Ninth Circuit Affirms FTC Authority over ISPs

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In an en banc decision, the U.S. Court of Appeals for the Ninth Circuit has ruled that the Federal Trade Commission (FTC) may regulate a common carrier’s non-common-carriage activity under the FTC Act, and thus affirmed a lower court ruling denying AT&T Mobility’s (AT&T) motion to dismiss an FTC unfair business practices lawsuit. In October 2014, the FTC filed a federal court complaint against AT&T alleging AT&T misled millions of its smartphone customers by advertising unlimited data plans, but reducing data speeds by almost 90 percent after a customer went over a certain usage milestone. The FTC charged that AT&T throttled at least 3.5 million customers more than 25 million times. AT&T argued that it was exempt from FTC jurisdiction because of the common carrier exception under Section 5 of the FTC Act which exempts common carriers from FTC enforcement authority over unfair or deceptive acts or practices. The lower federal district court denied AT&T Mobility’s motion to dismiss. The Ninth Circuit granted AT&T’s petition for interlocutory review, and a three judge panel of the Ninth Circuit reversed. That panel concluded that the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by Section 5 of the FTC Act. On en banc rehearing, the new panel overruled the previous three judge panel agreeing with the lower district court. The new Ninth Circuit panel ruled that common carrier immunity only attaches when a company is engaging in common-carrier services. In short, the panel determined that the exemption in Section 5 of the FTC Act 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. Thus, the en banc Ninth Circuit panel held that the FTC Act’s common-carrier exemption was activity-based, and not status-based.  The case will now proceed in the Northern District of California.

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