FTC Bureau of Competition warns against enforcing contract terms that hinder agency investigations

Voluntary interviews “essential” to FTC investigations  

In a three-page legal analysis published alongside its June 16 statement, the Bureau explains the important role that voluntary interviews with stakeholders play in its investigations into potential unfair methods of competition.  Typically conducted in response to the Bureau’s outreach to “people and businesses affected by the activity” being investigated, the Bureau considers these voluntary interviews to be a “critical investigative tool” allowing the Bureau to “understand real-world dynamics and effects” of the alleged activity being investigated. The Bureau also argues that voluntary interviews serve to help “reduce unnecessary burdens on marketplace stakeholders and Bureau staff.” 

The Bureau explains that it has learned that targets of investigations are “increasingly imposing and invoking certain types of contract terms that can impede our ability to conduct voluntary interviews with market participants.” It argues that “contractual requirements and restrictions that hinder or obstruct the voluntary-interview process impede the Bureau’s ability to fulfill [its] congressional mandate.” 

Bureau of Competition deems certain contract provisions unenforceable 

The Bureau identifies three types of contract terms that it considers to have a “chilling effect” on a potential voluntary interview subject’s willingness to speak with Bureau staff.  These include: (1) confidentiality agreements that prohibit the contracting parties from disclosing certain information to non-contracting parties; (2) nondisclosure agreements that prohibit a specified party from disclosing information to others; and (3) notice-of-agency-contact provisions that require contracting parties to provide notice of any contact with a government agency and/or require a summary of any discussions with law enforcers and regulators. 

While the Bureau acknowledges that the exact language and conditions found in these three categories of contract terms may vary, the following will be deemed by the FTC to be contrary to public policy and therefore void and unenforceable: terms that purport to prevent, limit, or otherwise hinder a contract party from speaking freely to the FTC; or terms that require a contract party to disclose anything to an investigation target about the FTC’s outreach or communications.  The legal analysis cites to case law1 supporting the agency’s position and notes that other federal agencies such as the U.S. Securities and Exchange Commission, National Labor Relations Board, Federal Aviation Administration, and the National Highway Transportation Safety Administration have also concluded that such contractual provisions run contrary to public policy. 

Looking Ahead

The Bureau makes a point to explain that its statement and accompanying legal analysis are not intended to provide legal advice to any potential witnesses.  However, the Bureau does warn investigation targets and their attorneys that “attempts to obstruct FTC investigations and enforcements may be viewed as unlawful efforts to discourage or influence cooperation with the FTC” and can potentially rise to the level of a criminal violation referrable to the Department of Justice.  

The Bureau’s statement provides another reason that subjects under investigation should consult with experienced counsel before responding to any FTC request to provide access to employees or other market participants in service of a Bureau investigation.