On February 26, 2018, a unanimous 11-judge en banc panel of the Ninth Circuit upheld the authority of the Federal Trade Commission (“FTC”) over the non “carrier” activities of a company with common carrier lines of business that are exempt from FTC jurisdiction. Although the ruling allows the FTC to pursue deceptive practices claims against AT&T Mobility for allegedly throttling data speeds for customers with “unlimited” data plans, its greater impact is to close a potential regulatory “gap” that arguably left some companies exempt from the privacy and broadband Internet regulatory regimes intended by the Federal Communications Commission (“FCC”) and the FTC.

When the FCC ruled in 2015 that broadband Internet access was a common carrier service, it effectively stripped the FTC of authority over carriers’ privacy practices, and later imposed new and far-reaching broadband privacy rules. Congress repealed the new FCC privacy framework in its entirety in early 2017, seeking to return privacy issues to the FTC – recognized by the Ninth Circuit as “the chief federal agency on privacy policy and enforcement” -- and bring the broadband privacy rules back into alignment with the FTC’s approach for the rest of the Internet ecosystem. Similarly, when the FCC decided in late 2017 to return broadband Internet access to its historic status as an information service, it intended for the FTC to enforce the public commitments made by ISPs about their broadband practices, relating to privacy and other matters. An earlier Ninth Circuit 3-judge panel’s decision had opened a potential regulatory gap by accepting AT&T’s argument that its status as a common carrier exempted it from FTC authority over any of its operations. In May 2017, however, the Ninth Circuit ordered an en banc rehearing of the panel decision. 

The new en banc ruling closes the potential gap. Under this ruling, the FCC continues to regulate the common carrier activities of entities such as AT&T, and the FTC retains authority to supervise those entities’ non-common carrier activities – including their broadband service terms and privacy policies.

In its 34-page ruling, the en banc court first contrasted the statutory common carrier exemption, which refers to “common carriers subject to” certain statutes (including the Communications Act), with the entirely unqualified exemption for “banks.” The court emphasized the broad scope of the FTC Act, as well as the fact that, as remedial legislation, it should be broadly construed. The court then considered and rejected AT&T’s argument that other aspects of the FTC Act support a “status-based” reading of the common carrier exemption, including failed attempts to amend the FTC Act to specifically provide an activity-based exemption. 

The court next considered judicial precedent interpreting the term “common carrier” as of the time the FTC Act was passed, and concluded that it had long been understood that common carriers regularly engaged in non-common-carrier activities, and that regulatory bodies (such as the Interstate Commerce Commission and, later, the FCC) did not have jurisdiction over those activities. From this the court concluded that the statutory exemption of “common carriers subject to the Acts to regulate commerce” was, in effect, an exemption of common carriers to the extent that they are subject to such other laws.

Next, the court reviewed decisions from other circuits, and found support for its conclusion in rulings from the D.C. Circuit, the Eleventh Circuit, and the Second Circuit. Finally, the court drew support from the fact that both the FTC and the FCC had long viewed their authority as operating in the coordinated fashion endorsed by the court – the FCC has authority over entities’ activities as common carriers, and the FTC has authority over those same entities’ non-common carrier activities. The en banc panel also considered and found persuasive that the FCC and FTC entered into a Memorandum of Understanding where the two agencies “express[ed] their belief that the scope of the common carrier exemption in the FTC Act does not preclude the FTC from addressing non-common carrier activities engaged in by common carriers.” The court also noted that the FCC had filed an amicus brief in the case, supporting the FTC.

Finally, the court rejected AT&T’s claim that the FCC’s now-superseded ruling that broadband Internet access was a common carrier (Title II) service rendered the case moot. The court emphasized that the FCC’s ruling on its face had only prospective effect, and – since the agency could seek monetary relief for AT&T’s past actions, prior to the FCC’s ruling – the case was not moot.

The en banc decision confirms and supports another part of the FCC’s effort to return jurisdiction over privacy and consumer protection issues relating to broadband services to the FTC. In response, Acting Chairman Ohlhausen welcomed the ruling as good news for consumers, stating that 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.”