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State attorneys general (AGs) are the chief legal officers of their states or territories and can bring actions to protect the “public interest” in almost any area of law. They represent the state government and the general public and have broad jurisdiction over everything from public corruption to consumer protection.
Consumer protection issues are popular with constituents (nearly all state AGs (43) are elected officials), and so aggressive enforcement against conduct such as telemarketing, debt relief, privacy violations, and charity fraud can generate goodwill with AGs’ “clients,” i.e., their state’s residents. In most states, AGs protect consumers under their state’s unfair, deceptive, and abusive practices (UDAP) laws, which authorize AG offices to monitor advertising claims and other potentially “deceptive” or “unconscionable” acts against consumers. State AGs may also enforce certain federal consumer protection laws.
Organizations should consider a two-pronged AG approach: First, minimize the risk of an action by complying with applicable state and federal laws, while monitoring and handling consumer complaints promptly. Second, ensure the organization is prepared and responds appropriately if it receives a subpoena, civil investigative demand (CID), or voluntary access letter from an AG’s office.
Strategies for avoiding an inquiry:
- Understand the laws applicable to your business or nonprofit organization, and the potential risks and penalties that can result from noncompliance. Violations and penalties differ from state to state. Often the penalties for violating the UDAP law are “per violation,” and, in some instances, they are increased if the deception is against an at-risk population, such as the elderly.
- Monitor complaints on company or social media sites, including so-called gripe sites, the company’s Better Business Bureau web page, and its toll‑free hotline number. Resolve complaints immediately. Many AG investigations originate from consumer complaints or from whistleblowers (e.g., disgruntled current or former employees, officers, or directors). State AGs also receive referrals from other law enforcers like the Federal Trade Commission (FTC), and they monitor press reports and news articles about organizations’ conduct. AGs are more likely to act when there are numerous consumers complaining, especially if the company does not address the concerns. State AGs often compare notes to find trends and identify potential multistate investigations, which can be tremendously expensive for companies to defend against.
- Understand AGs’ enforcement priorities and their views on what conduct is prohibited by the statutes they enforce. AGs will very often be transparent about which conduct they are seeking to stop. Proactive engagement with the AGs can also be warranted, so that they understand your business practices and the measures you take to protect consumers.
Preparing for and responding to an AG inquiry:
- Do your best to retain documents that demonstrate you are complying with state law and resolving consumer complaints diligently.
- The moment you receive an AG inquiry, begin preparing for litigation. Preserve relevant documents: distribute a document hold to all those in your company who may have responsive documents and to the company’s IT department. Clarify with the AG’s office your responsibilities for things such as document collection, electronically stored information (ESI) issues, custodians, search terms, document review, and timelines for completing production of documents. Increasingly, AG offices question computer‑assisted reviews.
- 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 to protect 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 overbroad, negotiate a narrower scope. This will reduce the company’s response burden and may lower the cost of defending against and resolving the investigation. Experienced and well-connected state AG counsel can assist from the outset.
- If your company faces a multi‑state action, avoid playing “whack‑a‑mole” with potentially dozens of states (and the FTC, too). Multi-state actions are typically led by a smaller executive committee of state AGs who represent the other enforcers—focus your efforts there.
To learn more about state AG inquiries, contact Len Gordon or Ellen Berge. For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter.
