Court Upholds FTC Jurisdiction Over Common Carrier: Nonprofits Should Take Heed

Recently, a federal judge in the Northern District of California denied AT&T's motion to dismiss the Federal Trade Commission's (FTC) lawsuit against the company concerning its advertising and business practices for its mobile wireless data plans. While you might not expect it, the case has potential implications for nonprofit organizations, particularly charities that might otherwise presume they are not subject to the FTC's jurisdiction.

In 2014, the FTC accused AT&T of misleading millions of its customers by marketing "unlimited" data plans, but then "throttling," or reducing data speeds, for unlimited plan customers after they used a certain amount of data during a given billing cycle. As a result of the throttling, said the FTC, customers' smartphone applications would not function as well as they would with higher internet speeds. The FTC asserted that AT&T had been throttling data speeds for its unlimited data customers since 2011, and that it has throttled at least 3.5 million customers a total of more than 25 million times.

Although AT&T has defended the merits of its conduct—arguing that it temporarily reduces data speeds for heavy users (and is transparent when doing so) in order to preserve its network's quality for everyone else—its primary strategy was to argue that, as a common carrier, the FTC lacks the ability to regulate its conduct entirely.

Congress gave the FTC broad authority to prevent unfair methods of competition and unfair or deceptive acts or practices. However, the FTC's jurisdiction is not unlimited: banks, savings and loan institutions, federal credit unions, air carriers, meatpackers and poultry dealers, and, most relevant here, common carriers, are exempt from the coverage of the FTC Act.

According to AT&T, its status as a common carrier should place it beyond the FTC's jurisdictional reach. The FTC countered that an entity's exempt status, by itself, is not controlling. Rather, the court must look at the activity in question and allow the FTC to regulate the non-exempt conduct of a common carrier (meaning, in this case, AT&T's conduct regarding its mobile data services). The court sided with the FTC on this issue and held that "the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity." AT&T has now asked the U.S. Court of Appeals for the Ninth Circuit to grant an interlocutory appeal of the federal district court's...