and Submitted June 17, 2016 San Francisco, California
from the United States District Court for the Northern
District of California D.C. No. 3:14-cv-04785-EMC Edward M.
Chen, District Judge, Presiding
Michael K. Kellogg (argued) and Mark C. Hansen; Kellogg,
Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington,
D.C.; David L. Anderson, Sidley Austin LLP, San Francisco,
California; for Defendant-Appellant.
Marcus (argued), Director of Litigation; Matthew M. Hoffman
and David L. Sieradzki, Attorneys; David C. Shonka, Acting
General Counsel; Federal Trade Commission, Washington, D.C.;
Evan Rose, Matthew D. Gold, and Linda K. Badger, Federal
Trade Commission, San Francisco, California; for
Before: Richard R. Clifton, and Sandra S. Ikuta, Circuit
Judges, and William Q. Hayes, [*] District Judge.
Trade Commission Act
panel reversed the district court's denial of AT&T
Mobility LLC's motion to dismiss, and remanded for an
entry of an order of dismissal in an action brought by the
Federal Trade Commission under section 5 of the FTC Act that
took issue with the adequacy of AT&T's disclosures
regarding its data throttling plan, under which AT&T
intentionally reduced the data speed of its customers with
unlimited mobile data plans.
5 of the FTC Act contains an exemption for "common
carriers subject to the Acts to regulate commerce." 15
U.S.C. § 45(a)(2). The panel held that AT&T was
excluded from the coverage of section 5 of the FTC Act, and
FTC's claims could not be maintained. Specifically, the
panel held that, based on the language and structure of the
FTC Act, the common carrier exception was a status-based
exemption and that AT&T, as a common carrier, was not
covered by section 5.
CLIFTON, Circuit Judge.
a practice referred to by the Federal Trade Commission as
"data throttling, " AT&T Mobility LLC
intentionally reduces the data speed of its customers with
unlimited mobile data plans. A throttled customer receives
data at a substantially reduced speed during a given billing
cycle once the customer's data usage during that billing
cycle exceeds a threshold determined by AT&T. Unlimited
data plan customers are throttled without regard to real-time
filed a complaint against AT&T under section 5 of the FTC
Act, 15 U.S.C. § 45(a), taking issue with the adequacy
of AT&T's disclosures regarding its data throttling
program. The central issue before us is whether AT&T is
covered by section 5, which exempts, among others,
"common carriers subject to the Acts to regulate
commerce." We conclude that AT&T is excluded from
the coverage of section 5, and that the FTC's claims
cannot be maintained.
offers mobile voice service and mobile data service to its
customers. Mobile data service allows customers with
smartphones to access the internet using AT&T's
mobile data network. Customers with mobile data service can,
among other things, send and receive email, use GPS
navigation, and stream videos.
2007, AT&T became the exclusive service provider for the
Apple iPhone in the United States. At that time, AT&T
began offering iPhone customers an "unlimited"
mobile data plan, allowing users access to an unlimited
amount of data for a fixed monthly rate. Starting in June
2010, however, AT&T stopped offering unlimited mobile
data plans to new customers. Since then, it has required new
customers to select one of various "tiered" data
plans, under which a customer has a set data allowance per
month for a fixed monthly rate and incurs additional charges
for any data usage in excess of the set data allowance.
Customers with preexisting unlimited data plans were
grandfathered into the new system to avoid encouraging them
to switch to a different service provider.
2011, AT&T decided to begin reducing the speed at which
unlimited data plan users receive data on their smartphones.
Under AT&T's data throttling program, unlimited data
plan customers are throttled for the remainder of a billing
cycle once their data usage during that cycle exceeds a
certain threshold. Although AT&T attempts to justify this
program as necessary to prevent harm to the network,
AT&T's throttling program is not actually tethered to
real-time network congestion. Instead, customers are subject
to throttling even if AT&T's network is capable of
carrying the customers' data. AT&T does not regularly
throttle its tiered plan customers, no matter how much data
those customers use.
contends that AT&T failed to adequately inform its
customers of its data throttling program. It asserts two
claims against AT&T under section 5 of the FTC Act,
pursuant to which the FTC may "prevent persons,
partnerships, or corporations, except . . . common carriers
subject to the Acts to regulate commerce . . . from using . .
. unfair or deceptive acts or practices in or affecting
commerce." 15 U.S.C. § 45(a)(2).
Count I, the FTC asserts that AT&T's imposition of
data speed restrictions on customers with contracts
"advertised as providing access to unlimited mobile
data" and without terms "provid[ing] that
[AT&T] may modify, diminish, or impair the service of
customers who use more than a specified amount of data"
is an unfair act or practice. In Count II, the FTC asserts
that AT&T's failure to adequately disclose that it
"imposes significant and material data speed
restrictions on unlimited mobile data plan customers who use
more than a fixed amount of data in a given billing
cycle" is a deceptive act or practice.
filed a motion to dismiss the FTC's Complaint, contending
that it is immune from liability under section 5 because of
its status as a common carrier. The FTC opposed the motion,
arguing that AT&T is not exempt from liability for
violations in connection with its mobile data service, a
non-common carrier service, because the common carrier
exemption in section 5 protects entities with the status of
common carrier only to the extent that the service in
question is a common carrier service.
the motion to dismiss was pending, the Federal Communications
Commission reclassified mobile data service from a non-common
carrier service to a common carrier service. In response,
AT&T argued to the district court that the FCC's
Reclassification Order, even though prospective in
application, stripped the FTC of authority to maintain its
claims against AT&T, even as to past
undisputed that AT&T is and was a "common carrier
subject to the Acts to regulate commerce" for a
substantial part of its activity, but prior to the FCC's
Reclassification Order, its mobile date service was not