[Federal Register Volume 77, Number 188 (Thursday, September 27, 2012)]
[Rules and Regulations]
[Pages 59294-59311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-23691]


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FEDERAL TRADE COMMISSION

16 CFR Parts 2 and 4


Rules of Practice

AGENCY: Federal Trade Commission (``Commission'' or ``FTC'').

ACTION: Final rule.

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[[Page 59295]]

SUMMARY: The FTC is adopting revised rules governing the process of its 
investigations and attorney discipline. These rules, located in the 
Commission's Rules of Practice, are intended to promote fairness, 
transparency, and efficiency in all FTC investigations; and to provide 
additional guidance about appropriate standards of conduct for 
attorneys practicing before the FTC.

DATES: Effective date: November 9, 2012.
    Compliance date: The amendments to Rule 4.1(e) (16 CFR 4.1(e)) will 
govern attorney misconduct alleged to have occurred on or after 
November 9, 2012.

FOR FURTHER INFORMATION CONTACT: Lisa M. Harrison, Assistant General 
Counsel for Legal Counsel, (202) 326-3204, or W. Ashley Gum, Attorney, 
(202) 326-3006, Office of the General Counsel, Federal Trade 
Commission, 600 Pennsylvania Avenue NW., Washington DC 20580. For 
information on the proposed revisions to the rule governing attorney 
discipline, contact Peter J. Levitas, Deputy Director, Bureau of 
Competition, (202) 326-2030, Federal Trade Commission, 600 Pennsylvania 
Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: This discussion contains the following 
sections:

I. Overview of Rule Revisions and Comments Received
    A. Part 2 Rules Governing Investigations
    B. Rule 4.1(e) Governing Attorney Discipline
II. Section-by-Section Analysis of Final Rule Revisions
III. Final Rule Revisions

I. Overview of Rule Revisions and Comments Received

    The purpose of these final rules is to update and improve the 
Commission's Part 2 \1\ investigation process by accounting for and 
incorporating modern discovery methods, facilitating the enforcement of 
Commission compulsory process, and generally increasing efficiency and 
cooperation. The adopted revisions to Rule 4.1 \2\ are designed to 
provide additional guidance regarding appropriate standards of conduct, 
and procedures for addressing alleged violations of those standards. 
The revisions to Part 2 will take effect on November 9, 2012 unless the 
Commission or a Commission official identified in Rule 2.7(l) 
determines that application of an amended rule in an investigation 
pending as of November 9, 2012 would not be feasible or would create an 
injustice. Revised Rule 4.1(e) will govern attorney conduct alleged to 
have occurred on or after November 9, 2012.
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    \1\ 16 CFR part 2.
    \2\ 16 CFR 4.1(e).
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A. Part 2 Rules Governing Investigations

    In its January 23, 2012 Notice of Proposed Rulemaking 
(``NPRM''),\3\ the Commission invited public comment on proposed 
amendments to its Rules of Practice governing its nonadjudicative 
procedures in investigative proceedings (``Part 2 investigations''). 
The public comment period closed on March 23, 2012.\4\ The Commission 
stated in the NPRM that it has periodically examined and revised its 
Rules of Practice for the sake of clarity and to make the Commission's 
procedures more efficient and less burdensome for all parties. The 
Commission observed that its review of the Part 2 investigation process 
was especially appropriate in light of growing reliance upon and use of 
electronic media in Part 2 investigations.
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    \3\ 77 FR 3191 (Jan. 23, 2012).
    \4\ The public comments are available at http://www.ftc.gov/os/comments/part2and4.1rules/. As stated in the NPRM, the Commission 
sought public comment although the proposed rule revisions relate 
solely to agency practice and procedure, and thus are not subject to 
the notice and comment requirements of the Administrative Procedure 
Act (``APA''). See 5 U.S.C. 553(b)(3)(A). The American Financial 
Services Association (``AFSA'') argues that the proposed revisions 
to the Commission's attorney discipline rules ``are substantive in 
nature and not merely procedural,'' and therefore should not be 
exempt from notice and comment. AFSA Comment at 2 & n.2. The 
Commission regards the rule revisions as concerning agency practice 
and procedure but notes that AFSA's concerns are not relevant in 
this instance because the Commission has afforded the public notice 
and an opportunity to comment on the proposed changes. Accordingly, 
the Commission has fully complied with the APA.
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    The proposed amendments announced in the NPRM were the culmination 
of a broad and systematic internal review to improve the Commission's 
investigative procedures and reflect the development of Part 2 
investigative practice in recent years. The Commission undertook this 
effort in order to improve the Part 2 investigation process through a 
comprehensive review, rather than piecemeal modifications of a limited 
number of rules, to ensure that the rules are internally consistent and 
that they are workable in practice.
    With the NPRM, the Commission endeavored to modernize some of the 
Part 2 rules by proposing regulations that included: (1) A rule that 
sets out specifications for privilege logs; (2) a rule that conditions 
any extensions of time to comply with Commission process on a party's 
continued progress in achieving compliance; (3) a rule that conditions 
the filing of any petition to quash or limit Commission process on a 
party having engaged in meaningful ``meet and confer'' sessions with 
Commission staff; (4) a rule that eliminates the two-step process for 
resolving petitions to quash; and (5) rules that establish tighter 
deadlines for the Commission to rule on petitions. Other proposed 
changes updated the rules by including express references to 
electronically stored information (``ESI'') and consolidated related 
provisions that were dispersed throughout Part 2.
    Apart from modernizing the Part 2 rules, the NPRM also sought to 
turn well-accepted agency best practices into formal components of the 
Part 2 investigation process. Such rules included: (1) A rule affirming 
that staff may disclose the existence of an investigation to certain 
third parties; (2) a rule codifying staff's practice of responding 
internally to petitions to limit or quash compulsory process; and (3) 
the Commission's announcement of its general policy that all parties 
engage in meaningful discussions with staff to prevent confusion or 
misunderstandings about information sought during an investigation.
    The Commission received comments on the proposed Part 2 revisions 
from five individuals or entities: the Section of Antitrust Law of the 
American Bar Association (``Section''); Crowell & Moring, LLP 
(``Crowell & Moring''); Kelley, Drye & Warren, LLP (``Kelley Drye''); 
James Butler of Metropolitan Bank Group; and Joe Boggs, an individual 
consumer.\5\ Most commenters endorsed the objectives of the 
Commission's proposed amendments. Mr. Butler opined that ``the proposed 
revisions will streamline the rules and add structure to the agency's 
investigatory process by consolidating related provisions that are 
currently scattered and/or may be outdated.'' The Section commented 
that it was generally supportive of the Commission's efforts ``to 
review its investigatory procedures with an eye toward fairness, 
efficiency, and openness.'' \6\ The Crowell & Moring and Kelley Drye 
comments likewise endorsed the Commission's proposed changes, 
``particularly as they relate to electronic media in document 
discovery.'' \7\ The Crowell & Moring

[[Page 59296]]

comment also observed that the rules should ``help the Commission 
execute its enforcement mandate while minimizing unnecessary cost and 
burden on parties and bringing investigations to a speedier 
conclusion.'' \8\
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    \5\ The Commission also received comments from one entity and 
one individual that limited their focus to an analysis of the 
agency's proposed revisions to 16 CFR 4.1. These are discussed in 
Section I.B. below.
    \6\ Comment from the Section of Antitrust Law of the American 
Bar Association (``Section Comment'') at 1.
    \7\ Comment from Kelley Drye & Warren LLP (``Kelley Drye 
Comment'') at 1.
    \8\ Comment from Crowell & Moring, LLP (``Crowell & Moring 
Comment'') at 1.
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    But these commenters also offered several substantive criticisms of 
the proposed rules. As a threshold matter, the Commission addresses the 
Section's general observation that ``although it is apparent that the 
Commission has serious concerns about how the investigative process is 
working, it is not entirely clear from the proposed amendments what 
those problems are, why the Commission's existing authority is 
inadequate to remedy particular issues * * * or how the proposals would 
remedy any such problems or omissions.'' \9\ In conjunction with this 
comment, the Section also proposed that the Commission convene a joint 
task force comprised of members of the private bar ``to review whether 
there are indeed problems with the investigative or disciplinary 
processes, and, if so, the types of targeted remedies that might be 
appropriate.'' \10\ The Commission notes in response that each of the 
rule revisions is a product of the Commission's own considerable 
expertise and investigative experience. As noted above, some of the 
problems that the Commission has identified stem from a lack of a 
clear, well-recognized policy setting out what is expected of 
respondents in certain circumstances. One example the Section 
identifies pertains to proposed Rule 2.11(c), discussed below. 
Compulsory process respondents occasionally produce documents with 
material redacted for reasons apart from its protected status. However, 
redaction of, for example, allegedly confidential, but non-privileged, 
business material, is improper.\11\ The proposed rule clarifies the 
obligations of recipients of compulsory process.\12\
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    \9\ Section Comment at 1-2.
    \10\ Id. at 2.
    \11\ See FTC v. Church & Dwight Co., 665 F.3d 1312 (DC Cir. 
2011).
    \12\ The need for revisions to other rules, including Rule 
4.1(e) governing attorney discipline, is discussed further in the 
section-by-section analysis below.
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    These commenters also offered more specific criticisms addressed in 
detail below in the section-by-section analysis. The announced 
privilege log specifications were among the new modernizing rules that 
garnered significant comments. Many commenters urged the Commission to 
relax these specifications to align them with the Commission's 
procedures for privilege logs submitted during discovery for 
administrative adjudications (``Part 3'') and Hart-Scott-Rodino second 
requests (``second requests''). Commenters also criticized the 
Commission's adaptation of the Federal Rules of Civil Procedure 
(``FRCP'') to account for ESI and provide for the sampling and testing 
of documents.
    The commenters also offered analysis of the rule revisions intended 
to codify existing practices. This subset of comments included the 
Section's and Kelley Drye's view that staff replies to petitions to 
limit or quash should be served on the petitioner. Those same 
commenters also argued against the provision in Rule 2.6 stating that 
Commission staff may disclose the existence of an investigation to 
potential witnesses.
    Upon consideration of the various comments and its own review of 
the existing and proposed rules, the Commission agrees that some of the 
proposed rules can be modified to better reduce the burdens of the Part 
2 process without sacrificing the quality of an investigation. After 
all, the proposed rules were intended to improve, rather than diminish, 
the FTC's ability to conduct fair and efficient investigations. The 
Part 2 investigative process works most effectively and efficiently 
when staff and outside counsel and their clients engage in meaningful 
communication and work in a cooperative and professional manner.
    Accordingly, the Commission is adopting the proposed rules and 
issuing some further modifications, including: (1) A revision of the 
privilege log specifications to decrease the burden on respondents, 
while still accounting for staff's need to effectively evaluate 
privilege claims; (2) extending the deadline for the first meet and 
confer to decrease the burden on recipients of process and their 
counsel; and (3) implementing a ``safety valve'' provision allowing 
parties showing good cause to file a petition to limit or quash before 
any meet and confer has taken place.
    The comments and the Commission's revisions to Part 2 are addressed 
in more detail in the section-by-section analysis of the final rule 
revisions.\13\
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    \13\ The Commission is also making a number of technical, non-
substantive changes to the proposed rules.
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B. Rule 4.1(e) Governing Attorney Discipline

    The Commission also sought comment on proposed changes to its rule 
governing attorney discipline, Rule 4.1(e). As the Commission explained 
in the NPRM,\14\ the proposed rule was designed to provide additional 
clarity regarding appropriate standards of conduct for attorneys 
practicing before the Commission and procedures for the evaluation of 
allegations of attorney misconduct. The proposed rule clarified that 
attorneys may be subject to discipline for violating such standards, 
including engaging in conduct designed merely to delay or obstruct 
Commission proceedings or providing false or misleading information to 
the Commission or its staff. The proposed rule also provided that a 
supervising attorney may be responsible for another attorney's 
violation of these standards of conduct if he or she orders or ratifies 
the attorney's misconduct.
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    \14\ 77 FR at 3194.
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    In addition, the proposed rule instituted appropriate procedural 
safeguards to govern the Commission's consideration of allegations of 
attorney misconduct, which is discussed further in the section-by-
section analysis. To that end, the proposed rule established a 
framework for evaluating and adjudicating allegations of misconduct by 
attorneys practicing before the Commission.
    The Commission received three comments addressing the proposed 
revisions to Rule 4.1(e) from the Section, the American Financial 
Services Association (``AFSA''), and a law student.\15\ These 
commenters offered several substantive criticisms of the proposed rule, 
which are addressed below. The Commission, upon consideration of these 
comments and its own review of the existing and proposed rules, issues 
several modifications to the proposed rules, including: (1) A revision 
to clarify the scope of potential imputed responsibility under the rule 
for supervisory or managerial attorneys; and (2) revisions to provide 
for the Commission to issue an order to show cause before issuance of 
an attorney reprimand in all cases and to provide an opportunity for a 
hearing prior to imposition of any sanction where there are disputed 
issues of material fact to be resolved.
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    \15\ Kristen Sweet Comment.

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[[Page 59297]]

II. Section-by-Section Analysis of Final Rule Revisions

Section 2.2: Complaint and Request for Commission Action

    The Commission proposed revisions to this rule that would account 
for more modern methods of submitting complaints and requests for 
agency action, and to avoid repetition of certain provisions in current 
Rule 2.1. That rule identifies how, and by whom, any Commission inquiry 
or investigation may be initiated. In contrast, Rule 2.2 describes the 
procedures that apply when members of the public or other parties 
outside of the agency request Commission action. No comments were 
received, and the Commission adopts the revised procedures with some 
minor modifications intended to simplify the proposed rule text.

Section 2.4: Investigational Policy

    The Commission proposed revising Rule 2.4 to underscore the 
importance of cooperation between FTC staff and compulsory process 
recipients, especially when confronted with issues related to 
compliance with CIDs and subpoenas. The proposed rule affirmed the 
Commission's endorsement of voluntary cooperation in all 
investigations, but explained that cooperation should be viewed as a 
complement, rather than a mutually exclusive alternative, to compulsory 
process. This proposed revision was meant to more accurately account 
for the complexity and scope of modern discovery practices.
    The proposed revision was not intended to herald a groundbreaking 
approach to investigations. The Commission proposed the revised rule as 
an affirmation of--and not a significant departure from--current 
Commission policy regarding compulsory process. Contrary to the 
Section's interpretation, the revised rule does not ``announc[e] a 
preference for compulsory process over voluntary production.'' \16\ The 
Commission will continue to use whatever means of obtaining information 
is appropriate, and notes that compulsory process is more likely to be 
necessary in complex cases. In a substantial number of investigations, 
voluntary methods are used.
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    \16\ Section Comment at 2.
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    The Section also observed that ``the `meaningful discussions' 
expected under the proposed rule could be read as an obligation imposed 
only on the parties receiving process.'' \17\ The Commission believes 
that such a reading is misguided because staff are necessarily 
participants in the discussions. Indeed, Crowell & Moring commented 
that the proposed rule will often encourage ``trust and cooperation and 
reduce[] possible confusion regarding mutual expectations.'' \18\ The 
Commission adopts the proposed rule.
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    \17\ Id. at 3.
    \18\ Crowell & Moring Comment at 2-3.
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Section 2.6: Notification of Purpose

    The Commission proposed amending this rule to clarify staff's 
ability to disclose the existence of an investigation to witnesses or 
other third parties. As noted in the NPRM, the proposed revision would 
restate longstanding agency policy and practice recognizing that, at 
times, staff may need to disclose the existence of an otherwise non-
public investigation, or the identity of a proposed respondent, to 
potential witnesses, informants, or other non-law-enforcement groups. 
The Commission's ability to disclose this information to third parties, 
to the extent that disclosure would further an investigation, is well 
established,\19\ and the practice plainly facilitates the efficient and 
effective conduct of investigations. Nevertheless, the Section remarked 
that ``it is unclear why a change in the current policy is necessary, 
or indeed what specific changes the Commission intends.'' \20\ The 
proposed rule was intended merely to reflect existing practice. As the 
Section further noted, the Commission ``historically has been properly 
mindful of the importance of confidentiality of its investigations, 
taking into consideration the various federal statutes that protect the 
confidential nature of non-public investigations.'' \21\ Under its 
current policy, the Commission does not ordinarily make blanket 
disclosure to the public of the identity of persons (including 
corporations) under investigation prior to the time that a complaint 
issues.\22\ The Commission is not departing from its current policy in 
this regard.
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    \19\ See FTC Operating Manual, Ch. 16.9.3.4.
    \20\ Section Comment at 3.
    \21\ Id.
    \22\ See FTC Operating Manual, Ch. 3.1.2.3.
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    Similarly, the Commission finds it unnecessary to require, as 
Kelley Drye suggested, a certification from ``all third parties with 
access to nonpublic information'' that ``the material will be 
maintained in confidence and used only for official law enforcement 
purposes.'' \23\ The statutory basis for Kelley Drye's comment applies 
only to disclosure to law enforcement agencies of ``documentary 
material, results of inspections of tangible things, written reports or 
answers to questions, and transcripts of oral testimony.'' \24\ The 
revisions to Rule 2.6 do not expand staff's authority to share such 
material with third parties, but merely acknowledge staff's ability, in 
limited circumstances, to disclose the existence of an investigation. 
Appropriate safeguards against improper use of confidential materials 
are already in place.
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    \23\ Kelley Drye Comment at 4.
    \24\ 15 U.S.C. 57B-2(b)(6).
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    The Section expressed an additional concern that the rule's 
proposed new language, specifying that ``[a] copy of the Commission 
resolution * * * shall be sufficient to give * * * notice of the 
purpose of the investigation,'' diminishes the Commission's obligation 
to notify targets about the scope of investigations. Specifically, the 
Section commented that ``Commission resolutions prescribed under 2.7(a) 
often are stated in broad general terms and, as such, do not provide 
sufficient detail to investigation targets of the objectives of a 
particular investigation.'' \25\ However, it is well established that 
``in the pre-complaint stage, an investigating agency is under no 
obligation to propound a narrowly focused theory of a possible future 
case. Accordingly, the relevance of the agency's subpoena requests may 
be measured only against the general purposes of its investigation.'' 
\26\ Further, the Commission observes that questions about the 
investigation may be discussed during the meet and confer process 
prescribed by Rule 2.7(k), or raised in a petition to limit or quash, 
as described in Rule 2.10. Thus, Rule 2.6 is adopted as proposed.
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    \25\ Section Comment at 3.
    \26\ FTC v. Texaco, Inc., 555 F.2d 862, 874 (D.C. Cir. 1977).
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Section 2.7: Compulsory Process in Investigations

    The proposed revisions to this rule consolidated the compulsory 
process provisions previously found in Rules 2.8, 2.10, 2.11, and 2.12. 
As explained in the NPRM, the proposed rule would substantially 
expedite its investigations by: (1) Articulating staff's authority to 
inspect, copy, or sample documentary material--including electronic 
media--to ensure that parties are employing viable search and 
compliance methods; (2) requiring parties to ``meet and confer'' with 
staff soon after compulsory process is received to discuss compliance 
with compulsory process and to address and attempt to resolve potential 
problems relating to document production; and (3) conditioning any 
extension of time to comply on a party

[[Page 59298]]

demonstrating its progress in achieving compliance.
    Proposed paragraph (a) describes the general procedures for 
compulsory process under Sections 9 and 20 of the Federal Trade 
Commission Act.\27\ In its comments, Kelley Drye requested that the 
Commission explain ``whether metadata will be included in the 
definition of ESI and consistently apply that definition to all 
investigative proceedings.'' \28\ The Commission believes that the rule 
requires no further clarification because, on its terms, the definition 
of ESI encompasses ``other data or data compilations stored in any 
electronic medium,'' which clearly includes metadata. This definition 
also comports with the broad meaning of ``electronically stored 
information'' in the FRCP.\29\ In a particular case, the instructions 
accompanying compulsory process may provide variations in the 
definition of ESI attributable to the particular circumstances of the 
investigation.
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    \27\ 15 U.S.C. 49, 57b-1.
    \28\ Kelley Drye Comment at 6.
    \29\ See Fed. R. Civ. P. 34 note (2006) (Notes of Advisory 
Committee on 2006 amendments) (``The wide variety of computer 
systems currently in use, and the rapidity of technological change, 
counsel against a limiting or precise definition of electronically 
stored information. Rule 34(a)(1) is expansive and includes any type 
of information that is stored electronically.'').
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    Kelley Drye also recommended that the Commission revise the 
definition of ESI ``to limit application of the translation requirement 
to instances when reasonably necessary to further the FTC's 
investigation.'' \30\ Here again, the Commission observes that, as with 
the FRCP, the definition on its terms calls for translation of data 
``if necessary.'' Moreover, even after compulsory process has issued, 
the meet and confer process described at paragraph (k), in conjunction 
with paragraph (l)'s delegation of authority to certain Commission 
officials to modify the terms of compliance with compulsory process, 
provides an adequate means to depart from this standard requirement 
when necessary. If the issue is unresolved after discussions with 
staff, the Commission is available to consider a petition to limit or 
quash compulsory process.
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    \30\ Kelley Drye Comment at 7.
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    The Commission received no further comments on paragraph (a) and it 
has been adopted as modified. Likewise, revised paragraphs (b)-(h), 
which described the Commission's additional compulsory process 
authority, did not elicit substantive comments and they have been 
adopted with some minor modifications intended to simplify the proposed 
rule text.\31\
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    \31\ As noted in the NPRM, these provisions consolidate 
provisions found in Rules 2.8, 2.10, 2.11, and 2.12. In addition, 
the revisions update and streamline the process for taking oral 
testimony by requiring corporate entities to designate a witness to 
testify on their behalf, as provided in FRCP Rule 30(b)(6), and by 
allowing testimony to be videotaped or recorded by means other than 
stenograph.
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    Proposed paragraph (i) articulates staff's authority to inspect, 
copy, or sample documentary material, including electronic media. The 
proposal elicited extensive comment from Crowell & Moring. First, the 
firm expressed a concern that the Commission could employ this method 
through ``mere'' compulsory process because it ``does not require the 
procedural safeguard of obtaining a Commission order.'' \32\ Crowell & 
Moring also expressed concerns about the scope of this provision, 
arguing that it could be read to ``allow the Commission to issue a 
subpoena or CID requiring the production of, e.g., servers, hard 
drives, or backup tapes, so that the Commission staff can `inspect' the 
ESI to see if there is anything of interest contained thereupon.'' \33\ 
The firm further argued that ``the proposed rule appears to give staff 
essentially unfettered access to any source of ESI,'' and thus ``staff 
could conceivably obtain access to an enterprise-wide email system and 
review large volumes of business information beyond the scope of the 
purported investigation.'' \34\ Finally, Crowell & Moring observed that 
the proposed rule raises privilege issues because ``conducting a 
privilege review, redaction, and then compiling the required privilege 
log'' attendant to such an inspection ``would in some cases present an 
enormous burden, since the privilege review would necessarily have to 
be conducted across the entire contents of the electronic media.'' \35\
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    \32\ Crowell & Moring Comment at 5.
    \33\ Id.
    \34\ Id.
    \35\ Id. at 6.
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    The proposed rule is authorized by Sections 9 and 20 of the FTC 
Act.\36\ Section 9 provides for access to documentary evidence in 
investigations other than those pertaining to unfair or deceptive 
practices, and Section 20 allows the Commission to require that 
``tangible things'' relevant to the investigation be submitted. The 
proposed rule is modeled after Fed. R. Civ. P. 34(a)(1), which 
expressly permits parties to test, sample, inspect or copy requested 
material. The methods contemplated by this paragraph are limited to 
``inspection, copying, testing, or sampling,'' and are not meant to 
sidestep, but only to supplement, the other tools of compulsory process 
available to the Commission. Any testing method would be specifically 
tailored to the needs of the investigation. Thus, the Commission 
anticipates that, as with all forms of compulsory process, an 
inspection or sampling demand would be bounded by the nature and scope 
of the investigation, as articulated in the Commission resolution and 
compulsory process.
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    \36\ See 15 U.S.C. 49 (``the Commission * * * shall at all 
reasonable times have access to, for the purpose of examination, and 
the right to copy any documentary evidence of any person, 
partnership, or corporation being investigated or proceeded against 
* * *''); 15 U.S.C. 57b-1(c)(1) (``Whenever the Commission has 
reason to believe that any person may be in possession * * * of any 
documentary material or tangible things, or may have any 
information, relevant to unfair or deceptive acts or practices * * * 
or to antitrust violations * * * the Commission may * * * issue in 
writing * * * a civil investigative demand requiring such person to 
produce such documentary material for inspection and copying or 
reproduction, [or] to submit such tangible things.'').
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    Furthermore, the Commission acknowledges Crowell & Moring's 
concerns about privileged material, and notes that parties may raise 
such concerns with staff during meet and confer sessions and discuss 
whether methods may be employed to allay any burden attendant to the 
production of privileged material. Such methods may include the 
implementation of an independent ``taint team,'' to segregate 
privileged material obtained under this rule in a manner that is duly 
respectful of the protected status of any material sought. If a 
respondent finds these means ultimately to be unavailing, the 
Commission believes that a petition to limit or quash compulsory 
process is a sufficient remedy. Accordingly, paragraph (i) is adopted 
as proposed.
    Proposed paragraph (j) sets out the manner and form in which 
respondents must provide ESI. Regarding this provision, Kelley Drye 
noted that, because producing a document in native electronic format 
often ``precludes the ability to protect privileged or sensitive 
information in that document,'' the Commission should ``exclude from 
production privileged information contained in native electronic 
format, provided that non-privileged information is produced in another 
format.'' \37\ The Commission notes that while staff would of course be 
open to discussing such concerns at a meet and confer session, it is 
the respondent's responsibility to produce all material in a usable 
format, and some materials (such as Microsoft Excel spreadsheets) are 
not usable unless produced in native

[[Page 59299]]

format. Thus, while it is advisable to bring these concerns to staff's 
attention, the blanket rule that Kelley Drye proposes would be 
unworkable in practice. Finally, the Commission acknowledges Kelley 
Drye's request that production requirements be narrowly tailored 
``particularly as they relate to metadata and duplicative electronic 
formats,'' \38\ and notes that revised paragraph (j) specifically 
provides authority for a Commission official to modify production 
requirements as they relate to ESI. Accordingly, revised paragraph (j) 
is adopted as proposed.
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    \37\ Kelley Drye Comment at 20.
    \38\ Id. Compulsory process requests do not typically call for 
material to be provided in duplicative formats. However, where the 
documents are produced in a form that is not searchable, the 
documents may need to be accompanied by an extracted text file to 
render them searchable.
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    Proposed paragraph (k) required parties to meet and confer with 
staff within ten days after compulsory process is received to discuss 
compliance with compulsory process and to address and attempt to 
resolve potential problems relating to document production. Several 
commenters objected to the ten-day timeline. For example, the Section 
commented that the ten-day requirement ``would impose a significant 
burden on outside counsel and responding parties.'' \39\ In response to 
these concerns, the Commission revises the rule to extend the meet and 
confer timeline to 14 days. The revised rule also provides that the 
deadline for the first conference may be further extended to up to 30 
days by any Commission official identified in paragraph (l). The 
revised rule provides further that the Commission will not consider 
petitions to quash or limit absent a pre-filing meet and confer session 
with Commission staff and, absent extraordinary circumstances, will 
consider only issues raised during the meet and confer process. The 
Commission observes that the meet and confer procedure is intended to 
be an iterative process. The rule only prescribes a timeline for the 
first meeting with staff, not the last. The rule does not preclude, and 
indeed the Commission strongly encourages, additional discussions of 
other issues as they arise. Revised paragraph (k) is therefore adopted 
as modified.
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    \39\ Section Comment at 4; see also Kelley Drye Comment at 11-
13.
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    Finally, proposed paragraph (l) stipulates that certain Commission 
officials may modify the terms of compliance with compulsory process. 
Kelley Drye requested that the Commission revise this rule to allow for 
time extensions based on a respondent's ``written acknowledgment that 
it is taking steps to comply with the FTC's request,'' \40\ rather than 
an actual demonstration of satisfactory progress toward compliance. 
This paragraph is intended to improve the overall speed and efficiency 
of investigations, like many other revisions to the rules. Conditioning 
extensions merely upon unsupported assurances that parties intend to 
comply with compulsory process would not adequately serve this purpose. 
Although the Commission recognizes that counsel ordinarily deal in good 
faith, it is the Commission's experience that assurances are often not 
met. Therefore, paragraph (l) is adopted as proposed.
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    \40\ Kelley Drye Comment at 11.
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Section 2.9: Rights of Witnesses in Investigations

    Proposed Rule 2.9 specified the rights of witnesses in Commission 
investigations, including witnesses compelled to appear in person at an 
investigational hearing or deposition. Paragraph (a) of the proposed 
rule continued to provide that a witness has a right to a transcript of 
the proceeding and copies of any documents used. This provision kept in 
place an exception--established in the preceding Rule 2.9--for some 
nonpublic proceedings. In those circumstances, the witness may inspect 
a transcript of the proceedings, but, for good cause, may not keep a 
copy. Although the proposed paragraph (a) did not revise that 
exception, the Section commented that ``any witness should be entitled 
to retain or procure a copy of any submitted document or recorded 
testimony, as the Commission recognized several years ago in its merger 
process reforms.'' \41\ The rule continues to provide that in general, 
staff should make such transcripts and documents available to 
witnesses. However, in certain circumstances, it is appropriate to 
withhold a transcript until the Commission pursues litigation. The 
Commission has long recognized the need for a good cause exception, 
even in the context of merger investigations.\42\ This provision is 
thus consistent both with established agency policy pursuant to Section 
20(c)(14)(G) of the FTC Act and the Administrative Procedure Act.\43\ 
Paragraph (a) is therefore adopted as proposed.
---------------------------------------------------------------------------

    \41\ Section Comment at 5.
    \42\ See Statement of the Federal Trade Commission's Bureau of 
Competition On Guidelines for Merger Investigations (December 11, 
2002) (http://www.ftc.gov/os/2002/12/bcguidelines021211.htm).
    \43\ See 15 U.S.C. 57b-1(c)(14)(G); 5 U.S.C. 555(c) (``in a 
nonpublic investigatory proceeding the witness may for good cause be 
limited to inspection of the official transcript of his 
testimony'').
---------------------------------------------------------------------------

    Proposed Rule 2.9(b)(1) was intended to prevent counsel from 
improperly engaging in obstructionist tactics during an investigational 
hearing or deposition conducted pursuant to Section 9 of the FTC Act by 
prohibiting consultation except with respect to issues of privilege. As 
the Section noted in its comments, Section 9 of the FTC Act \44\ grants 
the Commission broader authority than Section 20 \45\ to prohibit such 
conduct in matters not involving unfair or deceptive acts or practices. 
The proposed revision is necessary to prevent obstructionist conduct 
and is supported by federal court decisions and court rules prohibiting 
consultation in depositions while a question is pending.\46\ Thus, the 
Commission is statutorily authorized to regulate this aspect of 
investigational hearings and depositions conducted pursuant to Section 
9, and it has elected to do so.
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    \44\ 15 U.S.C. 49.
    \45\ 15 U.S.C. 57b-1.
    \46\ See, e.g., Hall v. Clifton Precision, 150 F.R.D. 525, 528 
(E.D. Pa. 1993) (such coaching ``tend[s], at the very least, to give 
the appearance of obstructing the truth.''); see also Fed. R. Civ. 
P. 30 advisory committee's note (1993 Amendments) (observing that 
``[d]epositions frequently have been unduly prolonged, if not 
unfairly frustrated, by lengthy objections and colloquy, often 
suggesting how the deponent should respond. While objections may * * 
* be made during a deposition, they ordinarily should be limited to 
* * * objections on grounds that might be immediately obviated, 
removed, or cured, such as to the form of a question or the 
responsiveness of an answer * * *. Directions to a deponent not to 
answer a question can be even more disruptive than objections.''); 
D. Col. L. Civ. R. 30.3(A) (Sanctions for Abusive Deposition 
Conduct); S.D. Ind. LR 30.1(b) (Private Conference with Deponent), 
E.D.N.Y. L. Civ. R. 30.6 (Conferences Between Deponent and Defending 
Attorney); S.D.N.Y. L. Civ. R. 30.6 (Conferences Between Deponent 
and Defending Attorney); M.D.N.C., LR 204(b); (Differentiated Case 
Management and Discovery); N.D. Ohio LR 30.1(b); D. Or. LR 30-5; D. 
Wyo. LR 30 (Depositions Upon Oral Examination).
---------------------------------------------------------------------------

    The other proposed changes to Rule 2.9, such as paragraph 
2.9(b)(2)'s limitations on objections, and the process for resolving 
privilege objections set out in revised paragraph 2.9(b)(3), generated 
no comments and are adopted with minor modifications intended to 
simplify the proposed rule text.

Section 2.10: Petitions To Limit or Quash Commission Compulsory Process

    In the NPRM, the Commission proposed to consolidate and clarify the 
provisions governing petitions to limit or quash into a re-designated 
Rule 2.10. In paragraph (a)(1), the Commission proposed a 3,750 word 
limit for all petitions to limit or quash. Both Kelley Drye and the 
Section objected to this word limit, and Kelley Drye suggested that the 
Commission increase the word

[[Page 59300]]

count to 5,000 words. The Commission agrees that a 5,000 word limit 
would still promote an efficient process for petitions to limit or 
quash while providing a party ample opportunity to address the issues 
raised in its petition. The Commission therefore incorporates this 
suggestion.
    Proposed paragraph (a)(3) establishes a procedure in instances 
where the hearing official elects to recess and reconvene an 
investigational hearing to continue a line of questioning that was 
interrupted by a witness's privilege objection. The provisions of 
paragraph 2.10(a)(3) expressly allow the hearing official to recess the 
hearing and give the witness an opportunity to challenge the 
reconvening of the hearing by filing a petition to limit or quash the 
Commission's compulsory process directing his or her initial 
appearance. Kelley Drye suggested that the Commission replace the five-
day deadline for filing a petition with the more inexact phrase 
``within a reasonable time.'' \47\ Proposed paragraph (a)(3), however, 
provides more clarity, and will further promote efficiency in Part 2 
investigations by foreclosing protracted discussions about what 
constitutes ``a reasonable time'' to address protected status issues 
raised during depositions or investigational hearings. Finally, the 
Commission notes, in reply to another comment from Kelley Drye, that 
the five-day deadline is computed by counting only business days, in 
accordance with Commission Rule 4.3(a).\48\ This paragraph is adopted 
as modified.
---------------------------------------------------------------------------

    \47\ Kelley Drye Comment at 14.
    \48\ Rule 4.3(a) provides that time periods of seven days or 
less exclude weekends and holidays.
---------------------------------------------------------------------------

    Proposed paragraph (a)(4) clarified that Commission staff may 
provide the Commission with a response to the petition to limit or 
quash without serving the petitioner. The Section and Kelley Drye each 
commented that any response by staff should be served on the 
petitioner. The proposed revision was intended only to articulate the 
Commission's long-established procedure for collecting staff's input on 
petitions to quash. Staff recommendations regarding petitions, like 
other staff recommendations, are privileged, deliberative 
communications and often reveal details about the matter, the premature 
disclosure of which could reasonably be expected to interfere with the 
investigation. Contrary to Kelley Drye's suggestion, the President's 
and the Commission's transparency policy do not call for the disclosure 
of this information.
    The Section also suggested that the Commission reevaluate Rule 
2.10(d), which makes public all petitions to limit or quash and the 
related Commission decisions. Specifically, the Section commented that 
``there is no compelling reason to reveal the identity of the 
respondent and the nature of the investigation during the pendency of 
the Part 2 investigation.'' \49\ But the Commission has previously 
determined that redaction of information that reveals the identity of 
the subject of a nonpublic investigation would ``impair the public's 
ability to assess and understand these important rulings.'' \50\ The 
Commission continues to believe that publication of past proceedings 
will guide future petitioners and provide predictability to the 
determination process. Therefore, the Commission has a compelling 
reason to continue its well-established practice of making petitions to 
limit or quash generally available unless a particularized showing is 
made that confidentiality should be granted pursuant to Rule 4.9(c). 
Accordingly, the Commission declines to adopt the Section's suggested 
changes.
---------------------------------------------------------------------------

    \49\ Section Comment at 6.
    \50\ 42 FR 64135 (1977).
---------------------------------------------------------------------------

    The other proposed changes to Rule 2.10 established a time limit 
for disposition for review of petitions by the entire Commission, and 
stay the time for compliance with compulsory process. The Commission 
did not receive comments on the former proposal, but notes by way of 
clarification that any failure to meet the deadline imposed by Rule 
2.10(c) will result in neither the automatic grant, nor the automatic 
denial, of a petition. No comments were received on the latter 
proposal, and both proposals are adopted with some revisions intended 
to clarify the proposed rule text. \51\
---------------------------------------------------------------------------

    \51\ The Commission is also updating the cross-references in 
Rules 4.2 and 4.9 to reflect the new numbering of the petition to 
quash rule.
---------------------------------------------------------------------------

Section 2.11: Withholding Requested Material

    The Commission proposed Rule 2.11 to set out the specific 
information required in privilege logs submitted in Part 2 
investigations.\52\ The objective of the proposed specifications, and 
those in the further revised rule, adopted in this notice, is to 
encourage parties to withhold only materials that qualify for a 
protected status, as that term is defined at Rule 2.7(a)(4),\53\ and to 
provide a basis for staff to analyze whether documents withheld on 
privilege grounds do, in fact, satisfy the legal requirements for the 
applicable privilege.
---------------------------------------------------------------------------

    \52\ The previous requirements for privilege logs were in Rule 
2.8A.
    \53\ ```Protected status' refers to information or material that 
may be withheld from production or disclosure on the grounds of any 
privilege, work product protection, or statutory exemption.'' 16 CFR 
2.7(a)(4).
---------------------------------------------------------------------------

    Several commenters suggested generally that the Commission adopt 
the more flexible privilege log rules that it has implemented for 
administrative adjudications conducted under Part 3, which are modeled 
on the FRCP, or the procedures that it has implemented for HSR second 
requests.\54\ However, there are factors specific to Part 2 proceedings 
that often make protected status claims difficult to assess and resolve 
efficiently. As explained in the NPRM, the Part 2 rule must contain 
more specific requirements than the rules applicable to Part 3 because 
there is no neutral Administrative Law Judge available in Part 2 
proceedings to analyze the sufficiency of the log. At present, the 
Commission's sole recourse in a Part 2 investigation is to file an 
enforcement action in federal court. Similarly, the nature of HSR 
second requests and attendant statutory deadlines create an environment 
where staff and respondents can more readily address and resolve issues 
of protected status.
---------------------------------------------------------------------------

    \54\ See, e.g., Crowell Comment at 8-10; Kelley Drye Comment at 
20; Section Comment at 6.
---------------------------------------------------------------------------

    Nevertheless, upon consideration of the various comments about 
these specifications, the Commission has modified proposed paragraph 
(a) to reduce the burdens placed on process recipients without 
sacrificing the quality of the privilege logs submitted. For example, 
although the Commission is modifying the proposed rule to require that 
the log be submitted in searchable electronic format, the proposed rule 
has also been amended to permit respondents to append a legend to the 
log enabling them to more conveniently identify the titles, addresses, 
and affiliations of authors, recipients, and persons copied on the 
material. The legend can be used in lieu of providing that information 
for each document. The paragraph also allows respondents to more 
conveniently identify authors or recipients acting in their capacity as 
attorneys by identifying them with an asterisk in the privilege log.
    Furthermore, the Commission acknowledges the suggestion from 
commenters such as Kelley Drye \55\ that providing the number of pages 
or bytes of a withheld document would be too burdensome. At the same 
time, the

[[Page 59301]]

Commission likewise recognizes that a privilege log must also contain 
control numbers in order for the parties to clearly and efficiently 
communicate with one another about the privilege claims asserted 
(including at the meet-and-confer session). Without control numbers, it 
would be difficult or infeasible to identify the precise documents 
under discussion. Thus, the Commission has determined to require 
document control numbers for withheld material, but will not require 
parties to provide document size information in a privilege log.
---------------------------------------------------------------------------

    \55\ See Kelley Drye Comment at 17.
---------------------------------------------------------------------------

    The Commission further modified paragraph (a) to require that 
respondents include document names in the privilege log. This 
codification of standard practice will allow staff to quickly identify 
the nature and source of the document. Finally, the modified paragraph 
includes a requirement that privilege logs contain the email address, 
if any, from which and to which documents were sent. This will enable 
staff to determine whether, and to what extent, authors, recipients, 
and persons copied on the material used non-secure email systems to 
access allegedly protected material.
    Parties should bear in mind that, as provided in paragraph (b), 
staff may relax or modify the specifications of paragraph (a), in 
appropriate situations, and as the result of any agreement reached 
during the meet and confer session. Under certain circumstances, less 
detailed requirements (for example, allowing documents to be described 
by category) may suffice to assess claims of protected status. This 
revision is designed to encourage cooperation and discussion among 
parties and staff regarding privilege claims. Consistent with existing 
practices, the Commission also codified in this rule its existing 
authority to provide that failure to comply with the rule shall 
constitute noncompliance subject to Rule 2.13(a). Paragraph (b) 
elicited no comments and is adopted as modified.
    Paragraph (c) of the proposed rule addresses an issue that has 
arisen in some investigations wherein targets of Part 2 investigations, 
in contravention of the instructions accompanying process, redacted 
numerous documents that were not claimed to qualify for any protected 
status. Paragraph (c) codifies the Commission's routine instructions by 
explicitly providing that responsive material for which no protected 
status claim has been asserted must be produced without redaction. The 
Commission has modified the proposed paragraph to replace the term 
``privilege or protection'' with the more general term ``protected 
status'' to comport with the revised definition of ``protected status'' 
in Rule 2.7(a)(4), and to better account for all categories of 
protected status claims available to respondents.\56\ No comments were 
received, and the paragraph is adopted with one modification intended 
to clarify the proposed rule text.
---------------------------------------------------------------------------

    \56\ The modifications to Rule 2.7(a)(4) and Rule 2.11(c) are 
representative of several technical revisions that the Commission 
has made to the proposed rules. Another example is the modification 
of Rules 2.7 and 2.9 to replace the term ``Commission 
Investigator,'' which has a separate meaning under Rule 2.5, with 
the term ``hearing official.''
---------------------------------------------------------------------------

    Proposed paragraph (d) follows recent changes in the Commission's 
Part 3 Rules and Fed. R. Evid. 502 regarding the return or destruction 
of inadvertently disclosed material, and the standard for subject 
matter waiver. Crowell & Moring supported this proposal, commenting 
that ``the non-waiver provisions reduce risk to recipients of 
compulsory process, and greatly facilitate the ability of recipients to 
take advantage of advanced technologies that can significantly reduce 
the overall costs of compliance.'' \57\ The Commission received no 
other comments about this paragraph and it is adopted with one non-
substantive modification.
---------------------------------------------------------------------------

    \57\ Crowell & Moring Comment at 3.
---------------------------------------------------------------------------

Section 2.13: Noncompliance With Compulsory Process

    Proposed paragraph (b)(3) expedited the Commission's Hart-Scott-
Rodino second request enforcement process by delegating to the General 
Counsel the authority to initiate enforcement proceedings for 
noncompliance with a second request under 15 U.S.C. 18a(g)(2) (``(g)(2) 
actions''). This change would enable the General Counsel to file (g)(2) 
actions quickly and without the need for a formal recommendation by 
staff to the Commission, and a subsequent Commission vote. Proposed 
Rule 2.13(b) also authorized the General Counsel to initiate an 
enforcement action in connection with noncompliance of a Commission 
order requiring access. In addition, the proposed rule clarified that 
the General Counsel is authorized to initiate compulsory process 
enforcement proceedings when he or she deems enforcement proceedings to 
be the appropriate course of action.
    Kelley Drye and the Section both offered criticism of this proposed 
rearticulation of the General Counsel's authority. Specifically, the 
Section wrote that ``[t]he decision to initiate litigation should not, 
in the Section's view, be subject to an advance delegation but should 
be the result of Commission consideration of specific facts and other 
circumstances in each particular case.'' \58\ In response, the 
Commission notes that Rule 2.13(b) does not establish a firewall or 
otherwise discourage communication between the Commission, Bureau staff 
conducting the investigation, and the General Counsel. As with many of 
the rules adopted today, this provision simply reflects longstanding 
agency procedure. The Commission notes that neither the Commission nor 
the General Counsel works in a vacuum regarding these matters. To 
underscore this point, the Commission has modified paragraph (b)(3) to 
provide that the General Counsel shall provide the Commission with at 
least two days' notice before initiating an action under that 
paragraph. The rule is adopted with that modification and a revision to 
paragraph (b)(1), which clarifies the General Counsel's authority to 
enforce compulsory process against a party that breaches any 
modification.
---------------------------------------------------------------------------

    \58\ Section Comment at 7.
---------------------------------------------------------------------------

Section 2.14: Disposition

    The Commission proposed to revise Rule 2.14 to relieve the subjects 
of FTC investigations and third parties of any obligation to preserve 
documents after one year passes with no written communication from the 
Commission or staff.\59\ The Commission proposed this revision in 
response to recipients of compulsory process who reported that they 
often did not know when they were relieved of any obligation to retain 
information or materials for which neither the agency nor they have any 
use. Such recipients were not inclined to inquire about the status of 
an investigation for fear of renewed agency attention. The proposed 
revision relieves compulsory process recipients of any obligation to 
preserve documents if twelve months pass with no written communication 
from the Commission or staff. However, the revision does not lift any 
obligation that parties may have to preserve documents for 
investigations by other government agencies, or for litigation.
---------------------------------------------------------------------------

    \59\ In the final Rule, the Commission is also extending this 
relief to recipients of a preservation demand.
---------------------------------------------------------------------------

    Commenters were generally supportive of these proposed revisions, 
although the Section and Kelley Drye asked that the Commission consider 
providing for a formal presumption that a matter has closed after the 
one-year period has passed. While the Commission recognizes that 
parties may, in certain circumstances, be reluctant to contact staff to 
inquire

[[Page 59302]]

about the status of a seemingly dormant investigation, it is unclear 
how such a ``formal presumption'' that a matter has closed would work 
in practice. Furthermore, the release of document preservation 
obligations strikes the appropriate balance between fairness to 
compulsory process recipients and staff's ability to conduct long-term 
investigations. Finally, Crowell & Moring urged the Commission to 
affirmatively notify targets of compulsory process when an 
investigation is closed. The Commission notes that, like each of the 
foregoing proposed rules, Rule 2.14 is not intended to discourage 
interaction and transparency during the Part 2 investigatory process. 
Consequently, wherever feasible, staff will continue to keep open lines 
of communication in all stages of an investigation. The rule is adopted 
with some modifications intended to clarify the proposed language.

Section 4.1: Reprimand, Suspension, or Disbarment of Attorneys

    The proposed rule provided additional clarity regarding standards 
of conduct for attorneys practicing before the Commission. In addition, 
the proposed rule established a framework for evaluating allegations of 
misconduct by attorneys practicing before the Commission. Under the 
proposed rule, allegations of misconduct would be submitted on a 
confidential basis to designated officers within the Bureaus of 
Competition or Consumer Protection who would assess the allegations to 
determine if they warranted further review by the Commission. After 
completing its review and evaluation of the Bureau Officer's 
assessment, the proposed rule provided for the Commission to initiate 
proceedings for disciplinary action where warranted. If the Commission 
determined that a full administrative disciplinary proceeding would be 
warranted to consider potential sanctions including reprimand, 
suspension, or disbarment, the Commission would serve an order to show 
cause on the respondent and assign the matter to an Administrative Law 
Judge.\60\ The proposed rule also granted the Administrative Law Judge 
the necessary powers to oversee fair and expeditious attorney 
disciplinary proceedings.
---------------------------------------------------------------------------

    \60\ In the alternative, the proposed rule provided for the 
Commission to preside over the matter in the first instance or 
assign one or more members of the Commission to sit as 
Administrative Law Judges in a matter.
---------------------------------------------------------------------------

    The Commission also proposed a process for issuance of attorney 
reprimands without a hearing in appropriate circumstances. After 
affording a respondent attorney notice and an opportunity to respond to 
allegations of misconduct during the Bureau Officer's investigation, 
the Commission could issue a public reprimand if it determined on the 
basis of the evidence in the record and the attorney's response that 
the attorney had engaged in professional misconduct warranting a 
reprimand. The proposed rule also established expedited procedures to 
allow the Commission to suspend an attorney temporarily after receiving 
official notice from a state bar that the attorney has been suspended 
or disbarred by that authority, pending a full disciplinary proceeding 
to assess the need for permanent disbarment from practice before the 
Commission.
    As noted previously, the Commission received three comments 
addressing the proposed revisions to Rule 4.1(e) from the Section, 
AFSA, and an individual commenter. Upon consideration of these comments 
and its own review of the existing and proposed rules, the Commission 
is announcing several modifications to the proposed rules, which are 
addressed in detail below.
A. Need for Revisions
    The Section questioned the need for revisions to Rule 4.1(e), 
noting that the Commission already has the power to sanction attorneys 
under Rule 4.1(e) or refer charges of attorney misconduct to local bar 
authorities.\61\ Rather than adopting the proposed changes to this 
rule, the Section suggested that the Commission should convene a 
working group of stakeholders to consider more limited changes to the 
rule.\62\ AFSA also suggested that the Commission's current rules are 
sufficient to address attorney discipline.\63\ In contrast, an 
individual commenter applauded the Commission for proposing a rule that 
provides greater clarity regarding the procedures that will be employed 
to investigate and adjudicate allegations of attorney misconduct.\64\
---------------------------------------------------------------------------

    \61\ Section Comment at 1, 7.
    \62\ Id. at 7-8.
    \63\ AFSA Comment at 1.
    \64\ Kristen Sweet Comment at 2.
---------------------------------------------------------------------------

    After reviewing these comments, the Commission has determined that 
the proposed rule revisions are warranted in order to address what have 
sometimes appeared to be dilatory and obstructionist practices by 
attorneys that have undermined the efficiency and efficacy of 
Commission investigations. Counsel for witnesses have sometimes taken 
advantage of the rule's lack of clarity during investigational hearings 
and depositions by repeating objections, excessively consulting with 
their clients during the proceedings, and otherwise employing arguably 
obstructionist tactics.\65\ In addition, the complexity of producing 
ESI may create an incentive for parties to engage in obstructionist or 
dilatory conduct that could interfere with the appropriate resolution 
of Commission investigations.\66\ In some cases, such conduct by an 
attorney could violate prevailing standards of professional conduct, as 
discussed below.\67\
---------------------------------------------------------------------------

    \65\ See e.g., 77 FR at 3192-94.
    \66\ See, e.g., Dan H. Willoughby, Jr. et al., Sanctions for E-
Discovery Violations: By the Numbers, 60 Duke L.J. 789 (2010).
    \67\ See, e.g., Ralph C. Losey, Lawyers Behaving Badly: 
Understanding Unprofessional Conduct in e-Discovery, 60 Mercer 
L.Rev. 983 (2009).
---------------------------------------------------------------------------

    In addition, the Commission has concluded that the proposed 
revisions will benefit attorneys practicing before the Commission by 
providing clearer guidance regarding appropriate standards of conduct. 
Although Rule 4.1(e) previously contained a general proscription 
against conduct that violates the standards of professional 
responsibility adopted by state bars or other conduct warranting 
disciplinary action, the revised rule more clearly describes the type 
of misconduct that may result in disciplinary action. The revised rule 
also provides greater transparency regarding the procedures that the 
Commission will use to adjudicate allegations of attorney 
misconduct.\68\ This increased transparency furthers due process in the 
adjudication of allegations of misconduct.\69\
---------------------------------------------------------------------------

    \68\ The revised rule also clarifies that investigations and 
show cause proceedings under the rule will be nonpublic until the 
Commission orders otherwise or schedules an administrative hearing. 
Administrative hearings on an order to show cause, and any oral 
argument on appeal of the Administrative Law Judge's decision, will 
be public unless otherwise ordered by the Commission or an 
Administrative Law Judge. See Rule 4.1(e)(5)(vii).
    \69\ See infra Section II.D.
---------------------------------------------------------------------------

B. Prohibition of ``Obstructionist, Contemptuous, or Unprofessional'' 
Conduct
    The Commission proposed paragraph 4.1(e)(1)(iii) to clarify that 
attorneys who engage in conduct that is ``obstructionist, contemptuous, 
or unprofessional,'' may be subject to discipline under the rule. The 
Section suggests that this provision ``presents potential due process 
concerns and leaves the Commission with essentially unfettered 
discretion to reprimand, suspend, or disbar attorneys.'' \70\
---------------------------------------------------------------------------

    \70\ Section Comment at 7; see also AFSA Comments at 4; Kristen 
Sweet Comment at 2.
---------------------------------------------------------------------------

    The Commission has determined to retain this provision, which 
provides

[[Page 59303]]

enhanced guidance to practicing attorneys regarding the type of conduct 
that may warrant sanctions under the rule. Previously, Rule 4.1(e) 
defined attorney misconduct by reference to state bar professional 
responsibility standards, providing that ``attorneys practicing before 
the Commission shall conform to the standards of ethical conduct 
required by the bars of which the attorneys are members.'' 16 CFR 
4.1(e). In addition, the rule authorized the Commission to discipline 
attorneys in other cases if it determined an attorney was ``otherwise 
guilty of misconduct warranting disciplinary action.'' Id.
    The revised rule's prohibition of contemptuous, obstructionist, or 
unprofessional conduct provides clearer guidance and is consistent with 
standards of conduct already adopted by federal agencies including the 
Commission. The Commission's rules governing investigations and 
adjudications already prohibit such conduct during Commission 
proceedings. Prior to the current revisions, the Commission's Part 2 
rules explicitly prohibited ``dilatory, obstructionist, or contumacious 
conduct'' and ``contemptuous language'' during Commission 
investigations.\71\ As a part of this revision, the Commission's Part 2 
rules have been revised to clarify that hearing officials have 
authority to prevent or restrain disorderly or obstructionist conduct 
during investigations.\72\ Similarly, the Commission's rules governing 
adjudicative proceedings prohibit such conduct during administrative 
adjudications.\73\ Accordingly, revised Rule 4.1(e)'s prohibition 
against ``contemptuous, obstructionist, and unprofessional conduct'' 
reaffirms the existing proscription against such conduct in the 
Commission's rules.
---------------------------------------------------------------------------

    \71\ Previous Rule 2.9.
    \72\ Revised Rule 2.9(b)(5).
    \73\ See 16 CFR 3.42(d) (prohibiting ``dilatory, obstructionist, 
or contumacious conduct'' and ``contemptuous language'' during 
Commission adjudications).
---------------------------------------------------------------------------

    In addition, the rules of practice of other federal agencies 
explicitly provide that contemptuous, obstructionist, and 
unprofessional conduct may be grounds for attorney sanctions.\74\ 
Likewise, such conduct is prohibited by the model rules of attorney 
professional conduct and corresponding rules that have been adopted in 
jurisdictions across the country:
---------------------------------------------------------------------------

    \74\ See, e.g., Federal Deposit Insurance Corporation, 12 CFR 
263.94 (prohibiting contemptuous conduct in administrative 
proceedings); Department of Justice, Foreign Claims Settlement 
Commission of the United States, 24 CFR 1720.135 (same); Department 
of Housing and Urban Development, 24 CFR 1720.135 (same); 
Comptroller of the Currency, Department of the Treasury, 12 CFR 
112.6 (providing that obstructionist conduct that interferes with an 
agency investigation or administrative proceeding may subject an 
attorney to sanction); Consumer Financial Protection Bureau, 12 CFR 
1080.9 (same); Federal Energy Regulatory Commission, 18 CFR 1b.16 
(same); Commodity Futures Trading Commission, 8 CFR 1003.104 
(providing that CFTC may sanction attorneys practicing before the 
agency for unethical or unprofessional conduct); Occupational Safety 
and Health Review Commission, 29 CFR 2200.104 (same); Department of 
the Interior, 43 CFR 1.6 (same).
---------------------------------------------------------------------------

     Obstructionist conduct: The ABA Model Rules of 
Professional Conduct prohibit attorneys from engaging in obstructionist 
conduct. For example, these rules prohibit attorneys from seeking to 
``unlawfully obstruct another party's access to evidence or unlawfully 
alter, destroy or conceal a document or other material having potential 
evidentiary value'' or to ``fail to make reasonably diligent effort to 
comply with a legally proper discovery request by an opposing party.'' 
\75\ The ABA Model Rules also define misconduct to include ``engag[ing] 
in conduct that is prejudicial to the administration of justice.'' \76\ 
Comments on the DC Bar's Rule 8.4 explain that such conduct may include 
``failure to cooperate with Bar Counsel'' investigating allegations of 
misconduct; ``failure to respond to Bar Counsel's inquiries or 
subpoenas''; ``failure to abide by agreements made with Bar Counsel''; 
``failure to obey court orders''; and similar behavior.\77\
---------------------------------------------------------------------------

    \75\ Model Rules of Prof'l Conduct R. 3.4(a), (d).
    \76\ Model Rules of Prof'l Conduct R. 8.4(d). Similarly, DC Rule 
of Professional Conduct 8.4(d) defines ``misconduct'' to include 
``engag[ing] in conduct that seriously interferes with the 
administration of justice.'' District of Columbia Bar Ass'n Rules of 
Prof'l Conduct R. 8.4(d).
    \77\ See District of Columbia Bar Ass'n Rules of Prof'l Conduct 
R. 8.4 cmt [3]-[4].
---------------------------------------------------------------------------

     Contemptuous conduct: The rules of professional conduct 
also prohibit conduct that is contemptuous and designed to disrupt 
discovery or adjudicatory processes. ABA Model Rule 3.5 prohibits 
attorneys from ``engag[ing] in conduct intended to disrupt a 
tribunal.'' \78\ The Comments on the Model Rule note that ``[t]he duty 
to refrain from disruptive conduct applies to any proceeding of a 
tribunal, including a deposition.'' \79\
---------------------------------------------------------------------------

    \78\ Model Rules of Prof'l Conduct R. 3.5(d).
    \79\ Model Rules of Prof'l Conduct R. 3.5 cmt [5]; see also 
District of Columbia Bar Association Rules of Professional Conduct, 
Rule 3.5(d) (``Impartiality and Decorum of Tribunal'').
---------------------------------------------------------------------------

     Unprofessional conduct: As the Commission explained in the 
NPRM, the revised rule prohibits conduct that violates appropriate 
standards of professional conduct and the Commission's rules.\80\ For 
example, the Model Rules of Professional Conduct provide that attorneys 
have dual obligations to competently represent their clients, while 
expediting and protecting the integrity of the adjudicative process. To 
that end, attorneys must display candor when practicing before a 
tribunal and avoid conduct that undermines the integrity of the 
adjudicative process.\81\ In addition, the Model Rules prohibit conduct 
that is merely designed to delay or burden another party.\82\
---------------------------------------------------------------------------

    \80\ 77 FR at 3194.
    \81\ Model Rules of Prof'l Conduct R. 3.3.
    \82\ Model Rules of Prof'l Conduct R. 4.4(a).
---------------------------------------------------------------------------

    Accordingly, the revised rule clarifies attorneys' existing 
obligations to refrain from obstructionist, contemptuous, and 
unprofessional conduct when practicing before the Commission. As a 
result, the revised rule is consistent with the Commission's existing 
rules of practice as well as the rules of attorney professional conduct 
and the practice of other federal agencies.
C. Imputed Responsibility for Attorney Supervisors and Managers
    Proposed paragraph 4.1(e)(1) provided for imputed responsibility 
for supervisory or managerial attorneys who direct or ratify a 
subordinate attorney's misconduct. The Section expressed concern with 
this provision, suggesting that the proposed rule could be read to 
provide that ``any `partner' or person with `comparable management 
authority' `in the law firm in which the [violating] attorney 
practices' may be held responsible for the violating attorney's 
actions.'' \83\ The Section argued that such liability would be 
overbroad and recommended that the proposed rule be amended to make 
clear that only parties who knew of the misconduct and failed to take 
reasonable remedial action should be held responsible for another 
attorney's prohibited conduct.\84\
---------------------------------------------------------------------------

    \83\ Section Comment at 7; AFSA Comment at 3.
    \84\ Section Comment at 7-8.
---------------------------------------------------------------------------

    The proposed rule is similar to the rules of professional conduct 
adopted by many state bars, which provide for imputed responsibility 
for supervisory or managerial attorneys who order or, with knowledge, 
ratify misconduct by their subordinates.\85\ To provide greater clarity 
concerning the rule's scope, however, the Commission is adopting the 
proposed rule with modifications to make clear that the rule provides 
for imputed responsibility only when a supervisor or managerial 
attorney orders or, with knowledge, ratifies another

[[Page 59304]]

attorney's conduct. For purposes of the revised rule, a lawyer with 
direct supervisory authority is a lawyer who has an actual supervisory 
role with respect to directing the conduct of other lawyers in a 
particular representation.
---------------------------------------------------------------------------

    \85\ See, e.g., Model Rules of Prof'l Conduct R. 5.1; District 
of Columbia Bar Ass'n Rules of Prof'l Conduct R. 5.1; New York State 
Bar Ass'n Rules of Prof'l Conduct R. 5.1.
---------------------------------------------------------------------------

D. Due Process
    Some commenters expressed concern regarding the due process 
protections afforded by the proposed rule.\86\ The Commission finds, 
however, that the rule as proposed provided appropriate procedural 
protections to ensure a full and fair evaluation of allegations of 
attorney misconduct. First, the proposed rule provided for a Bureau 
Officer to perform an initial assessment to determine whether 
allegations of attorney misconduct merit further review by the 
Commission.\87\ Second, after the Bureau Officer has completed this 
assessment, the Commission would review the record and make its own 
determination as to whether further action is warranted.\88\ And, 
ultimately, the rule provided for a determination of the merits of the 
allegations by the Commission or an Administrative Law Judge.\89\ 
Accordingly, the proposed rule provided several layers of procedural 
safeguards to ensure that allegations of misconduct are fully vetted 
and that respondent attorneys receive adequate process.
---------------------------------------------------------------------------

    \86\ Section Comment at 7; AFSA Comment at 2-3.
    \87\ Proposed Rule 4.1(e)(3).
    \88\ Proposed Rule 4.1(e)(5).
    \89\ Proposed Rule 4.1(e)(5).
---------------------------------------------------------------------------

    Nonetheless, the Section and AFSA expressed concern with the 
proposed rule's procedures for attorney reprimand without a hearing in 
certain circumstances. Under the rule, the Commission could issue a 
public reprimand if, after providing a respondent attorney notice and 
an opportunity to respond to allegations of misconduct during the 
Bureau Officer's review of the allegations, the Commission determined 
on the basis of the evidence in the record and the attorney's response 
that the attorney had engaged in professional misconduct warranting a 
reprimand. The Section asserted that ``even a public reprimand can have 
serious repercussions for a practicing attorney'' \90\ and, therefore, 
recommended that the Commission delete this provision.\91\
---------------------------------------------------------------------------

    \90\ Section Comment at 8.
    \91\ See Section Comment at 8. AFSA suggests that the proposed 
rule could be read to provide that ``the Commission may issue a 
public reprimand, sua sponte based solely on the Bureau Officer's 
recommendation with no notice to or opportunity for the subject of 
the complaint to be heard.'' AFSA Comment at 4.
---------------------------------------------------------------------------

    Based on these concerns and its own further consideration, the 
Commission adopts the proposed rule with modifications. Revised 
paragraph (e)(5) provides for the Commission to issue an order to show 
cause following its examination of the results of the Bureau Officer's 
review when considering any disciplinary sanctions, including 
reprimand, suspension, or disbarment.\92\ If, based on an attorney's 
response to the order and other evidence in the record, the Commission 
determines that the material facts, as to which there is no genuine 
dispute, show that an attorney has engaged in professional misconduct, 
the Commission may issue a disciplinary sanction without further 
process.
---------------------------------------------------------------------------

    \92\ Rule 4.1(e)(5).
---------------------------------------------------------------------------

    The opportunity for a respondent attorney to explain why 
disciplinary action is unwarranted in response to the order to show 
cause addresses the due process concerns raised by the commenters. 
While an attorney facing disciplinary sanctions is entitled to fair 
notice of the charges at issue and an opportunity to explain why he or 
she should not be sanctioned,\93\ courts have made clear that a full 
evidentiary hearing is not necessary before the imposition of attorney 
sanctions in all cases.\94\ As a result, the revised rule's procedures 
for affording attorneys with an opportunity to be heard in response to 
an order to show cause provides appropriate procedural protections. The 
order to show cause shall be accompanied by all declarations, 
deposition transcripts, or other evidence the staff wishes the 
Commission to consider in support of the allegations of misconduct. The 
rule also directs respondent attorneys to include all materials the 
Commission should consider relating to the allegations of misconduct 
along with his or her response to the order to show cause.
---------------------------------------------------------------------------

    \93\ See, e.g., In re Ruffalo, 390 U.S. 544, 550 (1968); Theard 
v. United States, 354 U.S. 278, 282 (1957).
    \94\ Muset v. Ishimaru, 783 F.Supp.2d 360, 371 (E.D.N.Y. 2011) 
(In context of EEOC's issuance of an attorney reprimand, `` `[a]n 
opportunity to be heard' does not necessarily entail a formal 
hearing or the ability to cross-examine witnesses. A court 
contemplating sanctions `need only ensure that an attorney who is 
potentially subject to a sanctions order has an opportunity to 
respond in writing to the allegations.' ''); see also Pacific Harbor 
Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d 1112, 1118 (9th 
Cir. 2000) (upholding district court's imposition of attorney 
discipline without a prior hearing and finding that ``an opportunity 
to be heard does not require an oral or evidentiary hearing on the 
issue'').
---------------------------------------------------------------------------

    Where the attorney's response raises a genuine dispute of material 
fact or the Commission determines otherwise that a hearing is 
warranted, the revised rule provides for the Commission to order 
further proceedings to be presided over by the Commission, an 
Administrative Law Judge, or by one or more Commissioners sitting as 
Administrative Law Judges before imposition of any sanction. Any such 
disciplinary proceeding shall afford an attorney respondent with due 
opportunity to be heard in his or her own defense, but does not 
necessarily invoke the full procedures of Part 3 of the Commission's 
rules. The Commission will specify the nature and scope of any such 
hearing consistent with the Commission's interest in an expeditious 
proceeding and fairness to the attorney respondent. An attorney 
respondent may be represented by counsel during the proceeding.
    AFSA also criticized the role of the ``Bureau Officer'' to 
investigate allegations of misconduct and refer charges to the 
Commission for further action where warranted.\95\ AFSA expressed 
concern that designation of officers in the Bureaus to assess 
allegations of misconduct will not ensure an impartial and unbiased 
review of those allegations.\96\ However, the revised rule provides 
appropriate procedural safeguards to ensure that allegations of 
attorney misconduct are evaluated by the Commission in an unbiased 
manner.
---------------------------------------------------------------------------

    \95\ AFSA Comment at 4.
    \96\ Id.
---------------------------------------------------------------------------

    The rule provides for the Commission to make an independent 
assessment to determine whether further action on allegations of 
misconduct is warranted based on the results of the Bureau Officer's 
assessment. Following this review, the Commission will determine 
whether to institute administrative disciplinary proceedings by issuing 
an order to show cause to the respondent attorney or take other action, 
such as referral to a state bar, under the rule. Accordingly, the 
decision as to whether an attorney's conduct warrants discipline under 
the rule ultimately rests with the Commission, an Administrative Law 
Judge, or one or more Commissioners sitting as Administrative Law 
Judges, who will evaluate allegations of attorney misconduct.\97\ It is 
well-established that

[[Page 59305]]

a system in which agency staff perform investigative functions, but the 
function of adjudication is vested in the agency head or another 
impartial decisionmaker, does not raise due process concerns.\98\
---------------------------------------------------------------------------

    \97\ AFSA also criticizes the proposed rule because, it claims, 
``there is no requirement that an administrative law judge will 
hear'' disciplinary cases. AFSA Comments at 4. However, the revised 
rule maintains the Commission's longstanding practice that 
administrative adjudications may be tried in the first instance 
before either an Administrative Law Judge, the Commission, or 
Commissioners sitting as Administrative Law Judges. See Rule 
4.1(e)(5)(ii); see also, e.g., 16 CFR 3.42(a) (``Hearings in 
adjudicative proceedings shall be presided over by a duly qualified 
Administrative Law Judge or by the Commission or one or more members 
of the Commission sitting as Administrative Law Judges.''). 
Moreover, under the APA, the Commission or its members have the 
authority to preside over a hearing. See 5 U.S.C. 556(b). 
Accordingly, the revised rule affords appropriate procedural 
protections and provides for an impartial decisionmaker to 
adjudicate any allegations of misconduct.
    \98\ Withrow v. Larkin, 421 U.S. 35, 47-48 (1975); see also FTC 
v. Cement Institute, 333 U.S. 683, 701 (1948).
---------------------------------------------------------------------------

    Finally, AFSA argued that it is unfair that allegations of 
misconduct by Commission employees are handled pursuant to the 
Commission's procedures for employee discipline or through 
investigations by the Office of the Inspector General.\99\ However, the 
Commission's procedures for addressing employee misconduct, coupled 
with the authority of the Commission's Inspector General to investigate 
misconduct, provide the most appropriate means to address allegations 
of misconduct by Commission attorneys acting in the scope of their 
duties on behalf of the Commission. Employees who engage in misconduct 
in the course of their employment face serious potential consequences 
and adverse employment action, including reprimand, suspension, or 
dismissal, as well as investigations by the Inspector General to 
address administrative, civil, and criminal violations of laws and 
regulations. In addition, the Commission may refer employees who have 
engaged in misconduct to state bar authorities for further action, 
including reprimand or disbarment. As a result, AFSA's claim that ``the 
potential for unwarranted disciplinary action against attorneys 
practicing before the Commission would be significantly higher than 
those for attorneys employed by the Commission,'' id., is incorrect.
---------------------------------------------------------------------------

    \99\ See AFSA Comment at 3.
---------------------------------------------------------------------------

III. Final Rule Revisions

List of Subjects in 16 CFR Parts 2 and 4

    Administrative practice and procedure.
    For the reasons set forth in the preamble, the Federal Trade 
Commission amends Title 16, Chapter 1, Subchapter A of the Code of 
Federal Regulations, parts 2 and 4, as follows:

PART 2--NONADJUDICATIVE PROCEDURES

0
1. The authority citation for part 2 continues to read as follows:

    Authority: 15 U.S.C. 46, unless otherwise noted.


0
2. Revise Sec.  2.2 to read as follows:


Sec.  2.2  Complaint or request for Commission action.

    (a) A complaint or request for Commission action may be submitted 
via the Commission's web-based complaint site (https://www.ftccomplaintassistant.gov/); by a telephone call to 1-877-FTC-HELP 
(1-877-382-4357); or by a signed statement setting forth the alleged 
violation of law with such supporting information as is available, and 
the name and address of the person or persons complained of, filed with 
the Office of the Secretary in conformity with Sec.  4.2(d) of this 
chapter. No forms or formal procedures are required.
    (b) The person making the complaint or request is not regarded as a 
party to any proceeding that might result from the investigation.
    (c) Where the complainant's identity is not otherwise made public, 
the Commission's policy is not to publish or divulge the name of a 
complainant except as authorized by law or by the Commission's rules. 
Complaints or requests submitted to the Commission may, however, be 
lodged in a database and made available to federal, state, local, and 
foreign law enforcement agencies that commit to maintain the privacy 
and security of the information provided. Further, where a complaint is 
by a consumer or consumer representative concerning a specific consumer 
product or service, the Commission in the course of a referral of the 
complaint or request, or in furtherance of an investigation, may 
disclose the identity of the complainant. In referring any such 
consumer complaint, the Commission specifically retains its right to 
take such action as it deems appropriate in the public interest and 
under any of the statutes it administers.


0
3. Revise Sec.  2.4 to read as follows:


Sec.  2.4  Investigational policy.

    Consistent with obtaining the information it needs for 
investigations, including documentary material, the Commission 
encourages the just and speedy resolution of investigations. The 
Commission will therefore employ compulsory process when in the public 
interest. The Commission encourages cooperation in its investigations. 
In all matters, whether involving compulsory process or voluntary 
requests for documents and information, the Commission expects all 
parties to engage in meaningful discussions with staff to prevent 
confusion or misunderstandings regarding the nature and scope of the 
information and material being sought, in light of the inherent value 
of genuinely cooperative discovery.


0
4. Revise Sec.  2.6 to read as follows:


Sec.  2.6  Notification of purpose.

    Any person, partnership, or corporation under investigation 
compelled or requested to furnish information or documentary material 
shall be advised of the purpose and scope of the investigation, the 
nature of the acts or practices under investigation, and the applicable 
provisions of law. A copy of a Commission resolution, as prescribed 
under Sec.  2.7(a), shall be sufficient to give persons, partnerships, 
or corporations notice of the purpose of the investigation. While 
investigations are generally nonpublic, Commission staff may disclose 
the existence of an investigation to potential witnesses or other third 
parties to the extent necessary to advance the investigation.


0
5. Revise Sec.  2.7 to read as follows:


Sec.  2.7  Compulsory process in investigations.

    (a) In general. When the public interest warrants, the Commission 
may issue a resolution authorizing the use of compulsory process. The 
Commission or any Commissioner may, pursuant to a Commission 
resolution, issue a subpoena, or a civil investigative demand, 
directing the recipient named therein to appear before a designated 
representative at a specified time and place to testify or to produce 
documentary material, or both, and in the case of a civil investigative 
demand, to provide a written report or answers to questions, relating 
to any matter under investigation by the Commission. For the purposes 
of this subpart, the term:
    (1) Electronically stored information (``ESI'') means any writings, 
drawings, graphs, charts, photographs, sound recordings, images and 
other data or data compilations stored in any electronic medium from 
which information can be obtained either directly or, if necessary, 
after translation by the responding party into a reasonably usable 
form.
    (2) ``Documentary material'' includes all documents, materials, and 
information, including ESI, within the

[[Page 59306]]

meaning of the Federal Rules of Civil Procedure.
    (3) ``Compulsory process'' means any subpoena, CID, access order, 
or order for a report issued by the Commission.
    (4) ``Protected status'' refers to information or material that may 
be withheld from production or disclosure on the grounds of any 
privilege, work product protection, or statutory exemption.
    (b) Civil Investigative Demands. Civil Investigative Demands 
(``CIDs'') shall be the only form of compulsory process issued in 
investigations with respect to unfair or deceptive acts or practices 
under section 5(a)(1) of the Federal Trade Commission Act (hereinafter 
referred to as ``unfair or deceptive acts or practices'').
    (1) CIDs for the production of documentary material, including ESI, 
shall describe each class of material to be produced with sufficient 
definiteness and certainty as to permit such material to be fairly 
identified, prescribe a return date providing a reasonable period of 
time within which the material so demanded may be assembled and made 
available for inspection and copying or reproduction, and identify the 
Commission's custodian to whom such material shall be made available. 
Documentary material, including ESI, for which a CID has been issued 
shall be made available as prescribed in the CID. Such productions 
shall be made in accordance with the procedures prescribed by section 
20(c)(11) of the Federal Trade Commission Act.
    (2) CIDs for tangible things, including electronic media, shall 
describe each class of tangible thing to be produced with sufficient 
definiteness and certainty as to permit each such thing to be fairly 
identified, prescribe a return date providing a reasonable period of 
time within which the things so demanded may be assembled and 
submitted, and identify the Commission's custodian to whom such things 
shall be submitted. Submission of tangible things in response to a CID 
shall be made in accordance with the procedures prescribed by section 
20(c)(12) of the Federal Trade Commission Act.
    (3) CIDs for written reports or answers to questions shall propound 
with sufficient definiteness and certainty the reports to be produced 
or the questions to be answered, prescribe a return date, and identify 
the Commission's custodian to whom such reports or answers to questions 
shall be submitted. The submission of written reports or answers to 
questions in response to a CID shall be made in accordance with the 
procedures prescribed by section 20(c)(13) of the Federal Trade 
Commission Act.
    (4) CIDs for the giving of oral testimony shall prescribe a date, 
time, and place at which oral testimony shall commence, and identify 
the hearing official and the Commission custodian. Oral testimony in 
response to a CID shall be taken in accordance with the procedures set 
forth in section 20(c)(14) of the Federal Trade Commission Act.
    (c) Subpoenas. Except in investigations with respect to unfair or 
deceptive acts or practices, the Commission may require by subpoena the 
attendance and testimony of witnesses and the production of documentary 
material relating to any matter under investigation. Subpoenas for the 
production of documentary material, including ESI, shall describe each 
class of material to be produced with sufficient definiteness and 
certainty as to permit such material to be fairly identified, prescribe 
a return date providing a reasonable period of time for production, and 
identify the Commission's custodian to whom such material shall be made 
available. A subpoena may require the attendance of the witness or the 
production of documentary material at any place in the United States.
    (d) Special reports. Except in investigations regarding unfair or 
deceptive acts or practices, the Commission may issue an order 
requiring a person, partnership, or corporation to file a written 
report or answers to specific questions relating to any matter under 
investigation, study or survey, or under any of the Commission's 
reporting programs.
    (e) Commission orders requiring access. Except in investigations 
regarding unfair or deceptive acts or practices, the Commission may 
issue an order requiring any person, partnership, or corporation under 
investigation to grant access to their files, including electronic 
media, for the purpose of examination and to make copies.
    (f) Investigational hearings. (1) Investigational hearings may be 
conducted in the course of any investigation undertaken by the 
Commission, including rulemaking proceedings under subpart B of part 1 
of this chapter, inquiries initiated for the purpose of determining 
whether a respondent is complying with an order of the Commission or to 
monitor performance under, and compliance with, a decree entered in 
suits brought by the United States under the antitrust laws, the 
development of facts in cases referred by the courts to the Commission 
as a master in chancery, and investigations made under section 5 of the 
Webb-Pomerene (Export Trade) Act.
    (2) Investigational hearings shall be conducted by one or more 
Commission employees designated for the purpose of hearing the 
testimony of witnesses (the ``hearing official'') and receiving 
documents and information relating to any subject under investigation. 
Such hearings shall be under oath or affirmation, stenographically 
recorded, and the transcript made a part of the record of the 
investigation. The Commission may, in addition, employ other means to 
record the hearing.
    (3) Unless otherwise ordered by the Commission, investigational 
hearings shall not be public. For investigational hearings conducted 
pursuant to a CID for the giving of oral testimony, the hearing 
official shall exclude from the hearing room all persons other than the 
person being examined, counsel for the person being examined, 
Commission staff, and any stenographer or other person recording such 
testimony. A copy of the transcript shall promptly be forwarded by the 
hearing official to the Commission custodian designated under Sec.  
2.16 of this part. At the discretion of the hearing official, and with 
the consent of the person being examined (or, in the case of an entity, 
its counsel), persons other than Commission staff, court reporters, and 
the hearing official may be present in the hearing room.
    (g) Depositions. Except in investigations with respect to unfair or 
deceptive acts or practices, the Commission may order by subpoena a 
deposition pursuant to section 9 of the Federal Trade Commission Act, 
of any person, partnership, or corporation, at any stage of an 
investigation. The deposition shall take place upon notice to the 
subjects of the investigation, and the examination and cross-
examination may proceed as they would at trial. Depositions shall be 
conducted by a hearing official, for the purpose of hearing the 
testimony of witnesses and receiving documents and information relating 
to any subject under investigation. Depositions shall be under oath or 
affirmation, stenographically recorded, and the transcript made a part 
of the record of the investigation. The Commission may, in addition, 
employ other means to record the deposition.
    (h) Testimony from an entity. Where Commission compulsory process 
requires oral testimony from an entity, the compulsory process shall 
describe with reasonable particularity the matters for examination and 
the entity must designate one or more officers, directors, or managing 
agents, or designate other

[[Page 59307]]

persons who consent, to testify on its behalf. Unless a single 
individual is designated by the entity, the entity must designate in 
advance and in writing the matters on which each designee will testify. 
The persons designated must testify about information known or 
reasonably available to the entity and their testimony shall be binding 
upon the entity.
    (i) Inspection, copying, testing, and sampling of documentary 
material, including electronic media. The Commission, through 
compulsory process, may require the production of documentary material, 
or electronic media or other tangible things, for inspection, copying, 
testing, or sampling.
    (j) Manner and form of production of ESI. When Commission 
compulsory process requires the production of ESI, it shall be produced 
in accordance with the instructions provided by Commission staff 
regarding the manner and form of production. All instructions shall be 
followed by the recipient of the process absent written permission to 
the contrary from a Commission official identified in paragraph (l) of 
this section. Absent any instructions as to the form for producing ESI, 
ESI must be produced in the form or forms in which it is ordinarily 
maintained or in a reasonably usable form.
    (k) Mandatory pre-petition meet and confer process. Unless excused 
in writing or granted an extension of no more than 30 days by a 
Commission official identified in paragraph (l) of this section, a 
recipient of Commission compulsory process shall meet and confer with 
Commission staff within 14 days after receipt of process or before the 
deadline for filing a petition to quash, whichever is first, to discuss 
compliance and to address and attempt to resolve all issues, including 
issues relating to protected status and the form and manner in which 
claims of protected status will be asserted. The initial meet and 
confer session and all subsequent meet and confer sessions may be in 
person or by telephone. The recipient must make available personnel 
with the knowledge necessary for resolution of the issues relevant to 
compliance with compulsory process. Such personnel could include 
individuals knowledgeable about the recipient's information or records 
management systems, individuals knowledgeable about other relevant 
materials such as organizational charts, and persons knowledgeable 
about samples of material required to be produced. If any issues relate 
to ESI, the recipient shall have a person familiar with its ESI systems 
and methods of retrieval participate in the meeting. The Commission 
will not consider petitions to quash or limit absent a pre-filing meet 
and confer session with Commission staff and, absent extraordinary 
circumstances, will consider only issues raised during the meet and 
confer process.
    (l) Delegations regarding CIDs and subpoenas. The Directors of the 
Bureau of Competition, Consumer Protection, or Economics, their Deputy 
Directors, the Assistant Directors of the Bureaus of Competition and 
Economics, the Associate Directors of the Bureau of Consumer 
Protection, the Regional Directors, and the Assistant Regional 
Directors are all authorized to modify and, in writing, approve the 
terms of compliance with all compulsory process, including subpoenas, 
CIDs, reporting programs, orders requiring reports, answers to 
questions, and orders requiring access. If a recipient of compulsory 
process has demonstrated satisfactory progress toward compliance, a 
Commission official identified in this paragraph may, at his or her 
discretion, extend the time for compliance with Commission compulsory 
process. The subpoena power conferred by section 329 of the Energy 
Policy and Conservation Act (42 U.S.C. 6299) and section 5 of the Webb-
Pomerene (Export Trade) Act (15 U.S.C. 65) are specifically included 
within this delegation of authority.


Sec.  2.8  [Removed and Reserved]

0
6. Remove and reserve Sec.  2.8.


Sec.  2.8A  [Removed]

0
7. Remove Sec.  2.8A.


0
8. Revise Sec.  2.9 to read as follows:


Sec.  2.9  Rights of witnesses in investigations.

    (a) Any person compelled to submit data to the Commission or to 
testify in a deposition or investigational hearing shall be entitled to 
retain a copy or, on payment of lawfully prescribed costs, procure a 
copy of any document submitted, and of any testimony as 
stenographically recorded, except that in a nonpublic hearing the 
witness may for good cause be limited to inspection of the official 
transcript of the testimony. Upon completion of transcription of the 
testimony, the witness shall be offered an opportunity to read the 
transcript. Any changes by the witness shall be entered and identified 
upon the transcript by the hearing official, together with a statement 
of the reasons given by the witness for requesting such changes. After 
the changes are entered, the transcript shall be signed by the witness 
unless the witness cannot be found, is ill and unavailable, waives in 
writing his or her right to sign, or refuses to sign. If the transcript 
is not signed by the witness within 30 days of having been afforded a 
reasonable opportunity to review it, the hearing official shall sign 
the transcript and state on the hearing record the fact of the waiver, 
illness, absence of the witness, or the refusal to sign, together with 
any reasons given for the failure to sign, as prescribed by section 
20(c)(14)(E)(ii) of the Federal Trade Commission Act.
    (b) Any witness compelled to appear in person in a deposition or 
investigational hearing may be accompanied, represented, and advised by 
counsel, as follows:
    (1) In depositions or investigational hearings conducted pursuant 
to section 9 of the Federal Trade Commission Act, counsel may not 
consult with the witness while a question directed to a witness is 
pending, except with respect to issues involving protected status.
    (2) Any objection during a deposition or investigational hearing 
shall be stated concisely on the hearing record in a nonargumentative 
and nonsuggestive manner. Neither the witness nor counsel shall 
otherwise object or refuse to answer any question. Following an 
objection, the examination shall proceed and the testimony shall be 
taken, except for testimony requiring the witness to divulge 
information protected by the claim of protected status. Counsel may 
instruct a witness not to answer only when necessary to preserve a 
claim of protected status.
    (3) The hearing official may elect to recess the deposition or 
investigational hearing and reconvene the deposition or hearing at a 
later date to continue a course of inquiry interrupted by any objection 
made under paragraph (b)(1) or (2) of this section. The hearing 
official shall provide written notice of the date of the reconvened 
deposition or hearing to the witness, which may be in the form of an 
email or facsimile. Failure to reappear or to file a petition to limit 
or quash in accordance with Sec.  2.10 of this part shall constitute 
noncompliance with Commission compulsory process for the purposes of a 
Commission enforcement action under Sec.  2.13 of this part.
    (4) In depositions or investigational hearings, immediately 
following the examination of a witness by the hearing official, the 
witness or his or her counsel may on the hearing record request that 
the hearing official permit the witness to clarify any answers. The 
grant or denial of such request shall be within the discretion of the 
hearing official and would ordinarily be granted

[[Page 59308]]

except for good cause stated and explained on the hearing record, and 
with an opportunity for counsel to undertake to correct the expressed 
concerns of the hearing official or otherwise to reply.
    (5) The hearing official shall conduct the deposition or 
investigational hearing in a manner that avoids unnecessary delay, and 
prevents and restrains disorderly or obstructionist conduct. The 
hearing official shall, where appropriate, report pursuant to Sec.  
4.1(e) of this chapter any instance where an attorney, in the course of 
the deposition or hearing, has allegedly refused to comply with his or 
her directions, or has allegedly engaged in conduct addressed in Sec.  
4.1(e). The Commission may take any action as circumstances may warrant 
under Sec.  4.1(e) of this chapter.

0
9. Revise Sec.  2.10 to read as follows:


Sec.  2.10  Petitions to limit or quash Commission compulsory process.

    (a) In general. (1) Petitions. Any petition to limit or quash any 
compulsory process shall be filed with the Secretary within 20 days 
after service of the Commission compulsory process or, if the return 
date is less than 20 days after service, prior to the return date. Such 
petition shall set forth all assertions of protected status or other 
factual and legal objections to the Commission compulsory process, 
including all appropriate arguments, affidavits, and other supporting 
documentation. Such petition shall not exceed 5,000 words, including 
all headings, footnotes, and quotations, but excluding the cover, table 
of contents, table of authorities, glossaries, copies of the compulsory 
process order or excerpts thereof, appendices containing only sections 
of statutes or regulations, the statement required by paragraph (a)(2) 
of this section, and affidavits and other supporting documentation. 
Petitions to limit or quash that fail to comply with these provisions 
shall be rejected by the Secretary pursuant to Sec.  4.2(g) of this 
chapter.
    (2) Statement. Each petition filed pursuant to paragraph (a)(1) of 
this section shall be accompanied by a signed separate statement 
representing that counsel for the petitioner has conferred with 
Commission staff pursuant to Sec.  2.7(k) of this part in an effort in 
good faith to resolve by agreement the issues raised by the petition 
and has been unable to reach such an agreement. If some of the issues 
in controversy have been resolved by agreement, the statement shall, in 
a nonargumentative manner, specify the issues so resolved and the 
issues remaining unresolved. The statement shall recite the date, time, 
and place of each conference between counsel, and the names of all 
parties participating in each such conference. Failure to include the 
required statement may result in a denial of the petition.
    (3) Reconvened investigational hearings or depositions. If the 
hearing official elects pursuant to Sec.  2.9(b)(3) of this part to 
recess the investigational hearing or deposition and reconvene it at a 
later date, the witness compelled to reappear may challenge the 
reconvening by filing with the Secretary a petition to limit or quash 
the reconvening of the hearing or deposition. Such petition shall be 
filed within 5 days after receiving written notice of the reconvened 
hearing; shall set forth all assertions of protected status or other 
factual and legal objections to the reconvening of the hearing or 
deposition, including all appropriate arguments, affidavits, and other 
supporting documentation; and shall be subject to the word count limit 
in paragraph (a)(1) of this section. Except for good cause shown, the 
Commission will not consider issues presented and ruled upon in any 
earlier petition filed by or on behalf of the witness.
    (4) Staff reply. Commission staff may, without serving the 
petitioner, provide the Commission a statement that shall set forth any 
factual and legal response to the petition to limit or quash.
    (5) Extensions of time. The Directors of the Bureaus of 
Competition, Consumer Protection, and Economics, their Deputy 
Directors, the Assistant Directors of the Bureaus of Competition and 
Economics, the Associate Directors of the Bureau of Consumer 
Protection, the Regional Directors, and the Assistant Regional 
Directors are delegated, without power of redelegation, the authority 
to rule upon requests for extensions of time within which to file 
petitions to limit or quash Commission compulsory process.
    (b) Stay of compliance period. The timely filing of a petition to 
limit or quash any Commission compulsory process shall stay the 
remaining amount of time permitted for compliance as to the portion or 
portions of the challenged specifications or provisions. If the 
petition is denied in whole or in part, the ruling by the Commission 
shall specify new terms for compliance, including a new return date, 
for the Commission's compulsory process.
    (c) Disposition and review. The Commission will issue an order 
ruling on a petition to limit or quash within 30 days after the 
petition is filed with the Secretary. The order may be served on the 
petitioner via email, facsimile, or any other method reasonably 
calculated to provide notice to the petitioner of the order.
    (d) Public disclosure. All petitions to limit or quash Commission 
compulsory process and all Commission orders in response to those 
petitions shall become part of the public records of the Commission, 
except for information granted confidential treatment under Sec.  
4.9(c) of this chapter.

0
10. Revise Sec.  2.11 to read as follows:


Sec.  2.11  Withholding requested material.

    (a)(1) Any person withholding information or material responsive to 
an investigational subpoena, CID, access order, or order to file a 
report issued pursuant to Sec.  2.7 of this part, or any other request 
for production of material issued under this part, shall assert a claim 
of protected status, as that term is defined in Sec.  2.7(a)(4), not 
later than the date set for the production of the material. The claim 
of protected status shall include a detailed log of the items withheld, 
which shall be attested by the lead attorney or attorney responsible 
for supervising the review of the material and who made the 
determination to assert the claim. A document, including all 
attachments, may be withheld or redacted only to the extent necessary 
to preserve any claim of protected status. The information provided in 
the log shall be of sufficient detail to enable the Commission staff to 
assess the validity of the claim for each document, including 
attachments, without disclosing the protected information. The failure 
to provide information sufficient to support a claim of protected 
status may result in a denial of the claim. Absent an instruction as to 
the form and content of the log, the log shall be submitted in a 
searchable electronic format, and shall, for each document, including 
attachments, provide:
    (i) Document control number(s);
    (ii) The full title (if the withheld material is a document) and 
the full file name (if the withheld material is in electronic form);
    (iii) A description of the material withheld (for example, a 
letter, memorandum, or email), including any attachments;
    (iv) The date the material was created;
    (v) The date the material was sent to each recipient (if different 
from the date the material was created);
    (vi) The email addresses, if any, or other electronic contact 
information to the extent used in the document, from which and to which 
each document was sent;
    (vii) The names, titles, business addresses, email addresses or 
other

[[Page 59309]]

electronic contact information, and relevant affiliations of all 
authors;
    (viii) The names, titles, business addresses, email addresses or 
other electronic contact information, and relevant affiliations of all 
recipients of the material;
    (ix) The names, titles, business addresses, email addresses or 
other electronic contact information, and relevant affiliations of all 
persons copied on the material;
    (x) The factual basis supporting the claim that the material is 
protected (for example, that it was prepared by an attorney rendering 
legal advice to a client in a confidential communication, or prepared 
by an attorney in anticipation of litigation regarding a specifically 
identified claim); and
    (xi) Any other pertinent information necessary to support the 
assertion of protected status by operation of law.
    (2) Each attorney who is an author, recipient, or person copied on 
the material shall be identified in the log by an asterisk. The titles, 
business addresses, email addresses, and relevant affiliations of all 
authors, recipients, and persons copied on the material may be provided 
in a legend appended to the log. However, the information required by 
paragraph (a)(1)(vi) of this section shall be provided in the log.
    (b) A person withholding responsive material solely for the reasons 
described in paragraph (a) of this section shall meet and confer with 
Commission staff pursuant to Sec.  2.7(k) of this part to discuss and 
attempt to resolve any issues associated with the manner and form in 
which privilege or protection claims will be asserted. The participants 
in the meet and confer session may agree to modify the logging 
requirements set forth in paragraph (a) of this section. The failure to 
comply with paragraph (a) shall constitute noncompliance subject to 
judicial enforcement under Sec.  2.13(a) of this part.
    (c) Unless otherwise provided in the instructions accompanying the 
compulsory process, and except for information or material subject to a 
valid claim of protected status, all responsive information and 
material shall be produced without redaction.
    (d)(1)(i) The disclosure of material protected by the attorney-
client privilege or as work product shall not operate as a waiver if:
    (A) The disclosure is inadvertent;
    (B) The holder of the privilege or protection took reasonable steps 
to prevent disclosure; and
    (C) The holder promptly took reasonable steps to rectify the error, 
including notifying Commission staff of the claim and the basis for it.
    (ii) After being so notified, Commission staff must:
    (A) Promptly return or destroy the specified material and any 
copies, not use or disclose the material until any dispute as to the 
validity of the claim is resolved; and take reasonable measures to 
retrieve the material from all persons to whom it was disclosed before 
being notified; or
    (B) Sequester such material until such time as an Administrative 
Law Judge or court may rule on the merits of the claim of privilege or 
protection in a proceeding or action resulting from the investigation.
    (iii) The producing party must preserve the material until the 
claim of privilege or protection is resolved, the investigation is 
closed, or any enforcement proceeding is concluded.
    (2) When a disclosure is made that waives attorney-client privilege 
or work product, the waiver extends to an undisclosed communication or 
information only if:
    (i) The waiver is intentional;
    (ii) The disclosed and undisclosed information or material concern 
the same subject matter; and
    (iii) They ought in fairness to be considered together.


Sec.  2.12  [Removed and Reserved]

0
11. Remove and reserve Sec.  2.12.

0
12. Revise Sec.  2.13 to read as follows:


Sec.  2.13  Noncompliance with compulsory processes.

    (a) In cases of failure to comply with Commission compulsory 
processes, appropriate action may be initiated by the Commission or the 
Attorney General, including actions for enforcement, forfeiture, civil 
penalties, or criminal sanctions. The Commission may also take any 
action as the circumstances may warrant under Sec.  4.1(e) of this 
chapter.
    (b) The General Counsel, pursuant to delegation of authority by the 
Commission, without power of redelegation, is authorized, when he or 
she deems appropriate:
    (1) To initiate, on behalf of the Commission, an enforcement 
proceeding in connection with the failure or refusal of a recipient to 
comply with, or to obey, a subpoena, a CID, or an access order, if the 
return date or any extension thereof has passed, or if the recipient 
breaches any modification regarding compliance;
    (2) To approve and have prepared and issued, in the name of the 
Commission, a notice of default in connection with the failure of a 
recipient of an order to file a report pursuant to section 6(b) of the 
Federal Trade Commission Act to timely file that report, if the return 
date or any extension thereof has passed; to initiate, on behalf of the 
Commission, an enforcement proceeding; or to request to the Attorney 
General, on behalf of the Commission, to initiate a civil action in 
connection with the failure of such recipient to timely file a report, 
when the return date or any extension thereof has passed;
    (3) To initiate, on behalf of the Commission, an enforcement 
proceeding under section 7A(g)(2) of the Clayton Act (15 U.S.C. 
18a(g)(2)) in connection with the failure to substantially comply with 
any request for the submission of additional information or documentary 
material under section 7A(e)(1) of the Clayton Act (15 U.S.C. 
18a(e)(1)), provided that the General Counsel shall provide notice to 
the Commission at least 2 days before initiating such action; and
    (4) To seek an order of civil contempt in cases where a court order 
enforcing compulsory process has been violated.

0
13. Revise Sec.  2.14 to read as follows:


Sec.  2.14  Disposition.

    (a) When an investigation indicates that corrective action is 
warranted, and the matter is not subject to a consent settlement 
pursuant to subpart C of this part, the Commission may initiate further 
proceedings.
    (b) When corrective action is not necessary or warranted in the 
public interest, the investigation shall be closed. The matter may 
nevertheless be further investigated at any time if circumstances so 
warrant.
    (c) In matters in which a recipient of a preservation demand, an 
access letter, or Commission compulsory process has not been notified 
that an investigation has been closed or otherwise concluded, after a 
period of twelve months following the last written communication from 
the Commission staff to the recipient or the recipient's counsel, the 
recipient is relieved of any obligation to continue preserving 
information, documentary material, or evidence, for purposes of 
responding to the Commission's process or the staff's access letter. 
The ``written communication'' may be in the form of a letter, an email, 
or a facsimile.
    (d) The Commission has delegated to the Directors of the Bureaus of 
Competition and Consumer Protection, their Deputy Directors, the 
Assistant Directors of the Bureau of Competition, the Associate 
Directors of the Bureau of Consumer Protection, and the Regional 
Directors, without power of redelegation, limited authority to close 
investigations.

[[Page 59310]]

PART 4--MISCELLANEOUS RULES

0
14. The authority citation for part 4 continues to read as follows:

    Authority:  15 U.S.C. 46, unless otherwise noted.


0
15. Amend Sec.  4.1 by revising paragraph (e) to read as follows:


Sec.  4.1  Appearances.

* * * * *
    (e) Reprimand, suspension, or disbarment of attorneys. (1)(i) The 
following provisions govern the evaluation of allegations of misconduct 
by attorneys practicing before the Commission who are not employed by 
the Commission.\1\ The Commission may publicly reprimand, suspend, or 
disbar from practice before the Commission any such person who has 
practiced, is practicing, or holds himself or herself out as entitled 
to practice before the Commission if it finds that such person:
---------------------------------------------------------------------------

    \1\ The standards of conduct and disciplinary procedures under 
this Sec.  4.1(e) apply only to outside attorneys practicing before 
the Commission and not to Commission staff. Allegations of 
misconduct by Commission employees will be handled pursuant to 
procedures for employee discipline or pursuant to investigations by 
the Office of Inspector General.
---------------------------------------------------------------------------

    (A) Does not possess the qualifications required by Sec.  4.1(a);
    (B) Has failed to act in a manner consistent with the rules of 
professional conduct of the attorney's state(s) of licensure;
    (C) Has engaged in obstructionist, contemptuous, or unprofessional 
conduct during the course of any Commission proceeding or 
investigation; or
    (D) Has knowingly or recklessly given false or misleading 
information, or has knowingly or recklessly participated in the giving 
of false information to the Commission or any officer or employee of 
the Commission.\2\
---------------------------------------------------------------------------

    \2\ For purposes of this rule, knowingly giving false or 
misleading information includes knowingly omitting material facts 
necessary to make any oral or written statements not misleading in 
light of the circumstances under which they were made.
---------------------------------------------------------------------------

    (ii) An attorney may be responsible for another attorney's 
violation of this paragraph (e) if the attorney orders, or with 
knowledge of the specific conduct, ratifies the conduct involved. In 
addition, an attorney who has direct supervisory authority over another 
attorney may be responsible for that attorney's violation of this 
paragraph (e) if the supervisory attorney knew of the conduct at a time 
when its consequences could have been avoided or mitigated but failed 
to take reasonable remedial action.
    (2) Allegations of attorney misconduct in violation of paragraph 
(e)(1) of this section may be proffered by any person possessing 
information concerning the alleged misconduct. Any such allegations may 
be submitted orally or in writing to a Bureau Officer who will evaluate 
the sufficiency of the allegations in the first instance to determine 
whether further action by the Commission is warranted. The Director of 
the Bureau or office responsible for the matter about which the 
allegations are made, or the Director's designee, shall serve as the 
Bureau Officer.
    (3) After review and evaluation of the allegations, any supporting 
materials, and any additional information that the Bureau Officer may 
acquire, the Bureau Officer, if he or she determines that further 
action is warranted, shall in writing notify the subject of the 
complaint of the underlying allegations and potential sanctions 
available to the Commission under this section, and provide him or her 
an opportunity to respond to the allegations and provide additional 
relevant information and material. The Bureau Officer may request that 
the Commission issue a resolution authorizing the use of compulsory 
process, and may thereafter initiate the service of compulsory process, 
to assist in obtaining information for the purpose of making a 
recommendation to the Commission whether further action may be 
warranted.
    (4) If the Bureau Officer, after review and evaluation of the 
allegations, supporting material, response by the subject of the 
allegations, if any, and all additional available information and 
material, determines that no further action is warranted, he or she may 
close the matter if the Commission has not issued a resolution 
authorizing the use of compulsory process. In the event the Bureau 
Officer determines that further Commission action may be warranted, or 
if the Commission has issued a resolution authorizing the use of 
compulsory process, he or she shall make a recommendation to the 
Commission. The recommendation shall include all relevant information 
and material as to whether further Commission action, or any other 
disposition of the matter, may be warranted.
    (5) If the Commission has reason to believe, after review of the 
Bureau Officer's recommendation, that an attorney has engaged in 
professional misconduct of the type described in paragraph (e)(1) of 
this section, the Commission may institute administrative disciplinary 
proceedings proposing public reprimand, suspension, or disbarment of 
the attorney from practice before the Commission. Except as provided in 
paragraph (e)(7) of this section, administrative disciplinary 
proceedings shall be handled in accordance with the following 
procedures:
    (i) The Commission shall serve the respondent attorney with an 
order to show cause why the Commission should not impose sanctions 
against the attorney. The order to show cause shall specify the alleged 
misconduct at issue and the possible sanctions. The order to show cause 
shall be accompanied by all declarations, deposition transcripts, or 
other evidence the staff wishes the Commission to consider in support 
of the allegations of misconduct.
    (ii) Within 14 days of service of the order to show cause, the 
respondent may file a response to the allegations of misconduct. If the 
response disputes any of the allegations of misconduct, it shall do so 
with specificity and include all materials the respondent wishes the 
Commission to consider relating to the allegations. If no response is 
filed, the allegations shall be deemed admitted.
    (iii) If, upon considering the written submissions of the 
respondent, the Commission determines that there remains a genuine 
dispute as to any material fact, the Commission may order further 
proceedings to be presided over by an Administrative Law Judge or by 
one or more Commissioners sitting as Administrative Law Judges 
(hereinafter referred to collectively as the Administrative Law Judge), 
or by the Commission. The Commission order shall specify the nature and 
scope of any proceeding, including whether live testimony will be heard 
and whether any pre-hearing discovery will be allowed and if so to what 
extent. The attorney respondent shall be granted due opportunity to be 
heard in his or her own defense and may be represented by counsel. If 
the written submissions of the respondent raise no genuine dispute of 
material fact, the Commission may issue immediately any or all of the 
sanctions enumerated in the order to show cause provided for in 
paragraph (e)(5)(i) of this section.
    (iv) Commission counsel shall be appointed by the Bureau Officer to 
prosecute the allegations of misconduct in any administrative 
disciplinary proceedings instituted pursuant to this rule.
    (v) If the Commission assigns the matter to an Administrative Law 
Judge, the Commission will establish a deadline for an initial 
decision. The deadline shall not be modified by the Administrative Law 
Judge except that it may be amended by leave of the Commission.
    (vi) Based on the entirety of the record of administrative 
proceedings, the

[[Page 59311]]

Administrative Law Judge or the Commission if it reviews the matter in 
the first instance, shall issue a decision either dismissing the 
allegations or, if it is determined that the allegations are supported 
by a preponderance of the evidence, specify an appropriate sanction. An 
Administrative Law Judge's decision may be appealed to the Commission 
by either party within 30 days. If the Administrative Law Judge's 
decision is appealed, the Commission will thereafter issue a scheduling 
order governing the appeal.
    (vii) Investigations and administrative proceedings prior to the 
hearing on the order to show cause will be nonpublic unless otherwise 
ordered by the Commission. Any administrative hearing on the order to 
show cause, and any oral argument on appeal, shall be open to the 
public unless otherwise ordered for good cause by the Commission or the 
Administrative Law Judge.
    (6) Regardless of any action or determination the Commission may or 
may not make, the Commission may direct the General Counsel to refer 
the allegations of misconduct to the appropriate state, territory, or 
District of Columbia bar or any other appropriate authority for further 
action.
    (7) Upon receipt of notification from any authority having power to 
suspend or disbar an attorney from the practice of law within any 
state, territory, or the District of Columbia, demonstrating that an 
attorney practicing before the Commission is subject to an order of 
final suspension (not merely temporary suspension pending further 
action) or disbarment by such authority, the Commission may, without 
resort to any of the procedures described in this section, enter an 
order temporarily suspending the attorney from practice before it and 
directing the attorney to show cause within 30 days from the date of 
said order why the Commission should not impose further discipline 
against the attorney. If no response is filed, the attorney will be 
deemed to have acceded to such further discipline as the Commission 
deems appropriate. If a response is received, the Commission may take 
action or initiate proceedings consistent with paragraph (e)(5) of this 
section before making a determination whether, and to what extent, to 
impose further discipline against the attorney.
    (8) The disciplinary process described in this section is in 
addition to, and does not supersede, the authority of the Commission or 
an Administrative Law Judge to discipline attorneys participating in 
part 3 proceedings pursuant to Sec. Sec.  3.24(b)(2) or 3.42(d).


Sec.  4.2  [Amended]

0
16. In Sec.  4.2, amend paragraphs (d)(2) and (d)(4), by removing the 
phrase ``Sec.  2.7(d), Sec.  2.7(f)'' and adding in its place ``Sec.  
2.10(a)''.


Sec.  4.9  [Amended]

0
17. Amend Sec.  4.9, by removing the phrase ``(16 CFR 2.7)'' from 
paragraph (b)(4) heading and the phrase ``, requests for review by the 
full Commission of those rulings, and Commission rulings on such 
requests'' from paragraph (b)(4)(i).

    By direction of the Commission, Commissioner Rosch dissenting.
Donald S. Clark,
Secretary.
    The following will not appear in the Code of Federal 
Regulations.

Statement of Chairman Jon Leibowitz Regarding Revisions to the 
Commission's Part 2 Rules and Rule 4.1(e)

September 19, 2012

    Today the Commission issued final changes to Parts 2 and 4 of the 
agency's Rules of Practice. The revised Rules streamline and update the 
procedures for Commission investigations, and clarify the agency's 
procedures for evaluating allegations of misconduct by attorneys 
practicing before the Commission, making us a more effective agency.
    All of the Commission generally supports the revisions. A 
legitimate question has been raised, however, that the revisions to the 
Part 2 Rules should have gone further. One issue involves the 
occasional use of ``access letters,'' rather than compulsory process, 
to conduct Commission competition investigations. Over the past few 
years, the Commission has moved decisively toward greater use of 
compulsory process in these investigations. Compulsory process results 
in faster, more efficient investigations, especially in anticompetitive 
conduct matters where the recipients may not have strong incentives to 
cooperate quickly with Commission staff. Our experience has shown that, 
all too often, the recipients of voluntary access letters slow walk 
compliance. Nevertheless, 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.
    Another question that has been raised is whether the Rules should 
require staff to submit regular status reports to all Commissioners on 
pending investigations. Our staff already meets regularly with 
individual Commissioners and responds to any inquiries about particular 
matters. Moreover, our current practice is for staff to submit regular 
status updates to the Commission at six-month intervals. This best 
practice, however, is a matter of internal management that does not 
necessarily need to be enshrined in the Rules of Practice.

[FR Doc. 2012-23691 Filed 9-26-12; 8:45 am]
BILLING CODE 6750-01-P