On April 8, the Director of the FTC Bureau of Consumer Protection announced that the “FTC’s Bureau of Consumer Protection (BCP) is committed to providing legal clarity to legitimate businesses that wish to deal honestly with their customers and comply with the law.”
Last year, the FTC shared how to work most effectively with BCP staff if your business receives an FTC Civil Investigative Demand (CID), and the consequences that can result if businesses fail to cooperate.
This week, the FTC has also addressed “another integral part of responding to a BCP CID and engaging with BCP during an investigation:” early and substantive engagement with FTC BCP staff and, in cases in where the FTC is seeking monetary relief, the FTC’s Bureau of Economics (BE).
Under Chairman Ferguson’s leadership, BCP “continues to prioritize rigorous economic analysis in its consumer protection investigations.” Economic analysis, “including empirical analysis of potentially large quantities of data,” plays an important role in antitrust analysis and the FTC is expected to “continue to play an important role in the Commission’s consumer protection enforcement decision-making.”
“And that is for good reason: the Commission’s authorities are best administered when rigorous economic analysis is incorporated into its investigations. For example, BCP works closely with BE to develop theories and evidence of concrete injury. While some harms may be more difficult to quantify, it is still important to rely on the economic way of thinking to structure the analysis, clarify the framework of harm, and ensure that injury—even non-quantifiable injury—remains grounded in sound economic principles, as discussed during our recent workshop on consumer injuries and benefits in a data-driven economy.”
In coordination with BCP, “BE recently expanded its guidance to businesses about the best practices for economic analysis and data submission during an FTC investigation to address consumer protection, and not just antitrust, investigations.”
What You Can expect from FTC Bureau of Consumer Protection and Bureau of Economics
If your business receives a CID and is under investigation in a case in which the FTC is seeking monetary relief, “FTC staff will endeavor to be as transparent as possible about their theories of economic harm.” Given the preliminary stage of the investigation, however, in the typical matter BCP and BE staff will not be able to provide an estimate of economic harm in connection with issuance of a CID. “That is because it is often the case that a CID is issued to determine whether law violations have occurred and in part to obtain facts or data from which BE can more fully evaluate potential economic harm.”
“In cases in which the FTC is seeking monetary relief, if you then receive a draft complaint and order as part of consent negotiations, BCP staff will endeavor to provide a clear, high-level summary of how we are evaluating economic harm, an estimate of the approximate harm, and a breakdown between redress and civil penalties, where applicable. In most instances, your business can expect staff to describe, at least in general form, the results of BE’s empirical analyses of BCP’s theories of liability. BCP staff will also seek to explain, at least in general form, why any proposed amount of civil penalties is legally appropriate under the relevant factors.”
In some cases, BCP or BE staff may propose additional empirical analyses that may be useful for your business to conduct, which could inform BCP’s decision-making.
What the FTC Expects From Businesses
With increased transparency from BCP and BE, the FTC expects “transparent and forthright engagement from your business and, to the extent you hire them, your economic consultants. To start, a corollary to the transparency discussed above is your business’s fulsome production of data and other information requested in the CID.”
According to the FTC, to maximize the productivity of discussions about the economic analysis of harm, your business should be prepared to:
(1) tell BCP staff in advance if they plan to bring economists to a meeting;
(2) present empirical analysis as early in the investigation as practicable;
(3) provide white papers far enough in advance of meetings to give staff and leadership time to analyze them; and
(4) produce the data and code underlying your analysis as promptly as possible to give staff enough time to analyze them.
‘BE is less likely to expend its resources engaging with you about presentations that provide only a summary of your analysis without the underlying data, methodology, and econometrics. Similarly, if there is insufficient time for BE and BCP staff to analyze what you provide, it will be impossible to incorporate your analysis into the Director’s recommendations to the Commission.”
Importantly, while BCP “will provide parties with sufficient high-level information to understand the economic theories underlying our theories of harm,” the Directors “must also safeguard staff’s time and resources.” “In each case, BCP will take into account whether your business is providing the information described above—and in a timely manner—in determining the extent to which BCP and BE staff will engage with you and your economic consultants.”
The announcement confirms that economic analysis now plays a more important role in BCP investigations. “We want to work cooperatively with your business to get the information we need to understand the costs, benefits, and attendant consequences of our law enforcement actions. Doing so will better promote the welfare of consumers, competition, and our market economy.”
