No. 15-16585 IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. AT&T MOBILITY LLC, a limited liability company, Defendant-Appellant. On Appeal from the United States District Court for the Northern District of California in Case No. 3:14-cv-04785 (Chen, J.) BRIEF OF THE FEDERAL COMMUNICATIONS COMMISSION AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLEE Brendan Carr General Counsel David M. Gossett Deputy General Counsel Jacob M. Lewis Associate General Counsel Scott M. Noveck Counsel FEDERAL COMMUNICATIONS COMMISSION 445 12th Street SW Washington, DC 20554 (202) 418-1740 fcclitigation@fcc.gov Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 1 of 51 (i) TABLE OF CONTENTS Page TABLE OF AUTHORITIES ........................................................................... ii INTEREST OF THE FEDERAL COMMUNICATIONS COMMISSION ........................................................................................... 1 INTRODUCTION AND BACKGROUND ....................................................... 2 SUMMARY OF THE ARGUMENT................................................................. 6 ARGUMENT ..................................................................................................... 7 A. The FTC Act’s Common-Carrier Exception Must Be Read In Conjunction With The Communications Act, Which Demonstrates That The Exception Is Activity-Based. ................ 8 B. The History Of The Addition Of The Communications Act To The Common-Carrier Exception Supports This Reading. .... 19 CONCLUSION ............................................................................................... 29 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMIT ......... 30 CERTIFICATE OF FILING AND SERVICE ............................................... 31 Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 2 of 51 (ii) TABLE OF AUTHORITIES Cases: Page(s) Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399 (2012) ............................................................................. 19 Comput. & Commc’ns Indus. Ass’n v. FCC, 693 F.2d 198 (D.C. Cir. 1982) ............................................................. 11 Crosse & Blackwell Co. v. FTC, 262 F.2d 600 (4th Cir. 1959) ............................................................... 15 ICC v. Goodrich Transit Co., 224 U.S. 194 (1912) ............................................................................. 24 In re Consol. Land Disposal Reg. Litig., 938 F.2d 1386 (D.C. Cir. 1991) ........................................................... 13 Kohlsaat v. Murphy, 96 U.S. 153 (1877) ............................................................................... 13 McDonnell Douglas Corp. v. Gen. Tel. Co. of Cal., 594 F.2d 720 (9th Cir. 1979) ............................................................... 11 Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC (NARUC), 533 F.2d 601 (D.C. Cir. 1976) ............................................................. 11 Nat’l Cable & Telecomm. Ass’n v. Brand X, 545 U.S. 967 (2005) ............................................................................... 3 Pickett v. United States, 216 U.S. 456 (1910) ............................................................................. 15 Santa Fe, Prescott & Phoenix Ry. v. Grant Bros. Constr. Co., 228 U.S. 177 (1913) ............................................................................. 24 Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014) ............................................................. 12 W. Va. Univ. Hosps. v. Casey, 499 U.S. 83 (1991) ............................................................................... 15 Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 3 of 51 TABLE OF AUTHORITIES (continued) Page(s) (iii) Legislative And Administrative Materials: 51 Cong. Rec. 8996 (May 21, 1914) ......................................................... 24 81 Cong. Rec. 2805 (Mar. 29, 1937) ........................................................ 26 In re AT&T Mobility, LLC, 30 FCC Rcd. 6613 (2015) ...................................................................... 3 Protecting & Promoting the Open Internet, 30 FCC Rcd. 5601 (2015), pets. for review denied, U.S. Telecom Ass’n v. FCC, 825 F.3d 674 (D.C. Cir. 2016), pets. for reh’g denied, 855 F.3d 381 (D.C. Cir. 2017) .................................................. 4 Restoring Internet Freedom, 32 FCC Rcd. ---, 2017 WL 2292181 (2017) ........................................... 4 Statement of E.S. Wilson, in Federal Trade Commission Act Amendments: Hearing on S. 3744 Before the H. Comm. on Interstate & Foreign Commerce (74th Cong. 1936) .................... passim Statement of Harvey Hoshour, in To Amend the Federal Trade Commission Act: Hearing on H.R. 3143 Before the H. Comm. on Interstate Trade & Foreign Commerce (75th Cong. 1937) ..... 24, 25, 27 Statement of Hon. Ewin L. Davis, in Federal Trade Commission Act Amendments: Hearing on S. 3744 Before the H. Comm. on Interstate & Foreign Commerce (74th Cong. 1936) ............................ 22 Statutes And Regulations: Communications Act of 1934, as amended, 47 U.S.C. §§ 151 et seq. ............................................................... passim 47 U.S.C. § 153(51) ..................................................................... passim 47 U.S.C. § 201(b) ..................................................................... 7, 10, 21 Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 4 of 51 TABLE OF AUTHORITIES (continued) Page(s) (iv) 47 U.S.C. § 332(c)(1) ................................................................... passim 47 U.S.C. § 332(c)(2) ........................................................................... 12 Federal Trade Commission Act (FTC Act), as amended, 15 U.S.C. §§ 41 et seq. ................................................................. passim 15 U.S.C. § 44 .................................................................................... 2, 9 15 U.S.C. § 45(a)(2) ..................................................................... passim Wheeler–Lea Act of 1938, Pub. L. No. 75-447, 52 Stat. 111 ..................................................... 9, 27 Other Authorities: Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts (2012) .............. 14, 15 FCC–FTC Consumer Protection Memorandum of Understanding (Nov. 16, 2015), available at 2015 WL 7261839 ................................. 10 Henry Campbell Black, Handbook on the Construction and Interpretation of the Laws (2d ed. 1911) ...................................... 13, 14 Joint Statement of FCC Chairman Ajit Pai and Acting FTC Chairman Maureen K. Ohlhausen on Protecting Americans’ Online Privacy (Mar. 1, 2017), available at 2017 WL 823586 ........... 10 Norman J. Singer, Sutherland Statutes and Statutory Construction (7th ed. 2007) ................................................................ 14 Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 5 of 51 - 1 - No. 15-16585 IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. AT&T MOBILITY LLC, a limited liability company, Defendant-Appellant. On Appeal from the United States District Court for the Northern District of California in Case No. 3:14-cv-04785 (Chen, J.) BRIEF OF THE FEDERAL COMMUNICATIONS COMMISSION AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLEE Pursuant to Ninth Circuit Rule 29-2(a), the Federal Communications Commission submits this amicus brief in support of plaintiff-appellee Federal Trade Commission. INTEREST OF THE FEDERAL COMMUNICATIONS COMMISSION This appeal concerns the division of authority between the Federal Trade Commission and the Federal Communications Commission. For decades, the FCC and the FTC have worked cooperatively to respect federal law’s careful delineation of authority between the two agencies, Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 6 of 51 - 2 - seeking to ensure that businesses providing communications services will neither be subject to conflicting demands from two regulators nor fall into a regulatory gap. Because the prior panel decision gravely upset this careful balance, potentially creating a regulatory no man’s land that is exempt from both FTC and FCC jurisdiction, the Federal Communications Commission has a significant interest in the outcome of this case. INTRODUCTION AND BACKGROUND Section 5 of the FTC Act gives the Federal Trade Commission authority to take action against unfair or deceptive acts or practices in or affecting commerce, subject to certain exceptions—including an exception for “common carriers subject to” the Communications Act. 15 U.S.C. § 45(a)(2); see also id. § 44 (cross-referencing the Communications Act). The Communications Act gives the Federal Communications Commission authority over communications by wire or radio, and it further provides that any service classified as a telecommunications service shall be treated as a common carrier and subject to comprehensive utility-style regulation under Title II of the Act. Communications Act of 1934, as amended, 47 U.S.C. §§ 151 et seq. The FCC’s classification of services under the Communications Act thereby works in conjunction with the FTC Act’s Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 7 of 51 - 3 - common-carrier exception to mark the boundary between the two agencies’ respective jurisdiction over telecommunications companies. Until early 2015, broadband internet access service was for many years classified as a non-common-carrier “information service” under the Communications Act. See Nat’l Cable & Telecomm. Ass’n v. Brand X, 545 U.S. 967 (2005). Under this regime, the FTC and FCC engaged in complementary regulation of that service. During this period, the FTC in October 2014 brought this suit alleging that AT&T committed an unfair and deceptive practice in marketing its wireless broadband internet access service, in violation of Section 5 of the FTC Act, by not adequately disclosing the terms of its “unlimited” mobile data plans. See FTC Br. 3–5.1 1 In June 2015, the FCC issued a Notice of Apparent Liability (NAL) finding that AT&T’s conduct apparently violated FCC disclosure requirements. In re AT&T Mobility, LLC, 30 FCC Rcd. 6613 (2015). An NAL is not an actual adjudication of liability, but instead is akin to a bill of particulars that advises a party of how it appears to have violated the law and offers an opportunity to respond. A majority of the FCC’s current commissioners dissented from the decision to issue the NAL, see id. at 6629–43, and no further action has been taken on it. Notably, the FCC rule underlying the NAL was not adopted pursuant to Title II’s pervasive common-carrier regime, so the congressional concern that gave rise to the common-carrier exception was not at issue. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 8 of 51 - 4 - In February 2015, while this suit was pending in the district court, the FCC adopted the Open Internet Order, which reclassified both fixed and wireless broadband internet access as common-carrier “telecommunications services” subject to comprehensive utility-style regulation under Title II of the Communications Act.2 For any conduct occurring after that order took effect, the FCC’s reclassification exempts broadband internet access service from FTC oversight and authority by operation of the FTC Act’s common-carrier exception. This case, however, concerns conduct that occurred before the FCC’s reclassification. See FTC Br. 56–64. Earlier this month, the FCC adopted a Notice of Proposed Rulemaking proposing to reverse the FCC’s common-carrier reclassification and return to treating broadband internet access service as a non-common-carrier information service—and in the process, seeking to restore the FTC’s power to oversee such services. See Restoring Internet Freedom, 32 FCC Rcd. ---, 2017 WL 2292181, ¶¶ 66–67 (2017). The FCC’s proposed regulatory changes, if adopted, would not resolve the issue in this appeal, because in addition to the broadband services at 2 Protecting & Promoting the Open Internet, 30 FCC Rcd. 5601 (2015), pets. for review denied, U.S. Telecom Ass’n v. FCC, 825 F.3d 674 (D.C. Cir. 2016), pets. for reh’g denied, 855 F.3d 381 (D.C. Cir. 2017). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 9 of 51 - 5 - issue in the FCC’s proceeding, AT&T also provides traditional wireline and wireless voice telephone service, which are (and always have been) Title II common-carrier services. The issue here therefore must be addressed even if the FCC returns broadband service to the regulatory status that applied when the FTC brought this case. If the en banc Court were to adopt AT&T’s position that the FTC Act’s common-carrier exception is “status-based” rather than “activity-based,” contrary to the reasoned analysis of the district court below, the fact that AT&T provides traditional common-carrier voice telephone service could potentially immunize the company from any FTC oversight of its non- common-carrier offerings, even when the FCC lacks authority over those offerings—creating a potentially substantial regulatory gap where neither the FTC nor the FCC has regulatory authority. That approach is contrary to a common-sense reading of the relevant statutes and could weaken or eliminate important consumer protections. While AT&T may prefer to offer services in a regulatory no man’s land, the law does not dance to AT&T’s whims. The Court should reject that unsound approach and instead affirm the decision below. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 10 of 51 - 6 - SUMMARY OF THE ARGUMENT The FTC Act’s common-carrier exception expressly depends on whether an entity is a common carrier “subject to” the Communications Act. The Communications Act, in turn, specifies that telecommunications providers may be treated as common carriers, and thereby subject to common-carriage regulation by the FCC, only when they are engaged in common-carrier activities. The relevant provisions of the Communications Act, as cross-referenced by the FTC Act’s common-carrier exception, thus turn on the activity in which a carrier is engaged rather than its status as a common carrier in other respects. Therefore, the FTC Act’s common- carrier exception, which is expressly intertwined with the Communications Act, likewise is activity-based. On this reading, the Communications Act and the FTC Act fit hand-in-glove to ensure there is no gap in the federal regulation of telecommunications companies, while also conferring the FCC with exclusive jurisdiction over common-carrier services. By contrast, AT&T’s contention that the FTC Act’s common-carrier exception is status-based, even though common-carriage regulation under the Communications Act is activity-based, would open a potentially substantial regulatory gap and greatly disrupt the federal regulatory scheme. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 11 of 51 - 7 - This reading is confirmed by the history of the amendment incorporating the Communications Act into the FTC Act’s common-carrier exception. The amendment was proposed in 1936 by E.S. Wilson, vice president of AT&T, who expressed concern that a telecommunications company could be subject to conflicting regulatory obligations if the FCC’s view of just and reasonable rates for common-carrier services diverged from the FTC’s views on unfair competition and unfair practices. Wilson’s rationale for his proposed amendment demonstrates that the amendment was designed as an activity-based exception, not a status-based immunity. AT&T’s alternative reading of the legislative history is at odds with the AT&T vice president’s lobbying on this precise issue in 1936, and its newfound position (which misattributes the amendment to a different source) misunderstands the origin and meaning of the amended language. The text, context, and history of the common-carrier exception thus all indicate that the exception was designed simply to avoid duplicative regulation under Section 5 of the FTC Act when a given service is already subject to comprehensive utility-style regulation by the FCC under Title II of the Communications Act, including the FCC’s authority under 47 U.S.C. § 201(b) to prescribe just and reasonable rates and practices for common- carrier services. It does not, as AT&T would have it, create an unexplained Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 12 of 51 - 8 - regulatory gap that deprives the FTC of its Section 5 authority even when the FCC has no commensurate authority, or in some cases no authority at all. ARGUMENT A. The FTC Act’s Common-Carrier Exception Must Be Read In Conjunction With The Communications Act, Which Demonstrates That The Exception Is Activity-Based. Section 5 of the FTC Act provides the FTC with broad power to “prevent persons, partnerships, or corporations * * * from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a)(2). At the same time, the statute exempts from FTC oversight “common carriers subject to the Acts to regulate commerce.” Ibid. AT&T urges that this language unambiguously establishes that the common-carrier exception is “status-based,” rather than “activity-based,” so that if a company has the status of a common carrier as to any particular aspect of its business, it can completely escape the FTC’s Section 5 jurisdiction even with respect to services that are not covered by any sort of common-carriage requirements. AT&T Br. 24–43. To reach that conclusion, AT&T not only ignores that common carriage has always been understood as an activity-based concept, see FTC Br. 15–22; FTC Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 13 of 51 - 9 - Reh’g Pet. 5–6, 12–16, but also overlooks the crucial interplay between the FTC Act and the Communications Act, upon which the FTC Act’s common- carrier exception expressly relies. Section 4 of the FTC Act, reprinted in modified form at 15 U.S.C. § 44, defines “Acts to regulate commerce” as “the Act entitled ‘An Act to regulate commerce,’ approved February 14, 1887”—better known as the Interstate Commerce Act—“and the Communications Act of 1934 [including all subsequent amendments].” Wheeler–Lea Act of 1938, Pub. L. No. 75-447, § 2, 52 Stat. 111, 111. The Communications Act, in turn, authorizes comprehensive common-carriage regulation of telecommunications providers only when they are engaged in common- carrier activities. See, e.g., 47 U.S.C. §§ 153(51), 332(c)(1). In other words, the provisions of the Communications Act cross-referenced by the FTC Act’s common-carrier exception are activity-based, not status-based—and so the common-carrier exception is activity-based as well. 1. The FTC Act’s common-carrier exception depends on, and indeed expressly cross-references, the corresponding provisions of the Communications Act. The Communications Act and the FTC Act thus fit hand-in-glove to ensure there is no regulatory gap in the oversight of telecommunications companies. When a telecommunications company is Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 14 of 51 - 10 - subject under the Communications Act to comprehensive common-carriage requirements overseen by the FCC—including the duty to charge just and reasonable rates and the prohibition on unjust and unreasonable practices, 47 U.S.C. § 201(b)—it falls within the FTC Act’s common-carrier exception, and regulatory oversight is left to the FCC. But when there is no such comprehensive FCC authority, routine regulatory authority remains in the hands of the FTC. Otherwise, if a service were exempt from FTC authority without being subject to commensurate FCC authority, there would be an open gap in the federal regulatory scheme—an exceedingly odd result that cannot be squared with the text of these provisions.3 2. Under the Communications Act, whether a telecommunications company like AT&T is treated as a common carrier depends (and has always been understood to depend) on the activity at issue. As the D.C. 3 For non-common-carrier services, or when the FTC exercises authority under other sections of the FTC Act that are not subject to the common- carrier exception, the FCC and the FTC may possess complementary authority. Recognizing this, the two agencies have entered into a formal memorandum of understanding in which they commit to several measures to “avoid duplicative, redundant, or inconsistent oversight.” FCC–FTC Consumer Protection Memorandum of Understanding (Nov. 16, 2015), available at 2015 WL 7261839; see also Joint Statement of FCC Chairman Ajit Pai and Acting FTC Chairman Maureen K. Ohlhausen on Protecting Americans’ Online Privacy (Mar. 1, 2017), available at 2017 WL 823586 (pledging to harmonize the agencies’ privacy rules to ensure a comprehensive and consistent framework). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 15 of 51 - 11 - Circuit explained decades ago, “[i]t is clear that an entity can be a common carrier with respect to only some of its activities” under the Communications Act, so “the term ‘common carrier’ will be used to indicate not an entity but rather an activity as to which an entity is a common carrier.” Comput. & Commc’ns Indus. Ass’n v. FCC, 693 F.2d 198, 209 n.59 (D.C. Cir. 1982) (citing Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 533 F.2d 601, 608 (D.C. Cir. 1976) (NARUC)). This Court has agreed, recognizing that “[a] carrier may be an interstate ‘common carrier’ within the meaning of [the Communications Act] in some instances but not others, depending on the nature of the activity which is subject to scrutiny.” McDonnell Douglas Corp. v. Gen. Tel. Co. of Cal., 594 F.2d 720, 724 n.3 (9th Cir. 1979) (citing NARUC). Congress has incorporated this activity-based approach into the plain text of the Communications Act. Under Section 3(51) of the Act, “[a] telecommunications carrier shall be treated as a common carrier under [this Act] only to the extent that it is engaged in providing telecommunications services[.]” 47 U.S.C. § 153(51) (emphasis added). Similarly, under Section 332(c)(1) of the Communications Act, “[a] person engaged in the provision of a service that is a commercial mobile service shall, insofar as such person is so engaged, be treated as a common carrier Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 16 of 51 - 12 - for purposes of” the Act. Id. § 332(c)(1) (emphases added).4 Applying these provisions, the FCC has explained (and the D.C. Circuit has recognized) that a telecommunications company “is to be treated as a common carrier for the telecommunications services it provides, but it cannot be treated as a common carrier with respect to other, non-telecommunications services it may offer.” Verizon v. FCC, 740 F.3d 623, 650 (D.C. Cir. 2014) (quoting FCC orders). A telecommunications company is thus “subject to” the Communications Act as a “common carrier,” 15 U.S.C. § 45(a)(2), only when it is engaged in common-carrier activities. 3. Applying longstanding principles of statutory interpretation, it is evident from the text of the FTC Act and its explicit cross-reference to the Communications Act that the common-carrier exception is activity-based. In particular, as a leading treatise explained at the time when the FTC Act and its common-carrier exception were enacted, “where one statute refers to another for the power given by the former, the statute referred to is to be considered as incorporated in the one making the reference.” Henry Campbell Black, Handbook on the Construction and Interpretation of the 4 Cf. 47 U.S.C. § 332(c)(2) (“A person engaged in the provision of the service that is a private mobile service”—as opposed to a commercial mobile service—“shall not, insofar as such person is so engaged, be treated as a common carrier for any purpose under” this Act.). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 17 of 51 - 13 - Laws § 104, at 339 (2d ed. 1911). Or as another court put it more recently, where “two sections were intended to work together (as evidenced by the cross references [between them]),” a court should reject “divergent interpretations [that] would create a gap in an otherwise complete scheme.” In re Consol. Land Disposal Reg. Litig., 938 F.2d 1386, 1389 (D.C. Cir. 1991). So too here, the common-carrier exception’s explicit cross-reference to the Communications Act incorporates that Act’s activity-based approach and counsels against creating an unexplained gap between the two statutes. More generally, the Supreme Court recognized nearly 140 years ago that “[i]n the exposition of statutes,” the “established rule” is that “where there are several statutes relating to the same subject, they are all to be taken together, and one part compared with another in the construction of any one of the material provisions[.]” Kohlsaat v. Murphy, 96 U.S. 153, 159–60 (1877). “[W]here there is more than one [statute] in pari materia,” the Court explained, “[r]esort may be had * * * to the whole system[] for the purpose of collecting the legislative intention, which is the important inquiry in all cases where provisions are ambiguous or inconsistent.” Ibid.; see also Black, supra, § 104, at 333 (“Whatever is ambiguous or obscure in a given statute will be best explained by a consideration of analogous provisions in other acts relating to the same subject, or by a study of the Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 18 of 51 - 14 - general policy which pervades the whole system of legislation.”). These time-honored principles of statutory interpretation remain in full force today. See, e.g., Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts § 39, at 252–53 (2012) (discussing the related-statutes canon); 2B Norman J. Singer, Sutherland Statutes and Statutory Construction ch. 51 (7th ed. 2007). Under these principles, the fact that common-carrier treatment under the Communications Act applies only when companies are engaged in common-carrier activities means that the FTC Act’s common-carrier exception, which is expressly intertwined with the Communications Act, likewise is activity-based.5 5 Even the panel, which at one point suggested that the common-carrier exception is unambiguous when viewed in isolation, Op. 9–12, appears to have recognized that related provisions may inform the meaning of that exception, since it proceeded to examine the common-carrier exception in light of a separate exception for activities subject to the Packers and Stockyards Act, see Op. 12–18. As the FTC notes, the panel erred in relying on language from a 1958 amendment to the packers- and-stockyards exception to inform the meaning of the common-carrier exception, which was enacted in 1914 and last amended in 1938. See FTC Reh’g Pet. 14–15. But in any event, there is no reason why the Court should consider the separate packers-and-stockyards exception yet ignore the parallel provisions of the Communications Act, which is expressly cross-referenced by the common-carrier exception itself. See Black, supra, § 104, at 333 (“[T]he same principle which requires us to study the context for the meaning of a particular phrase or provision, and which directs us to compare all the several parts of the same statute, only takes on a broader scope when it bids us read together, and with reference to each other, all statutes in pari materia.”). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 19 of 51 - 15 - Consistent with these principles, moreover, the Supreme Court has instructed more broadly that courts must construe statutes to “contain that permissible meaning which fits most logically and comfortably into the body of * * * law,” because “it is our role to make sense rather than nonsense out of the corpus juris.” W. Va. Univ. Hosps. v. Casey, 499 U.S. 83, 100–01 (1991); see also Scalia & Garner, supra, at 252–53, 330–31. It would make little sense here to treat the FTC Act’s common-carrier exception for telecommunications companies as status-based when common-carriage regulation of telecommunications companies under the Communications Act is activity-based. As the Supreme Court has admonished, “[n]o construction should be adopted, if another equally admissible can be given, which would result in what might be called a judicial chasm.” Pickett v. United States, 216 U.S. 456, 460 (1910). And just as “Congress did not anticipate that a great steel company might attempt to escape the restraint of the antitrust laws by operating a small packing plant,” Crosse & Blackwell Co. v. FTC, 262 F.2d 600, 604–05 (4th Cir. 1959), so too there is no reason to allow a large conglomerate to exempt all of its operations from FTC oversight simply because some other (perhaps entirely unrelated) portion of its activities is subject to common- carriage requirements under the Communications Act. Cf. FTC Reh’g Pet. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 20 of 51 - 16 - 11 (explaining that the panel decision “creates a roadmap for companies to attempt to immunize themselves against FTC enforcement by acquiring a common carrier or offering common-carrier service”); Consumers Union et al. Amicus Br. in Supp. of Reh’g 7–14. 4. In a recent filing, AT&T urged the Court to ignore these interlocking statutory provisions—and the time-honored interpretive principles that apply to this statutory text—because, it argued, “Congress expressly limited the applicability of the [Communications Act] provisions cited by the FCC to the context of the Communications Act.” Letter from Michael K. Kellogg, Counsel for AT&T, to Molly C. Dwyer, Clerk of Court (Apr. 24, 2017) (Dkt. Entry 72). That argument misses the point: Our submission is not that these provisions purport to alter or override the meaning of any terms in the FTC Act, but rather that, by the FTC Act’s own terms, determining when an entity qualifies as a “common carrier[] subject to” the Communications Act, 15 U.S.C. § 45(a)(2), in turn depends on how common carriage operates under the Communications Act. The panel’s observation that “[t]he common carrier exemption is surrounded by exemptions for ‘banks,’ ‘savings and loan institutions,’ and ‘Federal credit unions,’” which the panel perceived as status-based exceptions, Op. 10, instead supports an activity-based approach to the Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 21 of 51 - 17 - common-carrier exception. As the FTC suggests, financial institutions are pervasively regulated and subject to extensive supervision from federal financial regulators in a way that telecommunications companies are not, so it makes sense that Congress exempted heavily regulated financial institutions generally, without qualification. See FTC Reh’g Pet. 16–17. Yet the Communications Act subjects telecommunications companies to comprehensive common-carriage regulation only when they are engaged in common-carrier activities. See 47 U.S.C. §§ 153(51), 332(c)(1). By the same logic, therefore, the common-carrier exception should (and does) exempt telecommunications companies from FTC oversight only when providing those services and not when they are providing other, non-common-carrier services. Congress thus exempted telecommunications common carriers “subject to” the Communications Act. 15 U.S.C. § 45(a)(2) (emphasis added); see FTC Br. 18–19 (“Congress’s use of the phrase ‘subject to’ for common carriers—but not for banks—shows that the bank exemption was categorical but the common carrier exception was not.”). Despite the clear textual difference between the unqualified language used to create a status-based exception for financial institutions and the more qualified “subject to” language used for the common-carrier exception, AT&T insists that if Congress had really wanted the common-carrier Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 22 of 51 - 18 - exception to be activity-based, it could have used the more extended phrase “insofar as they are subject to,” as is used in the current version of the packers-and-stockyards exception. See AT&T Br. 25–28. That argument fails for three reasons. First, there was no need for Congress to use activity-based language such as “insofar as” (or “to the extent that”) in the common-carrier exception because the term “common carrier” itself has always been understood, both in general and under the Communications Act specifically, to refer to particular activities rather than some abstract status. See FTC Br. 15–18, 21–22; FTC Reh’g Pet. 5–6, 12–15. Indeed, Congress has embraced the view that common carriage under the Communications Act is status-based by placing the very language AT&T seeks in the Communications Act itself, see 47 U.S.C. § 153(51) (“to the extent that”); id. § 332(c)(1) (“insofar as”), which the FTC Act’s common-carrier exception incorporates by reference. Second, the “insofar as” language that AT&T points to comes from a 1958 amendment and was not part of the statute when the common-carrier exception was adopted in 1914 or when it was extended to incorporate the Communications Act in 1938, so the fact that a later Congress acting with the benefit of hindsight was able to formulate even more precise language Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 23 of 51 - 19 - tells us nothing about what Congress had in mind when it enacted the common-carrier exception. See FTC Br. 27–28; FTC Reh’g Pet. 15–16. Nor does “the mere possibility of clearer phrasing,” even when used elsewhere within the same statute, mean that the language Congress originally used was not clear enough. Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 416 (2012). Third, as the FTC explains, the 1958 addition of the “insofar as” language was not meant to change the meaning of the packers-and- stockyards exception, but instead to make explicit that the original “subject to” language was designed to be activity-based. See FTC Br. 30–33. That history therefore supports rather than undercuts the view that the “subject to” language in the common-carrier exception is activity-based. B. The History Of The Addition Of The Communications Act To The Common-Carrier Exception Supports This Reading. 1. An activities-based approach to the FTC Act’s common-carrier exception is supported by the history of the amendment incorporating the Communications Act into that exception. The amendment was first proposed in 1936 in testimony and an accompanying memorandum from E.S. Wilson, vice president of AT&T (the corporate predecessor to appellant AT&T here). See Wilson Testimony, attached as Addendum Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 24 of 51 - 20 - A.6 Concerned that the passage of the Communications Act and creation of the FCC in 1934 could in some circumstances subject a telecommunications company to conflicting FCC and FTC obligations, Wilson proposed two versions of an amendment to exempt telecommunications companies from FTC requirements when their charges and practices are already comprehensively regulated by the FCC. Wilson’s principal proposal was a very short, 18-word amendment to expand the definition of “Acts to regulate commerce,” as that term is used in the common-carrier exception, to include the Communications Act of 1934 (and all subsequent amendments) in addition to the Interstate Commerce Act. Id. at 62, 64. In the alternative, Wilson offered a slightly longer version of the same amendment “to make it perfectly clear” that the exception is limited to those activities regulated by the FCC, via an express proviso: “Provided, That a common carrier under the [Communications Act] is excepted as a common carrier under this act only in respect of matters to which the Federal Communications Commission is by law authorized to act.” Id. at 62–63, 64. Wilson did not suggest that 6 Statement of E.S. Wilson, in Federal Trade Commission Act Amendments: Hearing on S. 3744 Before the H. Comm. on Interstate & Foreign Commerce 61 (74th Cong. 1936). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 25 of 51 - 21 - there was any material difference between the two proposals, and indeed from his testimony he appears to have been entirely indifferent between the two formulations. See, e.g., id. at 63 (“I suggest either one of these amendments, which to my mind would carry out the intention of Congress” to avoid conflicting regulatory mandates). Wilson explained that the purpose of his amendment was “to clear up a situation which presents the possibility of a conflict of jurisdiction between” the FTC and the FCC and “to avoid the possibility of a conflict of jurisdiction.” Id. at 65. He pointed specifically to Section 201(b) of the Communications Act, 47 U.S.C. § 201(b), part of the common-carriage requirements in Title II of the Act, giving the FCC authority to prescribe just and reasonable rates and practices. Wilson Test. 64, 65. If the FCC’s view of just and reasonable rates and practices diverged from the FTC’s view of what constitutes unfair competition or unfair practices, then common-carrier telecommunications services could be subject to conflicting regulatory mandates under Title II of the Communications Act and Section 5 of the FTC Act. Under this stated rationale, interpreting the common-carrier exception to be status-based, rather than activity-based, would make no Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 26 of 51 - 22 - sense. Interpreting the common-carrier exception to preclude FTC authority over activities that are not subject to commensurate oversight (or even any regulatory authority) by the FCC would not avoid any conflict of jurisdiction, but instead would create an unexplained gap in the regulatory scheme. Wilson himself made clear that his amendment would not and should not create any such gap, affirming that “all of the power” that the FTC would lose under the common-carrier exception “is now within the provisions of the Federal Communications Act.” Wilson Test. 63.7 In response to a concern about jurisdiction over radio stations, Wilson submitted a written reply and asked for it to be entered into the record. See Wilson Test. 66. Wilson explained that the amendment would 7 Later in the hearing, FTC Commissioner Davis was asked to respond to Wilson’s proposals. Commissioner Davis stated that because the FTC has no jurisdiction to enforce the Communications Act and the FCC has no jurisdiction to enforce the FTC Act, he saw no potential for conflict between the agencies and no need for an amendment. But his testimony confirms that he shared the then-accepted understanding that the common-carrier carve-out is activity-based: “[T]he major part of the communication companies’ services are not common carriers. With some of them it is very difficult to determine whether they are or not; but if they”—that is, the parts of a company’s services at issue—“are common carriers, we have no jurisdiction.” Statement of Hon. Ewin L. Davis, in Federal Trade Commission Act Amendments: Hearing on S. 3744 Before the H. Comm. on Interstate & Foreign Commerce 75, 82 (74th Cong. 1936). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 27 of 51 - 23 - not exempt radio stations from FTC oversight because radio stations fall under Title III of the Communications Act, whereas the common-carriage requirements that govern telephone and telegraph service are found in Title II. Ibid.; see also id. at 63 (explain that “the second [title] is common carriers; the third is radio provisions”). But under a status-based approach, this could no longer be true. For example, Cox Enterprises operates a group of radio stations (through Cox Media Group) and also separately offers certain common-carrier telecommunications services (through Cox Communications). Similarly, Comcast owns and operates a number of broadcast television stations (which operate under the same regulatory regime as radio stations) through its acquisition of NBC Universal, and it also recently began offering wireless voice telephone service, which, like AT&T’s same service, is a common-carrier service under the Communications Act. Cf. FTC Reh’g Pet. 1–2, 8–11; Public Knowledge Amicus Br. in Supp. of Reh’g 12–15. Consistent with AT&T vice president Wilson’s testimony that his proposals would not exempt such non-common- carrier services from FTC oversight, it is clear that Wilson’s amendment was understood to adopt an activity-based approach—an understanding that appears to have been lost on AT&T through the course of its corporate Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 28 of 51 - 24 - evolution.8 2. In its brief, AT&T points (at 33–35) to testimony by a different AT&T representative, Harvey Hoshour, who presented an amendment that resembled Wilson’s alternative proposal. See Hoshour Testimony, attached as Addendum B.9 Like Wilson’s alternative proposal, Hoshour’s proposal contained a proviso stating that “common carriers under the [Communications Act] are excepted as common carriers under this act only in respect of their common-carrier operations.” Id. at 23, 25, 27. Hoshour acknowledged that AT&T “might engage in manufacturing, or we might 8 Wilson’s reply further stated that he was seeking the “same exemption [that had] existed for 20 years[] [for] railroads as common carriers,” Wilson Test. 66—an exemption that was understood to be activity- based, see FTC Br. 14–21; FTC Reh’g Pet. 4–5, 13–15. As the House floor manager of the FTC Act bill explained, “where a railroad company engages in work outside of that of a public carrier * * * such work ought to come within the scope of this [Federal Trade] [C]ommission for investigation.” 51 Cong. Rec. 8996 (May 21, 1914); accord ibid. (“[E]ven as to [common carriers], I do not know but that we include their operations outside of public carriage regulated by the interstate commerce acts.”); see also Santa Fe, Prescott & Phoenix Ry. v. Grant Bros. Constr. Co., 228 U.S. 177, 185 (1913) (railroads treated as common carriers only when performing common-carrier activities); ICC v. Goodrich Transit Co., 224 U.S. 194, 211 (1912) (Interstate Commerce Commission did not have jurisdiction over railroads’ non-common- carrier activities). 9 Statement of Harvey Hoshour, in To Amend the Federal Trade Commission Act: Hearing on H.R. 3143 Before the H. Comm. on Interstate Trade & Foreign Commerce 23 (75th Cong. 1937). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 29 of 51 - 25 - possibly go into the manufacturing business, have activities other than our common-carrier activities,” and he then explained that “if the communications companies should go into that kind of thing, into the kind of business in which the Federal Trade Commission has been interested, if they should go into the manufacturing business * * * then this exemption would not apply.” Id. at 25–26. “[W]here common carriers engage in activities that are not in the common carrier field, beyond the field that the [g]overnment is regulating,” Hoshour reiterated, “in that case, they are subject to the jurisdiction of the Federal Trade Commission, which * * * is a sound position to take from the viewpoint of the public interest.” Id. at 26. And when asked whether the amendment “would still leave [AT&T] within the jurisdiction of the Federal Trade Commission if you engaged in activities outside of the field of communications,” Hoshour replied, “Undoubtedly so.” Id. at 27. Hoshour further testified that he believed that the FTC Act already incorporated an activity-based approach to common carriers, even without any explicit proviso—“I have no doubt our manufacturing subsidiary is now subject to the Federal Trade Commission Act”—but stated that he included the proviso merely because “[i]f there is any question about it, this amendment will make it clear.” Hoshour Test. 27. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 30 of 51 - 26 - AT&T nevertheless contends that Hoshour’s proposal supports its view that the common-carrier exception is status-based. According to AT&T, Congress took Hoshour’s proposal and affirmatively “broadened” it by deleting the proviso confirming that the exception is activity-based. AT&T Br. 34. Thus, AT&T’s argument goes, Congress affirmatively “rejected” Hoshour’s activity-based approach and instead must have preferred a status-based approach. Ibid. (emphasis omitted). But AT&T’s understanding of the legislative history is incorrect: Congress did not adopt a modified form of Hoshour’s proposal; rather, it adopted Wilson’s principal proposal, and it did so without alteration. Two features make this clear. First, the amendment was added by the Senate Committee on Interstate Commerce, see 81 Cong. Rec. 2805–06 (Mar. 29, 1937), but Hoshour testified before only the House committee. Cf. FTC Br. 38 (Hoshour’s proposal “was never formally introduced by a member of Congress nor voted on by any committee in either House, but was merely suggested by a witness at a committee hearing and then barely noted”). By contrast, Wilson reported that he had “talked with the chairman of the Senate committee, and * * * submitted the amendment to the chairman of that committee,” Wilson Test. 62, and he also submitted a written memorandum detailing his proposals so that legislators could consult them Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 31 of 51 - 27 - later, see id. at 64–65. Second, and just as noteworthy, is a telltale difference in language. Under Hoshour’s proposal, the definition of “Acts to regulate commerce” would have been amended to add “and the Act entitled the ‘Communications Act of 1934,’” Hoshour Test. 23 (emphasis added), paralleling the existing reference to “the Act entitled ‘An Act to regulate commerce,’ approved February [14, 1887].” Wilson’s principal proposal, however, lacked the italicized words, breaking the parallelism. See Wilson Test. 62, 64. The language adopted by Congress corresponds to Wilson’s formulation, rather than Hoshour’s proposal: “‘Acts to regulate commerce’ means the Act entitled ‘An Act to regulate commerce,’ approved February 14, 1887, * * * and the Communications Act of 1934[.]” Wheeler– Lea Act § 2, 52 Stat. at 111. AT&T’s description of the incorporation of the Communications Act into the FTC Act’s common-carrier exemption—that Congress began with Hoshour’s language making expressly clear that the common-carrier exception should be activity-based, that it then made a conscious decision to delete that language, and that this alleged deletion demonstrates that Congress affirmatively rejected an activity-based approach—is not borne out by the facts. In fact, Congress appears to have given little attention to Hoshour’s proposal. Instead, the amendment incorporating the Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 32 of 51 - 28 - Communications Act into the common-carrier exception came from Congress’s straightforward adoption of Wilson’s principal proposal. And all available evidence indicates that Wilson’s proposal was understood to exempt only those activities subject to comprehensive regulation under the Communications Act’s common-carriage requirements, not any separate non-common-carrier activities. In sum, the legislative history, as well as the text of the governing statutes, shows that the FTC Act exempts common carriers from the FTC’s jurisdiction only when they are “subject to” the Communications Act as such, 15 U.S.C. § 45(a)(2)—i.e., only insofar as, or to the extent that, they are engaged in common-carrier activities, 47 U.S.C. §§ 153(51), 332(c)(1). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 33 of 51 - 29 - CONCLUSION The Court should hold that the FTC Act’s common-carrier exception is activity-based, in accordance with the parallel provisions of the Communications Act, and the district court’s order should be affirmed. Dated: May 30, 2017 Respectfully submitted, /s/ Scott M. Noveck Brendan Carr General Counsel David M. Gossett Deputy General Counsel Jacob M. Lewis Associate General Counsel Scott M. Noveck Counsel FEDERAL COMMUNICATIONS COMMISSION 445 12th Street SW Washington, DC 20554 (202) 418-1740 fcclitigation@fcc.gov Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 34 of 51 - 30 - CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMIT Certificate of Compliance With Type-Volume Limitation, Typeface Requirements and Type Style Requirements 1. This document complies with the type-volume limit of Ninth Circuit Rule 29-2(c)(3) because, excluding the parts of the document exempted by Fed. R. App. P. 32(f): ? this document contains 5,981 words, or ? this document uses a monospaced typeface and contains lines of text. 2. This document complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because: ? this document has been prepared in a proportionally spaced typeface using Microsoft Word 2013 in 14-point Century Schoolbook, or ? this document has been prepared in a monospaced spaced typeface using with . /s/ Scott M. Noveck Scott M. Noveck Counsel for Amicus Curiae Federal Communications Commission Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 35 of 51 - 31 - CERTIFICATE OF FILING AND SERVICE I, Scott M. Noveck, hereby certify that on May 30, 2017, I filed the foregoing Brief of the Federal Communications Commission as Amicus Curiae in Support of Plaintiff-Appellee with the Clerk of Court for the United States Court of Appeals for the Ninth Circuit using the electronic CM/ECF system. I further certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system. /s/ Scott M. Noveck Scott M. Noveck Counsel for Amicus Curiae Federal Communications Commission Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 36 of 51 ADDENDUM A: Wilson Testimony Statement of E.S. Wilson, in Federal Trade Commission Act Amendments: Hearing on S. 3744 Before the H. Comm. on Interstate & Foreign Commerce 61 (74th Cong. 1936). Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 37 of 51 FEDERAL TRADE COMMISSION ACT AMENDMENTS HEARING BEFORE THE COMMITTEE ON INTERSTATE AND FOREIGN CO~IMERCE HOUSE OF REPRESENTATIVES »- . SEVENTY-FOURTH CONGRESS . SECOND SESSION ON S.3744 TO!iAMEND THE ACT CREATING THE FEDERAL TRADE COMMISSION, TO DEFINE ITS Pe.>WERS AND DUTIES, AND FOR OTHER PURPOSES 73060 MAY 27, 28, AND 29, 1936 UNITED STATES GbVERN!llENT PRINTING OFFICE WASHINGTON : 1936 Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 38 of 51 }'EDlm,\L TUADg COMMISRIO.X ACT Al\IEND:i\mNTS' 61 .•hr.re a proccr ~ame unfair mcthohall not he used against such party in any other FIJCt•Ctl in so testifying." i· Amenu line 13 of page 15 by striking out "SEc. 5" and substituting therefor ·~EC. 3." · . · . S.'..)1t-'.".CnossER. Is that all. l\Ir. Hanson 1 . . . '~·'.)Ir. HANSON. Yes; tha11k you. ~\,~fr~ CuossEn. Then we will hear Mr. \Vilson. ~;: . 'STATEMENT OF E. S. WILSON, NEW YORK, N. Y., REPRESENTING ('.';: .. ,:, THE AMERICAN TELEPHONE & TELEGRAPH CO. :L}.::. ~ · L . -.,. · .·.!.;.~ ~¥'.llr. CnossEu. l\Ir. \\Tilson, how much time will you take1 ~:·Mr. WILSON. Five minutes, if I will be. permitted to file a state­ ment in support of my remarks. :,:·:My name is E. S. \Vilson. I am employed by the American Tele­ phone & Telegraph Co., 195 Broaclwa.y, New York, N. Y. ' "I nm not appearing in opposition to the bill. The only point I :'Wish to raise is whether or not it is the intention of Congress to ·AJlnnit one industry to the jurisdiction of two Federal commissions. lt the committee will tnm to page 3 of the bill, lines 17 to 19 .tXccpts from the powers of the Commission "banks .and common :arncrs subject to the acts to regulate conunerce." ~:'.On page 2, lines 21 to 23, inclusive: ·t· . ~ . ,•' .. ".\.<·ts to rPgulate comnH~rcp'' means the net entitlengrcss to submit or subject the telephone aml telegraph companies :.14.the powers of two commissions, there should be an amendment r•hirh will be embodied in the bill doing that, adding the Commimi- ' at ions Act of In34. . . [: .. ~The railroads, of course, are out, because they are under the Inter­ ' iibte Commerce Comrnission. The tc>lephone companies were ont, :tm l he other amenclmcnt. wl11ch 111 the altematl\'e 1s as follows: : At the same point, line 2i3, change the period at the end of line·· .. 23 on page 2 to a comma and insert the following: . ··~ and fhp act ent'itlcd the "Co111urn11ieatio11s Act of 1!)34'', np1iro\·e1l .Jnne 19, rn:H, aucl all nets amcllllatory thereof and supplementary thereto, vrovilled ... Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 40 of 51 . tho general provision; the second is common carriers; uw """ u ,~ ·: the radio provisions; and the fourth are the administrative provi- sions of the Communications Act and to make it perfectly clear ;•· that there cannot be any conflict of jnrisdiction, I suggest either ·· :. one of these amendments, which to my mind wonlr this act onl)' in rcspPct o[ matters as to which the Fecleral Com· m1111il'atio11s C01n111ission is hy law authorhwLI to act." S. 3H4 !ll'opo><1•s to t•nlarge the :-;co]le of the l<,t~1lerul Trade Conuni~sion Aet, :->cef'ion r.i of which 111akPs 11nlawfnl unfair metho1ls of crnnt>etitiun iu eo111111en·e so as to makP th<' :wt :t}lplie:1hle to unfnir or llec!'pl.iYe acts 01· practices in co11111u•rn'. . ~l'l't ion s unlawfnl nny. cha rg1', pr: wt i<-1., elassitie:i t ion or n·gulatiou rna1le IJy a tele]lhoue or telegru]lh · company whil'l1 is u11just or unrcaso11:thle. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 42 of 51 fl~DERAL TRADE COl\11\IISSION ACT A:'IIENDJ\IENTS 65 ;::· ~Pl'tio11 4o:i of the F1'{h·ral Cmnnmnieatiom: Act gives the Fetlernl Com­ ·,niu11icatio11,,; I 'ommis8ion hroatl authority to inn•i>tig:ite teh·phn1w ;11111 tPle­ ·. ~aph l'01llflani1•s and lSl"t:tion 20;:i (A) tlwreof authorize;; the Commission, after ·'lnvesti;:ation arnl hearin;:. if it finds any practice of sueh a 1·011111any to be In violatio11 of the act, to deter111i11e what practice will he just, fair, and -~nsonahlP to Lw thereafter follmn>.tl. ,. l'nhlic Hesolution Ko. S o.f the ~eventy-fourth Con;:ress, approved l\fnrch 15. 'IO:lii, dirccte1I tlw Federal Comnmnications Commission to investigate and rt•purt 011 tPlpphow• 1·0111p;111iPs 1.•111-rngecl in inten;tate commerce a111I appro­ priated $iG0,000 to he u,,;etl for the 11nq1oo:e. The Hou~e of HPJll'l'SP11tatives has rPcenlly a11provell of the appropriation .or $-!00.00D to continue the invPstigation hy the Federal 'l'rnde Con11nission , Ulltler Puhlic H\'solntion Ko. S of the SevPnty-fourth Congrpss. On ~lay 2i, lht• Rubcommittee on ApJll'l'Jll'iations of tl1e Senate reported favorably and untloubtedly the full <·ommittee and the Senate will approve the uppropriat.ion O! this atlditiminl fmHl. WhNl the Fetleral Tr:Hle Commission Act was Jllacecl n]lon the statute books ·on ~t>ptember 2G. 1014. tele]lhone and telegraph eo1111mnies were exempted · un1ler the following :, defined -to· menu the act entitlell, "an net to rp;:ulnte conuuerce", approvetl Fehrnary }H, l88i, whith is the Interstate Commerce Act. 'J'elPphone arnl tPlegraplt ::·companies were on Se11temher 2G, 1014, subject to the Interstate Commerce­ . • A<'t nnd matle common tarriers under it. The~· had been so since 1\)10. Y(Ac't of June 18, 1!110, ::JG Stnts. G-14.) -~· This exPm11tion eonti11ne1] for nearly 20 years nml until the Communications. :Act of ina4 wa8 ap111·on•ll on Jnne Ht, 1n:l4. Apparently no attention was paicl ·to the fact that the repPal of the Interstn te Comml'l'Ce C:ommis;;ion Act might ''extend the power of the Ft>tlernl Tralle Comniio:sion to inn•stigate and rP;.:nlate ·l'ummunil'ntion tompnnies over which the Fe1leral Commnnicatiom: Ctamnission · luul hroatlt>r pow1•rs than that whiC'h were ;.:iven to the Inter;;tatc Con1111erce 'l'ommission. St>ction Ull2 of the Communications Act rl'peuleil the provisions :or the Interstate Cummerc:e Act insofar no,; they related to communit:ation U)' . wirE> or wireless or to tPlegTnph, telPpho11e, or cable companies operating by , wireless, with two immatt>rial exc\'ption!>. In amending the 1''\'liPral Trade Commission Act ns now propose1l, Con;.:rl'SS ; now hns an opportunity to clear up a situation which presPnts thl' po;;;;ihility «'or a conflitt of juristliction hetwePn the Federal Trade Commission and the , }\'ilernl Con1111uni1·a tions Commission. :; Acting under the nnthnrit~· given in scetion 201 (B) of the Fetleral Com­ . mnnil'ations Act, the Fetleral Communications Co111111ission on OctohPr 31, Hl34, dlr~-ctC'd that a hearin;:- he heltl to determine, nnwng othl'r thing><, the justness. anti reasonahlL•111•>:;; of the practkf's and n•gulations under which tple;.:raph · ro111111u11ication;; an• hein;.: hamll\'ll. In this prneee< anci rPasonahll'lll'>'S of com1wtitive practices. No :s who desires to be heard, but ."·e cannot stop to hear him today. Mr. Daley, I understand~ Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 43 of 51 '66 FEDERAL TRADE COl\Il\IISSION ACT Al\IENDl\IENTS wants to be heard. I suppose that it js the intention of the chairman that we go on tomorrow, although I have no specific information to that effect. In such case, I suppose that the Commission will desire to reply. I think that some time has been reserved for such reply. Commissioner DAns. Mr. Chairman and gentlemen of the com­ mittee, the Commission would like to haYe the privilege of making a reply to certain statements that ha,ve been made here today. Mr: CnossEn. Then we shall adjourn until 10 o'clock tomorrow mornmg. . . (Thereupon, at 11: 35 a. m., the committee proceeded to the con­ sideration of other business, after which it adjourned to meet the following morning, Friday, l\lay 29, 1!)36, at 10 a. m.) (The following "·as submitted f~>r the record:) [Telegram] BALTIMORE, l\!D., May 29, 1936. E. J. LAYTON, Clerk, Jlouse I11tcrstate a·nd Foreign Co-m111erce Co111mitlcc, ll'f the Communications Act gives the Communications. Commission nuthoritv to inquire into management, which autlwrity I might state, us is common. knowledge, is very actively being exer-· cised by the Commission. . · Section 403 of the Communications Act also b.as to do with inquirim; as to any matters or things concerning which the Commission is. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 48 of 51 Al\IEXD FEDERAL TRADE COl\Il\IISSIOX ACT 25 interested and having any relation to any part of the Communications kl ' There are a number of other sections which I might also refer to here, particularly section 214 of the Communications Act, which has_ to do with interstn,te line facilities, under which we go to the FederaT Conununicn,tions Cornmis3ion with reference to matters of that kind.'" These things iudicuLe the brond 1md plenary power that is given t-0 the Federal Communications Commission, and in addition, as the committee doubtless knows, unde.r a resolution of Congress, for something like 2 years the Federal Communications Commission has been going into and taking evidence and testimony on all of our activities in every manner, sh:ipe and form. Testimony of that sort is being taken today, as it has been from time to time e\·er since last· March, before the Federal Communications Commission. l\'lay I also comment upon one more thing in the Communications Act'? Section 602 (d) of the Cornmunicatio11s Act has in it u very interesting point in connection with the matter I nm presenting to the committee. The enforcement of certain sections, the tieing sections nnd the others that have been referred to by Judge Davis, of the 'Clayton Act, were originnlly vested in the Interstate Commerce Com­ mission as to carriers subject to the Interstate Commerce Act. The same policy of a ,-oiding ove1fo pping is followed in the Communica- ; tions Act in the section tha-t I hnve referred to in amending the Clay- ton Act, and it is expressly provided as follows: · Thn t authority to enforce compliance with sections 2, 3, 7, and 8 · of this act-that is the Clnyton Act-by the persons respectively ·subject thereto is hereby Yested in the Interstate Commerce Com­ mission where applicnble to common cnrriers subject to the Interstate Commerce Act; in the Federnl Communications Commission where applicable to common carriers engaged in wire or radio communicn- . tions or radio transmission; nnd in the Federal Resen·e Board as to banks. / I hnd in mind also to comment on the policy of nonoverlapping to which the President in his recent messnge to the Congress indicated ·is the policy of the administrntion and policy of the Government, but time forbids. Now, our proposnl, if the committee please, is to clear up this possible difficulty I hnve commented on, nnd it is drawn in a wn.y that may seem a bit curious to the commit.tee, nnd I would like, if I may, to explain the rensons why we lun-e drnwn it as we hnve. I think its contents, if comp:ue1l with the bill, will be clear beyond . question, but l do wnnt to refer to the proviso we put in our recom­ mencln ti on w hie h reads: Provided, Tluit com111011 carriers nmler the latter act arc excepted as eomrnon carriers under this act only in respect or their com111011 carrier operations. Thnt clwnge in the proposal which we originally had in mind to subrnit to this committee, came about becnuse of a conference that I had with Chief Counsel Kellev of the Federal Trade Commission yesterday afternoon, nnd one of liis nssocintes, in which it was brought , out to me, thn t the objection thu t J udgc Dnvis had here last yenr to our proposed nmendment, nnd thnt Mr. Kelley seemed to have, wns this: ·we either might engnge in mnnufacturing, or we might possibly go into the mnnufocturing business, have nctivities other than our Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 49 of 51 26 Al\IEND FEDERAL TRADE COl\'fl\IISSION ACT common-carrier activities. And, of course, our common-carrier activi~ ties a.re subject to the Federal Communications Commission. \Yell, my answer to that was that the point seemed to me to be well taken, and so as to avoid any possible difficulty in that respect we added the proviso referred to so that if the communications com­ panies should go into tbat kind of thing, into the kind of business in which the Federal Trade Commission has been interested, if thev should go into the manufacturing business, which is the thing that we particularly discussed, then this exemptiop. would not apply. · · Mr. COLE. Mr. Chairman-­ The CHAIRMAN. Mr. CoLE. Mr. CoLE. May I ask a question? Nir. HosHOUR. Yes, indeed; so far as I am concerned. . 11r. COLE. During the hearings last year the Federal Tntde Com- mission opposed this amendment submitted by the company you represent. . · In view of the conference you had with them yesterday, do they now take the same position? Mr. HosHOUR. I am not able to speak for Mr. Kelley. I believe and hope that they \Vill not take the same position, but my conference was late yesterday afternoon, and I have not got their final decision;_ I think this amendment meets the objections they made, and I hope Mr. Kelley will agree with me. . . : 1 1Ir. CoLE. In the Communications Act the Federal Trncle Com-. mission is specificaily referred to as having certain jurisdiction. 1fr. Hosttoun. Y cs. 1Ir. C;)LE. Does this disturb that.? }.fr. HosnouR. Not in any mannrr, shape or form. All this does is to make it clear that so far as the fair trade practice provisions of the Federul Trade Commission Act arc concerned, the exception. which has always been in the act shall be preserved, and by my· amendment, if the committee approves of the amendment, it will; ma.ke clear one thing, which I think the Federal Tm.de Commission is entitled to have clear, namely, that where common carriers engnge­ in activities thnt a.re not in the common carrier field, beyond the:.­ field that the Government is regulating, then and in that case, they,_ are subject to the jurisdiction of the Federnl Trude Commission, which in my j udgmcnt is a sound position to take from the viewpoint. of the public interest. l\Jr. KEN'N'~~Y. How would vou read that amendment now? l\fr. HosHoun. The amend~nent, sir, would be-- . Mr. K1,;Nl'H:Y. Will you rca1l it Ycrhntim, following the bill. l\[r. O'CoNNELI .. Hc:1d it with the bill. Mr. Kr·:N':\"EY. Follow tl1c hill. l\fr. Hosuoun. Tho hill reads as follows, referring to page 1, line,' 3, t.Jiere \Vould lutve to he nn addition, because the clarifying amend-· mcnt we arc proposing has to do with section 4, so that after the word "that" in line 3 the words "the delinition of 'Acts to rcgulflt,9 com-·: merco' in section 4 and thnt" should he ndded-tlrnt part, only so as!. to mnkc it clear that this clarifying amendment is to be a part of the~: proposed amendment to the act. · : ::,;,:{. Then in line 8, the word "is" would have to he changed to "are";'.· and, after line 8, the amendment would he as follows-nod the first~ • I : I; i t I'\~. Case: 15-16585, 05/30/2017, ID: 10452259, DktEntry: 83, Page 50 of 51 AJ\IKXD FEDEIUL TRADE CO:'IL\IISSIOX ACT 27 part of it is exrrctly the srrrne, of course, rrs the old rrct in this respect­ " 'Acts to regulrrte comnH'rce' merrns the act entitled 'An act to regulate commerce', approved Februnry 14, 1887, and nll acts amendatory thereof and supplementary thereto,''-up to that point there is no change-"ancl the act entitled the 'Communications Act of 1934 ', approved ,June 19, 1934, and all acts amcndatory thereof and supple­ mentary thereto,"-nnd here is the proviso I commented on: "Pro­ t'1.ded, that common carriers under the latter act"-I would think_, if I rightly interpret the point Mr. Kelley made, it would also be appli ­ cable to railroads, but we are not interested in the railroad situation. Provided, That common carriers under the latter act arc excepted as common carriers under this act only in respect of their common carrier operations. That, if the chairman please, would, I think without peradventure of doubt, continue on the same policy of avoiding onrlapping that we h:we had in the past, and carry forward the policy that, so far us this point is concerned, has always been in the old Trade Commission Act. . \Ye may, if tliis amendment should be denied, argue-and that has been suggested, I think I may state without a breach of confidence by counsel for the Trade Cornmission-tlrnt the Communications Act is an r.menclment or a supplement to the Interstate Con:merce Act one! therefore we are already exempted. That argument is possibly tenable. One might argue also, if you do approve this amendment, that the old net docs not nffcct us, but m~- pcint is this, that it ought to be clenr, and \\C should not, I submit, be asked to rely upon matters of that kind when the poli<·y of a Yoiding overlapping jurisdiction is clear, and therefore we ask, if tl1e chairman please, tlrnt the committee gi,-e conoidcrntion to the amendment which we belie,·e will meet the Federal Trnde Cornmis,;ion's objection aIHl will avoid a type of over­ lnpping tlrnt, if I had time, I could show has been the policy of not onJy this act but a number of other acts to a voi(l. 1'lr. E1c1IEH. TIJi,; amendment woul(l still lc:1ve you within the jurisdiction of the Federal Trade Comrnissi,1n if you er!gaged in activi­ ties outside of the field of rommunicntions? 11r. Hosl!OUR. Pndoubtedly so, and 1 think \rn should be so, but ns a mattf'l' of fact, sir, '-'d' arc not engng<'tl in that kind of activities, except thro11g·h a subsidi:ny. I have no doubt our m:rnufacturing subsidiary is 11011· s11hjcct to tlie Federal Trade Commission ...\ct. 1f them is any question about it, this amcndmf'11L will make it ckar. We do not cou!t'IHl that :is to tlw fields thnt arc subjf'ct to the Federal Trade Cornmission's jurisdicticm, we should 1~ot lw subject to it, as to our n~nnuf:tcturing nrtiYilics if \1·e liaYe such acti\·itics, whether \1 e perform tlirni tlmrngli a sllh,.;idi:Hy or 11·hcil1cr \1·e do them (lirectl)'. That is the re:1 son 11·l 1y I 11 ('ll t along with this sllggcst ion making the prm·iso rpnd as it dlws, bllt in the common cnrrirr field, ns to which I think the Conrn1ission and :ill will ngrec, we arc pretty much regubted by nn act\\ liich is Hry inrlusin and Yl'!')' properly so. \\·e think we sho11ld not hr sllbjrct to onrlapping jurisdictions. · Tlic C11A11rnA;-.;. lt is timl' for the committee to adjourn, and if. you arc through, In' tkrnk you. :. }.Ir. 1Ios1101;u. Thank you. 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