The U.S. Federal Trade Commission got some good news yesterday when the United States Court of Appeals for the Ninth Circuit announced it will rehear Federal Trade Commission v. AT&T Mobility en banc. In the order, Chief Judge Sidney Thomas said of the ruling currently on the books, "The three-judge panel disposition in this case shall not be cited as precedent by or to any court of the Ninth Circuit."
That's a win for the FTC, which had filed an appeal of the Ninth Circuit's September ruling that common carriers — in this context meaning carriers of information that serve any customer and uniformly transmit any content — are always exempt from FTC Section 5 enforcement. It's an especially important ruling given the recent uncertainty over which regulatory agency will oversee broadband providers — the FTC or the Federal Communications Commission. FCC Chairman Ajit Pai has announced plans to hand enforcement over broadband providers back to the FTC, a power the FTC lost when the Open Internet Order was issued in 2015.
Pai plans to give enforcement back to the FTC by declassifying broadband providers under Title II of the Communications Act, which regulates common carriers, therefore removing them from FCC purview. But that has been controversial because some say the FTC still won't have jurisdiction over broadband providers given the FTC v. AT&T ruling, the most far-reaching implication of which being, in the end, the Ninth Circuit's holding that the common carrier exemption in Section 5 of the FTC Act is a status-based exemption and not an activity-based exemption. That's significant because most broadband providers also offer services that are still considered common carriage under Title II, meaning even though they offer broadband, which ostensibly will be reclassified, they'd still be regulated by the FCC and specifically not by the FTC.
It's an especially important ruling given the recent uncertainty over which regulatory agency will oversee broadband providers — the FTC or the Federal Communications Commission.
Alyssa Hutnik, a partner at Kelley Drye & Warren who often represents clients in FTC investigations, thinks that's about to change.
"If there are tea leaves to read here, the Ninth Circuit's decision to hear the case en banc, along with the statement that the panel decision is no longer circuit precedent, highly suggests we will see a full-court circuit ruling favoring FTC jurisdiction over internet providers based on their business activity, rather than an exemption that turns on their common carrier status," she said.
FTC Commissioner Terrell McSweeny is the sole democrat serving on the commission right now, and as such has been a bit drowned out by (Republican Commissioner) Pai's frequent assertion that reclassification is the answer and FTC Acting Chairman Maureen Ohlhausen's support of that. But McSweeny has maintained, often stating so on Twitter, that reclassification isn't the answer because the FTC v. AT&T decision still prevents it from doing its job given the status-based versus activity-based rule.
That the court will hear the case en banc — that is, a randomly selected group of 11 of the 29 total Ninth Circuit judges will hear the case versus the three-judge panel that first heard it — is a move in the right direction if you ask McSweeny.
— Terrell McSweeny (@TMcSweenyFTC) April 26, 2017
"I'm very pleased that the full court has decided to rehear this case," McSweeny told The Privacy Advisor. "The decision gives the court a chance to correct the panel's error." She added, however, that the only holistic way to restore FTC jurisdiction permanently would be for Capitol Hill to take action.
"The regulatory gap will not be closed until Congress repeals the common carrier exemption in the FTC Act," she said. In McSweeny's mind, that's the only solution here.
Despite their differing views on how best to restore FTC authority, Pai does agree with McSweeny that the rehearing of FTC v. AT&T is the right move.
Pai issued a statement yesterday applauding the court's action, calling it a "big win for American consumers. Now that the court's prior decision is no longer effective, it will be easier for the FTC to protect consumers' online privacy." He added that the court's action "also strengthens the case for the FCC to reverse its 2015 Title II Order and restore the FTC's jurisdiction over broadband providers' privacy and data security practices. Indeed, it moves us one step closer to having the consistent and comprehensive framework for digital privacy that the American people deserve."
AT&T, for whom the court's action is a setback given its 2016 win, said via a spokesperson, "We have reviewed the court's order, and we look forward to participating in the en banc review."
Jay Edelson, CEO of Edelson PC, said his firm was "very happy to see that the Ninth Circuit will be reviewing this case en banc." He said the FTC "serves as the last line of defense in protecting online privacy. We are hoping that the full court will recognize that it has the authority to continue in this role."
For now, telecom companies and regulators alike will surely be watching the case closely.
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