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From Antitrust Law Daily, August 30, 2016

AT&T exempt from FTC Act as common carrier

By Greg Hammond, J.D.

AT&T Mobility LLC is a common carrier that is excluded from the coverage of Section 5 of the FTC Act, the U.S. Court of Appeals in San Francisco has held. The court reversed and remanded a lower court’s decision denying AT&T’s motion to dismiss claims that AT&T violated the FTC Act by intentionally reducing the data speed of its customers with unlimited mobile data plans (FTC v. AT&T Mobility LLC, August 29, 2016, Clifton, R.).

The FTC claimed that AT&T failed to adequately disclose to customers on unlimited data plans that, if they reached a certain amount of data use in a given billing cycle, AT&T would reduce or "throttle" their data speeds, in some cases up to 90 percent. The suit charged that AT&T violated the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans. In January 2015, AT&T moved to dismiss the complaint, contending that the company was a common carrier under the Communications Act regulated by the Federal Communications Commission and was therefore exempt from the FTC’s enforcement authority under the FTC Act. The motion was denied by the federal district court in San Francisco. AT&T appealed.

The issue on appeal was whether the common carrier exemption in Section 5 of the FTC Act 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 appellate court concluded that, based on the language and structure of the FTC Act, the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by Section 5. In particular, the court noted that the plain language of the common carrier exemption casts the exemption in terms of status, contrary to the FTC’s position, because it does not contain any language suggesting that the activities of a common carrier affect the exemption’s application. In addition, the common carrier exemption is surrounded by other exemptions that the FTC acknowledged were not status-based exemptions.

The district court had concluded that the term "common carrier" was understood to encompass both a status and an activity prior to enactment of the FTC Act, but the cases the district court relied on did not show that when Congress used the term "common carrier" in the FTC Act, it could only have meant "common carrier to the extent engaged in common carrier activity." There was no indication that the regulatory distinction in the cases the district court cited was implicit in Congress’ phrasing of the common carrier exemption, according to the appellate court.

A status-based interpretation of the common carrier exemption also derived significant support from the language of the Packers and Stockyards Act exemption, the appellate court stated. Further, even if the agency’s interpretation was entitled to some deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944)—which found that non-binding agency opinions may be entitled to deference, with the weight of such a judgment in a particular case dependent upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control—such deference was insufficient to overcome the factors that pointed strongly in favor of AT&T’s position.

Because AT&T was a common carrier, it could not be liable for the violations alleged by the FTC. The district court’s denial of AT&T’s motion to dismiss was therefore reversed and remanded for entry of an order of dismissal.

The case is No. 15-16585.

Attorneys: Eric D. Edmondson for the Federal Trade Commission. Mark Charles Hansen (Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC) for AT&T Mobility LLC.

Companies: AT&T Mobility LLC

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