United States: Of "Lunch Stands And Merry-Go-Rounds": Ninth Circuit's Rejection Of FTC Authority Over "Throttling" Could Have Far Reaching Implications For Cable And Other Broadband Providers

On August 29th, a Ninth Circuit panel unanimously held that the FTC has no power to challenge "throttling" of unlimited data plan customers by mobile broadband providers as an "unfair or deceptive act." The panel found that a core source of FTC authority (Section 5 of the FTC Act) does not apply to any "common carriers" that are subject to regulation under the Communications Act of 1934. (FTC v. AT&T Mobility LLC, No. 14-04785 (9th Cir. Aug. 29, 2016)).

Critically, the panel found that the "common carrier" exception to section 5 applies based on the status of the entity as a regulated common carrier, not whether the particular activities at issue are regulated common carrier services. Given the FCC’s 2015 reclassification of all public broadband services (wired and mobile) as “common carrier” services, the decision potentially could be applied to exempt cable companies and other broadband providers (e.g., Google) from FTC Act section 5 enforcement actions for all of their services, not just those subject to the Open Internet Order.

The District Court Decision

In FTC v. AT&T Mobility, the FTC claimed that AT&T violated section 5’s prohibition on “unfair and or deceptive” practices by allegedly throttling data for “unlimited mobile data” customers without adequate consent or disclosures. AT&T moved to dismiss on the ground that, because it is a regulated communications common carrier with respect to its mobile telephone services, it has the “status” of a common carrier and is entirely exempt from section 5. The FTC, however, argued that the “common carrier” exemption applies only to “common carrier” activities and, during the period in question, AT&T’s mobile broadband service was not a “common carrier” activity, in contrast to its mobile telephone service.

Ultimately, the issue presented was: whether the common carrier exemption in section 5 is status-based, such that an entity is exempt from regulation as long as it has the status of a common carrier, or is activity-based, such that an entity with the status of a common carrier is exempt only when the activity the FTC is attempting to regulate is a common carrier activity.

The district court had agreed with the FTC and held that section 5’s exemption for “common carriers subject to the Acts to regulate commerce” applied narrowly only to a firm’s “common carrier” services. Because the FTC Act does not define “common carrier,” the lower court looked to the common law. It concluded that, when the FTC Act was passed in 1914, firms were regulated as common carriers only with respect to their common carrier services – i.e., general, public offers of carriage of people, freight, or, later, telephonic communication.

For example, it noted a 1912 Supreme Court case concerning the jurisdiction of the ITC (the FTC’s predecessor) over a company that provided common carrier transit services, but that also owned and operated “lunch stands, merry-go-rounds, bowling alleys, [and] bath houses.” The court observed that the ITC’s common carrier jurisdiction extended only to the freight carriage services, not to the entertainment services, despite the fact that the same firm owned and operated all of the services.

The district court also noted that the Communications Act – which is one of “the Acts to regulate commerce” – defines common carriers according to the specific service at issue. Indeed, a key issue leading up to the 2015 Open Internet Order was whether the FCC could and should “reclassify” wired and mobile broadband s Title II “common carrier” services.

Because there was no Ninth Circuit precedent, and courts in other jurisdictions were split on how to interpret the “common carrier” exemption, the district court allowed AT&T to seek an immediate appeal of the decision.

The Ninth Circuit Reversal

The Ninth Circuit reversed, holding that “AT&T is excluded from the coverage of section 5.”

Unlike the district court, the panel found the plain language of the exemption for “common carriers subject to the Acts to regulate commerce” compelled the conclusion that the exemption was based on the status of a firm as a regulated common carrier, not on the particular actions at issue. By contrast, the panel found that an additional exemption for “packers and stockyards” is expressly limited to “…corporations insofar as they are subject to the Packers and Stockyards Act of 1921″ and, therefore, an “activity” based exemption.

The Ninth Circuit also rejected the district court and FTC’s parsing of the legislative history and precedent concerning the “common carrier” and “Packers and Stockyards” exemptions. The panel’s conclusion was that Congress knew how to describe an activity-based exemption (the Packers and Stockyards exemption) when it intended to enact one.

Finally, the panel found that the language and structure of section 5 was so clear that it overcame any deference to which the FTC’s interpretation might otherwise be due. Indeed, the court noted it was not persuaded even by a 2015 FCC-FTC Consumer Protection Memorandum of Understanding, which stated that "the agencies express their belief that the scope of the common carrier exemption in the FTC Act does not preclude the FTC from addressing non-common carrier activities engaged in by common carriers."

Potential Implications

Assuming the panel’s decision is not modified or reversed en banc or by the Supreme Court, the AT&T Mobility decision has implications far beyond alleged “throttling” of mobile broadband. Among the potential implications are:

  • Any firm that provides any “common carrier” services governed by the Communications Act may be deemed to have the status of a “common carrier” for purposes of the exemption from section 5. (But note that the panel did say that “acquisition of some minor division unrelated to the company’s core activities that generates a tiny fraction of its revenue” should not bring the entire company within the common carrier exemption.)
  • The exemption would take such firms outside section 5 for all aspects of their business, not just the common carrier broadband services. This could mean, for example, that cable companies and others may be wholly exempt from section 5, even for non-broadband services such as linear television, video-on-demand, and set-top box leases.
  • A section 5 exemption bars the FTC with respect to both its consumer protection role and its antitrust role, an area in which the FTC recently has taken a more aggressive position.
  • Although the FCC is now regulating broadband as a common carrier, its powers are not identical to the FTC’s. For example, the FCC has no authority to seek refunds for customers and has a more limited “look back” period to challenge conduct. As a practical matter, the FCC also is simply newer to these issues and roles.
  • A finding that an entity as a whole is exempt section 5 as a common carrier does not mean that the entity as a whole will then be regulated as a common carrier elsewhere. For example, common carrier regulations under the Communications Act turn on the particular activity at issue. Thus, a service may be exempt from section 5 because it is offered by a common carrier, but not be subject to any common carrier regulations by the FCC.

Of "Lunch Stands and Merry-Go-Rounds": Ninth Circuit's Rejection of FTC Authority Over "Throttling" Could Have Far Reaching Implications for Cable and Other Broadband Providers

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.