AT&T Pays $60 Million to Settle FTC Data-Throttling Suit

SAN FRANCISCO (CN) – AT&T will pay $60 million to settle a lawsuit brought by the Federal Trade Commission claiming the telecom giant misled millions of smartphone customers by promising unlimited data plans before slowing down their data speeds.

“AT&T promised unlimited data – without qualification – and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s Consumer Protection Bureau, in a statement Tuesday.

The FTC sued AT&T in 2014, alleging the company failed to inform customers with unlimited data plans that it would reduce their data speed once they used a certain amount of data each month. According to the FTC, the data throttling made web browsing and video streaming on smartphones "difficult" or "nearly impossible."

The Federal Communications Commission (FCC) previously fined AT&T $100 million for failing to disclose its practice of throttling customers' data.

AT&T first started slowing data speeds in 2011 for unlimited plan customers who used at least two gigabytes of data per billing cycle. It affected more than 3.5 million customers, according to the FTC's 2014 complaint.

As part of the settlement announced Tuesday, AT&T agreed to be bound by a permanent injunction barring it from advertising data plans without clearly disclosing restrictions.

AT&T spokesman Jim Greer said the company no longer throttles data for its unlimited plan customers.

“Even though it has been years since we applied this network management tool in the way described by the FTC, we believe this is in the best interests of consumers," Greer said by email.

Last year, an en banc Ninth Circuit found the FTC has authority to regulate telecom companies like AT&T, rejecting arguments that its status as a "common carrier" makes it exempt from FTC regulation and subject only to FCC regulation.

Writing for the majority, U.S. Circuit Judge M. Margaret McKeown, a Bill Clinton appointee, wrote that because telecom companies like AT&T have expanded beyond mere phone services to "website operation, video distribution, news and entertainment production" and more, tasking the FTC with oversight is "common sense."

AT&T still faces a consumer class action over slowing down customers' data speeds. Lead plaintiff Marcus Roberts sued in 2015, claiming the company misled consumers about data throttling, which rendered "internet access and other wireless functions on their phones difficult or impossible."

A status conference in that case is scheduled for Thursday morning in San Francisco.

U.S. District Judge Edward Chen oversees both the FTC lawsuit and consumer class action against AT&T.

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