AT&T To Pay $60M to Settle 2014 FTC Data Throttling Complaint
Kelley Drye Client Advisory
After a long road that included questions over the scope of FTC and FCC jurisdiction, AT&T finally settled one of two cases challenging the unlimited data plans it offered to consumers. On Tuesday, November 5, 2019 the Federal Trade Commission (“FTC”) moved to settle its October 28, 2014 complaint against AT&T Mobility, LLC (“AT&T” or “Company”) in which the FTC asserted that the Company was reducing the data speeds of customers grandfathered into unlimited plans after they had used a certain amount of data. The stipulated order, approved 4-0 by the FTC and awaiting final approval from the United States District Court for the Northern District of California, will require AT&T to dole out $60 million to eligible customers and prohibit the Company from portraying the amount or speed of mobile data in its plans, including unlimited, without disclosing any material restrictions accompanying such plans.
As we covered extensively in several previous blog posts, one of the primary consequences of the case were questions about the limits of the FTC’s jurisdiction. The case mirrored a time when the Federal Communications Commission (“FCC”) took opposing positions in successive administrations regarding whether mobile data services and other Broadband Internet Access Services (“BIAS”) were subject to FCC regulation. One of the central questions underlying the case was which agency, the FCC or the FTC, could regulate AT&T’s mobile data practices. After the FTC won a Ninth Circuit decision that its jurisdiction reaches to non-common carrier activities of common carriers (and the FCC concluded that mobile BIAS was not a common carrier service), AT&T agreed to settle the FTC case. However, so long as the jurisdiction of particular services remains in doubt, or is subject to changing FCC positions, service providers will face potential overlapping enforcement activities by the two agencies.
The path to determining the FTC’s jurisdiction was long. In response to the FTC’s 2014 complaint, AT&T moved to dismiss the case, arguing that, because it is a common carrier, the Company is exempt from FTC regulation under Section 5 of the FTC Act. AT&T argued that the exemption in Section 5 for common carriers was “status based” – that is, that the FTC could not regulate any activities of a common carrier, even activities the FCC had subjected to limited or no regulation. The FTC responded by asserting that Section 5 of the FTC Act exempts only the common carrier activities of common carriers from FTC regulation.
Agreeing with the FTC, the district court denied AT&T’s motion to dismiss on March 31, 2015. The Company then appealed that decision to the Ninth Circuit Court of Appeals (“Ninth Circuit”). On August 29, 2016, a three-judge panel issued an opinion that reversed the district court’s decision and dismissed the case. The FTC then requested a rehearing en banc, which the Ninth Circuit granted on May 9, 2017. On February 26, 2018, the Ninth Circuit, sitting en banc, issued an opinion reversing its previous decision and giving the FTC broad authority to regulate practices not classified by the FCC as telecommunications services. It then remanded the case to the district court for further proceedings. AT&T settled the case before the District Court addressed the merits of the allegations.
Notably, AT&T commits to making refunds within 90 days to eligible customers without requiring a claims process. AT&T agreed to issue bill credits to current customers and to issue refunds to former customers. Any remainder not distributed will be deposited into a redress fund maintained by the FTC. Commissioner Rohit Chopra of the FTC issued a statement accompanying the settlement, in which he urged the FTC to pursue fraudulent practices by large and small firms alike, asserting that “scammers come in all sizes.”
Having settled with the FTC, AT&T is not necessarily out of hot water for alleged data throttling during this time period. In 2015, the FCC issued a $100 million Notice of Apparent Liability for Forfeiture (NAL) to AT&T over its mobile broadband data services and practices. The FCC also reached a $48 million settlement with T-Mobile on October 20, 2016 concerning a similar data throttling allegation regarding mobile data services. However, since the FCC’s leadership changed hands in early 2017, the Commission has not taken any action to finalize (or settle) the AT&T NAL. It remains pending, four years after its issuance.