State AG Collaboration With Federal Agencies Is on the Rise

By Toni Michelle Jackson, Derick D. Dailey, Daniel Leff & Matthew Menezes on June 28, 2024

With the increase in state-federal collaboration, now is the time to ensure that your company is in the best position to engage with and address potential regulatory enforcement actions. In light of the uptick in intergovernmental investigative and enforcement collaboration, namely among federal agencies such as the Department of Justice (DOJ), and individual state authorities like state attorneys general offices (AGs), AGs are growing their enforcement capacity and increasing their activity in areas that have historically been left to federal agencies.

Although companies facing joint state-federal enforcement action have typically focused their efforts on responding to federal enforcers who have historically been more well-resourced than state actors, doing so today comes with significant risk. State AGs are active participants in these collaborations, and for that reason they are important audiences for the business community to engage. Whether facing investigation, anticipating enforcement, or hoping to influence policy, companies should consider engagement with AGs an important component of their strategy to reduce litigation risk.

Renewed Emphasis on State-Federal Collaboration

Federal agencies regularly partner with AGs to conduct litigation, share information and identify potential investigative targets. The U.S. Department of Health and Human Services’ Office of the Inspector General, for example, has long funded and worked hand-in-hand with Medicaid Fraud Control Units (MFCUs) housed in AG offices.[1] The same is true for DOJ’s Civil Rights Division where DOJ attorneys and investigators collaborate with AG offices to enforce federal and state housing laws to address housing discrimination.[2]

In recent years there has been a renewed emphasis on federal-state partnerships. This has been particularly notable in the areas of antitrust and consumer protection, where states and federal agencies often have overlapping jurisdiction under the federal Sherman and Clayton Acts, as well as a patchwork of analogous state laws.

In April 2024, the FTC published a report titled Working Together to Protect Consumers: A Study and Recommendations on FTC Collaboration with the State Attorneys General.[3] The report describes information-sharing tools and practices, including the Consumer Sentinel Network, which aggregates consumer complaints to facilitate investigations. According to the Report, the FTC “values the feedback of State Attorneys General…on a number of matters on which it seeks public comment”[4] and “regularly submits amicus briefs advocating positions in support of State Attorneys General.”[5]

In more concrete terms, AGs have recently taken active roles litigating alongside the DOJ and FTC in high profile cases. For example:

In 2019, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB) partnered with Attorneys General from 48 states, Washington, D.C., and Puerto Rico to secure a $700 million global settlement with Equifax, Inc. to resolve allegations that the company failed to take reasonable steps to prevent a data breach in 2017.[6]
In 2020, a New York-led coalition of states filed antitrust litigation against Facebook in parallel with a suit filed by the FTC on the same day. The states litigated their case, containing similar (but not identical) claims to the FTC’s case in coordination with the FTC.[7]
In 2021, the DOJ launched the Combating Redlining Initiative, a partnership with other federal agencies and state AGs to enforce the Fair Housing Act and Equal Credit Opportunity Act. As of 2023, the initiative has negotiated 10 settlement agreements collectively worth over $100 million with banks and lending institutions.[8]
In 2023, the US Department of Agriculture (USDA) launched a partnership with more than 30 state AGs to “enhance competition and protect consumers in food and agricultural markets.”[9]
In May 2024, the DOJ filed a proposed consent decree to prohibit the National Collegiate Athletics Association (NCAA) from enforcing its Transfer Eligibility Rule.[10] AGs from 10 states joined the Department in its complaint alleging violations of the Sherman Act. Assistant Attorney General for the Antitrust Division Jonathan Kanter praised the state AG partners, stating “[t]his resolution is a testament to the benefits of federal and state enforcers working together to ensure free markets and fair competition for all Americans.”[11]

States’ Roles in Joint Investigations and Litigation

Although federal agencies may have greater personnel and funding resources, their state partners often provide key contributions to enforcement actions. This may entail state AGs taking the lead role in joint investigations and litigations, or in interacting with defendants and opposing counsel. Companies would be remiss to ignore the role state AGs play in supplementing federal resources and capacity.

States play many roles in joint enforcement actions including initiating investigations based on local intelligence, identifying witnesses, and negotiating remedies. Because of their limited jurisdiction, state enforcers are more proximate to issues and concerns of communities and industries than that of the federal government. As a result, federal partners often defer to states and their interests when determining whether and how to resolve certain issues.

States also provide extra personnel, which enables federal agencies to pursue investigations and lawsuits that they might not otherwise be able to on their own. The National Association of Attorneys General (NAAG) notes that “the federal government realizes the benefit of authorizing attorneys general to enforce many federal consumer laws, because the federal government also has limited resources and attorneys general are closest to affected communities in their states.”[12] NAAG identifies several benefits of federal-state collaboration: more efficient use of resources, addressing broad or novel issues that advance or clarify an area of law, and leveling the playing field for legitimate business practices across jurisdictions.

States Will Litigate on Their Own

When facing a joint federal and state enforcement action, parties should pay close attention to the interests of each participating state as well as that of DOJ. Failure to do so could result in settlement with DOJ that does not resolve ongoing litigation from states. For example, T-Mobile and Sprint settled with DOJ and five states in an action to block their proposed merger,[13] but still had to litigate through a trial against 14 other states[14] before ultimately securing a favorable judgment.[15] Kroger and Albertsons supermarkets currently face suits by AGs seeking to prevent their proposed merger in Washington[16] and Colorado[17] state courts, in addition to a joint FTC-State merger challenge in federal court in Oregon.[18] And, while Apple managed to avoid federal enforcement after a joint investigation by DOJ and the Securities and Exchange Commission (SEC) into claims that it secretly slowed down old iPhones,[19] it ultimately agreed to pay $113 million to settle consumer fraud lawsuits brought by 33 states alleging similar claims.[20] Because AGs represent sovereign states, settlements are often filed individually by each AG, which requires a series of bilateral negotiations in which defense counsel must remain mindful of the totality of their client’s commitments.[21]

Conclusion

State AGs are extremely active in joint investigations and enforcement actions with federal authorities, sharing information, resources, and local insight with federal counterparts.
Engaging with state AGs and federal agencies allows parties to shape policy and navigate investigations to reduce the risk of litigation.
State AGs retain separate settlement authority, and may decline to settle even if federal agencies are willing to do so.

State AGs are integral participants in state-federal joint enforcement actions. They play an important role in augmenting federal enforcement resources and they leverage federal information-sharing and other coordinating efforts to enhance the work of their own offices. Members of the regulated community accustomed to focusing advocacy efforts towards federal agencies should consider broadening their focus to include AGs. This is especially true where those officials have expressed interest in a particular industry or issue which may signal increased scrutiny or even a potential enforcement action.

Crowell & Moring attorneys have extensive experience working within and interfacing with both federal and state law enforcement agencies, as well as subject matter expertise in state AGs’ top enforcement priority industries and areas of law. We regularly advise members of the regulated community on how best to engage with these stakeholders and, when the need arises, how to navigate enforcement actions. If you have concerns or questions about the increasing collaboration between state and federal regulators and its implications for your business, look to Crowell for answers and guidance.

[1] Medicaid Fraud Control Units (MFCUs) | Medicaid Fraud | Office of Inspector General | U.S. Department of Health and Human Services (hhs.gov)

[2] See, e.g., “Justice Department Reaches Significant Milestone in Combating Redlining Initiative After Securing Over $107 Million in Relief for Communities of Color Nationwide” (justice.gov).

[3] https://www.ftc.gov/system/files/ftc_gov/pdf/p238400_ftc_collaboration_act_report.pdf.

[4] Id. at 24.

[5] Id. at 25.

[6] https://www.ftc.gov/news-events/news/press-releases/2019/07/equifax-pay-575-million-part-settlement-ftc-cfpb-states-related-2017-data-breach

[7]https://ag.ny.gov/sites/default/files/state_of_new_york_et_al._v._facebook_inc._-_filed_public_complaint_12.11.2020.pdf;
https://s3.documentcloud.org/documents/20421891/facebook-ftc-complaint.pdf.

[8]https://www.justice.gov/opa/pr/justice-department-reaches-significant-milestone-combating-redlining-initiative-after#:~:text=In%20October%202021%2C%20Attorney%20General,enforcement%20effort%20to%20address%20redlining.

[9] https://www.usda.gov/media/press-releases/2023/07/19/usda-launches-historic-partnership-bipartisan-state-attorneys

[10] https://www.justice.gov/opa/pr/justice-department-and-state-coalition-restore-competition-college-athletes-ncaa-division-i.

[11] Id.

[12] https://www.naag.org/issues/consumer-protection/interjurisdictional-collaboration/.