AG’s False Advertising Suit Challenging Broadband Claims Not Preempted

Advertising Law

A New York appeals court rejected the defendant’s preemption argument and affirmed that the state attorney general (AG) can pursue Charter Communications over false advertising claims for the company’s broadband service.

Former Attorney General Eric T. Schneiderman filed suit in February 2017, alleging that Time Warner Cable (TWC), later purchased by Charter, and Spectrum management deliberately and systematically defrauded New York consumers over a five-year period by promising high-speed Internet services and reliable access to online content that the defendants knew they could not deliver.

The Spectrum-TWC defendants offered a range of Internet speeds from 20 to 300 Mbps, charging consumers more for faster tiers of service. In addition to the advertised speeds, the defendants made more general guarantees, such as “reliable Internet speeds,” delivered “consistently,” “without slowdowns,” “no lag” and “without interruptions.”

According to the AG, the company failed to provide the promised level of service, in part because the speeds were impossible to attain due to technological bottlenecks for which Spectrum-TWC was responsible, and because it leased outdated modems to many subscribers despite knowing the modems were incapable of delivering the advertised speeds.

The defendants moved to dismiss the suit based on conflict preemption. They argued that the Federal Communication Commission’s (FCC’s) regulations and policy precluded the state regulator from bringing suit, as the Federal Trade Commission’s Transparency Rule requires providers to disclose “expected and actual access speed and latency,” among other information.

A trial court judge disagreed, and the appellate panel unanimously affirmed.

“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 panel wrote.

In accordance with the federal rule, the defendants made the necessary disclosures about broadband speeds, the court recognized. But the FCC’s standards do not override state laws against fraud and false advertising.

“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 appellate panel wrote. “The Transparency Rule does not preempt state laws ‘that prevent fraud, deception and false advertising.’”

As for the AG’s other claims, representations by Spectrum-TWC of speeds “up to” a certain level provided a cause of action and presented issues of fact as to whether defendants delivered the advertised speed levels consistently, the court said. Network quality and reliability claims also required further discovery, the appellate panel explained, because while some of the language used in the ads was mere puffery, other statements were actionable.

To read the decision in New York v. Charter Communications, Inc., click here.

Why it matters: Having already lost twice on the motion to dismiss, the defendants could elect to appeal again to the state’s highest court, or return to the trial court to begin a substantive defense of the advertising claims. Either way, Charter vowed in a statement about the decision to “continue to defend vigorously against these allegations,” which reiterates the lesson that federal preemption does not always apply to state fraud and false advertising laws.