Tech Enforcement At Risk If AT&T Ruling Stands, U.S. Says

  • FTC asks appeals court to reconsider data-throttling ruling
  • Google among firms that could avoid enforcement, FTC says

Google and other technology companies could potentially sidestep U.S. enforcement of consumer-protection laws if a federal appeals court ruling siding with AT&T Inc. isn’t reversed, the Federal Trade Commission is warning.

The FTC, in court papers filed Thursday, argued that an August appeals court decision risks eroding its mission of protecting consumers from unfair and deceptive practices. That’s because the ruling eliminated the FTC’s jurisdiction over phone carriers and internet service providers. That could open the door for technology companies that also offer phone or broadband service to avoid the FTC’s reach in consumer protection cases.

“The panel’s ruling creates an enforcement gap that would leave no federal agency able to protect millions of consumers across the country from unfair or deceptive practices or obtain redress on their behalf,” the FTC said.

The appeals court ruled that all activities of so-called common carriers fall under the supervision of the Federal Communications Commission. The FTC’s view is that it has broader powers than the FCC to carry out consumer protection enforcement in this area, including the authority to obtain money back for consumers.

The agency is worried about the wider implications of the ruling, which could provide a road map for companies to avoid FTC enforcement regardless of the conduct at issue, the commission said. Companies that aren’t common carriers today could gain that status by offering new service or through corporate acquisitions, it said, citing Verizon Communication Inc.’s pending purchase of Yahoo! Inc.’s core internet business.

Enforcement Action

Phone and cable companies could mislead consumers in a wide range of business areas and then argue they’re exempt from any FTC enforcement action because of their status as so-called common carriers. Alphabet Inc.’s Google could fall into that camp because of its Google Fiber broadband service, according to the agency.

The FTC is returning to court in a matter that started when it sued AT&T in 2014 over mobile-data speeds. The FTC accused the carrier of intentionally slowing data speeds of millions of phone customers who had paid for unlimited data plans. Once those customers hit an arbitrary data-use ceiling imposed by the phone company, according to the FTC, AT&T slowed speeds so that web browsing and watching video became difficult or impossible.

AT&T countered that the FTC can’t sue it because only the FCC has jurisdiction over phone companies under an exemption for common carriers. A three-judge panel of the San Francisco appeals court agreed and ordered the case dismissed in August. The FTC is now asking the full appeals court to rehear its arguments.

“We believe the appeals court’s ruling was correct, and that any reviews would agree,” AT&T spokesman Michael Balmoris said in an e-mail.

Google didn’t respond to a request for comment about the FTC’s appeal.

Common Carriers

The appeals court said AT&T and other carriers are exempt from FTC jurisdiction not only when they provide a common-carrier service such as an internet connection, but that they’re exempt more generally based on their “status” as common carriers. That’s in conflict with the FTC’s interpretation of the law and could put a broader range of conduct beyond its reach, the commission fears.

If the FTC loses, it could open the door to other big technology companies to acquire or operate broadband networks, gaining common-carrier status that could shield them from action from the commission. The FTC has taken on big tech companies in the past. It went after Apple Inc., Inc. and Google in 2014 over unauthorized purchases made by children using mobile applications. Google and Apple agreed to reimburse consumers, while Amazon fought the case and was found liable by a federal judge.

“The problem is especially severe in the area of consumer data privacy,” FTC lawyers said. “Consumers would have no protection from breach or misuse of their personal information or practices like false advertising or improper billing.”

The case is FTC v. AT&T Mobility LLC, 15-16585, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

    Before it's here, it's on the Bloomberg Terminal.