In response to a Freedom of Information Act request filed two months ago, the Federal Trade Commission refused to disclose 48 pages of documents related to the agency’s exclusive contract with an outside company to handle funds and customer data obtained in so-called consumer protection cases. The FTC indicated it was reviewing additional documents related to the outside firm — Analytics, Inc. of Chanhassen, Minnesota — that may also be subject to FOIA disclosure.
On June 20, the FTC received a FOIA request for all “contracts, bids, and related documents” pertaining to the Commission’s relationship with Analytics. The FTC’s Inspector General identified Analytics as the Commission’s exclusive contractor “to process redress distributions.” These are funds obtained by the FTC from companies accused of false advertising or fraud — most of whom settle and pay the Commission a lump-sum amount rather then contest the charges — which are supposed to be used for providing refunds to allegedly victimized consumers. FTC redress orders typically require the respondent company to turn over customer records, including credit card information, to the Commission; that information, along with the funds, is given to Analytics, which administers the refunds. Any money not refunded, minus Analytics’ expenses, is remitted to the FTC and deposited in the US Treasury.
The FTC generally does not name Analytics in press releases announcing redress orders, instead stating an “administrator” will process refunds. When directly questioned, FTC officials have refused to identify the administrator, despite the Inspector General’s public audit naming Analytics. Nor would FTC officials explain how customer information is provided to and managed by Analytics.
And despite the FTC’s mission of identifying and punishing companies that mislead the pubic, the Commission itself often exaggerates and misleads the public about the percentage of “consumer redress” funds that actually go to consumers. For example, in a June 7 press release, the FTC announced that it had distributed 2,335 checks, for $20.44 each, to consumers allegedly misled by Rite-Aid’s claims about a vitamin supplement. (The FTC did not identify any consumers actually misled; the Commission assumed all consumers were misled and demanded Rite-Aid provide refunds.) The press release failed to mention that the Commission received a total of $500,000 from Rite-Aid for “redress,” but the 2,335 checks amounted to just under $48,000. When questioned, an FTC official indicated the remaining $452,000 was divided between Analytics and the Treasury.
The FOIA Response
In response to the June 20 FOIA request, the FTC said in a “partial response” dated August 16 — substantially later than the 20-day deadline for answering FOIA requests mandated by law — that it “located and reviewed 51 pages of responsive records thus far.” The Commission, however, would only disclose three of those pages; the remaining 48 were exempt from disclosure, the FTC said, because they contained “confidential commercial or financial information.” The FTC did not elaborate further on what was contained in the 48 withheld pages.
The three pages disclosed contained copies of a General Services Administration order form related to an FTC contract with Analytics, although the document does not explain what the underlying contract is for. Nor is the contract itself disclosed. The order is signed by Helen Curlee, then an acquisitions official for the FTC. The only specific information provided is a schedule of the contract’s term, which initially ran from March 2008 to March 2009, with renewable one-year options through March 2013.
The FTC cited both FOIA exemption 4 — which covers “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential” — and the Commission’s own authorizing statute, which similarly bans the disclosure of trade secrets and “privileged or confidential” information obtained from individuals. But this latter provision only applies to information obtained in the course of an FTC investigation, not government contracting. The FTC did not explain how that applied to the Analytics FOIA request.
Since the FTC labeled its August 16 reply a “partial response,” the Commission may provide one or more future responses involving other documents. And there is no way to know what was in the 48 pages of “exempted” documents. The most pressing issue is whether those pages included the actual Analytics contract. If it does, then the FTC’s position amounts to a refusal to explain to the public how taxpayer dollars are spent on outside companies.
Even if the 48 pages do not include the contract, there are serious questions; such as, how long does it take the FTC to find a contract? FOIA requires a reply within 20 business days. The FTC has taken over two months just to offer a partial response that may or may not include the actual contract.
It is also curious that the FTC would invoke a “trade secrets” and “confidential information” exemption when the underlying subject matter is the relationship between the government and a private company to handle customer information obtained without the consent of any of the customers. There are no “opt-out” provisions for customers in FTC cases. The respondent companies are required to give the Commission (and Analytics) whatever information is necessary to find and communicate with customers.
As part of a recent “discussion draft” on how the FTC and the federal government could expand its role in the news media, the Commission’s staff noted, “The proactive production of government documents in an easy-to-access format could reduce the amount of resources the government devotes to complying with FOIA requests.” Although the FTC talks about expanding access to government information, this doesn’t apply to the Commission’s dealings with Analytics. Aside from a lone Inspector General audit — published in 2006 — the FTC has said nothing publicly about how much money Analytics receives, how much it is directly paid, what procedures are in place to protect private consumer information, or even what information is gathered. This also shows the dichotomy between the FTC’s public attacks against companies, such as Twitter, that handle consumer data and the agency’s own practices, which generally involve the involuntary acquisition of data.
It is also noteworthy that Analytics manages a number of non-FTC mass tort and class action settlements. This gives the company a strong incentive to lobby agencies like the FTC to take an aggressive regulatory stance — especially on consumer protection issues — that is likely to generate future civil litigation requiring Analytics’ services. This makes it all the more important for the public to understand the company’s relationship with the FTC.