9th Circuit Rejects AT&T Challenge to FTC Authority over Data Throttling

In 2010, AT&T dropped its “unlimited” mobile data plans in favor of tiered pricing but grandfathered in existing customers.  Well, sort of.  By 2011, AT&T began “data throttling” unlimited data plan users who exceeded preset data limits regardless of actual network congestion. AT&T made some limited disclosures of this practice, but it did not

inform unlimited data customers of the degree to which their data speed would be reduced. AT&T’s wireless customer agreements for unlimited data customers did not reveal that the use of more than a specified amount of data would trigger a slowdown.  Nor did AT&T disclose that speed reductions were intentional rather than the result of network congestion.

In 2014, the FTC brought suit against AT&T alleging that AT&T’s data-throttling program was unfair and deceptive because the company advertised “unlimited mobile data,” but in fact imposed restrictions on data speed for customers who exceeded a preset limit.

AT&T moved to dismiss the lawsuit as outside the FTC’s jurisdiction since AT&T was a common carrier.  The FTC Act exempts the following from FTC enforcement;

banks, savings and loan institutions . .  . Federal credit unions . . . common
carriers subject to the Acts to regulate commerce, air carriers and foreign air carriers . . . and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended,

On Monday, an en banc ruling of the 9th Circuit Court of Appeals, affirmed the Federal District Court for the Northern District of California’s ruling rejecting AT&T’s motion.  The 9th Circuit interpreted the limitation narrowly:

We conclude that the exemption in Section 5 of the FTC Act—“except . . . common carriers subject to the Acts to regulate commerce”—bars the FTC from regulating “common carriers” only to the extent that they engage in common carriage activity. By extension, this interpretation means that the FTC may regulate common carriers’ non-common carriage activities.

In addition, while the 2015 FCC net neutrality order regulated this activity as a common carrier, this litigation predates the order which did not have retroactive effect.

The ruling is an important win for consumers since the FCC cited the FTC’s retained jurisdiction in repealing the Obama net neutrality rules late last year.

FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. AT&T MOBILITY LLC, a limited
liability company, Defendant-Appellant, No. 15-16585 (February 26, 2018).

 

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