2014: Winter Issue

Home – FTC Rules Get E-Discovery Makeover This Month

FTC Rules Get E-Discovery Makeover This Month


When really broad neckties went out of style, one solution might have been to take a pair of scissors to them and snip them to a modern-day width. Smarter guys might simply have taken them to a tailor. Others might have made them into kites. But most guys simply purchased new ties, kept wearing the fat ones in case they came flapping back into style, or they stopped wearing the contraptions altogether in the present Age of Informality.

But when it comes to federal regulations, going to the tailor seems to be a preferred method of updating our regulatory wardrobe.  The Federal Trade Commission (FTC) is the latest government agency to perform a rules makeover to accommodate the rapid advances in technology that have for several years now been changing-vastly-the way discovery is conducted. 

On Sept. 27, 2012, following a nine-month comment and review period, the FTC updated its rules to "expedite FTC investigations and ensure the agency's investigatory processes continue to keep pace with electronic discovery." According to the FTC, revised Rule 2 has been amended to mirror guidelines over at the Department of Justice and U.S. Securities and Exchange Commission. The rules went into effect on November 9, 2012. 


"The modified e-discovery method is more realistic, given the exponential growth in Internet businesses, e-commerce, digitally stored information and communication," said Lori M. Tyler, a member of the e-discovery team at LexisNexis.

Accompanying the vote, FTC Chairman Jon Leibowitz issued a statement that the Commission's revised Rules of Practice make the FTC "a more effective agency." In response to questions about whether the rules should be more stringent about requiring compulsory process, he explained that, "while most competition investigations warrant compulsory process, and its use is strongly encouraged, it makes sense to provide staff with at least some flexibility in choosing which method to deploy in at least some investigations."

Here is a brief rundown of some of the changes.

Meet and Confer. As a way to streamline the process and perhaps take away any adversarial edge, the rules around subpoenas and Civil Investigative Demands now encourage parties to meet and confer with FTC staff within 14 days, if practicable, on the expedition of discovery. This was done, the FTC said, in light of the "complexity and scope of modern discovery practices." The deadline for the first meet and confer was extended to decrease the burden on recipients and their counsel. "Encouraging communication and cooperation to cultivate a more civil and amenable production and exchange of electronically stored information is a theme we see being advocated by e-discovery commentators from The Sedona Conference® to the judiciary," Tyler said.

Privilege Log Specifications. While the rules continue to provide for the FTC to evaluate privilege claims effectively, they were altered to lessen the burden on respondents.


Quashing or Limiting via Petition, Face-to-Face Discussions with Staff. The FTC put in place a provision allowing parties to show good cause to file a petition to limit or quash before a meet and confer session has taken place.  

Inadvertent Disclosure. The rules now incorporate a standard addressing waiver for inadvertently produced privileged material, including subject matter waiver, similar to Federal Rule of Evidence 502 [Rule 2.11(d)].

Compulsory Process in Investigations. Rules were changed to expedite investigations by: (1) treating production of documents as is done in civil matters; authorizing staff to review, duplicate or test all produced documents, including electronic media; (2) requiring the exchange of dialogue with staff to iron out any production problems; and (3) allowing for extra time, if necessary, to comply.

Document Preservation After One Year. It is no longer necessary to inform, in writing, subjects of investigation and third parties that they are obligated to preserve useless documents with open communications during all stages of the investigation. The revision does not remove any obligation that parties may have to preserve documents for investigations by other government agencies, or for litigation, however.

Crowell & Moring was among the active commentators in the process before the FTC. Crowell & Morning partner Jeane A. Thomas and associate Timothy (Ty) Carson provided their take on the Commission's revisions. With regard to e-discovery, they wrote that "while the Commission declined to modify the proposed rule permitting the Commission to require, through compulsory process, the production of 'electronic media' for 'inspection, copying, testing, or sampling' [Rule 2.7(i)], it acknowledged certain concerns and suggested methods for minimizing the risks and burdens posed by the final rule. For example, it explained that any testing method employed by the Commission would be specifically tailored to the needs of the particular investigation, and bounded by the nature and scope of the investigation. This acknowledgement should help respondents to negotiate the scope of initial requests that expose the respondent to undue risk and burden."

Thomas and Carson went on to say that the Commission acknowledged concerns about protecting privileged material during inspection, copying, testing and sampling. The FTC suggested, the attorneys reported, that parties raise concerns with staff during meet and confer sessions and discuss ways to allay burdens that come with the production of privileged material. For example, it was suggested that they implement independent "taint teams" to segregate privileged material obtained under this rule to respect its protected status. And if such measures fail, a respondent could petition to limit or quash the compulsory process.




Key Takeaways

  • Embrace cooperation in discovery. It is the consistent theme articulated from a variety of sources, from The Sedona Conference to respected judges like U.S. Judge Shira A. Scheindlin and U.S. Magistrate Judge Andrew J. Peck.
  • Keep in mind the nature and scope of investigations. This will be the basis of any testing procedures employed by the Commission.
  • Raise concerns with FTC staff if privileged material is at risk during inspections, copying, testing and sampling.
  • Implement independent taint teams to segregate privileged material to respect its protected status.

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