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Judge throws out AT&T’s common carrier defense in FTC throttling lawsuit

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A federal judge denied AT&T’s bid to throw out the Federal Trade Commission’s lawsuit against the carrier for throttling consumers’ “unlimited” data plans.

Last October, both the FTC and the Federal Communications Commission charged AT&T Mobility with misleading customers when it promised “unlimited data,” and, after a certain cap, throttled speeds of at least 3.5 million consumers by as much as 90 percent.

AT&T challenged the FTC’s case, arguing that because it was a common carrier that the FTC lacked jurisdiction.

The telco’s argument raised quite a few eyebrows when it used the FCC’s jurisdiction over common carriers as a shield to deflect the FTC’s deceptive advertising lawsuit.

Judge Edward Chen didn’t buy AT&Ts provocative claim and on Tuesday the U.S. District Court, northern district of California, denied AT&T’s motion to dismiss because the data service AT&T provided was not a common carrier (e.g. telephone) service when the FTC brought the case last October.

“Contrary to what AT&T argues, the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity. When this suit was filed, AT&T’s mobile data service was not regulated as common carrier activity by the Federal Communications Commission,” Judge Chen wrote.

Chen also added that the FTC’s jurisdiction in this AT&T case won’t change even when the FCC’s net neutrality order takes effect. The net neutrality order reclassifies mobile data service as a common carrier activity. “[It] will not deprive the FTC of any jurisdiction over past alleged misconduct as asserted in this pending action,” Judge Chen wrote.

FTC chairwoman Edith Ramirez said she was “gratified” by the court’s decision and agreed that the common carrier exemption doesn’t “insulate” AT&T from the FTC’s enforcement action.

“We look forward to proving that AT&T’s marketing of its ‘unlimited’ data plans was unfair and deceptive and to returning money to the millions of consumers who were harmed by AT&T’s action,” Ramirez said in a statement.

AT&T said in a statement: “We’re obviously disappointed in, and disagree with, the decision and will seek to appeal it as soon as possible.”

The AT&T case aside, Ramirez and the other FTC commissioners are worried about how the FCC’s net neutrality order to reclassify broadband and mobile Internet service as a common carrier service could limit the FTC’s consumer protection authority over a significant portion of the Internet economy.

During the past two weeks of Congressional hearings on the FCC and the net neutrality order, FTC commissioners called for Congress to eliminate the FTC’s common carrier exemption.

“The issue is whether reclassification will erode the FTC’s jurisdiction in a substantial way. It’s too soon to tell. But I would be crazy not to support Congress to end the common carrier exemption,” FTC commissioner Terrell McSweeny said Tuesday in an address at the Association of National Advertisers annual ad law and government policy conference.