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.
This is the full wording of the relevant portion of Section 5, 15 U.S.C. § 45(a)(2).
The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, savings and loan institutions described in section 57a(f)(3) of this title, Federal credit unions described in section 57a(f)(4) of this title, common carriers subject to the Acts to regulate commerce, air carriers and foreign air carriers subject to part A of subtitle VII of Title 49, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended [7 U.S.C.A. § 181 et seq.], except as provided in section 406(b) of said Act [7 U.S.C.A. § 227(b) ], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.
(Opinion pdf page 8).
The Ninth Circuit ruled that the language of Section 5 does not support the FTC’s activity based argument.
The common carrier exemption is surrounded by exemptions for ‘banks,’ ‘savings and loan institutions,’ and ‘Federal credit unions,’ all of which the FTC acknowledges are status-based exemptions even though phrased in similar terms as the common carrier exemption it contends is activity-based. The fact that surrounding exemptions are defined in terms of status suggests that ‘common carriers subject to the Acts to regulate commerce’ also carves out a group of entities based on status.
(Opinion pdf page 10).
The Ninth Circuit rejected all of the FTC’s statutory interpretation arguments for lack of support. The Ninth Circuit also refused to defer to the FTC’s practice of interpreting the Section 5 common carrier exemption as activity-based.
Although the FTC cannot enforce the FTC Act against AT&T for data throttling, the Ninth Circuit noted that “the FCC has also taken issue with AT&T’s data throttling program.” (Opinion pdf page 6, footnote 3.)
This case is Federal Trade Commission v. AT&T Mobility LLC, No. 15-16585, Ninth Circuit Court of Appeals.