What are Civil Investigative Demands, or CIDs?

Guy Shahar
December 18, 2023

Civil Investigative Demands (CIDs) are legal requests issued by government agencies, both at federal and state levels, including the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and state attorneys general. These demands compel companies to provide information relevant to investigations into potential violations of consumer protection laws. Despite being one of the government’s key tools when trying to enforce consumer protection laws, their breadth and implications often surprise businesses that find themselves in the government’s crosshairs.

What Are Civil Investigative Demands?

CIDs can require companies to submit documents, data, written responses, and/or oral testimony. They are typically used in preliminary investigations when a government agency is trying to determine if a law has been violated. Unlike subpoenas, which are used in the context of litigation, CIDs are employed in the investigative stage, making them a proactive tool for consumer protection. However, this also means that a business can be forced to expend significant resources responding to a CID before a complaint has even been filed.

Agencies That Can Issue CIDs

Various federal and state agencies have the authority to issue CIDs. At the federal level, the FTC and CFPB are both primary issuers, focusing on preventing anticompetitive, deceptive, and unfair business practices. State attorneys general also frequently issue CIDs under state consumer protection laws, often targeting local or state-specific issues.

Types of Information CIDs Can Compel

CIDs can demand a wide range of information, including but not limited to:

  • Internal company documents.
  • Emails and communication records.
  • Financial statements.
  • Marketing materials.
  • Data on consumer complaints and feedback.

Negotiating the Scope and Modifying CIDs

The scope of a CID varies depending on a number of factors. And this scope impacts the cost and time to respond, as well as potential penalties. However, companies receiving CIDs have a have avenues to negotiate or modify these demands, albeit within tight time frames.

Petitioning to Modify or Set Aside the CID

One option a company has is to file a petition with the issuing agency seeking to modify or completely set aside the CID. However, this decision involves weighing several factors. One primary consideration is that while the investigation remains nonpublic, the petition itself becomes public, potentially exposing the company to scrutiny. Additionally, not filing a petition could lead to waiving objections to the CID, as per FTC precedent. Petitions must be timely (usually within 20 days), detail all legal and factual objections, and include supporting documents. It's important to note, however, that while direct success with such petitions is rare, they can be effective when judicially reviewed.

Negotiating the Scope of the CID

In addition to filing a petition to modify or set aside the CID, companies may also negotiate the scope of the CID with the issuing agency. This negotiation process begins with the mandatory 'meet and confer' session with agency attorneys, usually within 10-14 days of receiving the CID.  Typical points of negotiation include the scope of documents requested, the production timeline, matters involving electronically stored information (ESI), and privileged and confidential information. Agencies usually require detailed justifications for any modifications, emphasizing the need to substantiate claims of undue burden, particularly regarding technical challenges.

Costs and Time Associated with Compliance

Complying with a CID can be resource-intensive. Companies often incur significant legal fees as they work with attorneys to respond appropriately. The process of gathering and reviewing the demanded information can be time-consuming, sometimes requiring several months, depending on the CID's scope and the company's size.

Penalties for Non-Compliance

Failure to comply with a CID can result in legal action, including contempt proceedings and fines. Non-compliance may lead to more severe scrutiny from the issuing agency, potentially escalating the situation.

Potential Outcomes for a Company

Once a company responds to a CID, several outcomes are possible:

  1. No Action: If the agency is satisfied with the response and finds no violation, the investigation may close without further action.
  2. Settlements and Consent Decrees: If violations are found, companies may negotiate settlements or consent decrees, often involving fines and measures to prevent future violations.
  3. Litigation: In more severe cases, agencies may initiate legal proceedings against the company.
  4. Reform of Practices: Companies often undertake voluntary reforms in response to issues highlighted by a CID.

Understanding CIDs is vital for businesses, given their potential impact on operations and reputation. Companies should be prepared to respond efficiently and in compliance with legal requirements, recognizing the serious nature of these investigative tools in consumer protection.

DISCLOSURE: This article does not constitute legal advice and should not be relied upon for business or legal decisions. Blee is not a law firm, or a substitute for an attorney or law firm. Blee is not liable for any damages arising from the use of or inability to use our service, product, or any material contained in it, or from any action or decision taken as a result of using our product or service. If you need legal or tax advice, you should consult an attorney or tax professional in your geographic area.

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