En banc Court of Appeals rules in FTC’s favor on common carrier issue

If you’ve been following the FTC’s lawsuit against AT&T alleging deceptive and unfair data throttling, there’s important news. A unanimous en banc decision of the United States Court of Appeals for the Ninth Circuit ruled in the FTC’s favor on a key issue involving the agency’s jurisdiction. You’ll want to read the opinion for the details, but here’s what Acting Chairman Ohlhausen said about it: “I welcome the Ninth Circuit’s ruling as good news for consumers. It ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anticompetitive market behavior.”

Filed in 2014, the FTC’s complaint alleged that AT&T Mobility LLC failed to adequately disclose to its customers on unlimited data plans that if they reached a certain amount of data use in a given billing cycle, AT&T would slow down – or throttle – their data speeds. The FTC said that for some consumers, AT&T’s throttling reached the point that many common apps, like web browsing or GPS navigation, became difficult or nearly impossible for them to use.

AT&T moved to dismiss the FTC’s suit, arguing that the company was a “common carrier” exempt from the FTC Act.

The FTC responded that the common carrier exception is activity-based, not status-based – meaning that it applies only to the extent that an entity is actually engaged in common carrier activities. A company’s non-common carrier activities are still subject to the FTC Act.

The district court denied AT&T’s motion to dismiss, but a three-judge panel of the United States Court of Appeals for the Ninth Circuit reversed that decision. The Ninth Circuit then agreed to hear the case en banc and that’s the opinion that was just announced. The en banc Court ruled for the FTC:

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.

The Court further held:

This statutory interpretation also accords with common sense. The FTC is the leading federal consumer protection agency and, for many decades, has been the chief federal agency on privacy policy and enforcement. Permitting the FTC to oversee unfair and deceptive non-common-carriage practices of telecommunications companies has practical ramifications. New technologies have spawned new regulatory challenges. A phone company is no longer just a phone company. The transformation of information services and the ubiquity of digital technology mean that telecommunications operators have expanded into website operation, video distribution, news and entertainment production, interactive entertainment services and devices, home security and more. Reaffirming FTC jurisdiction over activities that fall outside of common-carrier services avoids regulatory gaps and provides consistency and predictability in regulatory enforcement.

Thus, the en banc Court ruled that the FTC may use Section 5 of the FTC Act’s prohibition of unfair deceptive acts or practice to challenge AT&T’s conduct alleged in the complaint to be unlawful.