The FTC’s and DOJ’s New Magic Act: Vanished Messages Will Reappear in Discovery

By Mary M. Gardner, Leonard L. Gordon, Michael A. Munoz & Ellis McKennie

In late January, the Federal Trade Commission (FTC) and Justice Department (DOJ) announced a collaborative effort to update their instructions regarding preservation of electronic communications to targets of pre-litigation information requests in antitrust investigations. The agencies’ new instruction makes clear that targets must preserve ephemeral messages and threatens civil or criminal sanctions for failure to do so.

A number of popular messaging platforms—both text and email—allow users to send messages that are erased and permanently disappear either immediately or shortly after the recipient reads the message. SnapChat and Slack are common examples of apps that give users the option of ephemeral messaging. Some of these apps use end-to-end encryption to prevent third-party providers from accessing the communications. For example, Signal and Proton Mail are prevalent messaging and email platforms used for their ephemeral messaging capabilities.

Ephemeral messages can play an important role in business by preventing inadvertent dissemination of confidential business information. There are, however, certain risks associated with using ephemeral message systems. For example, the cloak of privacy can encourage informality and loose language senders might otherwise not want to be made public. It is typically very expensive to collect and produce these communications in any investigation or litigation.

From the agencies’ perspective, a major problem with ephemeral messaging is the all-too-common failure to preserve the messages once a target receives notice that it is the subject of a government investigation. The agencies released the updated instructions to ensure there is no ambiguity regarding their position on preservation of ephemeral messages: Targets who know they are under investigation by the FTC or DOJ must preserve these messages or face potentially severe civil spoliation sanctions or even criminal referrals.

In the announcement, the FTC underscored its intent to combat spoliation of ephemeral messages by discussing civil sanctions it imposed in a consumer protection case for a defendant’s failure to preserve documents. In FTC v. Noland, the FTC notified Noland that he was required to preserve any relevant documents as part of its investigation into his company, Success By Health.

In response, Noland instructed his company to begin using Signal and Proton Mail, two encrypted communication apps with autodelete functions. Upon discovery of these efforts, the FTC moved for spoliation sanctions. The district court agreed, instructing that the content of the unpreserved, ephemeral messages would be deemed adverse to Noland and Success By Health’s defense.

With the agencies’ directive and the evolving nature of ephemeral messaging, companies that have received document preservation notices from the FTC or DOJ, or have otherwise been notified that they are targets of agency investigations, should closely examine their use of business messaging platforms to evaluate whether they currently use ephemeral messaging and take immediate steps to preserve those messages.

As we previously discussed, adverse inference sanctions are just one of the many tools at the disposal of the agencies and courts if preservation is not properly conducted—and a motion for sanctions is not the time to start thinking about preservation. The best practice to avoid potential sanctions or criminal referrals is to hire lawyers with experience preserving, collecting, and producing ephemeral messages to help guide your efforts.

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