The new California law is sweeping in its scope. It prevents companies such as AT&T and Comcast from blocking or slowing down websites — something the companies say they aren’t interested in doing anyway — but it doesn’t stop there. The law also prohibits carriers from demanding special new fees from websites, and it bars Internet providers from selectively exempting their preferred apps from customer data caps.
The Justice Department is challenging the law on the grounds that it conflicts with the Federal Communications Commission’s own recent efforts to deregulate Internet providers.
In 2017, the FCC under chairman Ajit Pai voted to roll back its national-level net neutrality rules, and warned states not to defy the agency by writing legislation to circumvent the new policy. The new rules went into effect in June.
But dozens of states have done precisely what the FCC tried to prohibit, introducing bills meant to reinstate the Obama-era regulations. Three states have succeeded in passing legislation, while a half-dozen other states have put executive orders on the books. California’s legislation — which sailed through both legislative chambers by comfortable margins — is considered the toughest in the nation, because its law goes further than the FCC’s 2015 net neutrality rules.
The Justice Department’s case boils down to one central point: Under the Constitution, it’s the federal government whose policies must take priority over state law. In light of the FCC’s more recent deregulatory order, federal officials are asking for California’s net neutrality law to be invalidated, and industry groups are expected to join the effort. On Monday, AT&T said it supported the Justice Department effort.
“The fundamental issue here is that the Internet and Internet access is interstate commerce,” said Jonathan Spalter, president of USTelecom, an industry trade group. “You cannot send packets of data to my family in California without traversing a number of states.”
But supporters of the California law say the rule change contains a fatal flaw that undermines the Justice Department’s federalism case: The FCC’s new rules have the agency explicitly giving up its own authority to regulate Internet providers.
The FCC has said instead that other agencies, such as the Federal Trade Commission, should take a more active role in protecting the public from violations of net neutrality.
If the FCC is as powerless as it claims, the theory goes, then its attempt to ban states from regulating net neutrality is equally toothless.
“Courts have consistently held that when the federal government lacks authority to regulate, it cannot preempt states from regulating,” said Andrew Schwartzman, a lecturer in public interest law at Georgetown University.
Barbara van Schewick, a law professor at Stanford University and an advocate for tougher net neutrality policies, agreed.
“An agency that has no power to regulate has no power to preempt the states,” she said.
It’s unclear how this argument might play out. According to Marc Martin, a telecom attorney at the firm Perkins Coie, there is precedent for the federal government to say it won’t regulate a certain interstate commerce issue and then to seek to prevent states from filling the gap. In 1978, Congress deregulated the airline industry — eliminating the Civil Aeronautics Board and its rules governing airfare prices — and barred the states from enacting their own, state-level replacements.
“That preemption of the states, despite the federal government relinquishing regulation itself, was upheld by the courts,” Martin said, adding that it still was an act of Congress itself. The FCC is an independent executive agency that doesn’t enjoy as much latitude.
The U.S. Court of Appeals for the Eighth Circuit appeared to rule on the preemption issue last month, when it held that the FCC’s change of heart on net neutrality prevented Minnesota officials from regulating voice-over-IP services in the state.
“The facts and logic that 8th Circuit ruling appear closely analogous the DOJ vs. California net neutrality case, so we would anticipate a federal appeals court reaching the same outcome and preempting California’s net neutrality law,” said Paul Gallant, an industry analyst at Cowen & Co., in a research note Monday.
Beyond the debate over preemption, California also is expected to justify its legislation under its legal mandate to protect the health and welfare of its residents, which is protected under the 10th Amendment, Martin added.
But to justify the law, California would also need to prove that its existing laws and powers aren’t enough to protect consumer welfare on net neutrality, said Berin Szóka, president of the think tank TechFreedom and a critic of the legislation.
“California should focus on ensuring that its [attorney general] can deploy that existing authority effectively, rather than wasting everyone’s time on a lawsuit the state is sure to lose,” Szóka said.
Even as the two sides prepare to go to court, other lawsuits involving net neutrality — including a challenge to the 2017 order that weakened the federal rules — could complicate the litigation. Consumer advocacy groups, small tech companies and smaller telecom carriers have banded together in an effort to block the FCC from repealing its net neutrality regulations, and that case is still pending before the U.S. Court of Appeals for the District of Columbia Circuit.
It’s possible that the case involving California could be subjected to a stay until the D.C. Circuit litigation works itself out. The Justice Department has asked the U.S. District Court for the Eastern District of California for a preliminary injunction of the new law.
“Whether or not it grants an injunction, I suppose the Court might stay further action on the case (i.e., hold it in abeyance) unless and until the D.C. Circuit reverses the FCC’s decision,” Georgetown’s Schwartzman said.