Dive Brief:
- Block will comply with a Federal Trade Commission request for information as part of a regulatory inquiry into some 1,500 merchant complaints alleging the company froze or deactivated Square user accounts without notice. Block said in a court filing Friday that it would produce the materials the agency sought in three batches by year-end.
- “For the sake of efficiency and to avoid the burden and delay of litigation, the parties now wish to resolve the issues in the Petition, and all other issues related to compliance with” the FTC’s civil investigative demand, attorneys for Block and the FTC said in a joint filing to the federal court. Block said it “disputes and does not admit the allegations” in the agency’s petition.
- The FTC argued in a court filing last month that Block had not complied with its Jan. 22 civil investigative demand, despite several meetings between attorneys for the parties. The agency asked U.S. Magistrate Judge Sallie Kim to enforce its investigative demand.
Dive Insight:
Besides the Square point-of-sale business, Block owns Cash App and Afterpay, a buy now, pay later service. The Oakland, California-based company was founded and is led by Jack Dorsey, who also founded the social media company Twitter.
The Square user complaints at issue “allege that Block has wrongfully withheld at least $2.5 million of Square users’ payment proceeds since 2022,” the FTC said in its Oct. 7 filing with the U.S. District Court in San Francisco. “Given the FTC’s experience that only a small fraction of injured consumers complain to the government, these losses may be just the tip of the iceberg,” the regulator said.
Spokespeople for the FTC and Block declined to comment Monday on the filing or about which time period the alleged Square complaints cover.
Block agreed to respond to 47 interrogatories the FTC has posed about the Square matter and produce all non-privileged documents and non-privileged portions of partially privileged documents by Nov. 13, according to the joint filing. Block also will make a second submission to the FTC of additional information by Nov. 30. By year-end, Block also will turn over “all responsive non-privileged documents with one or more search term hits” detailed in an email last month between the parties, the filing said.
The request contained 47 questions, 21 documents requests and four separate data requests, according to the FTC’s October filing for the court’s intervention.
The FTC’s attorneys said its January demand gave Block until Feb. 18 to seek to quash or modify the agency’s request, “but Block never filed a petition to quash or modify the CID (demand), nor sought any extension of time to file the petition.”
Block’s attorneys with Gibson Dunn & Crutcher also asked the court Friday to seal some “confidential information that would cause Block particularized business harm if it were disclosed publicly.” The request pertains to Block presentations to directors and senior executives about its fraud-prevention and risk-management efforts, the company said.
The investigative demand is the third by a government agency against Block since 2021, the FTC noted in its petition to the court, citing court requests by the Consumer Financial Protection Bureau and the Washington state attorney general.
