On Friday, the Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division announced in a joint statement that both agencies are updating language in their standard preservation letters, second requests, voluntary access letters and compulsory legal process, including grand jury subpoenas, to address organizations’ increased use of collaboration tools and ephemeral messaging platforms.
The agencies said their updates reinforce the “longstanding obligation” to preserve and produce all responsive documents, including data from ephemeral messaging applications that allow messages to disappear or that are designed to hide evidence. “Failure to produce such documents may result in obstruction of justice charges,” said Deputy Assistant Attorney General Manish Kumar.
While documents created through use of modern collaboration tools and ephemeral messaging applications have long been covered by FTC and DOJ document requests, “companies have not always properly retained these types of documents during government investigations and litigation,” the agencies noted.
The updates serve to “ensure that neither opposing counsel nor their clients can feign ignorance when their clients or companies choose to conduct business through ephemeral messages”.
“Today’s update reinforces that this preservation responsibility applies to new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.”
Henry Liu, Director, FTC Bureau of Competition
The agencies said their joint statement underscores their continued cooperation on the criminal enforcement of antitrust laws and related issues that can arise in antitrust actions.
Retention practices to reflect modern workplace
As noted above, the agencies note that these updates don’t reflect new obligations, as documents created through use of these technologies have long been covered by FTC and DOJ document requests. It’s just that as companies continue to adopt new technologies to do their work, they have not always properly retained these types of documents in anticipation of and during their investigations and litigation.
The increase in the use of collaboration tools and ephemeral messaging applications, such as Slack, Microsoft Teams, and Signal – some of the technologies allowing for or even enabling automatic, immediate and irretrievable destruction of communications and documents – has just reinforced the rationale behind the longstanding record-retention rules, the FTC and DOJ note.
“Today’s update reinforces that this preservation responsibility applies to new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities,” said Director Henry Liu of the FTC Bureau of Competition.
When companies fail to preserve documents covered by an FTC investigation or enforcement action, that agency has successfully moved for civil spoliation sanctions and may refer cases to criminal prosecutors through the Bureau of Competition’s Criminal Liaison Unit in appropriate circumstances.
Continued regulatory messaging about messaging
US regulatory authorities have taken measures to address what they consider to be the problematic impermanence of electronic communications.
Looking at just some of the recently settled SEC orders against regulated entities for failures to retain employee communications on ephemeral messaging applications – communication apps that can and often do automatically erase the conversation between the users after a short amount of time – demonstrate the SEC’s zero-tolerance approach to these types of recordkeeping failures.
“Some market participants did not act as if they got the message.”
SEC Chair Gary Gensler
And DOJ’s recent guidance on ephemeral messaging applications has an array of companies revisiting how to deal with this evolving technology.
Through enforcement actions, the SEC has reinforced its requirements for maintaining ephemeral messages that, based on their content, the SEC considered to fall under the umbrella of Rule 17a-4 (applying to brokers) and Rule 204-2 (investment advisers), respectively.
From a December 2021 SEC settlement with a broker-dealer notably admitting to its wrongdoing and agreeing to pay a hefty $125m, to an array of agreements for recordkeeping lapses with off-channel apps announced in September 2022, and a number of similar fines in 2023, the regulators continue to set a consistent tone.
As SEC Chair Gary Gensler phrased it: “Some market participants did not act as if they got the message.”