In part II of our series on our wish list for the new FTC, we look at the issue of the pace of FTC investigations. And just like Tom Cruise, we feel the need, the need for speed.
Now it’s no secret that, for the most part, FTC investigations proceed slowly. Some of that is no doubt due to resource limitations and a wish for more FTC resources is just not likely one that Santa can make come true. Putting aside more resources, are there other creative alternatives that could be considered?
One approach the FTC has used more frequently (see Operation Full Disclosure) is warning letters. As any FDA practitioner knows, the FDA is a much bigger fan of the warning letter. Of course, there are pros and cons to warning letters. With responsible advertisers (or those who may not be chronically upstanding but have healthy fear of risk), a warning letter likely stops the alleged harm to consumers more quickly and reduces overall harm. To a certain degree the FTC’s ability to collect consumer redress makes this a moot point, but consumer redress is not perfect. In some cases consumers deserving of redress cannot be identified or fail to come forward. In other cases, a company may plead inability to pay and the redress requirement is suspended in part or in whole.
Of course, warning letters also have downsides from an enforcement perspective. Unscrupulous advertisers can ignore them, and companies who later engage in similar conduct are not necessarily under order or subject to civil penalties (we say not necessarily because there are some options here depending on the circumstances). However, on balance, we wonder if there isn’t a possible case to be made for a broader use of warning letters than the FTC has made to date.
Another option that occurs to us draws upon an approach adopted by the BCP’s sister Bureau, the Bureau of Competition. Hart Scott Rodino geeks know all about the “Quick Look”, which is designed to determine whether a full blown merger investigation is warranted. Could there be a Consumer Protection “Quick Look?” Perhaps this is a question that should be discussed further.
By now you might be saying “stop this madness.” Why would any self-respecting advertiser want the FTC to conduct its investigations more quickly? Shouldn’t you be advocating for the FTC to move more slowly? Well, we can think of at least three good reasons. First, ongoing FTC investigations impose a time and resource drain on the business and generally can be a drag on the ongoing business. Second, the FTC is increasingly pressing advertisers to cease any alleged unlawful activity even during the pendency of its investigation or possibly face heightened consequences. This often leaves advertisers, who wish to continue to challenge the FTC’s conclusions, between a rock and a hard place. While shortening investigations doesn’t make this problem go away, it at least shortens the time during which advertisers have to live with this dilemma. Last, and perhaps most painful, longer investigations almost invariably result in higher legal fees. So there may be a cost savings element as well. Certainly the legal fees associated with a warning letter pale in comparison to those associated with responding to a CID.