Research · 8 min read
How a Consumer-Protection Investigation Starts, and How It Usually Ends
The procedural rules say a complainant is not a party, that the agency acts only in the public interest, and that most matters resolve through a negotiated order placed on the public record for thirty days.
Key takeaways
- An investigation can begin six ways, one of which is a public complaint — but the rules state that a complainant is not a party to any resulting proceeding.
- The Commission acts only in the public interest and, by its own rule, does not act where the alleged violation is merely a private controversy.
- In deceptive-practices matters the civil investigative demand is the only form of compulsory process, and the target must be told the purpose and scope of the investigation and the applicable provisions of law.
- Objections run through a petition to limit or quash: 20 days, 5,000 words, a mandatory good-faith conference statement, a 40-day ruling, and public filing of both petition and order.
- Most matters end either in closure — after which a twelve-month silence relieves the recipient of further preservation duties — or in a negotiated consent order.
- A consent agreement may state that signing is for settlement purposes only and is not an admission that the law was violated, and the proposed order sits on the public record for thirty days of comment before final disposition.
Answer first: a complaint opens a possibility, not a case
16 CFR 2.1 lists how an investigation may begin. It "may be originated upon the request of the President, Congress, governmental agencies, or the Attorney General; upon referrals by the courts; upon complaint by members of the public; or by the Commission upon its own initiative." A public complaint is one entry point among six.
Section 2.2 describes what a complaint is and is not. A complaint "may be submitted via the Commission's web-based complaint site; by a telephone call to 1-877-FTC-HELP (1-877-382-4357); or by a signed statement setting forth the alleged violation of law with such supporting information as is available, and the name and address of the person or persons complained of," and "No forms or formal procedures are required."
Then comes the sentence that most people do not expect. "The person making the complaint or request is not regarded as a party to any proceeding that might result from the investigation." Filing does not create a case belonging to the filer, and it does not create a right to be heard in one.
Section 2.2(c) sets the confidentiality position: where the complainant's identity is not otherwise public, "the Commission's policy is not to publish or divulge the name of a complainant except as authorized by law or by the Commission's rules." It then notes that complaints may be lodged in a database and made available to federal, state, local and foreign law enforcement agencies that commit to maintain privacy and security, and that where a complaint concerns a specific consumer product or service, the Commission "may disclose the identity of the complainant" in the course of a referral or in furtherance of an investigation.
Section 2.3 states the threshold plainly: "The Commission acts only in the public interest and does not initiate an investigation or take other action when the alleged violation of law is merely a matter of private controversy and does not tend adversely to affect the public."
What compulsory process looks like, and what the target is told
Section 2.6 requires notice of what is being investigated. Any person, partnership or corporation "under investigation compelled or requested to furnish information or documentary material shall be advised of the purpose and scope of the investigation, the nature of the acts or practices under investigation, and the applicable provisions of law." A copy of the Commission's resolution is sufficient notice of purpose. The same section adds that "While investigations are generally nonpublic, Commission staff may disclose the existence of an investigation to potential witnesses or other third parties to the extent necessary to advance the investigation."
Section 2.7(a) provides that "When the public interest warrants, the Commission may issue a resolution authorizing the use of compulsory process," and defines the term to mean "any subpoena, CID, access order, or order for a report issued by the Commission."
One sentence in § 2.7(b) determines the shape of every consumer-protection investigation: "Civil Investigative Demands ('CIDs') shall be the only form of compulsory process issued in investigations with respect to unfair or deceptive acts or practices." Several other tools in the same section — subpoenas, special reports, access orders, depositions — are each introduced with the phrase "Except in investigations with respect to unfair or deceptive acts or practices."
CIDs come in four forms, each with its own specificity requirement: for documentary material including electronically stored information, for tangible things, for "written reports or answers to questions," and "for the giving of oral testimony." Each must "prescribe a return date providing a reasonable period of time" and identify the Commission custodian.
Investigational hearings are private by default. Section 2.7(f)(3) provides that "Unless otherwise ordered by the Commission, investigational hearings shall not be public," and requires the hearing official to exclude everyone other than the person being examined, their counsel, Commission staff and the reporter.
Section 2.7(k) requires a meet-and-confer before any fight over process: a recipient "shall meet and confer with Commission staff within 14 days after receipt of process or before the deadline for filing a petition to quash, whichever is first."
The rights of the person being asked, and the route to object
Section 2.9(a) gives anyone compelled to submit data or testify the right "to retain a copy or, on payment of lawfully prescribed costs, procure a copy of any document submitted, and of any testimony as stenographically recorded," with an exception permitting a witness in a nonpublic hearing to be limited for good cause to inspecting the official transcript. The witness must be offered an opportunity to read the transcript, and changes are entered and identified by the hearing official "together with a statement of the reasons given by the witness for requesting such changes."
Section 2.9(b) permits a compelled witness to "be accompanied, represented, and advised by counsel," and then constrains what counsel may do. Objections must be "stated concisely on the hearing record in a nonargumentative and nonsuggestive manner," and "Counsel may instruct a witness not to answer only when necessary to preserve a claim of protected status." The rule defines protected status as information that may be withheld "on the grounds of any privilege, work product protection, or statutory exemption."
Section 2.10 is the objection route, and it is tightly timed. A petition to limit or quash "shall be filed with the Secretary within 20 days after service of the Commission compulsory process or, if the return date is less than 20 days after service, prior to the return date." It must set out all assertions of protected status and all factual and legal objections, and "shall not exceed 5,000 words."
It must also be accompanied by a signed statement representing that counsel conferred with staff "in an effort in good faith to resolve by agreement the issues raised by the petition and has been unable to reach such an agreement," reciting the date, time and place of each conference and who took part. "Failure to include the required statement may result in a denial of the petition."
Filing stays the clock: a timely petition "shall stay the remaining amount of time permitted for compliance as to the portion or portions of the challenged specifications." The Commission "will issue an order ruling on a petition to limit or quash within 40 days after the petition is filed."
And the fight is public. Section 2.10(d) provides that all such petitions and all Commission orders responding to them "shall become part of the public records of the Commission," except information granted confidential treatment.
How most matters end
Section 2.14 sets out the two ordinary dispositions. "When an investigation indicates that corrective action is warranted, and the matter is not subject to a consent settlement pursuant to subpart C of this part, the Commission may initiate further proceedings." And: "When corrective action is not necessary or warranted in the public interest, the investigation shall be closed. The matter may nevertheless be further investigated at any time if circumstances so warrant."
Section 2.14(c) contains a quiet but useful provision about preservation. Where a recipient of a preservation demand, an access letter or compulsory process has not been told an investigation is closed, "after a period of twelve months following the last written communication from the Commission staff to the recipient or the recipient's counsel, the recipient is relieved of any obligation to continue preserving information, documentary material, or evidence."
The consent route is subpart C. Section 2.31 provides that "Where time, the nature of the proceeding, and the public interest permit," a party under investigation "shall be afforded the opportunity to submit" a proposed consent order agreement for the Commission's consideration alongside a proposed complaint drafted by staff. After a complaint has been issued, that route is generally closed.
Section 2.32 states what such an agreement must contain. It must include either an admission of the proposed findings of fact and conclusions of law "or an admission of all jurisdictional facts and an express waiver of the requirement that the Commission's decision contain a statement of findings of fact and conclusions of law." Every agreement "shall waive further procedural steps and all rights to seek judicial review or otherwise to challenge or contest the validity of the order."
It also permits the sentence that appears on most such documents: "The agreement may state that the signing thereof is for settlement purposes only and does not constitute an admission by any party that the law has been violated as alleged in the complaint." That is why a negotiated order and a finding of wrongdoing are not the same thing — and why an order can exist without an admission.
Section 2.32 requires the agreement to provide, among other things, that "The complaint may be used in construing the terms of the order," and that no outside understanding "may be used to vary or to contradict the terms of the order."
The public comment window, and the way back out
Acceptance of a consent agreement is not the end. Section 2.34(a) states that acceptance "does not constitute final approval, but it serves as the basis for further actions leading to final disposition."
Section 2.34(c) sets the comment period. Promptly after acceptance, the Commission "will place the order contained in the consent agreement, the complaint, and the consent agreement on the public record for a period of 30 days, or such other period as the Commission may specify, for the receipt of comments or views from any interested person." At the same time it places on the public record "an explanation of the provisions of the order and the relief to be obtained thereby," and publishes that explanation in the Federal Register.
That thirty-day window is the point at which the public sees the allegations and the proposed remedy together, and it is the reason a proposed order is usually readable in full before it becomes final.
After the comment period, § 2.34(e) provides that the Commission "may either withdraw its acceptance of the agreement and so notify respondents" or "issue and serve its complaint in such form as the circumstances may require and its decision in disposition of the proceeding."
There is also a way back out later. Section 2.51 permits any person subject to an effective rule or a final cease and desist order to "file with the Secretary a request that the Commission reopen the proceeding to consider whether the rule or order... should be altered, modified, or set aside in whole or in part." The request must make "a satisfactory showing that changed conditions of law or fact require" the change, or that the public interest requires it, supported by affidavits "set[ting] forth facts that would be admissible in evidence." A conclusory request does not satisfy the requirement.
Those requests are public too. Section 2.51(c) places the request on the public record and provides that it "shall remain on the public record for thirty (30) days after a press release on the request is issued," with the public invited to comment, and § 2.51(d) requires the Commission to determine the request "no later than one hundred and twenty (120) days after the date of the filing."
Sources
- 16 CFR Part 2 — Nonadjudicative Procedures (§ 2.1 How initiated; § 2.2 Complaint or request for Commission action; § 2.3 Policy as to private controversies; § 2.6 Notification of purpose; § 2.7 Compulsory process in investigations; § 2.9 Rights of witnesses in investigations; § 2.10 Petitions to limit or quash Commission compulsory process; § 2.14 Disposition; §§ 2.31-2.34 Consent Order Procedure; § 2.51 Requests to reopen)The six ways an investigation may be originated in § 2.1; the complaint channels, the absence of required forms, the statement that a complainant is not a party, and the confidentiality and law-enforcement-database provisions in § 2.2; the public-interest and private-controversy limit in § 2.3; the notice of purpose and scope, and the nonpublic-investigation sentence, in § 2.6; the compulsory-process resolution and definition, the statement that CIDs are the only form of process in unfair or deceptive acts or practices investigations, the four CID forms, the nonpublic investigational hearing rule, and the 14-day meet-and-confer requirement in § 2.7; the witness copy, transcript-review and counsel provisions and the instruction-not-to-answer limit in § 2.9; the 20-day, 5,000-word petition to limit or quash, the mandatory conference statement, the stay of the compliance period, the 40-day ruling and the public-record provision in § 2.10; the two dispositions and the twelve-month preservation-relief provision in § 2.14; the opportunity to propose a consent order in § 2.31; the required contents of a consent agreement in § 2.32, including the admission alternatives, the waiver of further procedural steps and judicial review, and the permitted settlement-purposes-only sentence; the acceptance, 30-day public comment, Federal Register explanation and post-comment options in § 2.34; and the requirements, public-record period and 120-day determination deadline for requests to reopen in § 2.51.
Frequently asked questions
Does filing a complaint make someone a party to a case?
No. Section 2.2(b) states that the person making a complaint or request "is not regarded as a party to any proceeding that might result from the investigation." Section 2.3 separately provides that the Commission acts only in the public interest and does not act where the alleged violation is merely a private controversy.
Is a complainant's name kept confidential?
Section 2.2(c) states the policy is not to publish or divulge a complainant's name except as authorized by law or the Commission's rules. It also notes that complaints may be lodged in a database available to law enforcement agencies, and that for complaints about a specific product or service the Commission may disclose the complainant's identity in a referral or in furtherance of an investigation.
What tool is used in a deceptive-practices investigation?
A civil investigative demand. Section 2.7(b) states that CIDs "shall be the only form of compulsory process issued in investigations with respect to unfair or deceptive acts or practices." Subpoenas, special reports, access orders and depositions are each introduced with an exception for those investigations.
How does a company object to a demand?
By a petition to limit or quash under § 2.10, filed with the Secretary within 20 days of service or before the return date if that is sooner, not exceeding 5,000 words, and accompanied by a signed statement that counsel conferred with staff in good faith and could not agree. The Commission rules within 40 days, and both the petition and the ruling become part of the public record.
Does a consent order mean the company admitted wrongdoing?
Not necessarily. Section 2.32 requires either an admission of the proposed findings or an admission of jurisdictional facts with a waiver, and expressly permits the agreement to state that signing is for settlement purposes only and does not constitute an admission that the law was violated. Every agreement waives further procedural steps and the right to seek judicial review of the order.
Is a proposed consent order public before it is final?
Yes. Section 2.34(c) requires the Commission, promptly after accepting a consent agreement, to place the order, the complaint and the agreement on the public record for 30 days for comment, together with an explanation of the order's provisions and the relief to be obtained, which is also published in the Federal Register.