20 Petitioners: FCC’s Digital Discrimination Rule 'Unlawful' in Multiple Ways

Section 60506 of the Infrastructure Investment and Jobs Act “should have been as unremarkable as it was uncontroversial,” said a brief Monday (docket 24-1179) in the 8th U.S. Circuit Court of Appeals from 20 industry and business petitioners, including CTIA and the U.S. Chamber of Commerce, in support of their 16 consolidated challenges to the FCC’s Nov. 20 digital discrimination order (see 240319004).

It’s “unsurprising” that Congress, under Section 60506, wanted to prohibit ISPs from intentionally discriminating among current or prospective customers, the brief said. But the FCC issued a rule “that rewrites the statute to do something much more unusual -- indeed, unprecedented,” it added.

In the FCC’s view, Section 60506 authorizes it “to forbid any entity from engaging in any business practice that has a disparate impact on broadband access based on the listed characteristics,” including income level, said the brief. According to the commission, Congress didn’t just ensure that ISPs don’t intentionally discriminate, it said. It created a “first-of-its-kind regime” requiring scrutiny of common business practices “for their differential effect on customers of varying income levels,” it said: “Congress supposedly did so without a word in the statute about disparate impact or a single line of debate.”

The FCC’s theory isn’t “plausible,” the brief contends. As the U.S. Supreme Court has repeatedly made clear, words that Congress chose to use in the statute -- digital discrimination based on protected characteristics -- is “hallmark” disparate-treatment language focused on intentional discrimination, said the brief. By contrast, Section 60506 “contains none of the outcome-focused language” that the Supreme Court previously, if rarely, interpreted “to authorize disparate-impact liability,” it said: “No legislator with even a passing familiarity with the Supreme Court’s decisions would have chosen the language of Section 60506 to create a disparate-impact regime for broadband access.”

Disparate-impact liability isn’t something that Congress “slips into laws with oblique language and no fanfare,” said the brief. The Supreme Court has cautioned that without “robust safeguards,” disparate-impact liability threatens to undermine the free market system, it said.

That threat is “particularly stark here,” said the brief. That’s because interpreting Section 60506 to cover disparate impacts based on income level “would throw into doubt all manner of standard business practices, including pricing decisions, credit checks, and marketing campaigns,” all of which could affect high- and low-income customers differently, said the brief. It “strains credulity” for the FCC to say that a bipartisan majority of Congress “quietly subjected a wide swath of the economy to a disparate-impact regime with such dramatic consequences, in one brief paragraph of a 1,000-page omnibus infrastructure law,” it said.

The FCC, at a minimum, can’t show that Congress “clearly authorized disparate-impact liability” in Section 60506, said the brief. Nor did the Commission “stop at creating an atextual disparate-impact regime,” it said. It also developed “an unprecedented disparate-impact framework that is particularly prejudicial to defendants,” it said.

In the “rare contexts” where the Supreme Court has recognized disparate-impact claims, it has required “a particular burden-shifting framework,” said the brief. Under that framework, a defendant can defeat a claim if it can show that the policy causing a disparity is necessary to achieve a valid interest, it said.

But the FCC’s rule “recognizes only a much narrower version of this defense,” said the brief. While the inclusive communities framework shifts the burden back to plaintiffs to offer a feasible alternative practice that wouldn’t cause a disparate impact, the commission “keeps the burden squarely on the defendant,” it said: “No disparate-impact regime has ever functioned that way.”

The commission’s rule is “unlawful” in at least two “other respects,” said the brief. For one, the rule’s sweeping definition of “covered entities” encompasses not only ISPs, “but also a broad range of other entities with the potential to indirectly affect broadband deployment, including infrastructure companies, contractors, and financial institutions,” it said. Some of those entities aren’t “traditionally subject” to the FCC’s jurisdiction. Congress didn't authorize that "overreach," it said.

Second, the FCC asserts the authority “to subject all of these entities to onerous monetary forfeitures,” said the brief. But the commission “has no statutory authority to impose backward-looking relief, including monetary forfeitures, for violations of rules issued under Section 60506.”