AT&T will pay $60 million to resolve allegations that it duped millions of wireless customers by promising them unlimited data but throttling them after they hit a monthly cap, the Federal Trade Commission said Tuesday.
If approved by U.S. District Court Judge Edward Chen in San Francisco, the settlement will resolve a 2014 lawsuit brought by the FTC against the carrier.
The agency alleged that between 2011 and 2014, AT&T slowed the wireless broadband connections of more than 3.5 million customers who exceeded monthly allotments of 3GB or 5GB, depending on their phones.
AT&T subscribers who were affected by the throttling will receive at least partial refunds, the FTC said Tuesday.
FTC Commissioner Rohit Chopra on Tuesday criticized the company for pulling a “bait-and-switch” on customers.
“AT&T wanted the rewards without the risks, so it turned its offer of an 'unlimited' data plan into a bait-and-switch scam that victimized millions of Americans,” he stated. “Subscribers were lured in with promises of unlimited data service for a fixed fee, trapped into multiple years of service by punitive termination fees, and then forced to switch to a more expensive tiered plan with overage fees to actually receive the unlimited data they were promised.”
After the FTC filed suit, AT&T revised its throttling practices, as well as its “unlimited” data plans. Starting in 2015, AT&T moved to a "soft cap" system that involved throttled customers after they consumed 22 GB a month of data, but only when the network is congested. Last week, the company announced new “unlimited” plans that have soft caps of 50 GB and 100 GB.
The proposed settlement unveiled Tuesday requires AT&T to prominently disclose any speed restrictions on “unlimited” data.
The Obama-era Federal Communications Commission also initiated proceedings against AT&T, proposing a $100-million fine for its alleged failure to transparency disclose broadband practices. The current Republican-controlled FCC dropped the matter two years ago.
A group of AT&T wireless consumers also brought a potential class-action lawsuit against the company over the slowdowns. AT&T has argued that the case should be dismissed because its agreements with customers require arbitration of all disputes.
Chen, who also presides over that matter, initially granted AT&T's request. But last year, Chen reconsidered in light of a recent decision by the California Supreme Court, which ruled against enforcing an arbitration agreement in a case where a consumer sought an injunction.
AT&T appealed Chen's ruling to the 9th Circuit Court of Appeals, which is still considering the matter.