FTC settlement returns $60 million to consumers affected by AT&T’s throttling practices

Sometimes FTC cases affirm important legal principles in the courtroom. In other cases, we’re able to get money back for consumers injured by a company’s illegal conduct. The FTC’s action against AT&T for allegedly deceptive and unfair practices related to AT&T’s promises of “unlimited data” resulted in a key ruling last year about the FTC’s jurisdiction and will return $60 million to affected consumers.

In 2014 the FTC sued AT&T Mobility, LLC, for failing to adequately disclose to customers on unlimited data plans that if they used a certain amount of data in a billing cycle, AT&T would slow down – or throttle – their data speeds to the point that many everyday smartphone functions (for example, web browsing and video streaming) became nearly impossible. According to the complaint, despite its unequivocal promises of unlimited data, in 2011 AT&T began throttling data speeds for its “unlimited” customers who used a little as 2 gigabytes in a billing period.

In the course of that lawsuit, AT&T maintained that its status as a “common carrier” shielded it from the FTC’s action. Last year, a unanimous en banc decision of the United States Court of Appeals for the Ninth Circuit rejected AT&T’s argument and held that “the FTC may regulate common carriers’ non-common-carriage activities.” It was an important legal precedent about how established consumer protection principles apply in the digital marketplace, and paved the way for the FTC to get money back for consumers impacted by AT&T’s throttling practices.

The just-announced settlement prohibits AT&T from making any claim about the speed or amount of its mobile data – including describing it as “unlimited” – unless it clearly discloses in close proximity to the claim any material restriction on the speed or amount of data. For example, let’s say AT&T says on its site that a certain plan is unlimited. But what if the company wants to slow things down after consumers reach a certain data cap? Under the terms of the proposed order, AT&T must disclose those restrictions clearly and conspicuously and in close proximity to the claim. The order details how that must be done. For example, if AT&T makes the claim on a webpage, any restrictions on the amount or speed of mobile data must be “proximate to the triggering representation.” Using a hyperlink, pop-up, or interstitial won’t suffice.

The $60 million paid by AT&T will be used to provide partial refunds to current and former customers who signed up for unlimited plans, but were throttled by AT&T. The refund process will be automatic and no applications will be accepted. Current AT&T customers will get a credit on their bill and former customers will get checks for their portion of the settlement.

The take-away tip for businesses extends well beyond the wireless marketplace. If you advertise a service without qualification as unlimited, consumers have a right to expect you to deliver on that promise.