In July, the Federal Trade Commission accused Warner Bros of failing to disclose that it paid some well-known gaming fans to promote "Middle Earth: Shadow of Mordor" on YouTube.
Warner Bros, which will be part of AT&T if its $85 billion merger with Time Warner closes, agreed to settle the charges, but the deal isn't yet final.
Today, the FTC told a federal appellate court that if AT&T completes its merger with Time Warner, the agency will no longer be able to police questionable influencer marketing by any of the company's divisions.
That's because a three-judge panel of the 9th Circuit recently barred the FTC from proceeding with a lawsuit accusing AT&T of duping consumers by selling them "unlimited" data, but throttling them after they hit a cap. The judges ruled that the FTC lacks jurisdiction over common carriers -- even if they're not engaged in common-carrier activity. (A different agency, the Federal Communications Commission, classified broadband in 2015 as a "common carrier" service, subject to net neutrality rules. But the FTC's lawsuit against AT&T concerned events before mobile broadband was reclassified.)
The FTC recently asked the 9th Circuit to reconsider that ruling; numerous outside groups are backing the agency's request. The FTC and its supporters argue that the ruling could place many companies that offer a mix of common carrier services, like broadband access, and non-common carrier services, like search engines, outside the agency's jurisdiction. Sen. Richard Blumenthal (D-Conn.) pointed out in a friend-of-the-court brief that the ruling could mean that Google is no longer subject to the FTC's authority, because it owns the common carrier service Google Fiber.
Today, the FTC called the judges' attention to the proposed AT&T-Time Warner merger, arguing that it "illustrates a key point."
"Under the panel’s ruling, companies not engaged in common carriage could acquire the 'status' of common carriers through corporate acquisitions," the FTC says in its new papers. "Time Warner is not a common carrier, but if its entertainment and media businesses were combined with AT&T’s common carrier telecommunications businesses, Time Warner could argue that it has common-carrier status."
The FTC adds that no other federal agency has the power to police Warner Bros' ad techniques. "The proposed AT&T/Time Warner transaction thus highlights the significant enforcement gap that would be created under the panel’s status-based ruling."
AT&T is expected to respond to the FTC's arguments later this month.