9th Circuit FTC Ruling Welcomed by Many; Pai, Backers See Win for FCC Net Neutrality Repeal

An en banc panel of the 9th U.S. Circuit Court of Appeals unanimously ruled Monday the FTC has jurisdiction over the non-common-carrier activities of common carriers, such as AT&T (see 1802260016). If the court had sided with AT&T, it could have undermined the FCC's 2017 net neutrality repeal framework, which reclassified broadband as a largely unregulated Title I information service and relies on FTC oversight to protect internet consumers and privacy.

“The Ninth Circuit’s decision is a significant win for American consumers," Pai said: It reaffirms the FTC "will once again be able to police Internet service providers after the Restoring Internet Freedom Order takes effect.” It "ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anticompetitive market behavior,” said acting FTC Chairman Maureen Ohlhausen.

This doesn't "lessen the urgency of reversing the net neutrality repeal," contrary "to what some folks are saying," said Harold Feld, Public Knowledge senior vice president. PK "filed an amicus in support of the FTC, and this decision restoring the FTC's traditional jurisdiction is good for consumers. That doesn't make the FTC a replacement for the FCC," he emailed us: "As the Ninth Circuit made clear, far from 'usurping' the role of the FTC as net neutrality opponents claim, the relationship between the FTC and the FCC under the 2015 reclassification 'reflects a classic example of concurrent jurisdiction with two agencies sharing regulatory oversight.' (page 29) Thanks to the FCC's net neutrality repeal, consumers now lack critical protections that flowed from having 'two cops on the beat.'" Feld also said AT&T "began deceptively throttling 'unlimited' customers in 2011," and the FTC can now argue its case on the merits.

The carrier said the case isn't over: "Today’s decision on jurisdiction does not address the merits of the case. We are reviewing the opinion and continue to believe we ultimately will prevail.”

The FTC brought a case alleging AT&T Mobility's data-throttling plan was "unfair and deceptive" under Section 5 of the FTC Act. A U.S. District Court denied AT&T's motion to dismiss, but on appeal a three-judge 9th Circuit panel reversed the lower court and said the common-carrier exemption is "status-based," preventing FTC common-carrier oversight, including of their non-common-carrier activities (see 1608290032). The 9th Circuit agreed to rehear the case en banc and oral argument was Sept. 19 (see 1709180061 and 1709190025).

The full panel affirmed District Court denial of AT&T's motion to dismiss. The FTC common-carrier exemption is "activity based" and "thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services," said the opinion of Judge Margaret McKeown for the panel in FTC v. AT&T Mobility, No. 15-16585. It cited the text of the FTC Act, legislative history, the courts' traditional meaning of "common carrier," and the expertise of the FTC and FCC. The FCC backed the FTC's case.

The new ruling "accords with common sense" and "avoids regulatory gaps" between agencies, McKeown wrote: "The FTC is the leading federal consumer protection agency and, for many decades, has been the chief federal agency on privacy policy and enforcement. Permitting the FTC to oversee unfair and deceptive non-common-carriage practices of telecommunications companies has practical ramifications. New technologies have spawned new regulatory challenges. A phone company is no longer just a phone company. The transformation of information services and the ubiquity of digital technology mean that telecommunications operators have expanded into website operation, video distribution, news and entertainment production, interactive entertainment services and devices, home security and more."

"The decision removes any doubt: the FTC can and will police net neutrality, broadband privacy and any other broadband consumer protection or competition concern that might arise," said TechFreedom President Berin Szoka. "The court had already vacated the panel decision -- but that didn’t stop Title II zealots from insisting that the sky would fall if the FCC didn’t maintain common carriage authority over broadband. That argument has always been a pretext for those who simply want to regulate the Internet as railroads were regulated in the 19th century, and Ma Bell was last century.”

“It’s the right outcome but it doesn’t change the fact that the FTC does not have either the expertise or strong enough tools to oversee the broadband market, and especially network management practices," Open Society Foundations fellow Gigi Sohn told us. "To the extent that the FCC is going to use this decision to bolster its argument that the FTC is the proper arbiter of net neutrality, it won’t work. The FTC doesn’t have rulemaking authority, so it can only selectively enforce violations, and the FTC has interpreted its Section 5 authority over ‘unfair and deceptive’ acts to only go after companies that either misled or lied to customers. To the extent the FTC brings antitrust suits -- and they hardly ever do -- they take a long time to resolve."

"This is the right result for the FTC and consumers" but "only restores the limited jurisdiction" the agency had over ISPs, said Consumer Union's Jessica Rich, vice president-advocacy for Consumer Reports. "This ruling is no substitute for the critical net neutrality protections that the FCC has rolled back under Chairman Pai, which is why we’re urging Congress to restore the rules to protect the open internet.”