United States: Keeping Watch Over The FTC’s Consumer Sentinel: How Businesses Can Use FOIA To Look Inside The FTC’s Hidden Complaint Database

Consumer complaints are a fact of life for even the most scrupulous businesses.  When companies deal with consumers in a uniform yet large-scale manner, occasional lapses that generate ill-will are inevitable.  Upset customers can lead to lost sales and diminished reputation, but they can also affect more than just the bottom line.  Over the past decade, American businesses have seen an up-swell in consumer-driven class actions.  At the same time, federal and state regulatory agencies have aggressively pursued companies of all sizes and industry backgrounds for unfair and deceptive trade practices.  In many instances, businesses targeted by these lawsuits or regulatory investigations could have avoided them all together by more carefully monitoring what was upsetting their customers.

Today it is easier than ever for companies to track consumer sentiment beyond what they learn through phone calls, emails, and letters received directly from customers.  Organizations like the Better Business Bureau, Yelp, and Angie's List solicit consumer feedback and make it widely available on the Internet for public consumption.  However, not all businesses are aware that the Federal Trade Commission—the nation's top consumer protection watchdog—also maintains an enormous consumer complaint database known as the FTC Consumer Sentinel Network.  This secure online repository contains roughly 20 million consumer complaints, which the FTC uses to identify unlawful business practices and to build evidence for litigation.  The FTC carefully guards the contents of its Consumer Sentinel database, which it has long refused to make publicly available.  But a recent decision by the U.S. District Court for the District of Columbia suggests that businesses who want to peak into the FTC's consumer complaint files may have an avenue for doing so via a carefully tailored Freedom of Information Act request.

The Consumer Sentinel Network is composed of three separate sub-databases: (1) identify theft complaints; (2) Do Not Call Registry complaints; and (3) consumer fraud complaints.  Consumers can lodge complaints with the Consumer Sentinel Network by submitting them directly through the FTC's website or by dialing the FTC's telephone complaint line and relaying them to an FTC operator.  Complaints are also channeled to the Consumer Sentinel database from independent online services provided by other governmental and private entities, such as the Canadian Anti-Fraud Centre and the Econsumer.gov website.  When complaints are recorded, they are entered into two types of data fields: "free-form" fields, which have no limit on the type of information the complainant may enter, and "non-free-form" fields, which only allow the complainant to select a pre-set option.

In Ayuda, Inc. v. Federal Trade Commission, a group of charities advocating for low-income individuals brought a FOIA action seeking to compel the FTC to produce several "free-form" data field categories for the stated purpose of converting the entire Consumer Sentinel database into a publicly-accessible consumer review tool akin to Yelp.  Prior to filing suit, the charities had submitted and appealed three separate FOIA requests, which the FTC mostly denied on the ground that many of the requested "free-form" data fields contain personal identifying information exempt from FOIA disclosure that would be unduly burdensome for the FTC to manually redact.  In particular, the FTC withheld information from data fields concerning the identity and location of the subject business and the description of the complained-of conduct.

Before the district court, the charities contended that the FTC should be ordered to produce the withheld information in order to permit meaningful public inspection of FTC complaint records.  In particular, the charities contended that disclosure of the Consumer Sentinel database would educate consumers about businesses they might patronize, permit businesses to identify and correct possible unlawful practices, and allow the public to monitor and verify the effectiveness of the FTC's consumer protection efforts and statistical conclusions.

District Judge Rudolph Contreras, writing on behalf of the district court, rejected these arguments and granted summary judgment in the FTC's favor based on its finding that the FTC had properly denied the charities' requests under FOIA Exemptions 6 and 7(C), which bar disclosure of personal information that would constitute an "unwarranted invasion of personal privacy."  Based on FTC affidavit evidence containing a sampling of several hundred complaints, the court found that the "free-form" data fields requested were likely to contain personal identifying information about complainants or alleged individual wrongdoers because consumers often insert such information into their descriptions of allegedly wrongful conduct.  Disclosure of such personal information, the court found, would constitute an "unwarranted invasion of personal privacy" because consumer-victims could suffer potential backlash and alleged individual wrongdoers could face stigma if wrongfully associated with illegal activity.

The district court also agreed that the FTC could not realistically redact the exempt personal identifying information because manual redaction of the roughly 20 million complaints in the Consumer Sentinel database would take approximately 8,000 hours of labor—an undue burden on the agency.  However, in doing so, the court observed that it would have likely ordered the FTC to simply redact the exempt information if the charities had sought disclosure of a smaller subset of Consumer Sentinel complaints:

Absent a successful appeal of this outcome, the FTC's Consumer Sentinel database will likely remain hidden from public view for the foreseeable future.  At the same time, the district court's decision effectively paves the way for businesses who want to examine FTC consumer complaints about their own practices to do so via a FOIA request.  This is not entirely good news, however: it also creates the risk that private interest groups with an axe to grind or plaintiffs' law firms trolling for new targets may use FOIA to inquire about specific businesses or industries in order to publicly expose alleged illegal practices or to build class action theories.

Also, before your business decides to submit a FOIA request, it should keep in mind that doing so will entail some expense.  In the Ayuda case, the FTC estimated that to conduct the roughly 60 hours of labor required to process the handful of data fields the FTC agreed to produce would cost in the range of $4,000 to $8,000.  These costs, of course, would come in addition to the attorneys' fees incurred to prepare the FOIA request and conducting any follow-up correspondence with the FTC.

Additionally, it's unclear whether a FOIA request would be successful if the business at issue is already subject to a public or non-public FTC investigation.  In such circumstances, the FTC might deny a request on the basis that disclosure would divulge the agency's investigative process.  But simply eliciting this response from the agency might itself be a useful method of ascertaining whether or not your business is currently being targeted by the FTC in advance of a formal investigative notice.

In short, recent increases in class action and regulatory scrutiny make it impossible for businesses to underestimate the importance of monitoring their consumer complaints.  The District of D.C.'s Ayuda decision gives companies one more method of doing so, but the costs and benefits associated with seeking such information should be considered before moving forward with a FOIA request.

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