The FTC Targets Contractual Restrictions on Voluntary Cooperation

On June 15, the Federal Trade Commission issued a policy statement sternly criticizing use of confidentiality and nondisclosure agreements that “impede” the FTC’s ability to conduct voluntary interviews with market participants.

According to the FTC, such contracts can “chill” employees’ willingness to speak with agency staff. Considering the recent statement, following are best practices for responding to voluntary interview requests from government agencies.

According to the FTC, investigation targets cannot contractually prevent, limit, or hinder employees from speaking with agency staff. The FTC argues that such provisions are “contrary to public policy and therefore unenforceable.” Several federal agencies have taken a similar stance, including the Securities and Exchange Commission, National Labor Relations Board, and Federal Aviation Administration.

The FTC further warns that attempts to obstruct its investigations and enforcement actions may be viewed as conduct that “can potentially rise to the level of a criminal violation.” It promises to refer violations to the Department of Justice through its criminal liaison unit, which has been highly active since its inception last year.

However, it’s important to recognize that the policy statement doesn’t address counseling employees to inform corporate counsel if the FTC reaches out to them directly, reminding employees that they may decline the interview, helping employees prepare for voluntary interviews, or highlighting the potential drawbacks of agreeing to such interviews.

Instead, the FTC’s focus is squarely on contractual limitations that “impair or prohibit the ability to communicate freely with an administrative agency.”

To help navigate voluntary interview requests, companies should consider the following best practices.

Offer an Internal Notification Process

Employees may be surprised and anxious when agency staff requests to speak with them about an ongoing investigation. Most likely, the employee has little experience interacting with federal agencies. They will have questions about the process but may not know where to turn.

This is especially true when the agency is seeking company information from an individual employee. Companies should have a procedure in place that enables employees to notify their supervisor and corporate counsel so they can escalate questions about their options and next steps.

Participation Is Optional

The FTC and other federal agencies view contractual restrictions on employees’ participation in voluntary interviews as void. Therefore, companies shouldn’t seek to prevent employees from engaging with agency staff. It’s also important to highlight that declining to participate in a voluntary interview can lead to more burdensome compulsory process down the road, such as subpoenas and depositions.

Depending on the circumstances, a brief voluntary conversation can be a better way to engage with regulators. On the other hand, companies shouldn’t swing too far in the other direction by suggesting to employees that the interview is required or that refusing to participate will negatively impact their job performance.

Ensure Agencies Have the Right Employee

Agencies must make their best guess when identifying the employee(s) best suited to address their questions. But they don’t always get it right. Interviewing an employee who is’nt knowledgeable about important subjects is a poor use of agency and employee resources.

Corporate counsel should engage with agency staff to confirm the nature and scope of their investigation. This can help the company ensure that the interviewee is able to address agency staff’s questions. Failure to identify the right interviewee may result in additional interview requests and wasted resources. Sometimes, it will be most efficient for more than one employee to participate so the full range of subjects can be covered in a single call.

Help Employees Understand the Process

For most employees, an interview with a federal agency is far from business as usual. The process can be intimidating, and a few helpful reminders will go a long way toward alleviating any anxiety. First, the interview is voluntary, and the employee can end the conversation at any time.

Agency staff values the employees’ time and expertise. Staff relies heavily on such interviews to understand the market and competitive dynamics. Without voluntary cooperation, their investigations would be less comprehensive, and agencies would be less-informed about the market. And at this stage, employees aren’t required to discuss any information that they do not wish to share.

Stay on Point

Investigators will come prepared with a long list of questions about the employee, their company, and the market. For efficiency, it’s important to listen carefully to staff’s questions. Veering onto tangential topics is rarely helpful to anyone involved. Adequately addressing staff’s questions starts with active listening. If unfamiliar jargon enters the conversation, or if the employee is confused, they should ask for clarification.

Cover Common Questions

The FTC and the DOJ Antitrust Division interviews often focus on competitive and market dynamics. The flavor will differ depending on whether the company is a competitor, customer, or target of the investigation. The employee should at minimum be prepared to cover the following subjects:

• How the products or services at issue are used
• Companies they view as competitors
• Barriers to enter the market
• Recent entry or exit from the market
• Recent competitive negotiations, wins, and losses
• Likely response to a 5-10% price increase on products or services at issue
• Concerns with the proposed transaction or conduct under investigation

By following these best practices, companies can ensure that their employees are well-prepared for efficient voluntary interviews with staff from the FTC and other regulatory agencies.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Eli Glasser is chief compliance officer at Tyson Foods.

Henry Hauser is counsel, and Jon Jacobs is a partner, at Perkins Coie.

Brittany Hinson, a summer associate at Perkins Coie, also contributed to this article.

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