San Francisco Chronicle

FTC wins its appeal on AT&T ruling

- By David McLaughlin and Andrew Harris David McLaughlin and Andrew Harris are Bloomberg writers. Email: dmclaughli­n9@ bloomberg.net, aharris16@ bloomberg.net

A federal appeals court restored regulators’ role in consumerpr­otection cases against telecommun­ications companies like AT&T.

The Ninth U.S. Circuit Court of Appeals in San Francisco said the Federal Trade Commission can regulate non-telephone activities by the communicat­ions giant, which also owns DirecTV.

The case drew dire warnings from the FTC and the Federal Communicat­ions Commission that without a reversal of a 2016 ruling, some telecommun­ications companies would fall into a regulatory gap where specific business practices could evade oversight, inhibiting consumer-protection cases. AT&T had argued that its activities fall under the supervisio­n of the FCC under an exemption for common carriers like phone companies.

The FTC’s view is that it has broader powers than the FCC to carry out consumer protection enforcemen­t in the area of broadband, including the authority to obtain money back for customers. The agency was worried about the wider implicatio­ns of the 2016 ruling, which could have provided a road map for companies to avoid FTC enforcemen­t.

“The phrase ‘common carriers subject to the acts to regulate commerce’ thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services,” the 11-judge panel said in a unanimous opinion Monday. The ruling also “accords with common sense,” the judges said, given the new regulatory challenges generated by new technologi­es.

Companies that aren’t common carriers today could gain that status by offering new services or through acquisitio­ns, the FTC has argued, citing Verizon Communicat­ions’ acquisitio­n of Yahoo’s core business. Even energy companies like Exxon Mobil could have been immune, according to the FTC.

The FTC sued AT&T in 2014, accusing 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 company, AT&T throttled speeds so that Web browsing and watching video became difficult or impossible, according to the FTC.

AT&T countered that the FTC can’t sue it because only the FCC has jurisdicti­on. A threejudge panel of the appeals court agreed in 2016, saying AT&T’s “status” as a common carrier shielded it from FTC enforcemen­t.

That worried the FTC, which argued the exception for common carriers hinges on the activity at issue. The agency said phone companies could mislead consumers in other parts of their businesses outside phone service — such as selling smartphone­s, advertisin­g and maintainin­g consumers’ data privacy — and end up exempt from any FTC enforcemen­t action. Companies also could evade FTC enforcemen­t by acquiring a common-carrier service, it said.

In December, the FCC rescinded its net neutrality rules under which that agency had designated Internet service providers as common carriers that it could regulate. The FCC justified that move in part by saying consumers would still be protected by the FTC.

An appeals court ruling in favor of AT&T Mobility would have undercut that rationale. The case was reheard in September by the 11judge panel.

 ?? Alan Diaz / Associated Press 2017 ?? The Ninth U.S. Circuit Court of Appeals said the Federal Trade Commission can punish telecommun­ications companies for deceptive practices.
Alan Diaz / Associated Press 2017 The Ninth U.S. Circuit Court of Appeals said the Federal Trade Commission can punish telecommun­ications companies for deceptive practices.

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