Federal Trade Commission to Streamline Investigative Process and Discovery Regulations

Federal Trade Commission to Streamline Investigative Process and Discovery Regulations

Last week, the Federal Trade Commission (FTC) issued final revisions to agency procedures governing the investigative process and standards of conduct for attorneys. These revisions are part of FTC’s effort to intermittently review and update existing regulations to ensure the investigative process is efficient, effective, transparent, and reasonably enforced. In addition, these revisions are intended to reflect improvements in the electronic discovery process and the enforcement of attorney compliance. The revisions set forth by the FTC will be effective as of November 9, 2012.

The revision process began in January of this year when the FTC drafted a Notice of Proposed Rulemaking (NPRM) encouraging public commentary on proposed amendments to the FTC Rules of Practice. The revisions are located in Parts 2 and 4 of the FTC’s Rules of Practice, sections which outline investigation regulations and appropriate attorney conduct when practicing in front of the FTC. Several of the revisions issued were directly related to the discovery process, specifically, with regard to Electronically Stored Information (ESI). The FTC defines ESI as, “any writings, drawings, graphs, charts, photographs, sound recordings, images and other data or data compilations stored in any electronic medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” The FTC further revised regulations for the Compulsory Process by which they pursue complaints by defining it as “any subpoena, CID, access order, or order for a report issued by the Commission.”

The following is a synopsis of some of the important revisions relating to discovery and ESI:

The manner and form of production of ESI:

  • When the FTC compulsory process requires the production of ESI, it will be produced in a manner consistent with the instructions provided by the FTC staff.
  • If there are no instructions put in place regarding the form for producing ESI, it will be produced in its native form or else in a “reasonably usable form” as determined by the FTC or in the meet and confer process detailed below.

Mandatory meet and confer process:

  • A recipient of an FTC compulsory request will meet and confer with FTC staff within 14 days after receipt of the process or prior to the deadline for filing a petition to quash. This allows the recipient and the FTC to discuss compliance and resolve any outstanding issues including issues related to privilege or protected status.
  • If there are any issues related to ESI that will be discussed in the meet and confer, the recipient will have a person familiar with its ESI system and methods participate in the meeting.

Withholding requested material:

  • Any person who withholds information or material which is responsive to a compulsory request must assert a claim of protected status prior to the date set for the production of the material.
  • A claim of protected status must be substantiated by a detailed log of the items withheld.

The revisions further stipulate ground rules for instances where there is disclosure of material which is protected by attorney-client privilege or work product. Under these circumstances, the FTC stipulates that the disclosure will not operate as a waiver if one of the following holds true:

  • The disclosure is inadvertent.
  • The holder of the privilege or protection took reasonable steps to prevent disclosure.
  • The holder promptly took reasonable steps to rectify the error, including notifying Commission staff of the claim and the basis for it.

Once the FTC is notified of the inadvertent disclosure, they must do the following:

  • Promptly return or destroy the specified material and any copies.
  • Not use or disclose the material until any dispute as to the validity of the claim is resolved.
  • Take reasonable measures to retrieve the material from all persons to whom it was disclosed before being notified.
  • Hold back such material until an Administrative Law Judge or court may rule on the merits of the claim of privilege or protection.
  • The producing party must preserve the protected material until either the claim of privilege is resolved by the court, the investigation is closed, or any enforcement proceeding is concluded.

Over the past few years, courts have become increasingly stringent with respect to e-discovery requirements. Attorneys are expected to be up to date on the most current electronic discovery regulations and the proper methods and formats to produce responsive documents. It is noteworthy that the FTC continues to monitor and update its rules and procedures to meet a changing technological environment. Other agencies keeping an eye on the FTC may decide to follow suit to better accommodate recent changes in discovery technology.

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