The Federal Trade Commission enforces the FTC Act, which prevents “persons, partnerships, or corporations, except common carriers subject to the Acts to regulate commerce, from using unfair or deceptive acts or practices in or affecting commerce.” Section 5 of the FTC Act. AT&T offered consumers mobile data service, non-common carrier services, and mobile voice service, common carrier services. The FTC filed a complaint against AT&T for “data throttling,” reducing data speeds, on unlimited mobile data plans once the customer’s data usage exceeded a certain threshold during the billing cycle. AT&T brought a motion to dismiss the FTC’s complaint, arguing that it is a common carrier exempt from the FTC Act, even for the non-common carrier services it offers. The Federal Communications Commission (FCC) subsequently reclassified mobile data service as a common carrier service.
The district court denied AT&T’s motion to dismiss. On appeal to the Ninth Circuit, the issue was
Whether the common carrier exemption in Section 5 is status-based, such that an entity is exempt from regulation as long as it has the status of a common carrier under the ‘Acts to regulate commerce,’ or is activity-based, such that an entity with the status of a common carrier is exempt only when the activity the FTC is attempting to regulate is a common carrier activity.
The Ninth Circuit ruled that the common carrier exemption is status-based, so that AT&T, as a common carrier, cannot be sued for violating Section 5 of the FTC Act.