Wednesday, May 10, 2017
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Ninth Circuit to Hear ‘Data Throttling’ Dispute En Banc
By KENNETH OFGANG, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday agreed to go en banc to decide whether the Federal Trade Commission may regulate an internet service provider’s slowing down of data after a customer has used a specified amount of data under an “unlimited” plan.
Chief Judge Sidney R. Thomas, in a brief order for the court, said that a majority of the court’s unrecused active judges had voted to grant en banc rehearing in Federal Trade Commission v. AT&T Mobility LLC, 15-16585.
A three-judge panel last year ordered dismissal of the FTC’s complaint regarding the practice, known as “data throttling.” The panel, reversing a district judge’s ruling, said the FTC lacks jurisdiction because AT&T is a common carrier.
The FTC charged in its complaint, filed in the Northern District of California, that AT&T failed to adequately inform its customers of the data throttling program. It asserted two claims against the company under §5 of the FTC Act, which allows the commission to “prevent persons, partnerships or corporations, except…common carriers…from using…unfair or deceptive acts or practices.”
The FTC claims that imposing data speed restrictions while advertising a plan as unlimited is an unfair act or practice, and that failing to disclose that it “imposes significant and material data speed restrictions on unlimited mobile data plan customers,” is a deceptive act or practice. In opposing AT&T’s motion to dismiss, it argued that the §5 common carrier exception applies only to common carrier services, and not to non-common carrier services provided by common carriers.
FCC Reclassification
While the motion to dismiss was pending, the Federal Communications Commission reclassified mobile data service from a non-common carrier service to a common carrier service, and AT&T argued that the FCC’s order stripped the FTC of authority to maintain its claims, even as to past violations.
District Judge Edward Chen denied the motion, agreeing with the FTC that the exception did not apply when the common carrier is not “actually engaging in common carrier activity,” and that the reclassification order could not be applied retroactively. The judge certified the ruling for interlocutory appeal, which the panel agreed to hear.
Judge—now Senior Judge—Richard Clifton, writing for the panel, said AT&T had the better argument.
“We conclude, based on the language and structure of the FTC Act, that the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by section 5,” the judge wrote.
Status-Based Exemptions
The FTC, he wrote, acknowledges that other exemptions, including those for “banks,” “savings and loan institutions,” and “Federal credit unions,” are status-based and not limited to specific activity. Nothing in the text, Clifton wrote, supports treating the common carrier exception otherwise.
He contrasted the common carrier exception with the exemption of “persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921.”
Clifton also took issue with the district judge’s reliance upon a statement by a U.S. House member during the debate on the act in 1914, indicating that “financial institutions…which are engaged in some industrial pursuit that would come within the scope of this act…ought to be under the jurisdiction of this commission in order to protect the public.”
The appellate jurist noted that the representative also stated, equivocally, that he “[did] not know” whether activities of common carriers “outside of public carriage” were covered by the bill. In any event, Clifton wrote, the views of a single member are “not a powerful or persuasive indicator of Congress’s intent.”
Clifton was joined in the opinion by Judge Sandra S. Ikuta and visiting U.S. District Judge William Q. Hayes of the Southern District of California.
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