Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—2d Cir.: Western Union required to produce foreign fraud documents to FTC, (Oct 8, 2014)

By Greg Hammond, J.D.

The Western Union Company must submit foreign documents relating to fraud-induced money transfers to the FTC, pursuant to a Civil Investigatory Demand (CID), the U.S. Court of Appeals in New York City has decided. Consequently, the lower court order partially denying the FTC’s enforcement of the CID was reversed (FTC v. The Western Union Co., October 7, 2014, Per Curiam).

Background. Western Union has produced over two dozen categories of documents to the FTC, pursuant to the FTC’s investigation into fraud-induced money transfers. However, the company objected to two document categories: complaints of consumer fraud made outside the United States, and documents relating to the work of a monitor appointed in connection with a settlement of an Arizona state investigation of cross-border third-party money laundering. Consequently, the FTC issued a CID, demanding that Western Union provide: (1) “all documents referring or relating to complaints by consumers worldwide relating to fraud-induced money transfers,” and (2) “all documents referring or relating to communications with the Monitor, including, but not limited to, all information Western Union provided to the Monitor and, any reports, reviews or other documents prepared by the Monitor.”

After Western Union refused to provide the FTC with the documents, the Commission filed an enforcement action in the federal district court in New York City. The district court denied enforcement for the foreign documents, but granted enforcement with regard to the monitor-related documents. The parties cross-appealed the district court’s decision.

Foreign documents. According to the court, a request for “documents referring or relating to complaints by consumers worldwide relating to fraud-induced money transfers” falls under the FTC’s statutory authority. Specifically, the court determined that any foreign complaints of fraud-induced money transfers are subject to the company’s anti-fraud program, which is administered in the United States, and if Western Union does not respond to the foreign complaints, “it is ‘reasonably foreseeable’ that unaddressed fraud will harm U.S. consumers.” Consequently, the lower court’s decision denying the FTC’s enforcement of the foreign documents was reversed.

Monitor-related documents. Although the lower court acknowledged that fraud and money laundering may be different, it found that the monitor-related documents were relevant, because both fraud and money laundering “have to do with money transferred from one place to another place due to the agency of a company like Western union.” However, the court of appeals found that the lower court’s explanation was “too spare” to serve as a basis for its review. Consequently, the court vacated and remanded the lower court’s monitor-related documents decision, instructing the lower court to make findings on what justifies the production of: (1) the monitor’s reports; (2) Western union’s exchanges with the monitor, and (3) Western Union’s internal documents that “refer or relate” to the monitor.

The case numbers are 13-3100 and 13-3272.

Attorneys: Burke W. Kappler, Jonathan E. Nuechterlein, David C. Shonka, John Daly, Leslie Rice Melman, Josephine Liu, C. Steven Baker, Todd M. Kossow, Karen D. Dodge, Hugh Stevenson, Stacy Feuer, and Laureen Kapin, for the Federal Trade Commission. Charles G. Cole, Edward B. Schwartz, Kate M. Riggs (Steptoe & Johnson LLP), and David Fallek, for The Western Union Co.

Companies: The Western Union Co.

Cases: ConsumerProtection ConnecticutNews NewYorkNews VermontNews