We are definitely entering into a new era in regulation. Verizon, AT&T, and T-Mobile are disputing the FCC’s ability to levy fines on them. The fines in question all stem from an FCC action to penalize the carriers for selling customer location data to aggregators. This data allows marketers to become intimately knowledgeable about where people spend their time every day. In the majority of cases, the carriers did not get permission from customers to share their data.
The carriers have all appealed the FCC action, and as is becoming a normal practice, each carrier filed an appeal in a different court. Verizon was fined $46.9 million and filed a brief in the appeal suit in the U.S. Second Court of Appeals. AT&T was fined $57.3 million and filed a brief in the Fifth Circuit. T-Mobile (including a fine against Sprint) was fined $80.1 million and is appealing in the DC Circuit Court of Appeals.
The FCC started the process of assessing the fines under Chairman Ajit Pai, who proposed the fines and said the carriers’ actions are a violation of customer privacy. The FCC under Chairperson Jessica Rosenworcel finalized the fines. Sharing customer data came to light when a sheriff in Missouri was openly using a location-finding service to track the people’s location. The sheriff obtained the data from Securus, a telecom provider that specializes in telecom services for jails and prisons. The FCC said that even after the carriers were made aware of the violation of customer privacy, they continued to sell the location information. The facts in the cases are a bit messy due to Securus’s role in the transactions and statute of limitations.
The three carriers are making roughly the same basic arguments. Verizon claims that the FCC overstepped its authority to enforce issues related to consumer data privacy. Of more interest is that AT&T and Verizon are both arguing that the Supreme Court’s ruling in Securities and Exchange Commission v. Jarkesy means that the FCC has no ability to levy fines and that the companies are entitled to a jury trial. It’s going to take lawsuits like this to define the limit on administrative agencies like the FCC to impose fines on anybody.
There is also a chance that the FCC could stop fighting for the fines. Proposed FCC Chairman Brendon Carr originally dissented against issuing the fines. It’s possible that the FCC could drop its opposition to the suits, which could stop the legal process.
The carriers must be hoping the suits get dropped. This does not seem an issue that the carriers would ever want to take to a jury. It’s not hard to picture a jury – on which every member likely has a cellphone – imposing much larger penalties on the carriers. I suspect most people are uncomfortable with the idea of their cellular carrier selling details of their daily movements to companies they never heard of. It’s not hard to imagine numerous ways that companies could misuse location data to harm people.
If these cases don’t make it to fruition, the courts are going to have to further test the idea in other suits that administrative agencies can’t impose fines. For now, the ability for the FCC to impose fines is in hanging in limbo.