Should entire telecommunications companies be given a free pass from regulation by the FTC simply because some part of their business may involve exempt ‘common carrier’ operations?
The Issue: The FTC Act does not apply to “common carriers” like landline telephone companies. But does that exemption include the entire company or just those aspects of the business that are actually engaged in common carrier activity?
When AT&T starting “throttling” the data it provided its “unlimited” data users, the FTC sued AT&T for unfair and deceptive practices for promising ‘unlimited’ data that it did not in fact provide. AT&T moved to dismiss the action on the ground that it was a common carrier, and therefore exempt from the FTC Act. The district court denied the motion on the ground that conveying mobile data was not considered a common carrier activity, even though other aspects of AT&T’s business, such as its landline telephone service, were. But a Ninth Circuit panel overturned the decision, holding that the common carrier exemption applies to the entire company, not just to those pieces which engage in common carrier activity.
Why It Matters: If allowed to stand, the Ninth Circuit panel’s ruling could have immunized from FTC oversight a vast swath of companies that engage in some common carrier activity. Such a result would be irreconcilable with Congress’s mandate that the FTC prevent harm to vulnerable consumers. To make matters worse, the panel’s opinion failed to grapple with the likelihood that many businesses – especially technology companies like Amazon, Apple, Facebook, and Twitter – are engaging or may soon engage in common carrier activities as a result of innovation, acquisition, or even, pursuant to this opinion, simply to evade FTC oversight. The panel opinion also threatened to undermine international commitments such as the recently adopted Privacy Shield agreement between the United States and the European Union, which authorizes the cross-Atlantic transmission of personal data based on the commitment that the FTC will use its enforcement power to safeguard the privacy of transferred EU data.
Contribution of Public Good: Public Good filed an amicus brief on behalf of a number of major consumer and privacy rights organizations in support of the FTC’s petition for rehearing en banc. Public Good’s brief noted that the panel decision broke from the 100-year-long understanding that the term “common carrier” is defined by activities, not status. The brief also pointed out that the panel failed to heed settled interpretive rules requiring that exemptions from antitrust laws be construed narrowly, that remedial statutes be read broadly to effectuate their purposes, and that an agency’s interpretation of its organic statute be accorded deference. The panel’s inversion of long-standing precedent, Public Good observed, not only would create a potentially disastrous regulatory gap, but also would put the Ninth Circuit directly in conflict with the D.C. and Second Circuits.
Amici represented by Public Good: Public Good’s brief was filed on behalf of the Center for Digital Democracy, the Center for Democracy & Technology, Consumer Action, the Consumer Federation of America, the Consumer Federation of California, Consumers Union, the Electronic Privacy Information Center, the National Association of Consumer Advocates, the National Consumers League, the Benton Foundation, Common Sense Kids Action, and the Privacy Rights Clearinghouse.
Outcome: The Ninth Circuit granted en banc review – a significant victory, given how seldom en banc review is granted. The 11 judges sitting en banc then unanimously overruled the panel decision, holding that – as argued by Public Good – the FTC Act’s common-carrier exemption is activity-based, and therefore the FTC may properly regulate AT&T’s other activities.
835 F.3d 993 (9th Cir. Aug. 29, 2016), and 883 F.3d 848 (9th Cir. Feb. 26, 2018) (en banc).