AT&T Data-Throttling Case Taken Up by Full 9th Circuit

(CN) – Telecom giant AT&T and the federal agency that apparently regulates wide swaths of the U.S. economy returned to the Ninth Circuit on Tuesday, rehashing arguments in front of a wider panoply of judges.

AT&T attempted to make its case that the Federal Trade Commission is asserting regulatory authority that more properly belongs to the Federal Communications Commission. The FTC says it’s well within its bounds in punishing AT&T for secretly throttling cellphone service.

“We’re happy to defend our practices to the FCC,” said AT&T attorney Michael Kellogg. “But we shouldn’t have to open up a second front.”

The case stems from a 2013 federal lawsuit filed by the FTC against AT&T, which claimed the telecom offered millions of customers unlimited data but artificially slowed transmission rates after a certain data limit, making basic smartphone applications like GPS and video streaming difficult.

AT&T, which received a $100 million fine from the FCC, has maintained the FTC has no jurisdiction over the matter and the federal case pending in San Francisco should be dismissed as a result.

A federal judge has already refused to dismiss the case. This prompted AT&T to appeal, arguing it’s common carrier and therefore exempt from FTC jurisdiction.

Common carriers transport goods or people at set rates. Congress carved out the FTC’s common-carrier exemptions for railroads in 1914, but they’ve since been applied to public utilities and telecommunications.

In August 2016, a three-judge Ninth Circuit panel agreed with AT&T and reversed the trial court with an order to dismiss the case. Before that could be done, the FTC requested an en banc hearing which was held Tuesday.

According to the FTC, the three-judge panel erred in calling AT&T a common carrier since Congress intended the exemption to apply to activities rather than status.

For instance, the FTC takes enforcement actions against petroleum companies. Because the companies operate pipelines, they act as common carriers – but the FTC punishes activities that are separate and apart from the transport of goods at set rates.

Additionally, doubts exist as to whether broadband can be considered a common-carrier activity. In 2013, when the FTC initially sued, broadband was not defined as such.

Circuit Judge Alex Kozinski said Tuesday that just because the FCC didn’t define broadband as a common-carrier activity in 2013 doesn’t mean it isn’t now.

But Joel Marcus, arguing for the FTC, said the FCC has since said broadband is a common-carrier activity, then said it isn’t and that the FTC has purview.

“We don’t have a final judgement,” Marcus told the en banc panel. “That is one reason you should send this back to district court with a denial of the motion to dismiss. You can allow the court to find the appropriate remedy and if they find a violation, AT&T is well within its right to appeal again.”

Marcus also said federal agencies commonly have enforcement overlap, pointing to the Department of Justice and the FTC pursuing Sherman Act antitrust litigation through coordinated efforts.

“Just because you violate two laws doesn’t mean you are exempted from the consequences of one of them if you are held to be in violation of the other,” Marcus said.

Judges appeared sympathetic to both sides of the argument, with Circuit Judge Marsha Berzon saying she could see the efficacy in arguing common-carrier exemptions are based on what a company does, not what it is.

The en banc panel took the matter under submission.

 

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