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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 2 minutes read

FTC Files Against Third Party to Force CID Compliance

On October 20, 2023, the Federal Trade Commission filed a petition asking a federal court to compel Total Wine to comply with an FTC third party civil investigative demand. CID enforcement action by the FTC or U.S. Department of Justice is rare, and this petition is a reminder that companies and third parties need to carefully and strategically consider their CID compliance efforts.

The FTC had issued Total Wine a CID as part of its investigation into wine distributor Southern Glazer’s Wine and Spirits. According to the petition, FTC staff is investigating whether Southern is violating the Robinson Patman Act by charging higher prices to small independent retailers for wines and spirits as compared to large, favored chain retailers like Total Wine. FTC staff is also looking at whether Southern is providing Total Wine and other large retailers with discriminatory non-price services like shelf stocking and free marketing and labor support.

The FTC’s CID enforcement petition alleges that Total Wine refused to work cooperatively with the FTC for over four months. CIDs are a type of administrative subpoena seeking documents and other information in an antitrust investigation. Henry Liu, the FTC’s Director of the FTC’s Bureau of Competition, stated, “[a] civil investigative demand issued by the FTC is not a voluntary request, it is a demand made by the federal government that companies must comply with.”

Total Wine is not a target of the FTC’s investigation; it is one of several third parties from which the FTC wants information. The FTC sent nearly identical CID requests to ten of Southern’s largest chain retailer customers, including Total Wine. Total Wine filed an administrative petition on April 7, 2023, challenging the CID as too expansive and burdensome. Total Wine also requested that the Commission limit the CID’s definitions of both “distributor” and “relevant product.” By contrast, according to the FTC every other retailer CID recipient negotiated a limited set of document custodians and keyword searches. The Commission denied Total Wine’s petition on May 19, 2023, and ordered Total Wine to fully comply with the CID as written.

Despite the Commission’s order, Total Wine allegedly unilaterally narrowed the definitions of “distributor” and “relevant product” and produced only a limited production of materials that the FTC claimed were incomplete. According to the FTC, Total Wine’s production was deficient as it did not:

  • Produce any data related to any entity other than Southern;
  • Search and produce documents responsive to six specifications from the files of five Total Wine custodians the FTC staff had reason to believe possessed relevant information;
  • Include any explanation or definitions of the fields in several data sets in Total Wine’s production; 
  • Produce the five categories of materials previously identified and offered as relevant by Total Wine counsel; and
  • Provide the certification of compliance required by the CID and the FTC Act.

The FTC argued that Total Wine’s refusal to produce these materials had “burdened, delayed and impeded the Commission’s investigation” into Southern. The agency requested that the federal court issue an order directing Total Wine to show cause why it should not produce the requested materials and to promptly order the materials be produced within 20 days.

The FTC and the DOJ have broad authority to issue CIDs to parties and third parties in antitrust investigations. CIDs can often be burdensome and expensive to comply with. CID enforcement petitions are rare, but enforcers do bring them occasionally. Ordinarily, parties and third parties negotiate with the FTC and DOJ to ensure the agencies have what they need while limiting their production burdens. However, as the agencies increasingly expand their enforcement authority and the scope of their investigations, they have begun issuing increasingly expansive CIDs and in some cases insist on strict compliance. CID recipients need to develop a comprehensive response (or challenge) strategy and a robust assessment of the benefits and burdens of compliance. If you have any further questions, please contact Jamillia Ferris or Tina Sessions.



antitrust and competition