ICLE Comments to the Office of the Privacy Commissioner of Canada on Age Assurance
I. Introduction and Overview
The International Center for Law & Economics (ICLE)[1] submits these comments to Office of the Privacy Commissioner of Canada (OPC) regarding the regarding the draft guidance, “Assessing whether and how to use age assurance – Guidance for websites and online services.”[2] ICLE is a nonprofit, nonpartisan research center that applies law & economics to public-policy questions, with a focus on consumer welfare. ICLE scholars have written extensively on the intersection of online platform regulation, protecting children online, and free speech, including white papers, regulatory comments, and amicus briefs.[3]
While we share the OPC’s goal of mitigating genuine online harms to minors, we caution against guidance that implicitly encourages or effectively mandates the widespread adoption of age assurance across the internet to avoid the alleged harm of targeted advertising. Pushing platforms to verify or estimate the ages of their users to restrict access or restrict data-collection practices introduces massive transaction costs, fundamentally alters the economics of the internet, and paradoxically, could degrade user privacy.
The claimed benefits of these interventions are limited and uncertain. The economic, operational, and privacy costs are substantial. The guidance should make clear that age assurance is only applicable when content leads to legally cognizable harms to minors and not merely protected free expression or targeted advertising.
To this point, the OPC guidance identifies practices such as “detailed profiles of users… used to create exploitative or age-inappropriate advertising” as potential harms that might necessitate age assurance.[4] However, as ICLE scholarship has consistently demonstrated, legislation and regulatory guidance often miss the mark by focusing on data collection and targeted advertising instead of real dangers like cyberbullying, predation, and severe mental health drivers. Age-gating the internet to stop targeted ads does not stop malicious actors, but it does disrupt the economic engine that funds high-quality, moderated online spaces, including the development of content for minors.
Moreover, through the lens of the Coase theorem and general principles of good governance,[5] the burden of avoiding negative externalities (spillover harms) should be placed on the party that can avoid them at the lowest cost. For minors using the internet, parents—working in tandem with their children—are overwhelmingly the least-cost avoiders. They possess localized knowledge of their child’s maturity, vulnerabilities, and needs. Shifting this burden to platform operators via mandatory age-assurance schemes introduces massive friction and inefficiencies. It should only be imposed when the harms to minors accessing online content are clearly so high that it is worth the cost, i.e. online pornography or other content which is illegal for minors to access.
Broad age assurance requirements erect barriers to entry for accessing entire platforms rather than placing barriers around specific malicious conduct. This “collateral censorship” excludes minors from valuable educational, social, and community resources, while significantly inconveniencing adults who wish to browse anonymously or cannot easily provide identity documentation.
II. The Economics of Multisided Platforms: Why Targeted Ads are Not a Harm
Most of organizations operating websites and online services subject to the OPC guidance are what economists call multisided markets, or platforms.[6] Such platforms derive their name from the fact that they serve at least two different types of customers and facilitate their interaction. Multisided platforms generate “indirect network effects,” described by one economist as a situation where “participants on one side value being able to interact with participants on the other side… lead[ing] to interdependent demand.”[7] Online platforms provide content to one side and access to potential consumers on the other side. In order to keep demand high, online platforms often offer free access to users, whose participation is subsidized by those participants on the other side of the platform (such as advertisers) that wish to reach them.[8] This creates a positive feedback loop in which more participants on one side of the platform leads to more participants on the other.
This dynamic is also true of platforms with a “non-trivial number of children” accessing their content.[9] Revenue is collected not from those users, but primarily from the other side of the platform—i.e., advertisers who pay for access to the platform’s users. To be successful, online platforms must keep enough of the right type of users engaged to maintain demand for advertising.
Moreover, many websites and online services are platforms that rely on user-generated content. Thus, they must also consider how to attract and maintain high-demand content creators, often accomplished by sharing advertising revenue. If platforms fail to serve the interests of high-demand content creators, those creators may leave the platform, thus reducing its value.
Online platforms acting within the market process are usually going to be the parties best positioned to make decisions balancing the interests of platforms users, in general. Websites and online services which attract a lot of children often compete on privacy policies and protections for them by providing tools to help users avoid what they (including, in this context, their parents and guardians) perceive to be harms, while keeping users on the platform and maintaining value for advertisers.[10] Part of this is driven by a recognition that children have little income or ability to spend money online at all without parental involvement.
There may, however, be examples where negative externalities[11] stemming from internet use are harmful to society more broadly. A market failure could result, for instance, if platforms’ incentives lead them to collect too much (or the wrong types of) information for targeted advertising, or to offer up content that is harmful for children. But this does not necessarily imply that all (or even the majority of) targeted advertising is “exploitative or age-inappropriate” as the OPC guidance suggests.[12] If anything, accurate age profiles of users could allow platforms to help advertisers reach them with more age-appropriate and relevant advertising. Again, the interests of the various platforms are in making sure that all the various parties (which includes the parents of children) are content with their services.
III. Transaction Costs: The Burden of Avoiding Harm Should be on the Least Cost Avoider of that Harm
In situations where there are negative externalities from internet use, there may be a case to regulate online platforms in specific, well-defined ways keyed to demonstrable and quantifiable harms. Any case for regulation must, however, acknowledge potential transaction costs, as well as how platforms and users may respond to changes in those costs. To get regulation right, the burden of avoiding a negative externality should fall on the least-cost avoider.
The Coase Theorem, derived from the work of Nobel-winning economist Ronald Coase[13] and elaborated subsequent economic research,[14] helps to explain the issue at-hand:
- The problem of externalities is bilateral;
- In the absence of transaction costs, resources will be allocated efficiently, as the parties bargain to solve the externality problem;
- In the presence of transaction costs, the initial allocation of rights does matter; and
- In such cases, the burden of avoiding the externality’s harm should be placed on the least-cost avoider, while taking into consideration the total social costs of the institutional
In one of Coase’s examples, the noise from a confectioner using his candy-making machine is a potential cost to the doctor next door, who consequently cannot use his office to conduct certain testing. Simultaneously, the doctor moving his office next door to the confectioner is a potential cost to the confectioner’s ability to use his equipment.
In a world of well-defined property rights and low transaction costs, the initial allocation of rights would not matter, because the parties could bargain to overcome the harm in a mutually beneficial manner—i.e., the confectioner could pay the doctor for lost income or to set up sound-proof walls, or conversely, the doctor could pay the confectioner to reduce the sound of his machines.[15] But since there are transaction costs that prevent this sort of bargain, it is important whether the initial right is allocated to the doctor or the confectioner. To maximize societal welfare, the cost should be placed on the entity that can avoid the harm at the lowest cost.[16]
In the context of the OPC guidance in question here, websites and online services create incredible value for their users, but they also can, at times, impose negative externalities relevant to children who use their services. In the absence of transaction costs, it would not matter whether policy requires age assurance and possible age-gating by platforms or makes it the parents’ responsibility to avoid those potential harms.
But since transaction costs involved in age assurance certainly do exist, and the corresponding responsibilities of platforms in response to children accessing “harmful” content are likely high, then defining those alleged harms is very important. For example, if, for argument’s sake, we assume that targeted ads, per se, are a harm to children, the cost involved in banning then will be the proliferation of less relevant ads, or even less relevant content available to children as creators find less ability to monetize without the extra revenue generated by targeted ads.
Further, since most minors can’t afford the basic means to access the internet on their own, parents already have a large role to play in when and how their children engage online. Thus, the actual least cost avoider in controlling both positive and negative content available to children (including targeted ads) is their own parents. Nearly every major provider of an online service (including device manufacturers) provides a plethora of tools to allow parents to restrict how their devices are used, when purchases can be made, as well as a host of other parenting-relevant preferences.[17] Moreover, a targeted ad itself is only effective insofar is it leads to a parent purchasing something on behalf of their child. Assuming parents have set their children’s devices up with their preferred controls, there is simply no easy way for children to even respond to targeted ads (relevant or irrelevant) without their parents’ involvement. Thus, the OPC guidance aimed at restricting such targeted advertising comes with little benefit, but considerable cost in lost content generation.
The lessons from Children’s Online Privacy Protection Act (COPPA) in the United States illustrate this point. Scholars have found that after the Federal Trade Commission’s settlement with YouTube that required the limiting of personalization for made-for-kids (MFK) content, both the quantity and quality of children’s content decreased along with views for such channels.[18] This is because “COPPA’s definition of personal information includes persistent identifiers, which are often used for personalized advertising and platform interaction features.”[19] And since “obtaining verifiable parental consent for free online services is difficult, COPPA acts as a de facto ban on personal information collection by free MFK content providers.”[20] In other words, the transaction costs of gaining verifiable parental consent is high enough that it operated as a ban on targeted advertising, and creators were no longer able to monetize their content if it was aimed at children. This directly led to a “COPPAcalypse” where the market for child-directed content was severely harmed.[21]
By wrongly placing the burden on operators to avoid harms associated with targeted advertising, societal welfare can be reduced, including the welfare of children who no longer get the benefits of quality content designed for them. Here, the OPC guidance should focus on real harms that are not easily avoided.
For instance, there are situations where operators of websites and online services are the least-cost avoiders because they are the parties best placed to monitor and control harms associated with internet use, especially in cases where it is difficult or impossible to hold those using their platforms accountable for the harms they cause.[22] A prime example is deterring child predators. The OPC is right to be concerned about the facilitation of adults’ ability to message children, or making it easier for children to access illegal content like online pornography or gambling. Placing the burden on children or their parents to avoid such harms could allow operators to impose un- or undercompensated harms on society. There is a case to be made that, given their access to user data, platforms have better intelligence for detecting and deterring these harmful activities. On the other hand, given the vast amount of legal content and heterogeneous preferences of different parents, parents themselves are better positioned to determine what legal content is appropriate for their children to access in most cases.
Thus, in order to get the balance right, it is important to determine whether it is the operators or their users (and parents) who are the least-cost avoiders. Placing the burden on the wrong parties would harm societal welfare, either by reducing the value that online platforms confer to their users, or in placing more uncompensated negative externalities on society. Here, the OPC should differentiate between the alleged harms associated with online advertising, which can be avoided by parents who largely control the power of the purse, and harms from accessing illegal content or unwanted contacts from adults.
IV. Conclusion
We appreciate the OPC’s openness to public input through this consultation. ICLE remains available to provide further analysis or clarification on any of the issues raised in these comments. But the OPC should refocus its guidance on real harms to children and recognize the importance of targeting in delivering age-appropriate ads and funding vibrant and safe content for children online.
[1] The International Center for Law & Economics (ICLE) has received financial support from numerous companies, foundations, and individuals, including firms with interests both supportive of and in opposition to the ideas expressed in this and other ICLE-supported works. Unless otherwise noted, all ICLE support is in the form of unrestricted, general support. The ideas expressed here are the authors’ own and do not necessarily reflect the views of ICLE’s advisors, affiliates, or supporters.
[2] Office of the Privacy Comm’nr of Canada, Assessing whether and how to use age assurance – Guidance for websites and online services, https://www.priv.gc.ca/en/privacy-topics/age-assurance/aa-gd-web (last accessed Aug. 4, 2026).
[3] Much of these comments are adapted from previous work. See Ben Sperry, A Coasean Analysis of Online Age-Verification and Parental-Consent Regimes, INT’L CTR. L. & ECON. (ICLE Issue Brief, Nov. 9, 2023), https://laweconcenter.org/resources/a-coasean-analysis-of-online-age-verification-and-parental-consent-regimes; ICLE Comments to FTC on Children’s Online Privacy Protection Rule NPRM (Mar. 11, 2024), https://laweconcenter.org/resources/icle-comments-to-ftc-on-childrens-online-privacy-protection-rule-nprm.
[4] Supra note 2.
[5] See generally Geoffrey A. Manne, Kristian Stout, & Ben Sperry, Who Moderates the Moderators?: A Law & Economics Approach to Holding Online Platforms Accountable Without Destroying the Internet, 49 RUTGERS COMPUTER & TECH. L. J. 26 (2022).
[6] See, e.g., Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 1 J. EUR. ECON. ASS’N 990 (2003).
[7] David S. Evans, Multisided Platforms in Antitrust Practice, at 3 (Oct. 17, 2023), forthcoming, Michael Noel, ed., ELGAR ENCYCLOPEDIA ON THE ECONOMICS OF COMPETITION AND REGULATION, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4606511.
[8] For instance, many nightclubs hold “ladies’ night” events in which female patrons receive free admission or discounted drinks in order to attract more men, who pay full fare for both.
[9] Supra note 2.
[10] See, e.g., Ben Sperry, Congress Should Focus on Protecting Teens from Real Harms, Not Targeted Ads, THE HILL (Feb. 16, 2023), https://thehill.com/opinion/congress-blog/3862238-congress-should-focus-on-protecting-teens-from-real-harms-not-targeted-ads.
[11] An externality is a side effect of an activity that is not reflected in the cost of that activity—basically, what occurs when we do something whose consequences affect other people. A negative externality occurs when a third party does not like the effects of an action.
[12] Supra note 2.
[13] See Ronald H. Coase, The Problem of Social Cost, 3 J. L. & ECON. 1 (1960)
[14] See Steven G. Medema, The Coase Theorem at Sixty, 58 J. ECON. LIT. 1045 (2020).
[15] See Coase, supra note 12, at 8-10.
[16] See id. at 34 (“When an economist is comparing alternative social arrangements, the proper procedure is to compare the total social product yielded by these different arrangements.”).
[17] See, e.g., Children Online Safety Tools, COMPETITIVE ENTERPRISE INSTITUTE (last accessed Aug. 4, 2026), https://cei.org/children-online-safety-tools.
[18] See Garrett A. Johnson, Tesary Lin, Liang Zhong, & James C. Cooper, COPPAcalypse? The YouTube Settlement’s Impact on Kids’ Content, MANAGEMENT SCIENCE, ARTICLES IN ADVANCE 1, 6 (Mar 4, 2026) (“Overall, our descriptive analysis suggests that, after the YouTube settlement, YouTube MFK channels reduce both MFK video production and content originality, and views and subscriptions for MFK content fall compared with the non-MFK counterparts… us, both mechanisms—deactivating personalized ads and plat-form engagement features—may contribute to reduced content production and viewership.”).
[19] Id. at 3.
[20] Id.
[21] Id. ay 13-14 (“Removing ad personalization may have reduced ad revenue substantially. Personalized advertising generates value by enabling advertisers to target, measure, and optimize ad effectiveness… Removing content engagement features may have reduced the demand for content. These features helped users engage with their preferred content… and creators.”
[22] See Geoffrey A. Manne, Kristian Stout, & Ben Sperry, Twitter v. Taamneh and the Law & Economics of Intermediary Liability, TRUTH ON THE MARKET (Mar. 8, 2023), https://truthonthemarket.com/2023/03/08/twitter-v-taamneh-and-the-law-economics-of-intermediary-liability; Ben Sperry, Right to Anonymous Speech, Part 2: A Law & Economics Approach, TRUTH ON THE MARKET (Sep. 6, 2023), https://truthonthemarket.com/2023/09/06/right-to-anonymous-speech-part-2-a-law-economics-approach.