[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Proposed Rules]
[Pages 3191-3202]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-985]


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FEDERAL TRADE COMMISSION

16 CFR Parts 2 and 4


Rules of Practice

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

ACTION: Proposed rule amendments; request for public comment.

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SUMMARY: The FTC is proposing to amend parts of its regulations. The 
proposed amendments would make changes to the FTC's investigatory 
procedures in the interest of fairness, efficiency, and openness in all 
FTC investigations. The amendments would also revise the Commission's 
rules governing reprimand, suspension, and disbarment of attorneys 
practicing before the Commission.

DATES: Written comments must be received on or before March 23, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part (subsection 
III) of the SUPPLEMENTARY INFORMATION section below. Write ``Parts 2 
and 4 Rules of Practice Rulemaking (16 CFR Parts 2 and 4) (Project No. 
P112103)'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/rulespart2and4.1nprm, by following the 
instructions on the Web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
Y), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: For further information on the 
proposed revisions to the investigatory procedures, contact Lisa M. 
Harrison, Assistant General 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. Introduction
II. Section-by-Section Analysis of Proposed Rule Revisions
III. Invitation To Comment
IV. Proposed Rule Revisions

I. Introduction

1. Need for Reform of the Commission's Investigatory Process

    The Commission has periodically examined and revised its Rules of 
Practice in the interest of clarifying the Rules and making the 
Commission's procedures more efficient and less burdensome for all 
parties.\1\ Especially in response to growing reliance upon and use of 
electronic media in document discovery, the Commission has reviewed its 
current rules governing the process of nonadjudicative investigations 
(``Part 2 Rules'').
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    \1\ See, e.g., 74 FR 1828 (Jan. 13, 2009).
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    Document discovery today is markedly different than it was only a 
decade ago. The growing prevalence of business files in electronic 
form--email, voicemail, text messages, blogs, word processing 
documents, PowerPoint presentations, videos, spreadsheets, and data 
files--has changed document discovery in several ways. First, 
information is no longer accurately measured in pages, but instead in 
megabytes, gigabytes, terabytes, and more. Second, because 
electronically stored information (``ESI'') is widely dispersed 
throughout organizations, parties can no longer complete searches by 
merely looking in file cabinets and desk drawers. While searchers must 
still reach into file cabinets and desk drawers, they must also--and 
primarily--seek and retrieve information from mainframe computers, 
shared servers, computers, cell phones, smart phones, portable devices, 
and other media, as well as from third-party service providers. Third, 
because ESI is broadly dispersed and not always consistently organized 
by its custodians, searches, identification, and collection all require 
special skills and, if done properly, may utilize one or more search 
tools such as advanced key word searches, Boolean connectors, Bayesian 
logic, concept searches, predictive coding, and other advanced 
analytics. Fourth, because ESI may be readily altered, it must be 
preserved early in any discovery process--or even before discovery, 
when litigation is anticipated--and handled carefully at all stages to 
preserve its accuracy, authenticity, and ultimate admissibility. Fifth, 
even when investigations are conducted cooperatively, and are both well 
organized and well managed, there remains a substantial risk that 
mistakes and delays will occur as the responding party collects 
responsive materials, analyzes them for relevance and privilege, and 
prepares them for production.
    The need to reform Part 2 Rules is also based in part on concerns 
that modern document discovery and its attendant complexities have 
become a source of delay in the Commission's securing the information 
it needs to complete its investigations. Thus, the Commission views its 
reexamination of the rules as an opportunity not only to account for 
the widespread use of ESI, but also to improve the efficiency of 
investigations, and the willingness of targets and third parties to 
cooperate.

2. Overview of Proposed Rule Revisions

    The proposed changes to the Part 2 Rules would expedite Commission 
investigations by: (1) Conditioning any extensions of time to comply 
with Commission processes on a party's continued progress in achieving 
compliance; (2) conditioning 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; and (3) removing the two-
step process for resolving petitions to quash and establishing tighter 
deadlines for the Commission to rule on petitions.
    The proposed revisions are also intended to streamline the rules 
and add structure to the agency's investigatory process by 
consolidating related provisions that are currently scattered 
throughout Part 2. The rules also update investigatory practices, 
especially in light of the ubiquity of ESI, by including express 
references to ESI in the rules. Finally, they facilitate the 
enforcement of Commission compulsory process by clarifying the rights 
and obligations both of agency staff and compulsory process recipients.

[[Page 3192]]

    The Commission also proposes to amend the attorney disciplinary 
procedures codified in current Rule 4.1(e) in order to address more 
effectively any misconduct by attorneys practicing before the agency. 
The proposed amendments are designed to provide additional guidance 
regarding appropriate standards of conduct, and procedures for 
addressing alleged violations of those standards.
    Finally, the Commission intends to make certain technical revisions 
throughout the rules including, for example, eliminating the convention 
of specifying numbers in both written and numerical form, and 
substituting gender-neutral language. The proposed rule revisions 
relate solely to agency practice and, thus, are exempt from the notice-
and-comment requirements of the Administrative Procedure Act (``APA''). 
5 U.S.C. 553(b)(3)(A). Nonetheless, the FTC is issuing the revisions as 
a proposed rule for public comment in order to benefit from the input 
of affected parties. The proposed revisions are also not subject to the 
requirements of the Regulatory Flexibility Act, 5 U.S.C. 601(2), the 
requirements of the Paperwork Reduction Act, 44 U.S.C. 
3518(c)(1)(B)(ii), and 5 CFR 1320.4 (exempting information collected 
during the conduct of administrative proceedings or investigations). If 
finalized, these revisions would govern all Commission investigations 
commenced on or after the date on which the rules are issued. The 
amendments would also govern all Commission investigations pending as 
of that date, unless the Commission, acting through its managers, 
determines that the application of an amended rule in a particular 
investigation would not be feasible or would create an injustice.

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

    The following is a section-by-section analysis of the proposed 
revisions to Part 2 of the Commission's Rules, and the proposed 
revision to Rule 4.1, which provides for new attorney discipline 
procedures.

Section 2.2: Request for Commission Action

    The Commission would amend this Rule to account for new web-based 
methods of submitting complaints and requests for agency action, and to 
avoid repetition of certain provisions in current Rule 2.1. The latter 
Rule--which the Commission does not propose to revise--identifies how, 
and by whom, any Commission inquiry or investigation may be initiated. 
Rule 2.2 describes the procedures that apply when members of the public 
or other parties outside of the agency request Commission action.

Section 2.4: Investigational Policy

    The revisions to this Rule would underscore the importance of 
cooperation between recipients of compulsory process and FTC staff to 
resolve issues related to compliance with CIDs and subpoenas. The 
proposed Rule affirms the Commission's endorsement of voluntary 
cooperation in all investigations, but would view cooperation as a 
complement--rather than a mutually exclusive alternative--to compulsory 
process. This revision is intended to more accurately account for the 
complexity and scope of modern discovery, specifically the electronic 
discovery so prevalent in Commission investigations.
    Equally important, the Commission's revised investigational policy 
would also endorse the principles articulated in the Sedona 
Conference's ``Cooperation Proclamation'' \2\ and Fed. R. Civ. P. 1's 
call for ``just, speedy, and inexpensive'' adjudication and apply them 
where they fit into law enforcement investigations. The Sedona 
Conference has been instrumental in providing guidance to practitioners 
with respect to modernized discovery practices. Numerous authorities, 
including more than 100 judges nationwide have endorsed the Cooperation 
Proclamation since its release, and the Commission believes that it 
provides a sound articulation of ``best practices'' in modern 
discovery.
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    \2\ The Sedona Conference is a nonprofit research and 
educational institute whose members are judges, attorneys and 
academics. The institute's Cooperation Proclamation declares that 
``the legal profession can engage in a comprehensive effort to 
promote pre-trial discovery cooperation. Our `officer of the court' 
duties demand no less. This project * * * is a tailored effort to 
effectuate the mandate of court rules calling for a `just, speedy, 
and inexpensive determination of every action' and the fundamental 
ethical principles governing our profession.'' See http://www.thesedonaconference.org/content/tsc_cooperation_proclamation/proclamation.pdf.
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Section 2.6: Notification of Purpose

    The Commission would amend this Rule to clarify staff's ability to 
disclose the existence of an investigation to certain parties. The 
added provision would restate longstanding agency policy and practice 
recognizing that staff may at times 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.

Section 2.7: Compulsory Process in Investigations

    The revisions to this Rule would consolidate and re-designate into 
one rule the compulsory process provisions now found in Rules 2.8, 
2.10, 2.11, and 2.12. Although the proposed revisions would encompass 
all types of documentary material sought by the Commission, the 
revisions would better reflect modern document retention and production 
practices by expressly accounting for the use of new technologies.\3\
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    \3\ The term ``electronic media'' is not a legal term of art. 
The Commission recommends the use of the term throughout the revised 
Rules for precisely this reason; it does not want any single 
technological advance in data storage or production to render a Rule 
provision obsolete.
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    The Commission expects the proposed revisions to substantially 
expedite its investigations by: (1) Conditioning any extensions of time 
to comply on a party demonstrating its progress in achieving 
compliance; (2) 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; and (3) 
requiring 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.
    Finally, the proposed revisions to this Rule would 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.

Section 2.9: Rights of Witnesses in Investigations

    Current Rule 2.9 details the rights of witnesses in Commission 
investigations, including witnesses compelled to appear in person at an 
investigational hearing or deposition. Rule 2.9(b)(2) permits a witness 
at an investigational hearing to refuse to answer questions that call 
for privileged information. As it is currently written, the rule does 
not provide guidance regarding the perimeters of the privileges that 
may be asserted. Counsel for witnesses have sometimes taken advantage 
of the rule's lack of clarity by repeating objections, excessively 
consulting with their clients during the hearing, and otherwise 
employing arguably obstructionist tactics. Revised Rule 2.9(b)(1) is

[[Page 3193]]

intended to prevent counsel from improperly engaging in such 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 or other protected status. The 
Commission believes that such a provision is necessary to prevent 
obstructionist conduct and has concluded that this revision is 
supported by federal court decisions that prevent counsel for a witness 
from conferring with the witness during a deposition while a question 
is pending.\4\ As one court has observed, such coaching ``tend[s], at 
the very least, to give the appearance of obstructing the truth.'' \5\ 
Many district courts have adopted rules prohibiting consultation in 
depositions while a question is pending.\6\ Also persuasive is the 
Advisory Committee's notes to Fed. R. Civ. P. 30, which associate the 
general regulation of attorney conduct during a deposition with the 
more specific prohibition against improper coaching.\7\
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    \4\ See, e.g., Hall v. Clifton Precision, 150 F.R.D. 525, 528 
(E.D. Pa. 1993); Plaisted v. Geisinger Med. Ctr., 210 F.R.D. 527, 
535 (M.D. Pa. 2002).
    \5\ Hall, 150 F.R.D. at 528.
    \6\ See, e.g., 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).
    \7\ See, e.g., Fed. R. Civ. P. 30 advisory committee's note 
(1993 Amendments) (noting 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.'').
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    The Commission also proposes revising this Rule to clarify the 
process for resolving those privilege objections that require a recess 
in a deposition or investigational hearing. At present, the validity of 
a witness's assertion of privilege during an investigational hearing is 
resolved definitively only through an enforcement action in district 
court, in accordance with the provisions of Rule 2.13, and not as part 
of a petition to limit or quash a subpoena in accordance with the 
provisions of existing Rule 2.7(d). Revised Rule 2.9(b)(3) would 
clarify the process for resolving privilege objections during a 
deposition or investigational hearing by expressly granting to 
Commission investigators the ability to recess, and subsequently 
continue, a course of inquiry interrupted by a witness's privilege 
objection. The new rule also states expressly that the Commission may 
file an enforcement action if the witness fails to reappear.

Section 2.10: Petitions To Limit or Quash Commission Compulsory Process

    The Commission proposes to consolidate the provisions governing 
petitions to limit or quash \8\ into a re-designated Rule 2.10. Apart 
from this consolidation, the revised Rule would clarify the process for 
filing and ruling on such petitions. Revised paragraph (a)(3) provides 
guidance to parties in instances where the Commission investigator 
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 2.10 expressly allow the Commission 
investigator 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. Paragraph (a)(4) clarifies the right of Commission 
staff to respond to a petition to limit or quash.
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    \8\ At present, the provisions are found in Rules 2.7(d)-(e), 
2.11(b)-(d), and 2.12(c)-(e).
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    To expedite rulings on petitions to quash, the revised Rule would 
provide that the Commission itself, rather than a designated Compulsory 
Process Commissioner, would rule upon petitions to quash or limit in 
the first instance. This amendment is designed to address the fact that 
it has now become standard procedure for petitioners to file requests 
for review of virtually all letter rulings issued by the Compulsory 
Process Commissioner, frequently by simply filing a request for review 
and attaching to that request the original petition to quash or limit 
in its entirety. The current practice now results in substantial delays 
in disposing of petitions to quash or limit without offering any 
countervailing advantages. Second, the Commission proposes a new Rule 
2.10(c) to provide for a 30-day deadline for the issuance of an order 
ruling on a petition to limit or quash.\9\ To facilitate expedited 
review of petitions to limit or quash, the Commission also proposes an 
amended paragraph (a)(1), providing that petitions be limited to 3,750 
words (approximately 15 pages). The word limit would not apply to 
affidavits or other supporting documentation.
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    \9\ The Commission would retain its inherent authority to extend 
this time period if the petition is not acted upon within 30 days.
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Section 2.11: Withholding Requested Material

    This proposed Rule would revise and re-designate current Rule 2.8A 
to require parties to give more meaningful and specific information 
concerning privilege claims in Part 2 investigative proceedings. 
Parties withholding requested material would be subject to the revised 
Rule 2.11, which would set out specifications for a privilege log to be 
submitted to the Commission in lieu of a motion to limit or quash 
compulsory process.
    As part of its comprehensive reforms governing adjudicative 
proceedings, in 2009, the Commission amended Rule 3.38A to eliminate 
the requirement that a privilege log must always contain specific 
information for each item being withheld.\10\ The Commission 
substituted the more flexible requirement of Fed. R. Civ. P. 
26(b)(5)(A), which prescribes that the nature of the materials withheld 
be described ``in a manner that * * * will enable other parties to 
assess the claim.'' The Commission believes that the Part 2 Rule should 
contain a more specific requirement because there is no neutral 
Administrative Law Judge (``ALJ'') 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.
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    \10\ See 73 FR 58839.
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    The proposed amendment would require detailed descriptions of the 
withheld material (including the number of pages or bytes comprising 
the privileged material and the respective dates when the material was 
both created and sent), and descriptions of the authors and recipients 
of the material (including the parties' names, titles, physical 
addresses, email addresses, and organizations). The revision would also 
require the person claiming a privilege to provide a factual basis for 
the claims. Finally, the proposed privilege log would be notarized by 
the ``lead attorney'' on the matter, to avoid instances where junior-
level attorneys or non-lawyer ESI specialists might notarize a log and 
thereby attempt to shield senior attorneys from sanctions in the event 
of misrepresentation.
    Paragraph (b) of the proposed rule allows the requirements to be 
modified as the result of any agreement reached during the ``meet and 
confer'' session. In some situations, less detailed requirements (for 
example, allowing

[[Page 3194]]

documents to be described by category) may suffice to assess privilege 
claims. This revision is designed to encourage cooperation and 
facilitate partial privilege logs, such as those encouraged by the 
Commission's ``best practices'' in merger cases.\11\
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    \11\ See http://www.ftc.gov/os/2006/02/mergerreviewprocess.pdf.
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    Paragraph (c) of the proposed rule addresses an issue that has 
arisen in some recent investigations wherein the targets of Part 2 
investigations, in contravention of instructions in a subpoena issued 
by the Commission, redacted numerous documents that were not claimed to 
be protected by any privilege. Paragraph (c) highlights the instruction 
by explicitly providing that responsive material for which no privilege 
claim has been asserted must be produced without redaction.
    Finally, the suggested revised Rule also incorporates recent 
changes in Commission Rules 3.31(g), 3.38A, and Fed. R. Evid. 502 
regarding the return or destruction of inadvertently disclosed 
material. The Federal Rule sets the new standard for subject matter 
waiver in the United States. As previously noted with respect to the 
Part 3 revisions,\12\ the risk of privilege and work product waiver, 
and the resources used to avoid it, significantly increase the costs 
and delay of discovery. This risk is amplified when a party is asked to 
produce ESI. The Commission believes that requiring parties to make 
only those efforts reasonably necessary to protect privilege or 
immunity will reduce the time and effort needed to avoid waivers.
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    \12\ See 73 FR 58839.
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Section 2.13: Noncompliance With Compulsory Process

    The proposed Rule amendment would expedite the Commission's Hart-
Scott-Rodino enforcement process by delegating to the General Counsel 
the authority to initiate enforcement proceedings for noncompliance 
with a Hart-Scott-Rodino second request under 15 U.S.C. 18a(g)(2) 
(``(g)(2) actions''). The Commission believes this change is 
appropriate because it 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. The revised 
Rule would also authorize the General Counsel to initiate an 
enforcement action in connection with noncompliance of a Commission 
order requiring access pursuant to 15 U.S.C. 49, in addition to 
compliance with compulsory process already covered in the existing 
Rule.

Section 2.14: Disposition

    Rule 2.14 applies after the Commission determines whether to take 
corrective action following an investigation. If corrective action is 
deemed necessary, the Commission may elect to institute proceedings in 
Part 3 or in federal court. If corrective action is not necessary, the 
investigation is usually closed. Past subjects of Commission 
investigations have occasionally expressed informal concerns about the 
lack of a formal notification process following the disposition of an 
investigation, especially in light of the fact that at times staff does 
not affirmatively issue closing letters.\13\ Currently, if a party does 
not receive notification that a matter has been closed, it is under a 
continuing obligation to preserve documents.
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    \13\ Because closing letters are public, some companies 
affirmatively request that no closing letter be issued.
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    To address these concerns, the Commission proposes a new paragraph 
(c) to Rule 2.14. Paragraph (c) is intended to benefit both the 
subjects of FTC investigation and third parties by relieving them of 
any obligation to preserve documents after a year passes with no 
written communication from the Commission or staff. The Commission 
believes this revision is warranted because the retention and 
preservation of information, documentary material, and other evidence 
can, depending on the volume, be expensive--and wasteful if 
unnecessary. In many instances such retention and preservation can 
expose the custodian to potential liability; for example, sensitive 
personal or medical information, or non-current (but still sensitive) 
trade information and data can all cause substantial problems for a 
firm if lost, stolen, or hacked into. The Commission also notes that in 
some circumstances, 18 U.S.C. 1519 threatens imprisonment for any party 
who violates an obligation to retain such materials if an investigation 
is pending. Equally significant, third parties are generally not 
informed when one of the agency's non-public investigations has been 
concluded. In sum, recipients of compulsory process report that they 
often do not know when they are relieved of any obligation to retain 
information or materials for which neither the agency nor they have any 
use; nor are they inclined to ask about the status of an investigation 
for fear of renewed agency attention. The proposed Rule 2.14 revisions 
would relieve parties of any obligation to preserve documents if twelve 
months pass with no written communication from the Commission or staff.

Section 4.1: Appearances

    Rule 4.1(e) governs the administration of attorney discipline for 
attorneys practicing before the Commission. The Commission proposes to 
amend this Rule to provide additional guidance regarding the type of 
conduct that may warrant disciplinary action. The revised Rule provides 
for disciplinary action where an attorney engages in conduct during a 
Commission investigation or other proceeding that is contemptuous, 
obstructionist, or violates appropriate standards of professional 
conduct, as well as where an attorney knowingly or recklessly provides 
false or misleading information to the Commission or its staff. In 
addition, the revised Rule provides 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 other attorney's 
misconduct, or has managerial authority over the attorney.
    The revised Rule also establishes a new framework for evaluating 
and adjudicating allegations of misconduct by attorneys practicing 
before the Commission. The revised Rule provides for Commission staff 
to submit allegations of misconduct on a confidential basis to 
designated officers within the Bureaus of Competition or Consumer 
Protection with the authority to investigate such charges. The rule 
establishes procedures for the investigation of alleged misconduct and 
authorizes an investigating officer to request that the Commission 
issue compulsory process to facilitate an investigation of the 
allegations. After completion of an investigation, the revised rule 
provides the investigating officer with discretion to determine whether 
the allegations warrant further action and, if so, to recommend the 
charges to the Commission for its consideration.
    The revised Rule also introduces a process for issuance of attorney 
reprimands without an evidentiary hearing in appropriate circumstances. 
The revised Rule provides that the Commission may issue a public 
reprimand, after the subject of an investigation has been given notice 
and an opportunity to respond during the course of the investigation, 
if it determines, based on the attorney's response, if any, and the 
record before it, that the attorney has engaged in professional 
misconduct warranting a public reprimand.
    In cases where the Commission determines that a full administrative 
disciplinary proceeding is warranted to

[[Page 3195]]

determine if a reprimand, suspension, or disbarment should be imposed, 
the Rule provides for the Commission to institute disciplinary 
proceedings by serving an order to show cause on the respondent 
attorney and assigning the matter to an ALJ.\14\ The revised Rule 
grants the ALJ the necessary powers to oversee expeditious attorney 
disciplinary proceedings, including the authority to allow for limited 
discovery and the filing of pleadings. Agency attorneys--appointed by 
the Director of the Bureau that has proffered the allegations--would 
serve as Commission counsel during a hearing to adjudicate the 
allegations of misconduct.
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    \14\ In the alternative, the rule provides that the Commission 
may preside over the matter in the first instance or assign one or 
more members to sit as administrative law judges in a matter. Under 
the APA, the Commission or its members have the authority to preside 
over a hearing. See 5 U.S.C. 556(b).
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    Revised Rule 4.1(e) also establishes expedited procedures to allow 
the Commission to suspend an attorney temporarily in the event that it 
receives official notice from a state bar that an attorney has been 
suspended or disbarred by that authority, pending a full disciplinary 
proceeding to assess the need for a permanent disbarment from practice 
before the Commission. These summary procedures would provide the 
Commission the ability to act promptly to suspend attorneys that have 
been found guilty by a state bar of conduct warranting suspension or 
disbarment.

III. Invitation To Comment

    The Commission invites interested persons to submit written 
comments on any issue of fact, law, or policy that may bear upon its 
proposal to revise its Part 2 and 4 Rules. Please include explanations 
for any answers provided, as well as supporting evidence where 
appropriate. After examining the comments, the Commission will 
determine whether to issue specific amendments.
    You can file a comment online or in a written document. For the 
Commission to consider your comment, we must receive it on or before 
March 23, 2012. Write ``Notice of Proposed Rulemaking on Parts 2 and 4 
of the FTC's Rules of Practice (16 CFR Parts 2 and 4) (Project No. 
P112103)'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the public Commission Web 
site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the Commission tries to remove individuals' home contact 
information from comments before placing them on the Commission Web 
site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). If you want the 
Commission to give your comment confidential treatment, you must file 
it in paper form, with a request for confidential treatment, and you 
have to follow the procedure explained in FTC Rule 4.9(c), 16 CFR 
4.9(c).\15\ Your comment will be kept confidential only if the FTC 
General Counsel, in his or her sole discretion, grants your request in 
accordance with the law and the public interest.
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    \15\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online, or to send them to the Commission by courier or 
overnight service. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/rulespart2and4.1nprm, by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``Notice of Proposed 
Rulemaking on Parts 2 and 4 of the FTC's Rules of Practice (16 CFR 
Parts 2 and 4) (Project No. P112103)'' on your comment and on the 
envelope, and mail or deliver it to the following address: Federal 
Trade Commission, Office of the Secretary, Room H-113 (Annex Y), 600 
Pennsylvania Avenue NW., Washington, DC 20580. If possible, submit your 
paper comment to the Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before March 23, 2012. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

IV. Proposed 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 proposes to amend Title 16, Chapter 1, Subchapter A of the 
Code of Federal Regulations, parts 2 and 4, as follows:

PART 2--NONADJUDICATIVE PROCEDURES

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

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

    2. Revise Sec.  2.2 to read as follows:


Sec.  2.2  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) Complaints or requests submitted to the Commission may 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

[[Page 3196]]

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. With these exceptions, it is 
the Commission's policy not to publish or divulge the name of a 
complainant except as authorized by law or by the Commission's rules.
    3. Revise Sec.  2.4 to read as follows:


Sec.  2.4  Investigational policy.

    Consistent with obtaining the information, including documentary 
material, it needs for investigations, 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.
    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.
    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 section, 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 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 legal 
exemption, privilege, or work product protection.
    (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 Commission investigator 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

[[Page 3197]]

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 or not 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 of 
any Commission member, examiner, attorney, investigator, or other 
person duly designated under the Federal Trade Commission Act, for the 
purpose of hearing the testimony of witnesses 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 Commission 
Investigator shall exclude from the hearing room all persons other than 
the person being examined, counsel for the person being examined, and 
any stenographer or other person recording such testimony. A copy of 
the transcript shall promptly be forwarded by the Commission 
Investigator to the Commission custodian designated under Sec.  2.16. 
At the discretion of the Commission Investigator, 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 
Commission Investigator 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 Commission Investigator, 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 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 Sec.  2.7(l). 
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 by a Commission official identified in Sec.  2.7(l), a 
recipient of Commission compulsory process shall meet and confer with 
Commission staff within 10 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 
privilege issues and the form and manner in which privilege claims will 
be asserted. Such meetings 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, and/or other 
relevant materials such as organizational charts and 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 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 negotiate 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.
    6. Reserve Sec.  2.8.
    7. Remove Sec.  2.8A.
    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

[[Page 3198]]

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 
Commission Investigator, 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 Commission Investigator shall 
take the actions 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 of privilege involving protected 
status.
    (2) Any objection during a deposition or investigational hearing 
shall be stated concisely on the 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 privilege or work product. Counsel may instruct a witness not 
to answer only when necessary to preserve a claim of privilege or work 
product.
    (3) The Commission Investigator 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 (b)(2). The Commission Investigator 
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 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 Commission Investigator, 
the witness or his or her counsel may on the record request that the 
Commission Investigator permit the witness to clarify any answers. The 
grant or denial of such request shall be within the discretion of the 
Commission Investigator and would ordinarily be granted except for good 
cause stated and explained on the record, and with an opportunity for 
counsel to undertake to correct the expressed concerns of the 
Commission Investigator or otherwise to reply.
    (5) The Commission Investigator shall conduct the deposition or 
investigational hearing in a manner that avoids unnecessary delay, and 
prevents and restrains disorderly or obstructionist conduct. The 
Commission Investigator 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.
    9. Revise Sec.  2.10 to read as follows:


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

    (a) In general.
    (1) 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 privilege 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 3,750 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), 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) 
shall be accompanied by a signed separate statement representing that 
counsel for the petitioner has conferred with counsel for the 
Commission pursuant to Sec.  2.7(k) 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 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 
Commission Investigator elects pursuant to Sec.  2.9(b)(3) to recess 
the 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 privilege 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). 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

[[Page 3199]]

process shall stay the amount of time permitted for compliance with the 
portion challenged. 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.
    10. Revise Sec.  2.11 to read as follows:


Sec.  2.11  Withholding requested material.

    (a) 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, or any other request for production of 
material issued under this part, shall assert a claim of protected 
status not later than the date set for the production of the material. 
The claim of privilege, work product, or protected status by operation 
of law 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 a claim of privilege or protected status. All responsive 
material that is neither privileged, work product, nor in a protected 
status by operation of law, including all attachments, that contain 
privileged or protected information shall be produced 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 of privilege, 
work product, or protected status by operation of law without 
disclosing the privileged or protected information. The failure to 
provide information sufficient to support a claim of privilege or 
protection may result in a denial of the claim of privilege or 
protection. The log shall provide:
    (1) The full title (if the withheld material is a document) and the 
full file name (if the withheld material is in electronic form);
    (2) A description of the material withheld (for example, a letter, 
memorandum, or email), including any attachments;
    (3) The date the material was created or prepared;
    (4) The date the material was sent to each recipient (if different 
from the date the material was created or prepared);
    (5) The names, titles, physical addresses, email addresses, and 
organizations of all authors (if not contained in the disclosed 
material);
    (6) The names, titles, physical addresses, email addresses, and 
organizations of all recipients of the material (if not contained in 
the disclosed material);
    (7) The factual basis supporting the claim that the material is 
privileged, work product, or protected by operation of law (for 
example, that it was prepared by an attorney rendering legal advice to 
a client in an attorney-client privileged communication, or prepared by 
an attorney in anticipation of litigation regarding a specifically 
identified claim of work product);
    (8) The number of pages (if the withheld material is a document) or 
the number of bytes (if the withheld material is in electronic form); 
and
    (9) Any other pertinent information necessary to support the 
assertion of privilege, work product, or protected status by operation 
of law.
    (b) A person withholding responsive material solely for the reasons 
described in paragraph (a) shall meet and confer with Commission staff 
pursuant to Sec.  2.7(k) 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). The Commission may challenge the validity of any 
privilege or protection claim for responsive material by initiating a 
judicial enforcement proceeding.
    (c) Unless otherwise provided in the instructions accompanying the 
compulsory process, and except for information or material subject to a 
valid claim of privilege or protection, all responsive information and 
material shall be produced without redaction.
    (d)(1)(A) The disclosure of material protected by the attorney-
client privilege or as work product shall not operate as a waiver if:
    (i) The disclosure is inadvertent;
    (ii) The holder of the privilege or protection took reasonable 
steps to prevent disclosure; and
    (iii) The holder promptly took reasonable steps to rectify the 
error, including notifying Commission staff of the claim and the basis 
for it.
    (B) After being so notified, Commission must:
    (i) 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
    (ii) 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.
    (C) 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:
    (A) The waiver is intentional;
    (B) The disclosed and undisclosed information or material concern 
the same subject matter; and
    (C) They ought in fairness to be considered together.
    11. Reserve Sec.  2.12.
    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;
    (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

[[Page 3200]]

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 in a United States District Court under section 7A(g)(2) of 
the Clayton Act (15 U.S.C. 18a(g)(2)); and
    (4) To seek an order of civil contempt in cases where a court order 
enforcing compulsory process has been violated.
    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 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 sent by the Commission or Commission staff to the 
recipient or his or her counsel.
    (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.

PART 4--MISCELLANEOUS RULES

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

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

    15. Amend Sec.  4.1 by revising paragraph (e) to read as follows:
* * * * *
    (e) Reprimand, suspension, or disbarment of attorneys.
    (1) The following provisions govern procedures for evaluating 
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.
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    (i) Does not possess the qualifications required by Sec.  4.1(a);
    (ii) Has failed to conform to standards of ethical conduct required 
of practitioners at the bar of any court of which he or she is a 
member;
    (iii) Has engaged in obstructionist, contemptuous, or 
unprofessional conduct during the course of any Commission proceeding 
or investigation; or
    (iv) 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\
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    \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.
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    An attorney may be responsible for another attorney's violation of 
this Sec.  4.1(e) if the attorney orders, or with knowledge of the 
specific conduct, ratifies the conduct involved, or is a partner or has 
comparable managerial authority in the law firm in which the other 
attorney practices, or has direct supervisory authority over the other 
attorney, and 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 subsection may be proffered by any person possessing 
information concerning the alleged misconduct. Any such allegations may 
be submitted orally or in writing to the Bureau Director, the Deputy 
Director if the Director is not available, or to any of their 
designees, of the Bureau or office responsible for the matter about 
which the allegations are made (``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 deems it appropriate, shall 
in writing notify the subject of the complaint of the underlying 
allegations and potential sanctions available to the Commission under 
this subsection, 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 good cause 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), 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)(8) of this subsection, 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. Within 14 days of 
service of the order to show

[[Page 3201]]

cause, the respondent may file a response admitting or denying the 
allegations of misconduct, and may request a hearing. If no response is 
filed, the allegations shall be deemed admitted.
    (ii) The Commission may assign the matter for further proceedings 
to be presided over by an Administrative Law Judge or by the Commission 
or one or more members of the Commission sitting as Administrative Law 
Judges. The Administrative Law Judge or the Commission if it reviews 
the matter in the first instance shall rule on any request for a 
hearing.
    (iii) 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.
    (iv) To the extent appropriate, practicable, and consistent with 
the Commission's policy of conducting proceedings expeditiously, the 
Administrative Law Judge or the Commission may issue orders (1) 
authorizing the filing of pleadings in accordance with subpart B of 
Part 3 of the Commission's rules; (2) specifying the available 
prehearing procedures in accordance with subpart C of Part 3 of the 
Commission's rules, (3) authorizing discovery to whatever extent deemed 
appropriate, but no more than what is provided for in proceedings held 
under subpart D of Part 3 of the Commission's rules; (4) conducting and 
controlling administrative proceedings in accordance with subpart E of 
Part 3 of the Commission's rules; and (5) providing for the opportunity 
to be heard, the receipt into evidence of documentary material, and the 
taking of testimony at a hearing. The time periods specified in 
subparts B, C, D, and E of Part 3 of the Commission's rules with 
respect to pleadings, prehearing procedures, discovery, and hearings 
shall not apply to administrative disciplinary proceedings. Instead, 
all time periods and deadlines shall be determined by the 
Administrative Law Judge or the Commission consistent with the 
Commission's interest in an expeditious proceeding and fairness to the 
attorney respondent.
    (v) In its order to show cause, the Commission will establish a 
deadline for an initial decision by the Administrative Law Judge or by 
the Commission if it reviews the matter in the first instance. The 
deadline shall not be modified by the Administrative Law Judge except 
that it may be amended by leave of the Commission.
    (vi) After completing a review of the allegations of misconduct, 
the response of the respondent attorney, if any, and the entirety of 
the record of administrative proceedings, the Administrative Law Judge 
or the Commission if it reviews the matter in the first instance shall 
issue an initial 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 initial decision may be appealed to the Commission by either 
party within 30 days. If the Administrative Law Judge's initial 
decision is appealed, the Commission will thereafter issue a scheduling 
order governing the appeal.
    (vii) 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) Notwithstanding the administrative disciplinary proceedings 
described in paragraph (e)(5) of this subsection, if after completing a 
review of the Bureau Officer's recommendation, the response of the 
attorney, if any, and the entirety of the record before it, the 
Commission determines that an attorney has engaged in professional 
misconduct of the type described in paragraph (e)(1) of this 
subsection, the Commission may issue a public reprimand without resort 
to the procedures specified in paragraph (e)(5).
    (7) 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.
    (8) 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 subsection, 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 paragraphs (e)(5) or 
(e)(6) of this subsection before making a determination whether, and to 
what extent, to impose further discipline against the attorney.
    (9) The disciplinary process described in this subsection 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).

    By direction of the Commission, Commissioner Rosch dissenting.
Donald S. Clark,
Secretary.
Concurring and Dissenting Statement of Commissioner J. Thomas Rosch 
Regarding Proposed Revisions to the Part 2 Rules and Rule 4.1(e)
January 13, 2012
    The Commission announced today that it will publish a notice in the 
Federal Register proposing revisions to the FTC's Rules of Practice. I 
support the Commission's efforts to modernize our operating rules and 
generally agree with the changes proposed today. I nevertheless dissent 
from the proposed rule changes insofar as they omit two important 
reforms: mandatory compulsory process in all full-phase investigations 
and regular reports on the status of pending investigations to all 
Commissioners.
    A thorough investigation requires the use of compulsory process. 
This is particularly true for investigations involving competition 
concerns. Targets cannot be expected to provide incriminatory 
information in response to access letters, which are not judicially 
enforceable. Likewise, third parties cannot be expected to provide 
candid information unless they are given the ``cover'' from a target's 
retaliation that compulsory process provides. Only through the use of 
mandatory compulsory process at the outset of all full-phase 
competition investigations can the Commission be assured of having a 
thorough and complete record when making enforcement decisions.
    Another needed reform to our Rules of Practice is requiring regular 
reports on the status of pending investigations to all Commissioners, 
not just the Chairman. Notwithstanding the laudable efforts of our 
current Chairman, the Commission has not always been kept apprised of 
the status of pending investigations, particularly those languishing 
for a lengthy period of time. The current Chairman will not be in his 
position forever so leaving the

[[Page 3202]]

decision up to whoever is the Chairman about whether and when to brief 
other Commissioners does not solve the problem. Requiring regular 
reports to all Commissioners for investigations lasting longer than six 
months will inspire public confidence and help avoid undue delays in 
completing investigations.

[FR Doc. 2012-985 Filed 1-20-12; 8:45 am]
BILLING CODE 6750-01-P