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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 29, 2018

FTC Rule Does Not Preempt General Business Law Claims Against Broadband Providers

On June 21, 2018, the First Department issued a decision in People v. Charter Communications, Inc., 2018 NY Slip Op. 04644, holding that a Federal Trade Commission rule did not preempt General Business Law claims, explaining:

This civil enforcement action alleges that in the marketing of broadband Internet service defendants have engaged and continue to engage in fraudulent practices in connection with advertised promises to subscribers about Internet speeds and reliable access to online content. The complaint asserts claims pursuant to Executive Law § 63(12) and General Business Law §§ 349 and 350.

The court correctly rejected defendants’ argument that the claims based on allegations of false promises about broadband speeds involve an irreconcilable conflict between federal and state law that requires a finding of preemption. The Federal Communications Commission’s “Transparency Rule” requires providers of broadband service to “publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services.” Defendants make official disclosures about broadband speeds (actual speeds measured according to a testing protocol on the modems of consumers deemed representative) in accordance with the federal rule. The complaint alleges that defendants’ use of their official disclosures in consumer advertisements is misleading, because other statements in the advertisements give consumers the false impression that the disclosed speeds represent speeds that consumers can expect to experience on their devices, including wireless devices, consistently. The Transparency Rule does not preempt state laws that prevent fraud, deception and false advertising.

(Internal quotations and citations omitted).

Commercial litigation frequently involves fraud-based claims. This decision relates statute-based fraud claims brought by the State Attorney General. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a fraud-based claim, including one brought by the state or federal government.

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