Court rules against AT&T over FTC's data speed rules
27 Feb 2018
A federal appeals court has ruled in favour of the Federal Trade Commission in a case that has been closely watched and which would have undercut the consumer watchdog's ability to pursue certain misbehaving companies throughout the US economy.
While the case nominally started as a FTC crackdown on AT&T's marketing of "unlimited data" plans for cellphones, the legal battle assumed much greater significance as the telecom giant sought to defend itself.
The case has raised major questions about the extent of the FTC's power to hold corporations accountable.
According to commentators, yesterday's ruling from the US Court of Appeals for the 9th Circuit reaffirms the powers of the FTC that ensure that companies cannot immunise themselves from the agency's oversight simply by acquiring a stake, however small, in a telecom business, a loophole that according to analysts could have been devastating to the FTC's mission if it had been allowed to stand.
The Washington Post reported quoting Paul Gallant, an industry analyst at the research firm Cowen & Co, the loophole could have swallowed the internet. "Not just net neutrality, but online privacy regulation - an area that's becoming awfully important."
The 9th Circuit, in its ruling, held that AT&T cannot exempt its entire business from FTC oversight merely because a portion of its business is regulated by the Federal Communications Commission, a sister agency.
The FTC suit alleged that AT&T illegally throttled mobile users with ''unlimited'' plans between 2011 and 2014 as the case was progressing. In the meantime the 2015 net neutrality order came into effect, which changed the AT&T's broadband offerings from ''information services'' to ''telecommunications services,'' a much-debated distinction.
The effect was to shift AT&T from being under the FTC's authority to the FCC's, the designated agency for common carrier telecoms.
AT&T argued that this effectively stripped the FTC of its authority to pursue the case, and also because telephone services had always been considered telecommunications, and since AT&T offered this it must be treated as a telecommunications provider.
Yesterday the 9th Circuit judge M Margaret McKeown issued an opinion en banc (meaning with all judges weighing in) which squarely rejected the company's arguments. She ruled, ''AT&T repackages the failed arguments made by regulated parties in such cases: it claims company-wide protection from the FTC because it engaged in some activities performed by an exempted party - in this case, a common carrier. Courts routinely rejected such arguments in these cases, instead favoring the FTC's broad enforcement authority.''
According to commentators, the conclusion is that companies like AT&T are common carriers when they are offering common carrier services, and are not when they are not. McKeown pointed out that this ''activity-based'' rather than ''status-based'' determination had been upheld for over a century.
She also countered the idea that a company cannot be regulated by both agencies, calling this case ''a classic example of concurrent jurisdiction with two agencies sharing regulatory oversight. In the administrative context, two cops on the beat is nothing unusual.''
