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On February 26, 2018, the United States Court of Appeals for the Ninth Circuit ruled in an en banc decision that the “common carrier” exception in the Federal Trade Commission Act is “activity-based,” and therefore applies only to the extent a common carrier is engaging in common carrier services. The decision has implications for FTC authority over Internet service providers, indicating that the FTC has authority to bring consumer protection actions against such providers to the extent they are engaging in non-common carrier activities. The Federal Communications Commission (“FCC”) has previously ruled that Internet access service is not a common carrier service subject to that agency’s jurisdiction.

The Ninth Circuit’s decision arose from a case brought by the FTC against AT&T Mobility, LLC (“AT&T”), regarding AT&T’s “data-throttling practice,” by which “the company reduced customer broadband data speed without regard to actual network congestion” when a customer’s mobile data usage exceeded a specified limit. The FTC brought an action under Section 5 of the FTC Act, alleging that the practice was unfair and deceptive. AT&T moved to dismiss the action, arguing that it was exempt from the FTC’s Section 5 authority on the basis of the “common carrier exception,” in which “common carriers subject to the Acts to regulate commerce” are exempt from Section 5 enforcement authority. The court held that the common carrier exception is activity based, not “status-based,” and applies only to the extent an entity is engaging in common carrier activities. Accordingly, AT&T could not claim Section 5 exemption based on the argument that its overall status was that of a common carrier, and the Ninth Circuit denied its motion to dismiss. The Chairman of the FCC and Acting Chair of the FTC both expressed approval of the court’s decision.