How to Respond to an Antitrust Civil Investigative Demand (CID)
Being on the receiving end of a civil investigative demand, or CID, from federal law enforcement agencies, means that you are suspected of having important information regarding a potential violation of federal antitrust law. How you respond to the CID is crucially important, as it can minimize or greatly expand the potential liability you face in the very near future.
What is a CID?
First, it is important to fully understand what a civil investigative demand is, and how it works.
A civil investigative demand is an administrative subpoena, or formal demand for certain information, documents, or testimony. Importantly, it is backed up by legal action for noncompliance.
In the context of antitrust law and enforcement, civil investigative demands (CIDs) come from either the Antitrust Division of the United States Department of Justice (DOJ) or the Federal Trade Commission (FTC). The DOJ has the authority to issue civil investigative demands (CIDs) through 15 U.S.C. § 1312, while the Federal Trade Commission (FTC) has Congressional authority to issue them through 15 U.S.C. § 57b-1.
These demands can be issued whenever these federal agencies or law enforcement agencies think that a company has any information at all that is relevant to a civil antitrust investigation. That information is described in the demand letter, and can include:
Documents for inspection, reproduction, or copying
Answers to written questions
Importantly, CIDs are administrative subpoenas. This means that they do not require approval from the federal district court. They can be issued without a showing of probable cause.
What are Two Ways to Not Respond to a CID?
The most important way to respond to an antitrust CID is to not make huge unforced errors that lead to easily avoidable legal liability and scrutiny. Companies frequently make those very mistakes when they either:
Do not respond to the CID at all, or
Provide all of the documentation requested, and then some.
Ignoring or not responding to a DOJ civil investigative demand (CID) is a bad idea because your company can face criminal charges for contempt for noncompliance. Those charges would get added to your legal situation, as you would still have to satisfy the demands of the CID.
On the other end of the spectrum, over-complying is also a bad idea. Some companies are so confident that they have not broken antitrust laws that they see the documentary demand and say, “Here, take everything we have.” While this may reduce the time it takes to comply with the CID, any information that is disclosed but that did not have to be can potentially lead to liability in one form or another, needlessly exposing your company to legal liability in exchange for some short-term convenience.
Preserve All Data with a Legal Hold
One of the first things that you will usually have to do after receiving a CID is to institute a “legal hold.” This orders the preservation of all potentially disclosable documents and information. In some cases, CIDs demand information or documents that are years old. If your company’s standard record preservation protocols would destroy those documents in the regular course of business, it can trigger allegations of spoliation or obstruction of justice.
Determine if Your Company is Under Investigation
Both the Antitrust Division of the DOJ and the FTC have the authority to issue CIDs to companies that have relevant information for any antitrust investigation. It does not necessarily have to be an investigation into your conduct. Determining whether you are the target of an antitrust investigation or enforcement action is crucial for deciding how best to respond to it.
File a Motion to Quash the CID or Challenge Its Scope
In some cases, particularly if you determine that it is your company that is the target of the civil antitrust investigations, it can be wise to try to limit or quash the CID. As Dr. Nick Oberheiden, an antitrust defense attorney at Oberheiden P.C., says, “Limiting or quashing a civil investigative demand often involves showing the agency that it is overreaching its jurisdiction – something that agencies are generally going to disagree with and then convince a court to defer to its objections. So filing the motion is rarely successful. However, not filing a motion to quash at this point can be seen as a waiver of your rights, preventing you from raising this defense argument in the future.”
If you choose to take this route to get the demand set aside, though, you often have to do so very quickly. For example, if the CID was filed by the FTC, then under 16 C.F.R. § 2.10 you only have 20 days to file the motion.
Collect Documents and Find Grounds for Non-Disclosure
Even if you end up trying to challenge the CID, you should always do your diligence and collect the documents and information that fall within the scope of the demand. Challenging the demand does not delay its deadlines, so if the agency issuing it disagrees with your defense and a judge defers to the agency’s interpretation of the law, you will still be legally obligated to comply with the CID. If you have not taken pains to collect the information that is being demanded while the challenge to the CID was pending, you are not likely to have enough time once the challenge has been settled.
Additionally, once the CID is received you should immediately make complying with it a top priority. It is not good enough to gather the information and put it together just in time to meet the deadline. You want to beat the deadline with enough time to review the disclosure package and see what the issuing agency is going to learn about your company. If you find something incriminating or that could lead to something incriminating, it is extremely important to find a justifiable ground for not disclosing the material. Invoking a privilege, like the attorney-client privilege, or coming up with a good argument for why it is outside the scope of the demand can insulate your company from legal liability.