The Federal Trade Commission (FTC) announced on Tuesday that AT&T has agreed to pay $60 million to settle a legal dispute over allegations that the telco misled millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds.
The settlement brings an end to a dispute that first arose in 2014. The case had been thrown out in 2016, but it was reopened a year later by a federal appeals court as it wanted to revisit whether AT&T should be exempt from FTC regulatory oversight because it operates as a common carrier.
The appeals court ultimately found that the FTC did have jurisdiction and authority to challenge the company’s marketing of mobile data services, allowing the regulator’s case to proceed.
In the dispute, the FTC accused AT&T of reducing — or “throttling” — its customers’ data speeds to the point that many common mobile phone applications, such as web browsing and video streaming, became difficult or nearly impossible to use.
“AT&T promised unlimited data — without qualification — and failed to deliver on that promise,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that internet providers must tell people about any restrictions on the speed or amount of data promised.”
As part of the settlement, the telco will deposit $60 million into a fund that will be used to provide “partial refunds” to both current and former customers who had originally signed up for unlimited plans prior to 2011 and experienced throttling.
Affected consumers will not be required to submit a claim for the refunds, with current AT&T customers to automatically receive a credit to their bills while former customers will receive cheques for the amount they are owed.
The company will also be prohibited from making any representations about the speed or amount of mobile data in its plans, including that it is “unlimited”, unless it discloses any restrictions on the speed or amount of data that those plans may have.
“For example, if an AT&T website advertises a data plan as unlimited, but AT&T may slow speeds after consumers reach a certain data cap, AT&T must prominently and clearly disclose those restrictions,” the FTC said.
This is not the first time AT&T has been slapped with a fine from the FTC, having been ordered to pay $100 million back in 2015 for misleading consumers about its unlimited mobile data plans. For that fine, AT&T had slowed down data speeds for customers with unlimited data plans and didn’t notify them.