As we previously reported, in January AT&T filed a Motion to Dismiss the Federal Trade Commission’s (FTC’s) complaint alleging that AT&T engaged in unfair and deceptive conduct in violation of Section 5 of the FTC Act when it “throttled” mobile broadband subscribers who were “grandfathered” into the company’s unlimited mobile data plan. AT&T moved to dismiss on the basis that it is a common carrier subject to the Communications Act and thus exempt from Section 5 of the FTC Act. On March 31, a federal judge in the Northern District of California disagreed with AT&T and denied AT&T’s Motion holding that the common carrier exception applies only when the entity has the status of a common carrier and is engaging in common carriage activity.
The Court also addressed the impact on the case of the Federal Communications Commission’s (“FCC’s”) recent “Reclassification Order” that reclassified mobile data service from a non-common carriage service to a common carriage service. The Court noted that the Reclassification Order expressly states that reclassification will “apply only on a prospective basis” and when this suit was filed, AT&T’s past alleged mobile data service misconduct was not regulated as common carrier activity by the FCC. The Court rejected AT&T’s argument that once the Reclassification Order goes into effect, the FTC will no longer have jurisdiction to pursue the case even if limited to AT&T’s past conduct. The Order stated that “even if the change to the common carrier exception, resulting from the Reclassification Order, could be deemed a change in tribunal (i.e., because enforcement with respect to mobile data would be delegated to the [FCC] instead of the FTC and this Court would have jurisdiction only in the former instance), the fact remains that substantive rights are affected by that change as well.” Substantive rights are impaired, according to the Court and the FTC, because the FCC is not authorized to seek refunds for injured consumers and has a shorter one year statute of limitations. Thus, the Court reasoned that the reclassification’s effect on substantive rights undermined AT&T’s argument that the reclassification should be applied retroactively to divest the FTC of jurisdiction over past conduct.
As a result of the Court’s ruling, the FTC’s case against AT&T will proceed on the merits. FTC Chairwoman Edith Ramirez reportedly expressed that the FTC was “gratified” by the Court’s holding and “look[s] forward to proving that AT&T’s marketing of its ‘unlimited’ data plans was unfair and deceptive and returning money to the millions of consumers who were harmed by AT&T’s action.”