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
and Submitted En Banc September 19, 2017 San Francisco,
Michael 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; Evan Rose, Matthew D. Gold, and Linda K.
Badger, Of Counsel; Federal Trade Commission, Washington,
D.C.; for Plaintiff-Appellee.
M. Lewis, Associate General Counsel; Scott M. Noveck,
Counsel; Jacob M. Lewis, Associate General Counsel; David M.
Gossett, Deputy General Counsel; Howard J. Symons and Brendan
Carr, General Counsel; Federal Communications Commission,
Washington D.C.; for Amicus Curiae Federal Communications
E. Mermin, Samantha K. Graff, and Thomas Bennigson, Public
Good Law Center, Berkeley, California, for Amici Curiae
Consumers Union, Consumer Federation of America, Consumer
Federation of California, Consumer Action, National
Association of Consumer Advocates, National Consumers League,
Center for Digital Democracy, Center for Democracy &
Technology, Electronic Privacy Information Center, Benton
Foundation, Common Sense Kids Action, and Privacy Rights
K. Ohm, Professor, Georgetown University Law Center,
Washington, D.C.; William McGeveran, Associate Professor,
University of Minnesota Law School, Minneapolis, Minnesota;
for Amici Curiae Data Privacy and Security Law Professors.
Charles Duan, M. Ryan Clough, John Gasparini, Sara Kamal, and
Jaime Petenko, Public Knowledge, Washington, D.C., for Amicus
Curiae Public Knowledge.
H. Rosenbaum and Sean M. Sherman, Public Citizen Litigation
Group, Washington, D.C., for Amicus Curiae Senator Richard
Jay Schwartzman and Laura Moy, Institute for Public
Representation, Georgetown University Law Center, Washington,
D.C., for Amicus Curiae Social Justice Organizations.
Patrick J. Massari, Michael Pepson, and Cynthia Crawford,
Cause of Action Institute, Washington, D.C., for Amicus
Curiae Cause of Action Institute.
Weissmann, Munger Tolles & Olson LLP, Los Angeles,
California; Donald B. Verrilli Jr. and Chad I. Golder,
Washington, D.C.; for Amici Curiae Charter Communications,
Comcast Corporation, Cox Communications, and Verizon.
Before: Sidney R. Thomas, Chief Judge, and Stephen Reinhardt,
Susan P. Graber, M. Margaret McKeown, William A. Fletcher,
Johnnie B. Rawlinson, Milan D. Smith, Jr. [*] , N. Randy Smith, Jacqueline
H. Nguyen, Paul J. Watford and Michelle T. Friedland, Circuit
banc court affirmed the district court's denial of
AT&T Mobility's motion to dismiss an action brought
by the Federal Trade Commission ("FTC") under
Section 5 of the FTC Act, alleging that AT&T's
data-throttling plan was unfair and deceptive.
Mobility's data-throttling is a practice by which the
company reduced customers' broadband data speed without
regard to actual network congestion. Section 5 of the FTC Act
gives the agency enforcement authority over "unfair or
deceptive acts or practices, " but exempts "common
carriers subject to the Acts to regulate commerce." 15
U.S.C § 45(a)(1), (2). AT&T moved to dismiss the
action, arguing that it was exempt from FTC regulation under
threshold issue, the en banc court held that the federal
district court had federal question jurisdiction because the
dispute was one "arising under federal law, " and
the motion to dismiss was more properly treated as a
Fed.R.Civ.P. 12(b)(6) motion for failure to state a claim.
banc court held that the FTC Act's common-carrier
exemption was activity-based, and therefore the phrase
"common carriers subject to the Acts to regulate
commerce" provided immunity from FTC regulation only to
the extent that a common carrier was engaging in
common-carrier services. In reaching this conclusion, the en
banc court looked to the FTC Act's text, the meaning of
"common carrier" according to the courts around the
time the statute was passed in 1914, decades of judicial
interpretation, the expertise of the FTC and Federal
Communications Commission ("FCC"), and legislative
the FCC's order, issued on March 12, 2015, reclassifying
mobile data service from a non-common-carriage service to a
common carriage service, the en banc court held that the
prospective reclassification order did not rob the FTC of its
jurisdiction or authority over conduct occurring before the
order. Accordingly, the en banc court affirmed the district
court's denial of AT&T's motion to dismiss.
McKEOWN, Circuit Judge.
this case began as an effort by the Federal Trade Commission
("FTC") to address AT&T Mobility's
"data throttling"-a practice by which the company
reduced customers' broadband data speed without regard to
actual network congestion-the central issue is one of agency
jurisdiction and statutory construction.
5 of the Federal Trade Commission Act ("FTC Act"),
which gives the agency enforcement authority over
"unfair or deceptive acts or practices, " exempts,
among others, "common carriers subject to the Acts to
regulate commerce." 15 U.S.C. § 45(a)(1), (2). The
question is whether the common-carrier exemption is
activity-based, meaning that a common carrier is exempt from
FTC jurisdiction only with respect to its common-carrier
activities, or status-based, such that an entity engaged in
common-carrier activities is entirely exempt from FTC
affirm the district court's denial of AT&T's
motion to dismiss. Looking to the FTC Act's text, the
meaning of "common carrier" according to the courts
around the time the statute was passed in 1914, decades of
judicial interpretation, the expertise of the FTC and Federal
Communications Commission ("FCC"), and legislative
history, we conclude that the exemption is activity-based.
The phrase "common carriers subject to the Acts to
regulate commerce" thus provides immunity from FTC
regulation only to the extent that a common carrier is
engaging in common-carrier services.
statutory interpretation also accords with common sense. The
FTC is the leading federal consumer protection agency and,
for many decades, has been the chief federal agency on
unfair and deceptive non-common-carriage practices of
telecommunications companies has practical ramifications. New
technologies have spawned new regulatory challenges. A phone
company is no longer just a phone company. The transformation
of information services and the ubiquity of digital
technology mean that telecommunications operators have
expanded into website operation, video distribution, news and
entertainment production, interactive entertainment services
and devices, home security and more. Reaffirming FTC
jurisdiction over activities that fall outside of
common-carrier services avoids regulatory gaps and provides
consistency and predictability in regulatory enforcement.
and Procedural History
2007, AT&T Mobility LLC ("AT&T") was the
exclusive provider of mobile data services for the Apple
iPhone. AT&T initially offered iPhone customers a service
plan with "unlimited" mobile data for a flat
monthly fee. In 2010, however, AT&T stopped offering
unlimited mobile data plans to new smartphone customers.
Instead, AT&T offered "tiered" mobile data
plans. Under the new tiered plans, a customer who exceeded a
specified data allowance would be charged for any additional
data at a rate set by AT&T. Legacy customers who
previously signed up for unlimited data, however, were
grandfathered and allowed to keep their existing service
2011, AT&T began reducing the data speed for its
unlimited mobile data plan customers-a practice commonly
known as "data throttling." For example, if a
customer with an unlimited mobile data plan exceeded a
certain usage limit, AT&T would substantially reduce the
speed at which the customer's device would receive data
for the balance of the customer's billing cycle.
Customers experienced reduced speed when they exceeded the
preset limit, regardless of actual network congestion.
AT&T did not apply the data-throttling practice to
customers on tiered plans.
to the FTC, AT&T made limited disclosures about its
data-throttling practice. Although AT&T did alert some
customers about the practice via text message, a monthly
bill, or e-mail, it did not inform unlimited data customers
of the degree to which their data speed would be reduced.
AT&T's wireless customer agreements for unlimited
data customers did not reveal that the use of more than a
specified amount of data would trigger a slowdown. Nor did
AT&T disclose that speed reductions were intentional
rather than the result of network congestion.
on these practices, the FTC brought suit against AT&T
under Section 5 of the FTC Act. 15 U.S.C. § 45. The FTC
alleged that AT&T's data-throttling program was
unfair and deceptive because the company advertised
"unlimited mobile data, " but in fact imposed
restrictions on data speed for customers who exceeded a
moved to dismiss the suit, arguing that it was exempt from
FTC regulation under Section 5 because it is a "common
carrier subject to the Acts to regulate commerce." 15
U.S.C. § 45(a)(2). In AT&T's view, the
common-carrier exemption may be invoked so long as an entity
has the "status" of a common carrier. That is, if
an entity qualifies as a common carrier, all of its
activities are immune from regulation under Section 5,
regardless of whether the entity provides both
common-carriage and non-common-carriage services.
response, the FTC claimed that AT&T was exempt from
jurisdiction only "to the extent that it provides a
common carrier service." In the FTC's view, the
common-carrier exemption applies only to the extent that an
entity actually engages in common-carrier activities. Under
this "activity-based" interpretation, an
entity's non-common-carriage activities are subject to
FTC regulation. At the time the FTC filed suit, mobile data
provision was not a "common carrier service."
AT&T's motion to dismiss was pending, the FCC issued
an order changing its classification of mobile data, such
that it would be treated as a common-carriage service rather
than a non-common-carriage service, but "only on a
prospective basis." See In the Matter of Protecting and
Promoting the Open Internet, 30 F.C.C. Rcd. 5601, 5734
n.792 (2015) (the "Reclassification Order").
response to this regulatory change, AT&T took the
position that it was a common carrier under any construction
of Section 5, and that the FTC was no longer empowered to
pursue its claims, either past or present, against the
company. The FTC countered that the lawsuit remained live