Net Neutrality: From Rules to Enforcement

by Richard P. Lawson and Lisl J. Dunlop on Dec 20, 2017 11:00:43 AM Government Relations

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The statements, opinions, and advertisements expressed on the ERA Blog and other online entities owned by the Electronic
Retailing Association are those of individual authors and companies and do not necessarily reflect the views of the
Electronic Retailing Association.

To say that strong passions have surrounded the recent Federal Communications Commission (FCC) vote to reverse 2015’s net neutrality rules is putting it mildly. There are stories of FCC Chairman Ajit Pai enduring racist vitriol and protestors descending on his home with signs for his children stating, “They will come to know the truth. Dad murdered democracy in cold blood.” Pai in turn has used his speaking opportunities to challenge such celebrity critics as Cher and Mark Ruffalo on the effects of his proposal, formally known as the Restoring Internet Freedom Order (RIFO).

Now that RIFO has been passed, it might be a good time to set aside the commentary of whether it’s good or bad, and instead try to figure out exactly how things have changed. The essential point to know about RIFO is that it changes net neutrality from a regime based on rules to one based on enforcement. RIFO specifically states that “antitrust law and the Federal Trade Commission’s (FTC) authority under Section 5 of the FTC Act to prohibit unfair and deceptive practices” will protect against potential consumer and competitor harm. Accordingly, the role of the FTC has been restored in the internet service provider (ISP) arena – in fact, just days before the FCC vote, a memorandum of understanding between the FCC and FTC was signed acknowledging the expanded role for the FTC. Further, state attorneys general who are responsible for enforcing their “little FTC acts” can be expected to be just as involved in enforcement efforts.

So this begs the question as to what exactly these new cops on the beat – the FTC and state attorneys general – will be policing. RIFO states that it will “Adopt transparency requirements that ISPs disclose information about their practices to consumers, entrepreneurs, and the Commission.”  RIFO requires ISPs to disclose any practices regarding such matters as the blocking of websites, throttling of delivery speeds, prioritization of delivery (either through “free” data usage where downloads don’t count against a plan, or through “fast lane” delivery where an ISP is providing data faster due to a fee-based arrangement), and congestion management. 

With RIFO’s structure based on transparency, the onus will then shift to enforcers to police that ISPs are delivering what they are promising. The remedies can lie in traditional FTC consumer protection statutes regarding deceptive statements, such as an ISP stating that it does not throttle when in fact it does, or unfair acts, such as a unilateral change in a material term of a contract. Further, from a competition perspective, RIFO reopens the doors for antitrust enforcement. The FTC (and Department of Justice (DOJ) Antitrust Division, for that matter) have the power to prosecute ISPs under the Sherman Act for conduct that damages competition in markets for provision of content to consumers. For example, if an ISP has market power in ISP markets and restricts its customers’ access to the content of a multichannel video distributor or online video distributor with which the ISP competes (such as could be the case with large, vertically integrated ISPs like Comcast/NBCU), it will likely face investigation and enforcement action under the antitrust laws. The FTC also could challenge such conduct as an “unfair method of competition” under Section 5 of the FTC Act.

Consumers and companies should be mindful that unlike the FTC Act, many state “little FTC acts” have private causes of action that can, at times, be used by competitors to bring an action against a company for unfair or deceptive practices toward consumers. Damaged competitors also could bring private antitrust actions that carry with them the significant threat of treble damages, and could seek injunctions against certain types of market-restricting bandwidth-management practices.

Chairman Pai’s fundamental rationale for the move was based on reports of a decline in investment in the infrastructure of the internet. While some commentators challenged these numbers, the RIFO fact sheet prepared by the FCC states that since the 2015 net neutrality rules were passed, “investment has fallen for two years in a row – the first time that that’s happened outside of a recession in the Internet era.” Whether RIFO will be the key to unlock the door to further investment in broadband or instead fulfill the predictions of doom prophesied by its naysayers is a question that can only be answered with time. How much time – or even if we find out – is an open issue. Already the attorneys general of New York, Massachusetts, and Washington have indicated that they intend to challenge RIFO, and there are rumblings in Congress of an interest in looking at the issue. 

It is worth remembering that in 2006, in a comment that later caused considerable mirth in certain quarters, former Senator Ted Stevens of Alaska referred to the internet as “a series of tubes.” He made these comments during a debate over a congressional proposal regarding (you guessed it) net neutrality. If past is prologue, it seems most likely that the back and forth over net neutrality will be with us for some time to come.

 About the Author

Lawson_Richard_New-Bio-Template-730-x-730.jpgRichard P. Lawson, now in private practice, was a partner in the consumer protection practice of law firm, Manatt, Phelps & Phillips, LLP, where he concentrated his practice on FTC and state attorney general investigations and litigation. Before joining Manatt, Richard served as the director of the Consumer Protection Division for the Florida Attorney General’s Office. Much of Richard’s work focuses on handling regulatory inquiries into deceptive marketing and unfair trade practices, with a particular focus on consumer protection laws in the digital sphere. Richard has worked on many cases brought by the agency involving the interplay of the Restore Online Shoppers’ Confidence Act (ROSCA) and the Communications Decency Act.

Dunlop_Lisl_New-Bio-Template-730-x-730_2017_v2a.jpgLisl J. Dunlop is a partner in the New York office of Manatt, Phelps & Phillips, LLP, and co-chair of the firm’s antitrust and competition practice group. She advises leading U.S. and multinational companies in an array of industries—in particular the media, technology and healthcare sectors—on a broad range of antitrust counseling, antitrust litigation and transactional matters. Lisl advises on the antitrust-related aspects of mergers and acquisitions, joint ventures and other combinations, and sales and distribution matters; represents clients in antitrust agency investigations; and has represented major corporations in complex antitrust litigations, including multidistrict, treble damages class actions. Lisl has regularly been recognized as a leading antitrust lawyer in Chambers USA, Legal 500, Who’s Who Legal and Global Competition Review.

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The statements, opinions, and advertisements expressed on the ERA Blog and other online entities owned by the Electronic Retailing Association are those of individual authors and companies and do not necessarily reflect the views of the Electronic Retailing Association.