FTC Suit Against AT&T Is Dismissed -- WSJ

By Brent Kendall and Thomas Gryta 

A federal appeals court threw out a government lawsuit against AT&T Inc. that alleged the company misled wireless subscribers by selling them unlimited data plans and then quietly slowing down service if they consumed high amounts of data.

Monday's ruling, from the San Francisco-based Ninth U.S. Circuit Court of Appeals, is a blow to the Federal Trade Commission, which filed the suit in 2014 seeking potential refunds for consumers.

Although the FTC has broad authority to police unfair and deceptive commercial practices, it doesn't have authority over "common carrier" phone services such as the landline services traditionally offered by AT&T. The commission had said it could pursue the company, however, because it involved data services, but the appeals court rejected that argument.

The commission argued AT&T didn't do enough to tell customers that data speeds on their smartphones would be slowed considerably once they reached certain usage amounts each billing cycle.

Over a three-year period, AT&T throttled data speeds that affected 3.5 million customers, the FTC alleged. AT&T during the litigation said it had implemented reasonable network management practices that slowed speeds only to the very heaviest users whose data consumption harmed the company's network.

The ruling means government enforcement actions targeting an alleged lack of company transparency over internet data speeds would have to be brought by a different agency, the Federal Communications Commission.

The FCC brought a similar case against AT&T, announcing plans last year to fine the company $100 million on the grounds that the company didn't adequately inform consumers about its program for slowing data speeds in certain circumstances. The company is contesting the case in proceedings before the FCC.

AT&T said it was pleased with Monday's decision, while the FTC said it was disappointed and considering its options.

The ruling further solidifies the FTC's diminishing authority in the telecommunications space. The consumer protection agency already was facing reduced enforcement powers thanks to open-Internet rules the FCC put in place last year. Those rules imposed common-carrier obligations on broadband services, including wireless.

After years of selling unlimited data plans as customers adopted smartphones, AT&T stopped selling them to new subscribers in 2010. It began offering them again earlier this year to customers who also subscribe to one of its pay-television services, DirecTV, or U-verse.

Like other carriers, the company puts limits on its unlimited plans. Customers who use more than 22 gigabytes of data per line in a billing cycle may see slower speeds when the network is congested, according to posted plan details.

--John McKinnon contributed to this article.

Write to Brent Kendall at [e-mail] and Thomas Gryta at [e-mail]

(END) Dow Jones Newswires

August 30, 2016 02:48 ET (06:48 GMT)

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