United States: FTC: Unlimited Means Unlimited

Last Updated: October 30 2014
Article by Amy R. Mudge and Randal M. Shaheen

Defining unlimited is a metaphysical exercise worthy of a Cosmos or at least a Big Bang episode.  We have blogged before about the meaning of " lifetime supply" and " free."  But the FTC is very literal when it comes to defining the bounds of limitless and concludes that, well, unlimited means unlimited. The FTC has just filed a federal court complaint against AT&T seeking redress for customers who signed up for unlimited data plans.  In its  complaint, FTC charged AT&T with engaging in an unfair and deceptive data throttling practice that targeted customers on its unlimited data plans without providing customers adequate disclosure as to the nature of the practice.

According to the FTC, despite its "unequivocal promises of unlimited data," AT&T allegedly began throttling data speeds for its unlimited data plan customers in 2011, in which "numerous customers" experienced slow-downs of up to 85-95 percent. The FTC's complaint claims that AT&T violated the FTC Act by changing the terms of customers' unlimited data plans while those customers were still under contract with AT&T, and by failing to disclose the extent of the throttling program to consumers who renewed their unlimited data plans with AT&T.

In a  media conference call, Chairwoman Ramirez stated that in its litigation the FTC is not challenging the general practice of data throttling, but the fact that AT&T marketed and sold unlimited data plans and then, consequently, failed to provide unlimited service to existing customers when it enacted its throttling program. "AT&T, effectively, stopped providing the [unlimited] service customers understood they purchased when they entered into their contracts," Chairwoman Ramirez stated, "and [customers] were then subjected to an early termination fee that amounted to hundreds of dollars if they wanted to get out of their existing contract with AT&T."

According to the FTC, when AT&T began its throttling program in 2011 it had approximately 14 million customers with unlimited data plans. (As an aside, the timing of this program coincides with the availability of the iPhone on competing networks and really the advent of regular folks consuming significant amounts of data using mobile devices well beyond simple emailing and texting.  Because a network has a finite capacity, the act of throttling the truly excessive data users after they exceed a set limit might be seen as an act of corporate socialism to ensure the network will operate most efficiently for the masses.)  In its complaint, the FTC alleges that AT&T throttled its high data using customers more than 25 million times, which affected more than 3.5 million unique customers. The FTC maintains that customers were not given adequate information to decide whether to switch to a different program, to what degree speeds would be reduced, or what degree of service they would be receiving.

The FTC filed its complaint in federal court, and is seeking both injunctive relief and redress against AT&T. "We think that customers have been affected and we hope to put money back into their pockets," Chairwoman Ramirez said. "Our aim is to get restitution for injured consumers."

This case is in line with several FTC enforcement priorities.  First, the FTC in BCP cases aggressively seeks redress for customers.  While the FTC is clearly seeking refunds of early termination fees paid by individuals who allegedly canceled their contracts because of data throttling, it will be interesting to see whether the agency seeks redress on a broader scale.  For example, can you measure ill-gotten gains or restitution for those consumers who did not cancel but were not able to download as quickly as they would like if they exceeded a certain data threshold?  How do you measure the damages of not being able to download House of Cards before your airplane door closes?  Second, the FTC is very focused on  disclosures in national advertising and warned many national advertisers to be mindful of the size and clarity of disclaimers in television ads through Operation Full Disclosure.  Similarly the  FTC brought its first ROSCA case focusing on sufficiency of disclosures for subscription programs at the point-of-purchase.  This case adds to the mix how one discloses changes in the terms of an existing program and raises additional issues not just ofhow you disclose but what to disclose.  At least from the complaint, it appears the FTC is taking the position that telling consumers about the potential for throttling is not sufficient, but that AT&T was also required to explain in some detail exactly what the speed slow downs would mean in terms of practical effect.  Third, national advertising involving the mobile marketplace continues to be a broad focus of the agency, and after its headline grabbing year starting with its in-app purchase cases followed by mobile cramming, showing no signs of throttling.

*Laura Arrendondo-Santisteban is a Venable associate and not yet admitted to practice law

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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