The Federal Trade Commission (FTC) announced that AT&T will pay $60 million to settle its lawsuit against the company over its unlimited data plans.
In 2014, the FTC sued AT&T for allegedly misleading its millions of smartphone customers by charging them for unlimited data plans while reducing their data speeds.
The consumer watchdog found that the wireless provided failed to adequately disclose to customers that if they use up a certain amount of data at given cycle; it will throttle their data speeds. At some point, customers experience difficulty using common apps on their smartphones such as web browsing.
In its complaint, the FTC alleged that AT&T started throttling data speeds for its unlimited data plan customers who used 2 gigabytes of data in a billing period starting 2011. The company’ practice allegedly affected more than 3.5 million customers as of October 2014.
The wireless provider challenged the FTC’s jurisdiction to file the lawsuit against it. In 2018, the Ninth Circuit U.S. Court of Appeals ruled that the consumer watchdog has authority to hold AT&T accountable for its misleading marketing of mobile data services. The appeals court allowed the FTC’s litigation to proceed.
“AT&T promised unlimited data—without qualification—and failed to deliver on that promise. While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised,” said FTC Bureau of Consumer Protection Director Andrew Smith in a statement.
AT&T to provide partial refunds to customers
Under the settlement, the $60 million paid by AT&T will be deposited into a fund. The company will use the fund to provide partial refunds to current and former customers who originally signed up for unlimited data plans before 2011 and were affected by its throttling.
The FTC said current AT&T customers will automatically receive a credit to their bills while former customers will receive checks for the refund amount they are owed.
The settlement also prohibits AT&T from misrepresenting the size and speed of its mobile data speed. It cannot market its mobile data as “unlimited” without properly disclosing any material restrictions on the speed or amount of data.
It requires the company to make its disclosures prominent. It cannot place its disclosures behind hyperlinks or use fine prints.
“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,” according to the FTC.