Scholars, activists join FTC in pressing Ninth Circuit for full review of AT&T case

In recent days, legal scholars, privacy lawyers and consumer activists have lined up with the Federal Trade Commission to urge the US Court of Appeals for the Ninth Circuit to rehear en banc a decision by a three-judge panel that threw out the agency’s data throttling case against AT&T Mobility.

The panel’s ruling on Aug. 29 held that the mammoth telecommunications company is beyond the reach of the FTC because it is a common carrier — a status specifically exempted under Section 5 of the Federal Trade Commission Act.

But the FTC argued in very strong language — in sentiments echoed by its many supporters in amicus briefs — that the panel’s ruling “threatens to undermine consumer protection across the economy, leaving millions of consumers defenseless against garden-variety deception and high-tech threats.”

Even the Federal Communications Commission — which has sometimes battled the FTC over jurisdictional issues — agreed that the panel’s ruling is “at odds with the realities of the marketplace.”

The FTC had brought the case charging that AT&T had engaged in unfair and deceptive practices by promising 5 million customers “unlimited” mobile data usage but then subsequently severely restricted the rate of data throughput when customers exceeded a monthly threshold.

AT&T moved to dismiss, arguing that its common carriage voice service made it a common carrier, immune from the FTC’s challenge. The district court denied AT&T’s motion, finding that the company is a “common carrier” only when it is “actually engaging in common carriage services.” But the three-judge panel reversed and found that AT&T’s “status” as a common carrier provided blanket immunity from FTC enforcement in all of its activities.

The ruling, the FTC charged in its brief, filed on Oct. 13, seeking a rehearing en banc, “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 decision, the commission contended, not only will “make consumers worse off,” but it also “creates a roadmap for companies to attempt to immunize themselves against FTC enforcement by acquiring a common carrier or offering common carrier service.”

Privacy and communications lawyers echoed that critique, expressing consternation at the ease with which firms would be able to immunize themselves from FTC enforcement action when they engage in questionable conduct.

The ruling “turns decades of FTC understanding on its head as to who is and who is not a common carrier and it invites such obvious and easy abuse of the system it’s laughable,” said one battle-scarred communications lawyer, who declined to speak for attribution because that view might offend some clients.

“The ease with which you can evade the law is ridiculous — you could become a common carrier for $1,000 in 30 days,” the lawyer continued, explaining that you could simply fill out a common carrier license form attesting that you are not a foreign citizen and you didn’t kill anyone. If you then put out a notice for 30 days, it is automatically granted unless someone objects.

“From an FTC perspective, this is existential,” the lawyer added. “I am not exaggerating because anybody could evade their jurisdiction by spending $1,000 and waiting 30 days. What general counsel would not say, ‘you mean I don’t have to worry about an FTC investigation if I have a common carrier license?’ ”

Several amicus briefs, filed on Oct. 24, sounded similar concerns. They repeatedly noted that the FTC is the country’s most important privacy regulator and by truncating its jurisdictional reach, they argued, the panel’s decision has far-reaching and even “disastrous” consequences.

Noting that the ruling “appears to say that a company conducting any common carrier activities whatsoever is beyond the reach of FTC regulation in all of its activities,” a group of data privacy and security law professors wrote that it “creates serious risks for privacy rights of every American.”

The ruling would, these academics wrote, “immunize many of the largest information intermediaries in the modern economy — potentially including companies such as Facebook, Google and Yahoo — from almost all meaningful privacy oversight. This outcome would be disastrous.”

A dozen national consumer advocacy groups agreed that “if allowed to stand, the ruling could immunize from FTC oversight a vast swath of companies that engage to some degree in common carrier activity. This result is unprecedented, deeply disruptive to the market and at odds with Congress’s intent.”

“The havoc that the panel decision could unleash on federal consumer protection is…enormous,” they continued. “Under the panel’s ruling, scores or even hundreds of Internet service providers, including Google and the dozens of technology conglomerates among the Fortune 500, may be able to claim common carrier [status] and escape FTC oversight — even though they have to this point been subject to FTC jurisdiction for their non-common carrier activities.”

Public Knowledge, a consumer advocacy group that weighed in separately with an amicus brief, argued that “to open a regulatory loophole through which…companies may avoid administrative enforcement would be not only remarkable as a matter of law, but troubling as a matter of consumer protection.”

AT&T responded to a request for comment, saying, “We believe the appeals court’s ruling was correct, and that any review by another panel of the Court would agree.”

–Kirk Victor


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