The Federal Trade Commission (FTC) announced yesterday that it has filed a federal court complaint against AT&T Mobility, LLC, for what it alleges are deceptive practices related to the company’s unlimited data plan for smartphones. At issue is AT&T’s practice of “throttling,” or reducing data speeds after customers reach a monthly data limit. In many cases, speeds were reduced by 80 to 90 percent, making functions like audio and video streaming virtually impossible. The complaint charges that AT&T failed to adequately disclose this practice, which effectively imposes a limitation on the company’s “unlimited” data plan. The FTC is seeking “permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief” for practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
Although the FTC was created in 1914 to address widespread concerns about trusts and anticompetitive business practices, it also serves as a consumer protection agency, frequently targeting deceptive practices in advertising. Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” One famous instance of its use was in a 2004 case involving advertisements for KFC that touted the putative health benefits of the company’s chicken. That case ended in a consent order prohibiting KFC from making any representation that eating its fried chicken “is better for a consumer’s health than eating a Burger King Whopper,” or that it is “compatible with ‘low carbohydrate’ weight loss programs.” Another famous case involved the Airborne Health company, which sold an effervescent tablet that it claimed would reduce the risk of colds and other illnesses. The result was a settlement for $30 million to provide refunds to Airborne’s customers.