FTC's own rules in 16 CFR Part 2. KOR Law LLP's regulatory and enforcement practice defends clients in enforcement proceedings by federal agencies including the FTC, and represents companies in responses to subpoenas and informal inquiries. The general first-week checklist for any agency demand is in what a company should do in the first week after a government subpoena.
What is a civil investigative demand?
A CID is the FTC's compulsory process in consumer protection investigations. Under the FTC's rules, CIDs "shall be the only form of compulsory process issued in investigations with respect to unfair or deceptive acts or practices" (16 CFR 2.7(b)). The statute lets the Commission issue one whenever it has reason to believe a person may have documents, things or information relevant to unfair or deceptive practices or antitrust violations (15 U.S.C. 57b-1(c)(1)). A CID must state the nature of the conduct under investigation and the law that applies (57b-1(c)(2)), and the recipient must be told the purpose and scope of the investigation; a copy of the Commission resolution authorizing process is enough (16 CFR 2.6).
A CID can demand documents, written reports, answers to interrogatories and oral testimony. Documents are produced under a sworn certificate, and written answers are given separately and fully under oath, with reasons stated for any objection (15 U.S.C. 57b-1(c)(11), (13)). Where testimony is required from a company, the company must designate officers or other people to testify on its behalf about the matters described (16 CFR 2.7(h)).
| Step | Deadline | Rule |
|---|---|---|
| Meet and confer with staff | Within 14 days after receipt, or before the petition deadline if sooner; extendable up to 30 days in writing | 16 CFR 2.7(k) |
| Petition to limit or quash | Within 20 days after service, or before the return date if under 20 days | 16 CFR 2.10(a)(1); 15 U.S.C. 57b-1(f)(1) |
| Petition length and statement | Up to 5,000 words, with a signed statement that counsel conferred in good faith | 16 CFR 2.10(a)(1), (2) |
| Commission ruling on a petition | Within 40 days after filing | 16 CFR 2.10(c) |
| Privilege claims | No later than the production date, with a detailed log | 16 CFR 2.11(a) |
| Compliance | The return date in the CID, unless modified in writing | 16 CFR 2.7(l) |
How do you respond, step by step?
- Preserve and calendar. Issue a legal hold immediately, since destroying records to obstruct a federal investigation is a felony (18 U.S.C. 1519), and calendar the 14-day and 20-day dates.
- Read the resolution and the specifications. They define the investigation's scope and what is relevant (16 CFR 2.6).
- Meet and confer. Discuss compliance, scope, rolling production, the form of electronically stored information and how privilege claims will be asserted. The company must bring people with the knowledge needed to resolve the issues (16 CFR 2.7(k)).
- Seek modifications in writing. Senior FTC officials may modify the terms of compliance in writing and extend the time to comply where the recipient shows satisfactory progress (16 CFR 2.7(l)).
- Petition if needed. A petition must state all objections, including privilege, with supporting affidavits and documents (16 CFR 2.10(a)(1)). Filing a timely petition stays the compliance time for the challenged parts (2.10(b); 15 U.S.C. 57b-1(f)(2)).
- Produce and certify. Follow staff instructions on the format of electronically stored information (16 CFR 2.7(j)) and produce under the sworn certificate (15 U.S.C. 57b-1(c)(11)).
What if you do not comply?
The Commission can go to court. If a person fails to comply with a properly served CID, the FTC may petition the federal district court where the person resides, is found or does business for an order to enforce it (15 U.S.C. 57b-1(e)). Under the FTC's rules, noncompliance can lead to actions "for enforcement, forfeiture, civil penalties, or criminal sanctions," brought by the Commission or the Attorney General (16 CFR 2.13(a)). Because a petition to quash is the route for objections, a company that simply ignores the deadline loses leverage it would have had.
Petitions and the Commission's orders on them become part of the FTC's public record, apart from material granted confidential treatment (16 CFR 2.10(d)). That makes it worth exhausting the meet-and-confer process before filing.
Where would a court fight over a CID happen?
In federal court. An FTC enforcement petition is filed in the United States district court for a district where the recipient resides, is found or transacts business (15 U.S.C. 57b-1(e)). That court has jurisdiction to decide the petition and enter orders to carry out the statute, its final order can be appealed under 28 U.S.C. 1291, and disobeying a final order is punishable as contempt (57b-1(h)). For a company based in New York City, that usually means the Southern or Eastern District of New York, which divide the city's counties between them (28 U.S.C. 112(b), (c)); the differences between federal and state court for New York businesses are discussed in federal court or state court for a New York business dispute. Because contempt is available once a court orders compliance, the administrative petition is usually the better place to narrow a demand.
What changes the answer?
- The return date. If it is less than 20 days after service, the petition is due before the return date (16 CFR 2.10(a)(1)).
- Written extensions. Only designated officials can modify terms or extend time, in writing (16 CFR 2.7(k), (l)).
- Privilege. Claims must be logged in the required detail or they are treated as noncompliance (16 CFR 2.11(a), (b)).
- Entity testimony. The company must prepare designated witnesses on the matters listed (16 CFR 2.7(h)).
- Parallel state inquiries. State attorneys general may investigate the same conduct; in New York, see what powers the New York Attorney General has in a business investigation.
- Securities industry firms. Broker-dealers and their people may face parallel requests from FINRA; see what a FINRA Rule 8210 request is.
- Other federal regulators. Product efficiency claims can also draw Department of Energy attention; see how a Department of Energy appliance efficiency enforcement case works.
For example: an online retailer asked about "Made in USA" claims
For example, imagine a Long Island online retailer that receives an FTC CID asking for every advertisement using "Made in USA," supplier invoices for three years, and a sworn interrogatory answer listing sales by product. (This is a made-up illustration, not a real client or result.) The CID's return date is 30 days out.
Counsel calls staff in the first week and holds the meet and confer by day 10 (16 CFR 2.7(k)). Staff agree in writing to narrow invoices to the ten products with the claim and to accept rolling production (2.7(l)). One specification asking for all customer emails remains disputed, so the company files a petition to limit it by day 20, with the required conferral statement (2.10(a)(1), (2)); the time to comply with that specification is stayed while the petition is pending (2.10(b)).
Common mistakes
- Waiting to call staff. The 14-day meet and confer is mandatory (16 CFR 2.7(k)).
- Relying on an oral extension. Modifications must be in writing (16 CFR 2.7(l)).
- Filing a petition without conferring. The petition must include a signed conferral statement (16 CFR 2.10(a)(2)).
- A thin privilege log. The rule lists required fields (16 CFR 2.11(a)).
- Ignoring the specification on formats. ESI must follow staff instructions (16 CFR 2.7(j)).
- Assuming the matter stays private. Petitions become public (16 CFR 2.10(d)).
What to do this week
- Record the date of receipt and service, and calendar day 14 and day 20.
- Issue a legal hold and identify custodians and systems.
- Read the Commission resolution to understand the investigation's scope.
- Contact the staff attorney named in the CID to schedule the meet and confer.
- Draft a list of specifications to narrow or clarify.
- Begin a privilege review protocol that fits the FTC's log requirements.
Frequently asked questions
Can the FTC take testimony from our employees?
Yes. CIDs can require oral testimony, and a company served with a demand for testimony must designate people to testify on the listed matters (15 U.S.C. 57b-1(c); 16 CFR 2.7(h)). Privilege planning for employee interviews is covered in how to run an internal investigation without losing privilege.
Does filing a petition stop the clock?
Only for the parts being challenged. A timely petition stays the remaining time for the challenged specifications, and the company must comply with the rest (16 CFR 2.10(b); 15 U.S.C. 57b-1(f)(2)).
Is a CID the same as a subpoena?
In consumer protection investigations, the CID is the only compulsory process the FTC uses; in other investigations, the FTC can use subpoenas (16 CFR 2.7(b), (c)).
What if the FTC later sues?
Documents produced may be used in later proceedings. A CID investigation can also run alongside an SEC or state matter; see what an SEC Wells notice is for how the SEC's end-stage process works.
What if we accidentally produce privileged documents?
The FTC rule protects inadvertent disclosures if reasonable steps were taken to prevent them and the error was promptly addressed, including by notifying staff (16 CFR 2.11(d)).