Opinion ID: 793859
Heading Depth: 2
Heading Rank: 1

Heading: The Common-Carrier Exception to the FTC's Enforcement Power

Text: 24 The FTC Act limits the FTC's enforcement power. Pertinent here is the FTC's inability to enforce § 5(a)(1) of the FTC Act against common carriers subject to the Acts to regulate commerce. 15 U.S.C. § 45(a)(2) (providing this common-carrier exception to the FTC's powers). One such act to regulate commerce is the Communications Act of 1934, along with its amendatory acts. Id. § 44 (citing the Communications Act of 1934, 47 U.S.C. § 151 et seq. ). ACL argues that it is a telecommunications common carrier under the Communications Act and that therefore the common-carrier exception renders § 5(a)(1) of the FTC Act inapplicable. 1 25 This contention raises the question whether the term common carrier under the FTC Act has the same meaning as the term common carrier under the Communications Act. As explained below, we determine that common carrier under the FTC Act is properly defined by reference to the common law of carriers and not to the Communications Act, even though the common law definition does not meaningfully differ from the Communications Act definition for the purposes of this appeal. Under both definitions, ACL is not a common carrier. A brief history of the two acts is helpful in explaining our conclusion. 26 The first federal regulation to impose duties on common carriers was the Interstate Commerce Act of 1887 (ICA), ch. 104, 24 Stat. 379 (1887), which applied to any common carrier or carriers engaged in the railroad transportation of people or property interstate. The ICA imposed on railroad common carriers traditional common-carrier requirements such as nondiscrimination, tariff-filing, and charging just and reasonable rates, id. §§ 1-7, and it created the Interstate Commerce Commission (ICC) to administer the provisions of the act, id. §§ 11-12. In 1910, Congress passed the Mann-Elkins Act, ch. 309, 36 Stat. 539 (1910), which amended the ICA to apply to interstate telephone companies and to deem such companies common carriers, id. § 7(1). Neither the ICA nor the Mann-Elkins Act contained a definition of common carrier. 27 In 1914, in the thick of the antitrust movement, Congress passed the Federal Trade Commission Act (the FTC Act), ch. 311, 38 Stat. 717 (1914), which created the Federal Trade Commission (FTC) as an enforcement agency. Congress did not intend the FTC to enforce unfair-competition law 2 against common carriers because the ICC already regulated common carriers under the Interstate Commerce Act. Thus, for the purpose of preventing interagency conflict, the FTC Act common-carrier exception was created. See generally Marc Winerman, The Origins of the FTC, 71 Antitrust L.J. 1, 69 n.413 (2003) (mentioning the genesis of the common-carrier exception). Just as Congress had not provided a definition of common carrier in the Interstate Commerce Act, it did not provide a definition for that term in the FTC Act. 28 Regulation of telephone common carriers continued to rest with the ICC until 1934, when Congress passed the Communications Act of 1934, ch. 652, 48 Stat. 1064 (1934). 3 That act created the Federal Communications Commission (FCC) and transferred to the FCC regulatory authority over telephone common carriers. Id. The Communications Act defined common carrier circularly, as any person engaged as a common carrier for hire, in interstate or foreign communications by wire or radio.... 47 U.S.C. § 153(10). As one researcher has noted, the conference report for the Communications Act of 1934 suggests that the phrase common carrier had an ordinary meaning at the time, explaining why the Interstate Commerce Act left the term undefined and why the Communications Act included only a circular definition. Phil Nichols, Redefining Common Carrier, 1987 Duke L.J. 501, 511. Congress did not modify the exemption of common carriers from FTC regulatory authority except to extend the exemption to common carriers now subject to the Communications Act. Wheeler-Lea Act of 1938, § 2, 52 Stat. 111, 111 (1938). 29 The foregoing description brings us to the state of the relevant law today, against which we assess ACL's assertion that the correct definition for common carrier under the FTC Act is found in the Communications Act. We find no statutory basis for so concluding. The term common carrier in § 5(a)(2) of the FTC Act is still undefined, both in the act itself and in FTC regulations. As did our sister circuit when interpreting the circular definition of common carrier under the Communications Act, we decide to give meaning to common carrier in the FTC Act according to the ordinary sense of the word when Congress used it to create the exemption. See Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC (NARUC II), 533 F.2d 601, 608-09 (D.C.Cir.1976) (turning to the common law to define common carrier under the Communications Act); Nat'l Ass'n of Regulatory Util. Com'rs v. FCC (NARUC I), 525 F.2d 630, 640-42 (D.C.Cir.1976) (taking the same approach); cf. Sec. Indus. Ass'n v. Bd. of Governors of the Fed. Reserve Sys., 468 U.S. 137, 149-50, 104 S.Ct. 2979, 82 L.Ed.2d 107 (1984) (interpreting the undefined terms security and note by reference to their ordinary meaning to the 1933 Congress that used them). 30 The concept of a common carrier dates from the English common law and can be traced back to at least 1670 and the writings of Lord Chief Justice Hale. See Munn v. Illinois, 94 U.S. 113, 126, 4 Otto 113, 24 L.Ed. 77 (1876) (referencing Lord Hale's treatise). Early common-carrier law applied to almost all workers and tradesmen, requiring them to serve the public generally and to do so on just and reasonable terms, but over time, the common law of common carriers narrowed its focus to enterprises considered public in some way, such as by the government grant of a legal monopoly or their use of public funds. James B. Speta, A Common Carrier Approach to Internet Interconnection, 54 Fed. Comm. L.J. 225, 255-57 (2002); see also Nichols, supra, at 506-07 (describing Lord Hale's concept of public interest in privately held business). 31 Eventually, the definition of a common carrier coalesced into two requirements: (1) the entity holds itself out as undertaking to carry for all people indifferently; and (2) the entity carries its cargo without modification. See NARUC I, 525 F.2d at 640-42 (describing how the common law imposed common-carrier regulation on entities that undertook to carry for all shippers or travelers indifferently); NARUC II, 533 F.2d at 608-09 (describing the without modification requirement); Nichols, supra, at 508-09 (quoting the formulation of an 1857 carriers treatise that [t]o render a person liable as a common carrier, he must exercise the business of carrying as a `public employment,' and must undertake to carry goods for all persons indiscriminately). This definition does not differ meaningfully for our purposes from the definition of common carrier under the Communications Act — both require that an entity provides carriage to the public. See 47 U.S.C. § 153(43), (44), (46) (providing that [t]he term `telecommunications carrier' means any provider offering to the public the transmission... of information). 32 Applying these definitions, we conclude that defendant-appellant ACL is not a common carrier subject to the Communications Act and therefore does not fit within the FTC Act common-carrier exemption. The carriage of the telephone calls in this case involved three carriers in concept and two carriers in fact. Conceptually, the calls were carried by an originating carrier, a transit carrier, and a destination carrier. AT & T, and later Sprint, served as the originating carrier, routing the calls from the United States to the United Kingdom. The transit carrier was AT & T U.K./Viatel, whose role as transit carrier was, in concept, to route traffic [from an originating carrier] to a carrier in another country, the destination carrier. In re AT & T Corp., 14 F.C.C.R. 19140, 19176 n. 168, 1999 WL 979615 (1999). Conceptually, Telecom Malagasy was the destination carrier, with ACL standing in its shoes by virtue of the agreement assigning ACL the right to terminate calls placed to Telecom Malagasy's numbers. Even at this conceptual level, ACL is not exempt from the FTC Act because foreign terminating carriers are not carriers subject to the Communications Act, as contemplated by the FTC Act's common-carrier exemption. 15 U.S.C. §§ 44, 45(a). An entity is subject to the Communications Act if it is engaged within the United States in interstate and foreign communication by wire or radio [or] ... interstate and foreign transmission of energy by radio, which originates and/or is received within the United States. 47 U.S.C. § 152(a). As indicated by the engaged within the United States limitation, the Communications Act does not apply to foreign terminating carriers. Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224, 1229-30 (D.C.Cir.1999) (finding that because an FCC order applied to only domestic carriers, not foreign carriers, the FCC did not exceed its authority under the Communications Act in issuing it; noting that the FCC claims no authority to directly regulate foreign carriers). Thus, as a purely foreign terminating carrier at the conceptual level, ACL would not qualify for the FTC Act exemption. 33 Yet our determination that ACL was not a common carrier is even simpler because, in fact, the telephone calls at issue were carried by only two entities — the originating carrier and the transit carrier. AT & T, and later Sprint, carried the phone calls from the United States to the United Kingdom as originating carrier, and AT & T U.K./Viatel carried the phone calls to the U.K. internet servers where they were terminated. ACL simply brought together these carriers as part of its billing system; it never itself carried any calls. Thus, while AT & T and Sprint might be exempt from FTC enforcement, ACL is not. 34 On appeal, ACL presses the argument that the § 5(a)(2) common-carrier exemption applies to an entity with the status of a common carrier under the Communications Act, 4 even if its activities relevant to a pending lawsuit are not common carriage. Assuming arguendo that common carrier status can exist and is determinative, this argument would aid ACL only if it had the status of a common carrier. ACL contends that it holds such status because the FCC granted it a license pursuant to 47 U.S.C. § 214 (the § 214 license), yet this license simply authorizes ACL to become a facilities-based international common carrier ... and/or to become a resale-based international common carrier (emphasis added). The § 214 license does not purport to represent or determine that ACL is actually engaged in common carriage, nor did ACL's application for the license so represent. Rather than rely on what an entity is authorized to do, courts must examine the actual conduct of an entity to determine if it is a common carrier for purposes of the FTC Act exemption. Cf. Eagleview Techs., Inc. v. MDS Assocs., 190 F.3d 1195, 1197-98 (11th Cir.1999) (holding that an entity's possession of an FCC license to provide services as a common carrier did not alone make the entity a common carrier under the Communications Act). Here, as explained above, none of ACL's activities gave it the status of a common carrier subject to the Communications Act of 1934, and accordingly, the FTC Act common-carrier exception would not apply.