AT&T Mobility will pay $60 million to settle litigation with the Federal Trade Commission (FTC) over allegations that it misled millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds.

In a 2014 complaint, the FTC alleged that AT&T failed to adequately disclose to its unlimited data plan customers that, if they reach a certain amount of data use in a given billing cycle, AT&T would reduce or “throttle” their data speeds to the point that many common mobile phone applications, such as web browsing and video streaming, became difficult or nearly impossible to use.

The $60 million paid by AT&T will be deposited into a fund that the company will use to provide partial refunds to both current and former customers who had originally signed up for unlimited plans prior to 2011, but were throttled by AT&T. Affected consumers will not be required to submit a claim for the refunds.

Current AT&T customers will automatically receive a credit to their bills while former customers will receive checks for the refund amount they are owed.

The FTC’s Andrew Smith

“AT&T promised unlimited data — without qualification — and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s bureau of consumer protection. “While it seems obvious, it bears repeating that internet providers must tell people about any restrictions on the speed or amount of data promised.”

The FTC alleged that, despite promises of unlimited data, AT&T began throttling data speeds in 2011 for its unlimited data plan customers after they used as little as 2 gigabytes of data in a billing period. AT&T’s alleged practices affected more than 3.5 million customers as of October 2014, according to the FTC complaint.

After AT&T challenged whether the FTC had jurisdiction to bring the case, the Ninth Circuit U.S. Court of Appeals in 2018 ruled that the FTC did have jurisdiction and authority to challenge the company’s marketing of mobile data services, allowing the commission’s case to proceed.

As part of the settlement, AT&T is prohibited from making any representation about the speed or amount of its mobile data, including that it is “unlimited,” without disclosing any material restrictions on the speed or amount of data. The disclosures need to be prominent, not buried in fine print or hidden behind hyperlinks, according to the FTC. For example, if an AT&T website advertises a data plan as unlimited, but AT&T may slow speeds after consumers reach a certain data cap, AT&T must prominently and clearly disclose those restrictions.