Advertising Law Tool Kit - Ninth Edition | 2021

Venable / 87 86 / Venable Be Prepared: State AG Inquiries Strategies for avoiding an inquiry: • Avoid the time and expense of an investigation by knowing and understanding the laws applicable to your business, as well as the potential risks and penalties that can result from noncompliance. Violations and penalties differ from state to state. In many states, the penalties for violating the UDAP law are “per violation,” and, in some instances, that penalty is increased if the deception is against an at-risk population, such as the elderly. • Actively monitor consumer complaints that appear on company or other social media sites. This applies to the company’s toll‑free number as well. Complaints should be resolved immediately. AGs monitor consumer complaints and receive consumer complaints directly from their constituents on a regular basis. AGs are more likely to act when there are numerous consumers complaining, especially if the company does not address the concerns. In addition, AGs often compare notes with colleagues in other states to find trends and identify potential multistate investigations. Multistate investigations can be tremendously expensive for companies to defend against and resolve. Preparing for and responding to an AG Inquiry: • As you conduct business in the state, do your best to retain documents that demonstrate you are complying with state law and resolving consumer complaints diligently. • The moment you receive a state AG inquiry, begin preparing for litigation. Preserve documents (paper, electronic, and emails) from the moment there is an inquiry. A document hold should be sent out to all those who may have responsive documents, and to the company’s IT department. Your company also needs clarity with the AG’s office on things such as document collection, electronically stored information (ESI) issues, custodians, search terms, document review, and timelines for completing production of documents. Increasingly, state AG offices question the use of computer‑assisted review. Many AG offices expect a privilege log to be prepared and provided at the end of the document production. Treating the AG investigation like litigation can ultimately save time and money. • Know the state’s open record laws and negotiate a confidentiality agreement with the AG’s office. This can be very important to protecting the company’s sensitive information. Also, be aware that many states limit the time during which the recipient of a subpoena from an AG can initiate proceedings to quash. • If the request for documents is too broad, and they often are, be prepared to negotiate a narrower scope of the request. This might also lower the cost of defending against the investigation and ultimately reduce the cost of the inquiry and settlement. If your company receives an inquiry from an AG, you should obtain counsel that is experienced with working with AG offices to assist from the outset. State attorneys general (AGs) are the chief legal officers of their states and have the authority to bring actions to protect the “public interest” in almost any area of law. Fundamentally, they represent the state government and the general public, which gives them broad jurisdiction to handle everything from public corruption to environmental cases. State AGs prioritize consumer protection issues because of the broad jurisdiction they have in the area and the support the work receives from constituents. In most states, they are given statutory responsibilities to protect consumers through the states’ unfair, deceptive and abusive practices (UDAP) laws, which give them the authority and responsibility to monitor advertising claims and other potentially “deceptive” or “unconscionable” acts against consumers. Organizations should consider a two-pronged approach to mitigating the risk of state AG actions. The old adage applies to state AG activity: An ounce of prevention is worth a pound of cure . First, minimize the risk of an action by understanding applicable state and federal law, thereby ensuring compliance, and monitoring and handling of consumer complaints in a timely manner. Second, ensure the organization is prepared and responds appropriately if it receives a subpoena or civil investigative demand (CID) from an AG’s office. Erik Jones ecjones@Venable.com +1 202.344.4460