ICLE Affiliate Review: March 2025

2025 is already shaping up to be a year of change for many reasons related to the economics and technology of energy. Between the uncertainty arising from a political change in presidential administration and the dynamics of technological change in the economy, the only prediction I’d hazard is that change will happen. Some of these changes have been simmering for some time, while others will emerge. Okay, throat-clearing beginning-of-year platitudes out of the way.

Read the full piece here.

Abstract

In 2020, the Federal Communications Commission (FCC) revisited a spectrum allocation decision it made in 1999. The Agency found that frequencies set aside for specific technologies used by vehicles Intelligent Transportation Services (ITS) – had been left largely unused. It crafted new rules, shifting 45MHz of the 75 MHz allocation to newly designated wireless services focusing on Wi-Fi applications, while leaving the remaining(40% of bandwidth) reserved for ITS. The FCC decision was premised on a cost–benefit analysis performed by the agency, supported by two similar studies submitted by outside interests. Yet, upon examination, the cost–benefit calculations prove stunningly uncompelling. In their economic logic, their understanding of existing market data and their use of FCC policy, fundamental errors render net benefit estimates irrelevant to decision-making. In particular, the value of marginal products (VMPs) as well as the opportunity costs of rival allocations are ignored. These failings are stunning, both on their own and given that the FCC, in its reallocation, critiqued its 1999 decision as socially unproductive– and yet deployed just the same basic methodological format, relying on FCC administrative determinations to select favored business models for supplying wireless services.

It’s time to restore the IP rights that drove two centuries of American innovation – and with them, our nation’s place as the world’s technological trailblazer.

Read the full piece here.

Abstract

This paper uses rational choice theory to explain why drug traffickers in Rio de Janeiro’s favelas operate in plain sight despite constant threats from police and rivals. We argue that Rio’s traffickers remain visible because they have a quid pro quo with local residents. In exchange for supplying local governance, the traffickers get the support and silence of locals. To ground our argument, we develop a model in which criminals choose how to protect themselves. They can pick between hiding and exposure as well as a mix of protection investments including violence and cash bribes. Because violence can deter many enemies simultaneously, the model predicts that apparently reckless visibility can be profit-maximizing when three conditions hold: non-resident demand is large, enemies can enter freely, and local residents highly value informal governance. Evidence from Rio’s context meets these conditions.

American capitalism is at a crossroads. For decades, it has followed a flawed strategy: prioritizing short-term profits, appeasing shareholders, and narrowly focusing antitrust policy on maintaining low prices. This strategy has produced temporary gains while undermining innovation, corporate resilience, and the United States’ long-term economic competitiveness.

Read the full piece here.

Progressives and conservatives alike have denounced President Trump’s plan to impose reciprocal tariffs on nations that tax American imports, citing the potential costs to U.S. consumers. These critics overlook how tariffs are just one part of the administration’s broader economic strategy.

Read the full piece here.

Disruptive innovation has come to the jurisdictional competition for corporate charters.

For decades, the biggest obstacle facing states seeking to challenge Delaware’s dominance in the jurisdictional competition for corporate charters was their inability to replace Delaware’s massive inventory of highly developed case law precedent. This body of law, coupled with the promise that an elite cadre of sophisticated judges would interpret new legal disputes against the background of these precedents, allowed Delaware to offer what its competitor-states could not: certainty and predictability. Until now that is.

Read the full piece here.

As the Digital Markets Act (DMA) enters its implementation phase, the European Commission is investigating whether the proposed solutions of dominant tech firms (gatekeepers) comply with the mandates of the DMA. However, this process is unearthing new concerns about potential side effects and unintended consequences. One such concern is that pro-competition measures could weaken platform integrity and security, exposing end users to data breaches, scams, and privacy risks. Further, the topic is highly sensitive due to its potential geopolitical implications.

However, this debate is inevitable, as DMA mandates aim to promote fair access by opening up gatekeepers’ ecosystems, particularly app stores. The requirements include supporting sideloading (letting users install apps outside the app store), interoperability requirements (requiring smooth integration with third-party services), and obligations to remove anti-steering restrictions (allowing businesses to directly communicate with end users, promote offers, and enter into contracts with them, without going through the gatekeeper).

Against this backdrop, to mitigate the growing risk of polarisation – which has at times affected even academic discussions – it may be useful to identify common ground and outline reasonable principles to guide policymakers in addressing these complex challenges.

Summary:

• Risks to platform integrity and security are emerging as significant concerns in the implementation of the Digital Markets Act (DMA).
• Since policymaking involves trade-offs, the European Commission should assess whether the solutions proposed by gatekeepers align with the goal of fostering competition while maintaining an adequate level of security, ultimately achieving a constrained optimum.
• When evaluating gatekeepers’ technical implementations, it is crucial to account for the substantial differences in their business models.
• Due to information asymmetry between regulators and targeted companies, achieving a proper balance between competition and security requires the active involvement of gatekeepers.
• The experience of initiatives like Open Banking demonstrates that it is possible to promote competition without compromising security.

Abstract

To what extent can the state control technological development? Companies are being suspected of overcomplicating products to extract more profit, not to add value for consumers, which I call complexity profiteering. For example, cars do not have to be connected to the internet, but connecting cars to the internet enables firms to remotely lock features so they can be sold for recurring fees. Bans of specific features that firms could profiteer from, which I call complexity prohibitions, are gaining public support as a solution to suspected predatory design practices. Is BMW trying to sell heated seats for monthly fees? The law can ban the practice. Is Apple putting serial numbers on iPhone batteries so that only Apple can replace them, thereby incentivizing consumers to buy a new phone when a new battery would suffice? The law can ban Apple from putting serial numbers on batteries, and require Apple to provide for free any tools needed to replace batteries.

I argue that complexity prohibitions can reduce state control over technology, thereby exacerbating the predatory design practices they aim to mitigate. In the short run, complexity prohibitions are easily circumvented because banning one complexity merely causes firms to exploit another. Mercedes-Benz responded to proposed bans on the sale of heated seats for monthly fees by selling faster acceleration for monthly fees. In the long run, as the law bans each new complexity that firms exploit and firms circumvent each ban by finding new exploitable complexities, this whack-a-mole would lead to design micromanagement, which would complicate product design and defeat the point of complexity prohibitions: to eliminate complexities that firms profiteer from. Replacing the iPhone 16’s battery requires 20 tools, four of which Apple sells for $115, $190, $216, and $256.35, respectively.

As an alternative to complexity prohibitions, I propose a way to inform consumers so they can vote with their wallets against products suspected of complexity profiteering. I conclude by proposing a paradigm shift in tech law toward a pragmatic approach which accepts that indirect, market-based solutions may, in at least some instances, provide more control over technology than direct regulation would.

Read the full piece at SSRN.

President Trump’s executive orders penalizing three law firms—Covington & Burling, Perkins Coie and Paul Weiss—threaten the constitutional structure that the Framers envisioned. Though the orders deal with the executive branch—including removing employees’ security clearances, barring access to government buildings, and imposing unique limits on federal contracts—they constitute a shocking expansion of White House power.

Read the full piece here.

ICLE Academic Affiliate Babette Boliek was quoted by the Milwaukee Journal Sentinel in a story about spam calls. You can read the full piece here.

“The FCC estimates the cost of these calls to consumers is at least $3 billion per year from lost time alone,” Babette Boliek, the former FCC chief economist, wrote in a 2019 report.

 

ICLE Academic Affiliate Lars Powell was quoted by Newsweek in a story about State Farm and other property insurers exiting the California market ahead of this year’s tragic wildfires. You can read the full piece here.

Assuming State Farm followed its policy provisions, its actions were legal. If the law is applied fairly and accurately, they will not face any legal exposure.

By non-renewing a handful of very expensive houses in Pacific Palisades, they were able to reduce their exposure and continue insuring many more modest homes in California.

ICLE Academic Afiliate Liya Palagashvilli was cited by Forbes in a story about her recent study examining the effect of the ABC test on employment. You can read the full piece here.

Much of this has taken the nature of anecdotal data that has value but not the weight of quantitative measure. A study out of the free-market-oriented Mercatus Center at George Mason University by labor economist Liya Palagashvili and pre-doctoral researcher Revana Sharfuddin has the first take on the broader implications, and it’s a doozy.

Research by ICLE Nonresident Scholar Todd Zywicki about Fannie Mae’s pilot project to use artificial intelligence for property title searches was cited in an article in HousingWire. You can read the full piece here.

Fannie Mae’s title insurance pilot program could save borrowers up to $2.19 billion. This is according to a study released in January by Legal Economics’ Andrew Rodrigo Nigrinis and Todd Zywicki of the George Mason University’s Antonin Scalia School of Law. Nigrinis is a former enforcement economist at the Consumer Financial Protection Bureau (CFPB).

ICLE Academic Affiliate Michael Sykuta was quoted by the Columbia Missourian in a story about rural energy in Missouri. You can read the full piece here.

ICLE Academic Affiliate Adam Mossoff was a guest on Patently Strategic to discuss the claim that patents in the United States are monopolies that impede innovation and block economic growth.

ICLE Academic Affiliate Joshua Hendrickson was quoted by WLBT in a story about the impact of U.S. tariffs on Mississippi consumers. You can read the full piece here.

“If you are going to be a major industrial economy, you need to produce certain things. And so because other places have tariffs on the United States and we have higher labor costs than a lot of other countries, the costs will be borne by those who use steel as inputs in manufacturing, and this will make steel more expensive,” Dr. Joshua Hendrickson, Department of Economics Chair at The University of Mississippi explained.

Daniel Lyons, ICLE academic affiliate, was quoted in a WDSU story about the Supreme Court’s review of a case that could eliminate the FCC’s Universal Service Fund, created at the instruction of Congress. Read the full article here.

“The existing non-delegation doctrine has allowed agencies to get stronger and stronger, and that’s allowed Congress to atrophy,” Boston College Law School’s Daniel Lyons said. “Congress is no longer making the big decisions.”

Abstract

The Digital Markets Act (DMA) is a rare bird in competition policy. Indeed, it is a hybrid framework incorporating the institutional setting of a regulatory tool as well as the conduct already targeted by antitrust authorities in proceedings against digital platforms. From a policy perspective, the DMA seeks to prevent some anticompetitive practices. To this end, the EU legislator has construed an intricate set of provisions pursuing different policy goals. After setting out these goals in relation to the proclaimed legal interests protected by the DMA (i.e., contestability and fairness), the paper gauges them against the benchmark of the European Commission’s capabilities in its enforcement. Relying on the first round of compliance reports issued by gatekeepers in March 2024, the analysis aims to provide adequate pathways to measure the DMA’s success. Accordingly, the paper maps out market scenarios where policymakers can assert that the DMA’s enforcement has been effective.

I. Introduction

The adoption of the Digital Markets Act (DMA or Regulation) follows a clear premise.[1] EU competition law is deemed ineffective to police anticompetitive conduct in digital markets.[2] The alleged failure derived from slow-paced antitrust sanctioning proceedings as well as the complex construction of theories of harm revolving around novel types of digital conduct.[3] According to such a narrative, competition authorities took too long to set forth their cases and, even when they managed to do so, intense litigation further slowed the enforcement of antitrust provisions. Furthermore, even when litigation resulted in a victory for enforcers, remedies came short of working as the antiseptic means to restore the competitive process to its original undistorted state.[4] In summary, by this view, EU competition law failed to deliver effective enforcement with respect to the fast-paced, complex, and intricate nature of digital players and ecosystems.[5]

Against this backdrop, the DMA is expected to address such an enforcement failure. Therefore, effective enforcement shall be the norm as a result of its application. To this aim, the path chosen by the EU legislator to turn this desire into reality is not entirely consistent with the acquis construed around competition law.[6] Indeed, the DMA reverses the burden of intervention against the targets of its regulation (i.e., the gatekeepers) to demonstrate they comply with the substantive provisions enshrined under Articles 5, 6, and 7 in the fashion of per se obligations. Pursuant to Article 11 DMA, in March 2024, the first designated gatekeepers submitted their compliance reports, setting forth the technical implementations and changes to their business models they believed to satisfy the threshold of the DMA’s effective enforcement.[7]

Stemming from the gatekeepers’ reaction to the Regulation, the European Commission (EC), as the sole enforcer of the DMA, faces a challenging task. Indeed, although the regulatory intervention was advertised as self-executing to sidestep the protracted litigation associated with competition law enforcement, the opening of non-compliance investigations by the EC suggests legal disputes are poised to become commonplace.[8] From this perspective, these initial results question the call to discard the purportedly ineffective principles-based antitrust approach and advocate for a rules-based model in order to facilitate enforcement, thus ensuring the quick and effective implementation of the new rules. [9] If the adoption of bright-line rules does not seem to be able to lower the number of legal disputes, it may also expose the Regulation to significant risks of circumvention strategies, which would further undermine its effective implementation requiring additional time-delaying procedures.[10] Moreover, as these investigations are apparently extensions of previous (and sometimes ongoing) competition cases, the DMA is being used to reexamine and relitigate antitrust investigations. After all, while its role is not to endorse the compliance solutions presented by gatekeepers, at the same time the EC is not vested with the powers to assert what compliance should look like.

Against this background, one can easily determine that the DMA is a hybrid instrument in more than one aspect.

From its institutional design and setting, the regulatory framework adapts the tradition of regulation over essential facilities to the functioning of digital competition.[11] By this token, the enforcement strategies the EC may apply to the different solutions presented by the gatekeepers are diverse in nature.[12] The EC’s recent enforcement actions are good proof of that. First, the EC continues to pursue punitive proceedings against gatekeepers under the DMA, without the burden of the procedural safeguards of traditional antitrust proceedings.[13] Second, the EC holds investigatory powers to verify the accuracy and truthfulness of gatekeepers’ statements in their compliance reports, without the need to trigger non-compliance procedures.[14] Third, the DMA provides sufficient scope for the EC to suspend the enforceability of some of its provisions.[15] Finally, Article 8 DMA enshrines the gatekeeper’s and the EC’s capacity to engage in a non-adversarial dialogue where they can iterate their opinions on how compliance should look like.

From the substantive perspective, the DMA’s obligations do not correspond with a single idea of enforcement. The EC has constantly repeated that the DMA is not output-oriented.[16] Instead, the Regulation is set to pave the way for business users to grasp the business opportunities the regulatory instrument seeks to restore. As a result, it is quite complex to determine where effective enforcement lies since impacts on consumers are not directly secured nor ensured via the DMA’s application. Further, one cannot simply assert that effective enforcement is achieved, and no further regulatory intervention is needed, when a certain number of competitors populate the gatekeeper’s core platform services. This metric is inadequate for assessing the restoration of competitive conditions because, although many companies may be present in the market, the structural challenges may still persist. Therefore, one must turn to the few yardsticks the letter of the law provides for to define this threshold of effective enforcement.

In this scenario, this paper aims to investigate the true measure of the Regulation’s success. Therefore, it will examine whether the DMA includes specific metrics to evaluate its success and assess the challenges and risks the European Commission may face in meeting these criteria. Further, the paper cautions against the assumption that, if the DMA meets its own benchmarks, it will automatically be successful for consumers. The DMA’s success metrics do not necessarily align with those that measure consumer success. Even though the Regulation is intended to benefit end users, it is possible that, even if the DMA achieves its own objectives, its implementation may not deliver positive outcomes for consumers.

Both the EC and the gatekeepers have shied away from providing any indication of how success for the DMA should be defined. In fact, the EC directly transferred the whole responsibility of this task onto the gatekeepers by compelling them to detail within their compliance reports how each one of their technical implementations complied with the broader objectives of contestability and fairness and with each provision’s goal.[17] To this call, gatekeepers evaded any type of definite response. The reaction is just a logical consequence of the configuration of the EC’s stick-and-carrot enforcement of the DMA. If the gatekeepers are to set out the indicators for the DMA’s compliance, then the EC could easily hold them accountable for deviating from that conduct in the coming years.

The paper disentangles this conundrum by unveiling the underlying principles of the regulatory instrument. In the absence of clear guidance, it is challenging to determine the appropriate steps to take. Therefore, the paper clarifies the DMA’s main secret, i.e., its policy direction. Notably, the paper uncovers the following five main policy goals enshrined by the DMA: i) market modelling; ii) consumer choice; iii) eliminating restrictions that favor the platform’s openness; iv) neutralizing competitive advantages; and v) enhancing transparency.

To this end, the paper integrates various aspects of the Regulation’s nature and substantive provisions. First, it sets out the policy outcomes that the DMA seeks to achieve by considering the main benchmarks the Regulation puts forth in terms of its objectives, the indicators for compliance per provision, and the long-term goals of each one of these provisions. Therefore, the paper engages with the objectives of contestability and fairness, the results expected via the application of each of the provisions under Articles 5, 6, and 7, and the overall policy goal pursued by the EU legislator. Their conjunct application results in the categorization of the provisions into three main groups. On the one side, those provisions aimed at addressing conflicts of interest originated from gatekeeper presence in the market, which correspond with the concept of fairness and intra-platform competition under the DMA.[18] On the other side, those mandates are designed to trigger potential competition in the form of new entrants or the restoring of the conditions for effective competition of gatekeepers’ existing competitors, which conform to the idea of contestability and inter-platform competition enshrined under the DMA.[19] Both legal interests, however, are not necessarily contradictory. They can complement each other, as they address different aspects of the competitive dynamics within digital ecosystems. In fact, the paper identifies a third category of provisions seeking to maximize both legal interests simultaneously through hybrid mandates.

Second, the paper provides a comprehensive overview of the EC’s capacity to monitor gatekeeper behavior, considering its multi-dimensional toolbox of remedies and powers. In relation to the DMA’s legal interests and long-term policy goals, the paper reveals the EC’s enforcement capabilities, translating them into potential challenges that the public authority must overcome to ensure effective enforcement.

Finally, the paper captures the unintended consequences that DMA’s provisions may entail in practice. This last step of the analysis details the side effects that business and end users may have already suffered because of the gatekeepers’ compliance solutions starting in March 2024, as well as through the impacts that compliance with one DMA’s provision may entail with respect to another one. In this context, the paper examines the inherent contradiction in the foundational roots of the DMA. While the latter aims to deliver results for consumers by ensuring contestability and fairness, it is not output-oriented. Therefore, the DMA’s immediate effects might contradict its primary goal of securing better outcomes for consumers. In other words, even if the DMA satisfies its own metrics for promoting fairness and contestability, this does not necessarily mean that its enforcement will provide benefits to consumers.

The paper is structured as follows. Section 2 explores the meaning of the legal interests protected by the DMA and provides a classification of the provisions accordingly. Section 3 outlines the DMA’s long-term policy goals by examining its provisions in relation to the EC’s enforcement capabilities. Section 4 analyzes Alphabet’s compliance with Article 5(4) DMA as a case study to demonstrate the correlation and challenges in the DMA’s effective enforcement. Section 5 concludes.

II. Metrics for defining the Commission’s effective enforcement

Article 1(1) DMA sets out the main objectives of the Regulation, i.e., to ensure contestable and fair digital markets. These goals come within the wider purpose according to which the DMA aims at levelling the playing field of digital markets.^[20] In light of the economic characteristics commonly associated with most of digital platforms (e.g., extreme scale economies, very strong network effects or a significant degree of dependence on both business users and end users)^[21], the DMA reverses the antitrust error-cost framework by establishing per se obligations upon the designated targets.^[22] Once a gatekeeper is designated under the Regulation, it must comply with the mandates set forth in Articles 5, 6, and 7 in a period of six months.^[23]

The shift to the regulatory approach is substantial from the compliance viewpoint. Instead of the burden of initial intervention and proof lying with the antitrust enforcer, the target must demonstrate how it integrates compliance solutions into its business model in line with the DMA’s objectives of contestability and fairness.^[24] In this context, one would expect the DMA’s obligations and aims to be eminently easy to apply and pursue in practice. In fact, EC officials have constantly remarked on the fact that the DMA sets out clear rules, hence gatekeepers know exactly what compliance should look like.^[25]

However, such a legal certainty is not a given. Indeed, as opposed to the obligations under Article 5, termed self-executing obligations^[26], Articles 6 and 7 establish a set of obligations open to further specification, through the venue of regulatory dialogue illustrated in Article 8. Therefore, there is an implicit recognition that at least Articles 6 and 7 DMA are not so clearcut regarding the technical transformations they require.^[27]

From the substantive perspective, the provisions apply irrespective of the underlying premises of the gatekeeper’s business model. That is to say, the DMA does not directly address the formula by which gatekeepers claim to create and capture value in digital markets. Hence, the same bar of compliance applies to all core platform services (CPSs) catered by gatekeepers, regardless of the extent to which they feed on strong network effects, data advantages, or the mechanics of market tipping and whether those economic characteristics evolve over time.^[28]

Based on this premise, the DMA supports, thus, the application of a vast array of obligations following a clear pattern of ensuring contestable and fair markets for all businesses. The concepts of fairness and contestability act as touchstones to the enforcement in more than one way.^[29] First, being the main objectives of the Regulation, they influence all the EC’s actions in interpreting the DMA’s provisions. Accordingly, each one of the solutions presented by the gatekeepers must correspond to these objectives. Second, contestability and fairness permeate the regulatory mandates contained under Articles 5, 6, and 7 DMA. Therefore, they also play a role in fleshing out the policy outcomes that each of the twenty-three mandates outlined in the aforementioned articles seek to achieve.

A. Contestability as potential competition

As set out under Article 1(1) and Recital 32 DMA, contestability is a means to an end. It is a means to eliminate barriers to entry and expansion undermining the ability of undertakings to contest, based on competition on the merits, the gatekeeper’s position in the markets as well as to impact the innovation potential of the wider platform economy. This objective is clearly linked to the economic features of CPSs that imbalance competition and innovation.^[30]

Recital 32 states that the lack of contestability is not a matter of the number of competitors which populate the market. Instead, in order to promote inter-platform competition, the locus of attention is focused on the presence of barriers to entry or expansion hindering the exercise of competition at the platform level.^[31] By this token, the DMA builds on the traditional economic definitions set out by Bain in the 1950s, following the structuralist approach.^[32] Accordingly, entry to a market is assumed unprofitable until information asymmetries and market imperfections can be compensated.

Stemming from these findings, inter-platform competition can be easily translated into the elimination of barriers to entry and expansion. However, such a task is not easy to perform in practice. Indeed, similarly to its institutional design, the Regulation does not define what economic characteristics of the digital platforms are to be understood as those barriers to entry and expansion undermining inter-platform competition. In fact, the DMA sets out in the abstract the economic features that have led digital markets to tip the scales in favor of gatekeepers. But it does not indicate whether all of them are barriers to entry and expansion or even whether they may be reversed via the imposition of antitrust-like remedies. Such a determination is not trivial insofar as economists have been discussing for decades now whether a particular economic characteristic is a barrier to entry and expansion.^[33]

In a similar vein, the DMA presumes that all these economic features apply equally to all CPSs and gatekeepers across the board. Nonetheless, economic reality trumps this one-size-fits-all approach. Some CPSs are not as contestable as others. For instance, switching costs are not as intense on web browsers as they are on online social networking services. In a similar vein, within the same category of CPSs, it may well be the case that contesting a gatekeeper’s position may be easier than disputing another incumbent’s situation in the market. One such example is that of a number-independent interpersonal communications services (NIICS). The EC has only designated two NIICS belonging to the same gatekeeper (i.e., Meta’s WhatsApp and Messenger). However, the same economic characteristics (and, thus, the barriers to entry and expansion hindering the competitors’ capacity to contest the market position) do not apply to them with the same intensity and degree.[34] Even though both build on strong network effects, Meta’s WhatsApp service is much more prominent in its position as the by-default messaging service end users access in the EU. Albeit the same network effects apply to some extent to Messenger, they only influence market outcomes in proportion to their link with the CPSs integrated into Facebook.

Finally, contestability under the DMA is primarily adversarial. In other words, it can only be enhanced when one or several business users compete with the gatekeeper’s position, regardless of the value proposition each offers to end users. Therefore, it may be the case that the DMA may only facilitate the replacement of gatekeepers without addressing diversification, meaning increased contestability could simply replicate the gatekeeper’s operations across the board.^[35]

Against this backdrop, the paper translates the wider contestability objective into an identifiable metric to perform its analysis. To this end, the paper identifies those provisions and scenarios that would promote potential competition, understood as the springboard for existing and new sources of competition to become successful.^[36] Indeed, by eliminating barriers to entry and expansion, the DMA strives to trigger the emergence of competitors in two fundamental manners. First, by enhancing the competitive situation of existing rivals, which have populated the market alongside gatekeepers. Second, by creating favourable market conditions to foster market entries at the inter-platform level with the capacity to successfully compete against gatekeepers. Under Section 3, the paper sets out those DMA’s provisions that (individually or in conjunction with the goal of fairness) pursue one of these manifestations of potential competition.[37]

B. Fairness as conflicts of interest: value appropriation and conditions of access and competition

The DMA’s depiction of fairness addresses intra-platform competition with reference to imbalances between the rights and obligations of business users where the gatekeepers obtain a disproportionate advantage.[38] Accordingly, the unfairness of terms and conditions for the use of their CPSs has led gatekeepers to hinder business users from fully capturing the benefits of their own contribution to the markets. Thus, the fairness objective under the DMA is redistributive in nature.^[39] It is claimed gatekeepers have unfairly appropriated monopoly rents from the value that business users create on their platforms. The regulatory tool aims to correct this by redistributing these rents to business users.^[40]

Notwithstanding, the Regulation does not point out what type of redistribution applies, namely whether surplus must be allocated depending on each business user’s value brought to the market or whether the appropriation of value should take place unrelated to their economic profits. By this token, the value of fairness under the DMA cannot be categorized into a single manifestation that will narrow the gap between an unfair and a fair outcome.^[41] More than a tractable metric for identifying effective enforcement, fairness is a value bearing an amorphous nature, depending on the individual consideration of the configuration of the market and the CPS’s economic characteristics.

Following upon the DMA’s silence, the paper translates the fairness value into a single scenario that applies across the board to identify unfair conduct in the eyes of the regulation, i.e., the presence of conflicts of interest. The DMA’s scope of application predetermines this finding. Indeed, for an undertaking to qualify as a gatekeeper, it must provide a CPS which is an important gateway for business users to reach end users, aside from bearing a significant impact on the internal market and enjoying an entrenched and durable position in doing so.^[42] Therefore, the presence of a potential conflict of interest is implied in the designation of the gatekeeper.

A clear comparison can be made with reference to those cases where the Court of Justice (CJEU) has recognized that the dominant undertaking’s conflict of interest predetermines market outcomes.^[43] Following this same line of reasoning, the DMA embeds fairness in its foundational rationale, subtly implementing this principle through its per se mandates. In this regard, the DMA seeks to eliminate conflicts of interest concerning both the access conditions and competitive landscape of CPSs. On the one hand, the DMA removes all discriminatory conditions of access so that potential competition may crystallize. This is the reason behind the fact the Regulation highlights that contestability and fairness are intertwined, thus stating that a single provision may address both goals.^[44] On the other hand, the DMA revamps previously unfair distribution channels within ecosystems by compelling gatekeepers to adjust to digital business models that lack market dominance.[45]

In other words, the DMA weaponizes the goal of fairness to redistribute both value and control throughout gatekeeper ecosystems.

The redistribution of control across ecosystems entails co-responsibility on the part of business users. As opposed to the confrontational nature of contestability, fairness as outlined in the DMA is rooted in the Socratic paradigm, wherein each economic operator should be rewarded according to their efforts. Consequently, fairness is implied to apply to both the activities of gatekeepers (who may be rewarded for their role in shaping digital ecosystems) and business users.

C. The classification of the provisions according to their metrics

Stemming from the intertwinement of both metrics, each of the DMA’s provisions can be categorized into one of three categories illustrated in Table 1.

Table 1. DMA’s provisions depending on their metrics

Several provisions aim at narrowing down the conflicts of interest embroidered into the conditions of access and/or competition to the gatekeeper’s business models in isolation. This is only logical, given that the Regulation is mainly based on the presence of a gatekeeping power and on the related risks created by the leveraging of their advantages from one area of their activity to another. Therefore, such provisions pursue the disintermediation of the designated gatekeepers from their prominent positions within the markets they operate in. For instance, the DMA discontinues the gatekeeper’s capacity to leverage data generated by its business users when it competes with them, under Article 6(2) ordering a data siloing obligation.

A few obligations seek to restore potential competition as a standalone metric to their success. These provisions report a quasi-automatic increase in the number of competitors entering the market as a result of their implementation. As means of example, Article 6(4) DMA cements potential entries at the downstream and upstream level regarding app distribution by compelling gatekeepers to allow and technically enable third-party app stores and apps to interoperate with their operating systems.

Finally, most provisions have a hybrid nature as a single metric cannot be clearly defined for them because of their expected impact on both existing and potential competition whilst eliminating conflicts of interest.

After all, the Regulation has not been designed as a closed system of protection reporting clear legal interests per each provision. Although one could identify certain provisions to confer the power to business users to narrow the gatekeeper’s conflicts of interest to a minimum, the absence of these conflicts of interest will also entail, in the medium-to-long-term, a higher propensity and incentive for entrants to compete on the merits with the gatekeeper, thus fostering inter-platform (rather than just intra-platform) competition.

III. The matrix in practice

The DMA compels the EC to effectively enforce its provisions. From the first round of compliance reports issued by the six gatekeepers designated in September 2023, the task looks moving-target-like and complex.

As a first step, it is worth noting that there are three types of DMA’s mandates depending on the scope of their application. The twenty-three provisions do not necessarily apply to all CPS categories. Notably, as illustrated in Table 2, most provisions only apply to specific CPSs, while several provisions are even wider in scope than the CPS categories. Therefore, the DMA’s locus of attention is not necessarily ascribed to the designation exercise performed by the EC.

Table 2. Scope of DMA’s provisions

Further, irrespective of their scope, the provisions do not apply in a vacuum. That is to say, the solutions put forward by gatekeepers in their compliance reports do not exclusively impact the services falling under designation. Indeed, in most cases, the provisions target secondary or complementary services belonging to business users. Therefore, the gatekeepers’ adjustments to their business models have a clear external vocation, rather than representing a mere internal restructuring.

When descended into reality, under each provision one can derive the desirable policy goal the EU legislator wishes to achieve. The legal interests of the DMA are, thus, translated into a myriad of policy outcomes with two different origins.

On the one hand, the DMA seeks to restore the competitive conditions that the antitrust framework allegedly failed to achieve in digital markets. By doing that, the DMA aims at achieving solutions competition law is deemed unable to ensure. This is particularly salient if one looks at the self-preferencing prohibition under Article 6(5) DMA. Inspired by the EC’s investigation in Google Shopping, the DMA imposes an outright ban deriving from a novel theory of harm the CJEU has not backed yet.[46] A similar example can be drawn out from Article 5(2) DMA, which has been inspired by the German Facebook case.[47] Even though the national competition authority enforced the siloing obligation as the primary solution to Facebook’s data processing, the practical effects of the remedy were limited.[48]

On the other hand, the DMA pursues independent and complementary policy goals of its own. To the extent the regulatory instrument remains distinct from competition law, considerations of public policy can be integrated without the need to address how they intersect and overlap with the need to increase consumer welfare. Consequently, the DMA eliminates the concept of consumer harm, while also incorporating consumer protection-focused policy decisions into the regulatory framework. For instance, the gatekeepers reporting duties under the DMA encompass the submission of compliance reports as outlined in Article 11. Additionally, these obligations extend to the gatekeepers’ requirements to submit audited reports detailing the consumer profiling techniques they employ within their CPSs under Article 15. The primary aim of this second obligation is to promote transparency and understanding regarding how consumers perceive gatekeepers’ profiling activities. The rationale is that end users might be encouraged to stop using the gatekeeper’s CPSs once they become aware of the significant consequences of their personal data being processed.

In the next Sections, the paper will untangle the outcomes of both policy strands pursued by the DMA breaking down each provision to understand the EC’s enforcement capabilities against gatekeepers’ compliance reports and their potential unintended consequences when observed from the practical viewpoint. As the principles of proportionality and necessity lie at the core of the DMA’s effective enforcement, compliance should take place in the least burdensome way for gatekeepers in those cases where more than one alternative and equally effective solutions may be introduced. Further, the application of the principle of proportionality requires such measures to be benchmarked against the yardstick of the DMA’s legal interests, i.e., contestability and fairness.

A two-step process must, therefore, necessarily apply to the DMA, since all its provisions do not necessarily target the same policy goal, nor do they protect the same legal interests. When confronted with the question of whether the gatekeepers’ compliance solutions demonstrate effective enforcement, the first step requires the enforcer to establish what legal interest is pursued (i.e., the triggering of potential competition or the narrowing down of the gatekeeper’s conflicts of interest). Section 2.C already conducted this exercise, as shown in Table 1.

The second phase of the analysis translates these legal interests into long-term expectations. In other words, the declared contestability and fairness take various forms when actualized. Therefore, the paper distinguishes between legal interests and policy goals. The former are evident when reading the DMA’s letter of the law, whereas the latter are obscured by the myriad policy choices embedded in the Regulation. Section 3.A aims to uncover the policy goals behind each provision and Section 3.B outlines the enforcement capabilities the EC will need to address in relation to these goals.

A. The DMA’s policy goals

The DMA’s legal interests outlined under Section 2 co-exist with additional policy goals pursued by each of its provisions. Therefore, from the perspective of regulatory theory, the DMA brings together aspects of both a goals-based and a rules-based regulation.^[49] While it shifts the responsibility of intervention onto the subjects of the Regulation, compelling them to evaluate the most effective way to adhere to its goals of contestability and fairness, at the same time, the obligations under Articles 5, 6, and 7 DMA provide for specific prescriptions and proscriptions of conduct. Thus, rather than investigating whether the gatekeeper’s compliance is consistent with the goals set out by the Regulation, the EC analyses whether they comply with the substantive provisions.

As depicted in Table 3, on one side of the spectrum the DMA functions as a market modelling tool. Indeed, some provisions are designed with an additional motive in mind, i.e., to carve out a particular view of the architecture and design of digital ecosystems. As the outcome is apparently predetermined, the regulatory intervention prevents gatekeepers from selecting one option from a variety of potential solutions that could meet the compliance standard. For example, Article 5(2) prohibits data combinations across core platform services. Thus, business models based on behavioral advertising are seen as presumptively undesirable.[50] EC representatives have even highlighted that the DMA requires gatekeepers to offer users a less personalized alternative to its services, which may consist of contextual advertising.^[51]

Moving along the spectrum to more alleviated forms of intervention, a wide range of provisions build upon the DMA’s preference towards the openness of digital ecosystems.^[52] Accordingly, on the one hand, some of the mandates of the provisions aspire to open markets to trigger more consumer choice. For instance, Article 6(4) allows alternative operators to distribute their app stores and apps on the gatekeeper’s ecosystems without relying on proprietary technologies. On the other hand, the paradigm of openness entails business users should not be hindered from competing in gatekeeping environments. Due to this reason, several provisions unfasten the restrictions gatekeepers may impose upon the entry of certain functionality on their CPSs. As means of an example, Article 5(4) prohibits the gatekeeper’s anti-steering restrictions.

Moreover, some of the provisions pursue the detachment of those competitive advantages which, in principle, the gatekeeper enjoys due to its condition as a prominent player in digital markets. Such advantages are not identified as choke points to be eliminated by the least restrictive measures imposed by the Regulation. On the contrary, these provisions aim at neutralizing the gatekeeper’s CPSs in an all-encompassing fashion. The clearest example is enshrined in Article 6(2) DMA, which neutralizes the gatekeeper’s capacity to leverage business user data generated on its CPSs to compete with them. All the gatekeeper’s CPSs are comprised under the obligation as a matter of scope and every type of competition between the gatekeeper and the business user remains captured. In parallel, Article 6(5) introduces the self-preferencing prohibition hindering the gatekeeper’s capacity to treat more favorably, in ranking, related indexing and crawling, its own services and products vis-à-vis those of its business users. Under the assumption the provision is not sufficiently wide, Article 6(5) adds on that the gatekeeper shall apply fair, transparent, and non-discriminatory conditions to such ranking.

Finally, the least intense form of regulatory intervention is that of enhancing transparency, especially in online advertising services. As acknowledged in Recital 45, the choice is based on the failure of EU data protection regulation.[53] The conditions under which gatekeepers provide online advertising services to business users are considered opaque and non-transparent because of the gatekeeper’s practices and the complexity of modern-day programmatic advertising. Thus, the legislator imprints the need to restore transparency in favor of business users in online advertising services via Articles 5(9) and 5(10) to resolve a failure which is not necessarily indicative of the presence of gatekeeping power. Alternatively, the transparency policy goal permeates consumer-protection objectives into the competition policy-based regulation by different means by, for instance, approximating the DMA’s content to the spirit of the P2B Regulation.^[54] Article 5(6) is a good proxy for illustrating this point. Indeed, Article 5(6) does not shape gatekeeper decision-making into any given direction. It recognizes a right to business and end users so they can exercise it before public authorities without any type of impediment deriving from the target’s gatekeeping power.

Table 3. DMA’s provisions according to their metrics and policy goals

From a quantitative perspective, such an analysis demonstrates that the DMA’s policy goals are not embodied in the least intrusive means of the neutralization of competitive advantages nor of the enhancement of transparency. On the contrary, most of the DMA’s provisions target a particular view of how digital markets should look like from a policy perspective. Therefore, the Regulation cannot be said to be agnostic regarding the business model transformation it imposes upon the gatekeepers. It points towards the clear preference for choosing market outcomes via the market modelling provisions under Articles 5(2), 5(3), 6(11), and 7 DMA. In parallel, it mandates ecosystem openness, irrespective of the gatekeeper’s configuration of its business model and decision-making processes, prior to the full application of the obligations.

Alternatively, from a qualitative viewpoint, Table 3 confirms a finding already pointed out in Table 1. Most obligations are not directly fine-tuned to strengthen potential competition in the market. In fact, there is a clear preponderance of hybrid mandates alongside those provisions aimed at narrowing down the gatekeeper’s conflicts of interest in different forms.

 B. Enforcement capabilities

Stemming from the theoretical background of the DMA’s legal interests and policy goals, the EC’s effective enforcement can only be measured if confronted with practical reality. The initial six designated gatekeepers already applied the Regulation’s obligations across their business models and submitted their compliance reports in March 2024. EC officials have already termed some of the solutions presented by the gatekeepers as blatant infringements of the spirit and letter of the Regulation.^[55]

Two main cornerstones to the DMA’s enforcement loom over the EC’s capabilities in transforming the Regulation’s mandates into reality, namely, information asymmetries and the provisions’ interplay with other pieces of the EU law and ongoing antitrust proceedings.

With regard to the former, the DMA addresses the problems of the lack of information at the EC’s disposal to engage with the dynamics of digital platforms by shifting the responsibility onto gatekeepers. Therefore, they are required to submit compliance reports (Article 11) and the auditing of their consumer profiling techniques (Article 15).^[56] However, reviewing the various compliance reports submitted, such a solution does not necessarily appear decisive.

For instance, the prohibition under Article 5(2) is supposed to be self-executing and, therefore, applied by default. From the technical perspective, this shift entails the CPSs’ data infrastructures transformation into siloed datasets which cannot interact with each other, absent the end user’s consent. In practice, Alphabet applied this approach by restricting data flows of personal data across its eight core platform services vis-à-vis the siloing of its non-CPS designated services.^[57] The same enforcement strategy has not been followed by other gatekeepers, such as ByteDance, which refused to put forward substantial technical solutions. Indeed, according to ByteDance, TikTok’s advertising services are an integral part of the TikTok entertainment platform, no combinations of personal data apply from different services when it creates user profiles for personalized advertising. Therefore, it asserted that the current configuration of its data infrastructure already complies with the obligation under Article 5(2).^[58]

If the EC may gain some knowledge of the gatekeeper’s data processing activities via the obligation under Article 15 DMA, without the target’s active engagement in unveiling its own data infrastructure, a profound interpretation of the compliance report cannot be performed.^[59] Therefore, at first glance, when monitoring the provision’s enforcement, the EC can only trust the gatekeeper’s assessment. It is not completely unsurprising that those provisions directed at modelling the market in a particular direction are the most impacted by this motion. Bearing in mind they devise an idea of the expected market outcome, those results may conflict and oppose the policy goals set out by other pieces of EU regulation, providing sufficient grounds for an impending tension in the EC’s enforcement capabilities, especially in light of its obligations deriving from the principle of sincere cooperation under Article 4(3) TEU.

Furthermore, as the DMA is a piece of legislation within the wider corpus of EU law, the EC’s enforcement capabilities cannot be measured in a vacuum. Despite the Regulation’s assertion that its application takes place without prejudice to any other piece of EU regulations and to the application of competition law, the distinction of where the EC’s enforcement starts and ends is not straightforward.[60] The EC may have to look outwards to enforce the DMA’s mandates. For instance, when sharing search data generated on online search engines under Article 6(11), the gatekeeper’s anonymization task cannot be interpreted without reference to the understanding of anonymization under EU data protection regulation. Due to this reason, the DMA provides for several fora of discussion with data protection supervisory authorities to substantively engage on these points of law.^[61] In parallel, notwithstanding the DMA applies without prejudice to the application of competition rules, some of the gatekeepers’ compliance solutions mimic the remedies already offered within antitrust proceedings, in advance of the DMA’s adoption. This is the case of both Meta and Amazon with regard to the technical implementations of the obligations under Articles 6(2) and 6(5). Their solutions did not go any further in scope or substance than what they had already convened with the European Commission in their Facebook Marketplace and Amazon Buy Box and Marketplace proceedings.^[62]

Aside from both characteristics, the provisions following distinct policy goals bear different challenges regarding the EC’s enforcement capabilities to the exclusion of any other category of provisions.

Circling back to those provisions pursuing the neutralization of competitive advantages, for instance, the EC is at a clear crossroads. Information asymmetries persist with the gatekeepers, creating issues not only with their overall incentive for disclosing data but also with specific challenges arising from the implementation of the DMA’s provisions. If gatekeepers were to disclose their compliance strategies to reduce information imbalances when submitting their reports, assessing compliance with such provisions would still be entirely unclear. Because the obligations are mainly negative in nature and require an abstract demonstration of neutrality, gatekeepers can effectively obscure the decision-making process, making it more difficult for the EC to monitor enforcement.

As a matter of example, Amazon’s compliance with the data siloing obligation under Article 6(2) DMA demonstrates this point. In the illustration of its compliance solution, the gatekeeper did not substantially engage with the process of decision-making underlying its operations. Instead, it referenced, in the abstract, its efforts to silo data through the different technical systems it has in place. By this token, Amazon remarked the presence of various automated systems, algorithms, models, and tools that feed into the decisions where it may be perceived to act in competition with third-party sellers via selection, inventory, and pricing decisions. In summary, Amazon declared that, upon a review of the data inputs drawn from each of its automated systems, it could confirm that none of them ingest or use non-public third-party seller data. No further reference or explanation was provided by the gatekeeper. Despite the reversal of the burden of intervention, the gatekeeper does not present any evidence to the effect of demonstrating compliance with the negative obligation. The EC is, thus, expected to trust the gatekeeper’s word and explanations at face value.

Moving to those provisions targeting the openness of platforms and digital ecosystems, the compliance reports show the gatekeepers’ clear predilection to avoid relaying power out of their hands. Indeed, they shift the gatekeeper’s ability to make rules away from being the sole decision-maker towards the next most viable option for exerting their gatekeeping power, namely enabling business users to conduct their activities within their platforms. In other words, gatekeepers can no longer completely block access to their platforms as they could before the DMA came into effect. However, they have found ways to delay business users’ requests for access by implementing entitlement procedures.

Apple’s enforcement strategy is quite salient in this respect, as it was arguably the digital ecosystem with the smallest degree of openness prior to the DMA’s application. Pursuant to Article 6(4) DMA, the gatekeeper is required to allow alternative operators of app stores and apps to distribute these services via different means to its proprietary App Store. However, Apple has not relinquished  all its decision-making capacity when it comes to app distribution on iOS.^[63] Alternative app store operators must go through an entitlement process, managed and designed by the gatekeeper, to receive authorization to operate on iOS. Apple has not included the entitlement requirements into its first compliance report, but it updated and uploaded information on its developer’s webpage the conditions these alternative operators will have to comply to exert the opportunities for openness provided by the DMA.^[64] Such rules include the need to follow the notarization process, enabling Apple to filter through requests for access focusing on reasons of security, privacy, and the maintenance of device integrity. Without a positive answer from Apple on notarization, the business user will not be able to benefit from Article 6(4).[65] On top of this process, Apple establishes additional requirements to authorise the business user’s operations as an alternative app store, such as submitting a new binary for the app store’s sole distribution on iOS in the EU or providing Apple with a standby letter of credit from an A-rated financial institution in the amount of EUR 1.000.000.

Similar challenges involve the evaluation of the effective application of provisions pursuing market modelling and openness. While the DMA aims at introducing opportunities business users must grasp to thrive in the CPSs’ markets, some compliance reports show that the venues for the enhancement of inter and intra-platform competition are a matter of the business users’ discretion. Notably, some gatekeepers present their business users with a binary option. They may either stick with the choices and conditions they had before the DMA came into effect or choose to adopt the compliance solutions proposed under the entitlement conditions set by the gatekeeper. This is precisely the model Apple presented to its business users. However, in this context, compliance with the regulation does not apply by default.[66]

Considering the array of challenges the EC will encounter while monitoring DMA’s enforcement, it is clear that a complex network of obstacles lies ahead. These hurdles are not straightforward in theory and vary in practice, depending on the gatekeepers and their enforcement strategies outlined in compliance reports.

C. The impact on consumers

The concept of consumer welfare or consumer harm does not influence the EC’s analysis of the mandates within the Regulation. At least, this is the DMA’s legal stance on its impacts on consumers. For instance, Recital 23 eliminates the possibility for gatekeepers to present efficiencies or justifications on economic grounds to the EC.[67] Similarly, non-compliance procedures initiated by the Commission due to violations of Articles 5, 6, and 7 DMA do not require proof that consumer harm is directly caused by the gatekeeper’s conduct.[68] In turn, however, the interventions of EC officials reiterate that the changes introduced by the DMA must also please customers.[69]

The EC’s stance is based on a policy choice. Specifically, if gatekeepers cannot delay proceedings by presenting extensive economic reports and evidence that the competition authority must disprove, then the Regulation has a better chance of being effectively implemented and remaining responsive to digital dynamics. However, this choice does not necessarily align with the functioning of digital markets. In fact, the DMA’s focus on fostering opportunities for business users, rather than producing direct outcomes for consumers, highlights the disconnect between the Regulation’s goals and its eventual impacts on the different markets corresponding to the CPSs.

In this context, the DMA may result in both intended and unintended consequences for consumers. The Regulation’s opportunities-oriented approach presents the DMA’s chances of success in two different lights. On one hand, the DMA may achieve its intended outcomes by creating more opportunities for business users, which will, in most cases, provide more consumer choice. However, diversification does not necessarily follow from the enhancement of consumer choice. For instance, new entrants or existing business users in those markets may replicate the quality and business models of gatekeepers. Therefore, expanding consumer choice is not simply about increasing supply to enhance consumer satisfaction.

On the other hand, the DMA may also lead to some unintended consequences for consumers, particularly due to changes introduced by gatekeepers in user journeys across their services. In other words, consumers might perceive a decrease in the quality of services provided by gatekeepers if the usual distribution of these services is disrupted to implement DMA-driven solutions.

A paradigmatic example of user experience degradation that may result from the DMA’s implementation is provided by Google Maps. Under the DMA, gatekeepers are required to treat rival downstream services as favorably as their own to ensure platform neutrality. As a result, to avoid the risk of being accused of self-preferencing by offering preferential placement to its specialized Maps unit, Google decided not to allow users to go directly from Google Search to Maps in one click. Consequently, users can no longer click on the location image to access Maps directly. However, is has been reported that removing Google’s one-click advantage led to higher search costs for users without significantly boosting the discovery or adoption of alternative mapping services in the short run.[70] As a consequence, it may be questioned whether a provision that increases search costs for consumers but has a negligible effect on product substitution can be considered a success.

In some cases, relying on the DMA’s anti-circumvention clause, the EC has already raised concerns about the impacts on user experience proposed by gatekeepers in their compliance reports.[71] The provision ensures that gatekeepers cannot degrade the quality of their services due to DMA compliance or worsen the conditions under which consumers provide informed consent throughout their user experience. Therefore, this aspect of the Regulation does not necessarily address the concept of consumer harm and welfare, but rather its effect on consumer protection.

IV. Putting theory into practice: a case study of Alphabet’s proposed compliance with the anti-steering prohibition

Evaluating effective enforcement is a significant challenge. As illustrated in the previous Sections, given the DMA’s broad spectrum relating to its legal interests and policy goals, enforcement is anticipated to be multi-faceted, nuanced, and essentially unpredictable in terms of the outcomes expected from the Regulation’s mandates.

Therefore, the paper proposes a practical method to assess whether a specific compliance solution aligns with the concept of effective enforcement or necessitates further scrutiny under the measures outlined in the DMA. It fundamentally reveals the obscured aspects of the DMA’s enforcement strategy, aiming to balance its recognized legal interests with the often-overlooked long-term policy goals its provisions express and aim to achieve. In doing so, the paper illustrates a dual-layered enforcement approach that must not only uphold the DMA’s broader objectives but also align with the policy direction embedded by the EU legislator. This dichotomy within the DMA’s framework is crucial for anticipating the EC’s enforcement capabilities and determining how to address them effectively.

To examine the necessity of considering the secretive nature of long-term policy goals, the paper employs a case study of the non-compliance procedure initiated by the EC against Alphabet. The procedure addresses potential infringement of Article 5(4) DMA related to the Google Play intermediation service.

According to Alphabet’s compliance report, it now provides additional means for developers to communicate and promote offers to end users as well as by providing them with the capacity to directly conclude contracts via these means. Alphabet has opened this possibility for app developers via its new External Offers program. Developers must agree with the terms and conditions of that program to enjoy the possibility of steering their users to promotional offers. Aside from that, participation in the program by the app developer is subject to Google’s approval. For instance, some of the eligibility criteria fleshed out by Alphabet include the fact that developers must only direct end users to their own digital features or that they are directly responsible for providing support to users in their external transactions. In this respect, the most salient aspect of the compliance solution relates to the fee structure Alphabet imposes upon developers when they redirect their end users to promotional offers. Under the assumption the app developer acquired those end users due to its presence on Alphabet’s Google Play, the gatekeeper charges a 5% initial acquisition fee on the offers catered through the in-app digital features and services during the two years following the initial external transaction on top of an ongoing services fee of up to 7% for those same offers. Only after these two years stemming from the end user’s initial acquisition, the developer may opt out from receiving Play services and paying the ongoing services fee.

The first step of the analysis necessarily stems from its categorization in line with the legal interest it purports. Article 5(4) DMA seeks to promote intra-platform competition by narrowing down gatekeeping power in setting rules driving downstream competitors away from the digital ecosystem. The rationale underlying the anti-steering provision relates to the fact that a gatekeeper will not earn revenues from those services its downstream competitors realize outside its digital ecosystem.

Against this background, Article 5(4) pursues the legal interest of reducing conflicts of interest as a standalone metric. Upstream competition among platforms is not directly concerned and, as such, the provision does not fall within the definition of a hybrid obligation as depicted under Section 2.C. Establishing the provision’s legal interest sets the path for the anticipated results that one can intuitively expect the provision to achieve. In the case at stake, the legislator may intend to boost traffic from downstream services offered through digital ecosystems to their own websites by separating the completion of a transaction from the operator’s presence in a specific digital ecosystem. Therefore, an increase in the number of app developers offering such functionalities and the prevalence of more promotional offers providing those links would serve as initial indicators of effective compliance with the provision.^[72]

Once the legal interest has been identified, one must set out the provision’s scope in relation to the CPSs included to compare it with the scope of the compliance solutions proposed by the gatekeeper. According to the terms of Article 5(4), the provision is wider in scope to the CPS categories. It compels the gatekeeper to allow business users to communicate and promote offers to end users acquired via its core platform service or through other channels, and to conclude contracts with those end users. Looking at Alphabet’s proposed solution, the initial acquisition and ongoing services fees imposed on developers as a take-it-or-leave-it choice does not seem to align with the provision’s scope. Indeed, on the one hand, the anti-steering provision spans through all types of communications and channels. Thus, the absence of a compliance solution for the rest of Alphabet’s CPSs and channels is not coherent with the obligation. On the other hand, Article 5(4) does not solely focus on end users benefiting from a CPS, but on all categories of end users who depend on the gatekeeper’s ecosystem. In this context, it becomes possible to analyses the terms introduced by Alphabet regarding its fee structure when end users are directed to promotional offers from in-app services provided by app developers.

Continuing with the analysis, it is critical to determine the provision’s nature in the context of the broader policy goals pursued by the EU legislator. Article 5(4) aims at enhancing the openness of the ecosystem at the downstream level by removing previous restrictions on directing end users towards promotional offers. To this end, Article 5(4) includes a clear and active mandate to eliminate anti-steering restrictions from the terms and conditions imposed by gatekeepers on their counterparts. This enables transactions to take place outside of the gatekeepers’ ecosystems. Both the legal interest and policy goal remain, therefore, closely correlated in terms of their identification, even though one does not necessarily automatically follow from the other.

Given this context, the EC’s enforcement capabilities closely align with both the legal interest and policy goal of the provision. As the provision aims to promote openness in downstream markets, the primary enforcement challenges arise from Alphabet’s entitlement processes. Indeed, Alphabet’s proposed compliance solution does not prescribe openness by default. Instead, the steering of users will only occur with Alphabet’s prior authorization of developers’ entitlement to provide link-outs within its services.

Finally, the potential side effects stemming from the provision’s compliance must be taken in mind. In the case of Article 5(4), there is an undeniable interplay with the separate obligation imposed by Article 6(12), according to which the gatekeeper must apply fair, reasonable, and non-discriminatory conditions of access for business users to its software application stores, online search engines, and online social networking services listed as CPSs. Therefore, within the context of Article 5(4), the EC must assess how fair conditions are set through developers’ entitlements, which should be included in the broader analysis of compliance with Article 6(12) DMA. However, what is deemed fair under Article 5(4), aimed at reducing conflicts of interest, might not be regarded similarly under a distinct provision.

In summary, the case study of Alphabet’s compliance with Article 5(4) DMA yields mixed results but reveals several clear findings. At first glance, it is relatively easy to discern whether the provision serves one legal interest over another. If the provision addresses issues within the downstream market concerning the CPS it operates in, then conflicts of interest are at play. Therefore, Alphabet’s solution should aim to rectify any imbalances in bargaining power imposed on business users in comparison to Alphabet’s own position. However, the new fee structure and the requirement for app developers to pay an ongoing service fee for Google Play for two years contradict this spirit.

Since the provision aims to foster intra-platform competition by mandating active conduct, it becomes apparent that Alphabet’s technical implementation does not meet the requirement of neutralizing competitive advantages. In fact, Alphabet’s compliance report states that developers were already allowed to communicate and promote offers to Google Play’s end users and conclude contracts with them prior to the DMA. According to the gatekeeper, developers always had the ability to communicate and promote offers to Google Play users through channels outside the app store, such as emails and text messages. Therefore, neutralizing competitive advantages would be irrelevant. However, the provision hints at a clear direction towards openness. Consequently, Alphabet’s compliance solution introduces new policies that enable in-app link outs as an additional means for developers to communicate and promote offers to end users.

In this context, understanding the provision’s policy goal is not crucial for assessing compliance with it at face value, but it is pivotal for two fundamental aspects of the analysis. First, it defines the long-term objective the provision aims to achieve. If compliance solutions meet the legal interest (i.e., fairness) but fall short of achieving the desired degree of openness, there will still be room for the enforcer to encourage the gatekeeper to implement a modified version of its compliance solution.

Secondly, elucidating a provision’s policy goal is crucial for highlighting potential challenges the EC may face in its enforcement efforts. Regarding Article 5(4) DMA, which aims to instill openness, the most significant challenge associated with fulfilling this hidden promise is intermediation. In other words, the DMA is unlikely to completely eliminate gatekeeping power when a dominant player still benefits from operating within an ecosystem. This correlation becomes apparent when considering Alphabet’s entitlement process to offer its in-app link outs to business users. Without first establishing the long-term policy goal, it would be difficult to determine whether the entitlement process should be evaluated based on fairness or if enforcement challenges arise from elsewhere.

Indeed, this is precisely what the paper has untangled for each provision, paving the way for the EC’s effective enforcement. It is not entirely clear what legal foundations will influence the EC’s enforcement strategy, apart from the broader concepts of contestability and fairness. The paper has shown that an additional layer, substantiating the DMA’s direction into specific policy goals, is crucial for understanding where the Regulation’s success lies. This also guides gatekeepers and enforcers in narrowing down their choices in terms of ecosystem design, architecture, and enforcement approach. To hold both gatekeepers and the EC to account, the paper illustrates the common ground they can reach by acknowledging the DMA’s policy goals. As a consequence, the EC’s enforcement actions should be constrained to these specific goals.

V. Concluding remarks

The adoption of the DMA has been accompanied by significant doubts and criticism, particularly due to its controversial relationship with competition law. Inspired by antitrust investigations, the new Regulation finds its roots and essential rationale in an alleged antitrust enforcement failure. Therefore, once adopted and applied, the main question is how to determine the DMA’s success. Namely, how to identify the conditions under which the implementation of the new rules has been effective for each obligation by achieving results that competition law would not be able to ensure.

This paper addresses this question by providing metrics to measure the DMA’s success. Notably, it shows that such a process requires unveiling the DMA’s hidden policy goals. Indeed, although contestability and fairness are the proclaimed protected legal interests, they do not represent the outcomes the EU legislator aimed to embed in the Regulation. Despite the EC’s desire to keep these aims somewhat hidden, four main policy goals influence the DMA’s provisions: market modelling, openness, neutralizing competitive advantages, and enhancing transparency. In this context, the EC’s enforcement capabilities are directly correlated with the long-term policy goals pursued by each provision.

Translating fairness and contestability into clear policy goals and thus unveiling the secret of the DMA provides two significant benefits. It guides and constrains gatekeepers in developing solutions to comply with the new rules. At the same time, it holds the EC accountable for its enforcement strategy, ensuring its actions are directed toward achieving specific market outcomes.

[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L 265/1.

[2] Ibid., Recital 5.

[3] See Margrethe Vestager, Remarks on the opening of non-compliance investigations under the Digital Markets Act, (2024) https://ec.europa.eu/commission/presscorner/detail/en/speech_24_1702 (all the links were last visited on 15 May 2024), stating that the DMA was born out of a reflection process “very much influenced by our antitrust enforcement experience where we have seen the temptation to flout the law. We have brought several antitrust cases in the tech sector which ultimately led to the DMA. These include cases against Google (Shopping, Android, AdSense and the on-going AdTech investigation), Apple (the AppStore and Apple Pay cases), or Amazon (Buy Box/Prime/Data).” See also Friso Bostoen, Understanding the Digital Markets Act, (2023) 68 The Antitrust Bulletin 264; Marco Cappai and Giuseppe Colangelo, Taming digital gatekeepers: the more regulatory approach to antitrust law, (2021) 41 Computer Law & Security Review 105559; Filomena Chirico, Digital Markets Act: A Regulatory Perspective, (2021) 12 Journal of European Competition Law & Practice 493.

[4] The paradigmatical case used as an example of the ineffective enforcement of EU competition law is the European Commission’s decision in Google Shopping (Case AT.39740, [2017] C(2017) 4444 final).

[5] Commission Staff Working Document, Impact Assessment Report accompanying the Proposal for a Regulation of the European Parliament and of the Council on contestability and fair markets in the digital sector (Digital Markets Act), [2020] SWD/2020/363 final, paras. 2-4 and 9-14.

[6] On the shift from the EU competition law acquis to the regulatory-like instrument and its impact on judicial review, see Pablo Ibáñez Colomo, The Draft Digital Markets Act: A Legal and Institutional Analysis, (2021) 12 Journal of Competition Law & Practice 573.

[7] Gatekeepers’ compliance reports are available at https://digital-markets-act-cases.ec.europa.eu/reports/compliance-reports. On the relevance of compliance reports, see Jacques Cremer, David Dinielli, Paul Heidhues, Gene Kimmelman, Giorgio Monti, Rupprecht Podszun, Monika Schnitzer, Fiona Scott Morton, and Alexandre de Streel, Enforcing the Digital Markets Act: Institutional Choices, Compliance, and Antitrust, (2023) 11 Journal of Antitrust Enforcement 315. For a brief overview of the compliance reports, see Alba Ribera Martínez, Full (Regulatory) Steam Ahead: Gatekeepers Issue the First Wave of DMA Compliance Reports, (2024) https://competitionlawblog.kluwercompetitionlaw.com/2024/03/11/full-regulatory-steam-ahead-gatekeepers-issue-the-first-wave-of-dma-compliance-reports/. In May 2024, Booking was added to the list of gatekeepers for its online intermediation service: see European Commission, Commission designates Booking as a gatekeeper and opens a market investigation into X, (2024) https://ec.europa.eu/commission/presscorner/detail/en/IP_24_2561.

[8] See European Commission, Commission opens non-compliance investigations against Alphabet, Apple and Meta under the Digital Markets Act, (2024) https://digital-markets-act.ec.europa.eu/commission-opens-non-compliance-investigations-against-alphabet-apple-and-meta-under-digital-markets-2024-03-25_en, opening five non-compliance procedures against Google with regards to Articles 5(4) and 6(5), Apple with regards to Articles 5(4) and 6(3) as well as against Meta regarding Article 5(2) DMA. More recently, see also European Commission, Commission sends preliminary findings to Apple and opens additional non-compliance investigation against Apple, (2024) opening an additional non-compliance procedure against Apple with regards to Article 6(4), https://digital-markets-act.ec.europa.eu/commission-sends-preliminary-findings-apple-and-opens-additional-non-compliance-investigation-2024-06-24_en.

[9] The discussion also encompasses the decision-making process within antitrust enforcement, debating between the rule of reason and bright-line rules: see, e.g., Daniel A. Hanley, In Praise of Rules-Based Antitrust, (2024) 2 CPI Antitrust Chronicle 20.

[10] For a proposal on how to operationalize the general anti-circumvention provision under Article 13 DMA, see Jens-Uwe Franck and Martin Peitz, The Digital Markets Act and the Whack-A-Mole Challenge, (2024) 61 Common Market Law Review 299.

[11] Pierre Larouche and Alexandre de Streel, The European Digital Markets Act: A Revolution Grounded on Traditions, (2021) 12 Journal of European Competition Law & Practice 542.

[12] On the idea of the DMA’s hybrid nature from an institutional perspective, see also Anna Tzanaki and Julian Nowag, The Institutional Framework of the DMA: From Hybrid to Mature?, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4574518.

[13] DMA, supra note 1, Article 30. In principle, as noted by Anna Tzanaki and Julian Nowag, The DMA’s Cooperative Compliance Setup: Punishment as Ultima Ration, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4692533, the sanctioning of the gatekeepers should come as a last resource solution. See also Alba Ribera Martínez, Rocking the Contestability and Fairness Foundations: Multi-Level Governance and Trust Relations for Futureproofing the DMA’s Effectiveness, (2023) 104 European Yearbook of International Economic Law 1, noting that the EC must preserve, to some degree, trust relationships with each of the gatekeepers.

[14] The EC can direct requests for information (Article 21 DMA), carry out interviews, and take statements from any natural or legal person (Article 22 DMA), conduct inspections (Article 23 DMA) as well as retain documents deemed to be relevant to assess the implementation of, and compliance, with the obligations under Articles 5, 6, and 7 (Article 26 DMA). See European Commission, supra note 9, confirming that it would take investigatory steps regarding Amazon’s compliance with the self-preferencing prohibition under Article 6(5) and regarding Apple’s new fee structure and terms and conditions applied for the alternative distribution of apps on its ecosystem under Article 6(4). Moreover, the EC also set out that it had issued retention orders on the documents in Alphabet’s, Amazon’s, Apple’s, Meta’s, and Microsoft’s possession to secure future enforcement.

[15] See DMA, supra note 1, Articles 9 and 10.

[16] See Richard Feasey and Alexandre de Streel, DMA Output Indicators, (2023) CERRE Draft Issue Paper, https://cerre.eu/wp-content/uploads/2023/07/CERRE-Draft-Issue-Paper-DMA-Output-Indicators.pdf. EC officials have repeatedly highlighted that the transformation of the DMA of the structures of digital markets will be dependent on how business users grasp new opportunities and benefits open to them because of its application, but outcomes are not directly expected as a result: see Olivier Guersent, Keynote Speech at the Annual CRA Brussels Conference, (2023) https://competition-policy.ec.europa.eu/system/files/2023-12/20231206_CRA_conference_Olivier-Guersent_speech.pdf.

[17] The shift was made clear via the European Commission’s regulatory template on Article 11 DMA: see European Commission, Template Form for Reporting Pursuant to Article 11 of Regulation (EU) 2022/1925 (Digital Markets Act) (Compliance Report), (2023) https://digital-markets-act.ec.europa.eu/document/download/904debdf-2eb3-469a-8bbc-e62e5e356fb1_en?filename=Article%2011%20DMA%20-%20Compliance%20Report%20Template%20Form.pdf.

[18] Nicolas Petit, The Proposed Digital Markets Act (DMA): A Legal and Policy Review, (2021) 12 Journal of European Competition Law & Practice 536. On the concept of fairness, see Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, (2023) 68 The Antitrust Bulletin 618.

[19] On the concept of contestability in the context of the DMA, see Alba Ribera Martínez, The DMA’s Ithaca: Contestable and Fair Markets, (2023) 46 World Competition 429.

^[20] See DMA, supra note 1, Recital 54, and European Commission, Inception Impact Assessment, (2020) https://ec.europa.eu/info/law/better-regulation/.

^[21] See DMA, supra note 1, Recital 2, remarking on all these economic features as reasons justifying its proportionality.

^[22] For an analysis of the reversal of the error-cost framework, see Elias Deutscher, Reshaping Digital Competition: The New Platform Regulations and the Future of Modern Antitrust, (2022) 67 The Antitrust Bulletin 302. Regarding the nature of the DMA’s provisions as per se rules, see Petit supra note 21, 529.

^[23] DMA, supra note 1, Article 3(10).

^[24] Colomo, supra note 6, 562.

^[25] For instance, see Nicholas Hirst, Tech gatekeepers face enforcement action if not compliant with DMA by March, Koenig says, (2024) https://mlexmarketinsight.com/news/insight/tech-gatekeepers-face-enforcement-action-if-not-compliant-with-dma-by-march-koenig-says.

^[26] Chirico, supra note 3, 495. The categorization of those provisions as self-executing is not completely straightforward, insofar as it is not particularly clear how gatekeepers should comply with some of the mandates contained under Article 5, most notably the prohibition on processing, cross-using and combining personal data across core platform services.

^[27] This differentiation has clear repercussions on the DMA’s public enforcement regarding the terms of engagement between the EC and the gatekeeper, but it also has a clear impact on private enforcement, see Assimakis P. Komninos, The Digital Markets Act and Private Enforcement: Proposals for an Optimal System of Enforcement, (2021) N. Charbit and S. Gachot (eds.), Eleanor M. Fox: Antitrust Ambassador to the World, Concurrences, 425.

^[28] On this same point, see David J. Teece and Henry J. Kahwaty, Is the Proposed Digital Markets Act the Cure for Europe’s Platform Ills? Evidence from the European Commission’s Impact Assessment, (2021) 5, https://www.thinkbrg.com/insights/publications/digital-markets-act-eu-impact-assessment/.

^[29] On the multi-dimensional nature of the notions of contestability and fairness, see Ribera Martínez, supra note 13, 14.

^[30] DMA, supra note 1, Recital 32. See also Oliver Budzinski, Sophia Gaenssle, and Annika Stöhr, Outstanding relevance across markets: A new concept of market power? (2020) 3 Concurrences 38.

^[31] Bostoen, supra note 3, 266. In a similar vein, arguing that digital regulation promoting contestability is aimed at diminishing the benefits from network effects and data advantages, see Lazar Radic, Geoffrey A. Manne, and Dirk Auer, Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulations, (2024) ICLE White Paper, https://laweconcenter.org/resources/regulate-for-what-a-closer-look-at-the-rationale-and-goals-of-digital-competition-regulations/.

^[32]  Joe S. Bain, Barriers to New Competition: Their Character and Consequences in Manufacturing Industries, (1956) Cambridge: Harvard University Press. The recognition of this structuralist approach under the DMA, from an economic perspective, derives from Amelia Fletcher, Jacques Crémer, Paul Heidhues, Gene Kimmelman, Giorgio Monti, Rupprecht Podszun, Monika Schnitzer, Fiona Scott Morton, and Alexandre de Streel, The Effective Use of Economics in the EU Digital Markets Act, (2024) 20 Journal of Competition Law & Economics 1.

^[33] The discussion is illustrated in Preston R. Fee, Hugo M. Mialon, and Michael A. Williams, What Is a Barrier to Entry? (2004) 94 American Economic Review 465, building on Bain’s work but also on George J. Stigler, The organization of industry, (1968) Homewood: Irwin, and Franklin M. Fisher, Diagnosing Monopoly, (1979) 19 Quarterly Review of Economics and Business 23.

[34] See General Court, Case T-1077/23, ByteDance v Commission, EU:T:2024:478, para. 183, recognizing that different CPSs may be characterized by different degrees of intensity in terms of multi-homing.

^[35] This impact is also noted in John Davies, Valérie Meunier, Gianmarco Calanchi, and Angelos Stenimachitis, A Missed Opportunity: The European Union’s New Powers over Digital Platforms, (2022) 67 The Antitrust Bulletin 505.

^[36] On the concept of potential competition, see Herbert Hovenkamp, Potential Competition, (forthcoming) Antitrust Law Journal.

[37] See also Petit, supra note 18, 540.

[38] DMA, supra note 1, Recital 33.

^[39] Pablo Ibáñez Colomo, The New EU Competition Law, (2024) Oxford: Blommsbury, 133.

^[40] For an in-depth analysis of the rents that digital platforms may appropriate, see Nicolas Petit and David J. Teece, Innovating Big Tech firms and competition policy: favoring dynamic over static competition, (2021) 30 Industrial and Corporate Change 1168.

^[41] On this same complexity, see Torsten Körber, Lessons from the hare and the tortoise: Legally imposed self-regulation, proportionality and the right to defence under the DMA, (2021) Neue Zeitschrift für Kartellrecht 4.

^[42] DMA, supra note 1, Article 3(1). On the contrary, the EC has not designated two NIICS surpassing the thresholds under Article 3(2) due to their lack of control over the operations of their business users (i.e., Gmail and Outlook.com): see Decision, 5 September 2023, [2023] C(2023)6101 final, paras. 136, 144, and 145; and Decision, 5 September 2023, [2023] C(2023)6106 final, paras. 104 and 109. Further analysis of these criteria can be found in Alba Ribera Martínez, The Requisite Legal Standard of the Digital Markets Act’s Designation Process, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4681963.

^[43] For the digital sphere, see General Court, 10 November 2021, Case T-612/17, Google v. European Commission (Google Shopping), ECLI:EU:T:2021:763, and further analysis in Giuseppe Colangelo, Antitrust Unchained: The EU’s Case Against Self-Preferencing, (2023) 72 GRUR International 538. For non-platformed markets, see CJEU, 21 December 2023, Case C-333/21, European Superleague Company, ECLI:EU:C:2023:1011, para. 133; on its potential nexus to digital markets, see Jean-Christophe Roda, What if the Super League Case Was About the Digital Market? (forthcoming) Journal of European Competition Law & Practice.

^[44] DMA, supra note 1, Recital 34.

[45] See Petit, supra note 18, 531, arguing that DMA’s provisions do not always require entry to the platform.

[46] Supra notes 4 and 43.

[47] Bundeskartellamt, 7 February 2019, Case B6-22/16. For an analysis of the different episodes of the Facebook saga, including the judgement delivered by CJEU, 4 July 2023, Case C-252/21, Meta Platforms v. Bundeskartellamt, EU:C:2023:537, see, e.g., Giuseppe Colangelo, The privacy/antitrust curse: insights from GDPR application in competition law proceedings, (2023) ICLE Working Paper, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4599974.

[48] The German competition authority only secured commitments from Meta ensuring that Facebook and Instagram accounts would not be prima facie linked: see Bundeskartellamt, (2023) Meta (Facebook) introduces new accounts center – an important step in the implementation of the Bundeskartellamt’s decision, https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2023/07_06_2023_Meta_Daten.html?nn=295782.

^[49] The interplay between both is nothing new to regulatory theory, as established by Lawrence A. Cunningham, A Prescription to Retire the Rethoric of “Principles-Based Systems” in Corporate Law, Securities Regulation, and Accounting, (2007) 60 Vanderbilt Law Review 1413.

[50] This approach is derived from the European Data Protection Board’s opinion on Meta’s pay or consent model: see European Data Protection Board, Opinion 08/2024 on Valid Consent in the Context of Consent or Pay Models Implemented by Large Online Platforms, (2024) https://www.edpb.europa.eu/system/files/2024-04/edpb_opinion_202408_consentorpay_en.pdf.

^[51] See Thierry Breton, Answer given on behalf of the European Commission, (2024) E-003434/2023(ASW), https://www.europarl.europa.eu/doceo/document/E-9-2023-000479-ASW_EN.pdf. In a similar vein, the European Commission stated that, for end users to make informed choices about Meta’s pay-or-consent model, there must be a third option offering free services without relying on behavioral advertising: see European Commission, Directorate-General for Competition and Directorate-General for Communications Networks, Content and Technology, Commission sends preliminary findings to Meta over its “Pay or Consent” model for breach of the Digital Markets Act (2024), https://digital-markets-act.ec.europa.eu/commission-sends-preliminary-findings-meta-over-its-pay-or-consent-model-breach-digital-markets-act-2024-07-01_en.

^[52] See Vestager, supra note 3.

[53] Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC [2016] OJ L 119/1.

^[54] Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services [2019] OJ L 186/57.

^[55] See Margrethe Vestager’s opinion before the Committee on Internal Market and Consumer Protection, (2024) https://multimedia.europarl.europa.eu/en/webstreaming/committees_20240403-0900-COMMITTEE-IMCO. The six non-compliance procedures triggered by the European Commission in the span of four months since the application of the substantive provisions enshrine this same idea.

^[56] Regarding the interplay of information asymmetries between competition authorities and firms, see Luís Cabral, Justus Haucap, Geoffrey Parker, Georgios Petropoulos, Tommaso Valletti, and Marshall Van Alstyne, The EU Digital Markets Act: A Report from a Panel of Economic Experts, (2021) Joint Research Centre of the European Commission, https://publications.jrc.ec.europa.eu/repository/handle/JRC122910.

^[57] Despite the gatekeeper included these technical transformations in its compliance report, it presented those same solutions in the compliance workshop organized by the European Commission in late March 2024: for the recording of the event see Compliance with the DMA: Google, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-google-2024-03-21.

^[58] See ByteDance, Compliance Report (Non-confidential Version) under Article 11 of Regulation (EU) 2022/1925 of the European Parliament and of the Council (Digital Markets Act), (2024) para. 10, https://sf16-va.tiktokcdn.com/obj/eden-va2/uhkklyeh7othpu/Bytedance%20DMA%20Compliance%20Report%20Public%20Overview.pdf.

^[59] For instance, in its report pursuant to Article 15, ByteDance did not provide much information in this regard.

[60] DMA, supra note 1, Recital 12 and Article 1(6).

^[61] Such a case is that of the High-Level Group set out pursuant Article 40 DMA: see Commission Decision 23 March 2023, C(2023) 1833 final. Within the High-Level Group, a sub-group has been constituted to interpret the concept of consent in the sense of Articles 4(11) and 7 GDPR: see Directorate-General for Communications Networks, Content and Technology and Directorate-General for Competition, Kick-off Meeting of the Article 5(2) Digital Markets Act sub-group of the High-Level Group for the Digital Markets Act, (2024) https://ec.europa.eu/transparency/expert-groups-register/core/api/front/document/104022/download.

^[62] In fact, they both recognized such replication in the interventions of their representatives in the compliance workshops organized by the European Commission. For the recordings, see Amazon, Compliance with the DMA, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-amazon-2024-03-20, and Meta, Compliance with the DMA, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-meta-2024-03-19.

^[63] A substantive analysis of the changes proposed by Apple is addressed in Alba Ribera Martínez, Ecosystem Orchestrator, No More? Apple’s Proposed Changes to its Distribution of Apps and Overall Architecture, (2024) https://competitionlawblog.kluwercompetitionlaw.com/2024/01/29/ecosystem-orchestrator-no-more-apples-proposed-changes-to-its-distribution-of-apps-and-overall-architecture/.

^[64] The requirements may be found in Apple, Apple announces changes to iOS, Safari and the App Store in the European Union, (2024), https://www.apple.com/newsroom/2024/01/apple-announces-changes-to-ios-safari-and-the-app-store-in-the-european-union/, and Apple, Update on apps distributed in the European Union, (2024) https://developer.apple.com/support/dma-and-apps-in-the-eu/.

[65] Even though consumers may access the first alternative app stores on iOS, the notarization process raised concerns for Epic when it attempted to submit its own binary for launching the Epic Games Store on iOS: see Christopher Dring, Apple calls Epic ‘verifiably untrustworthy’ and blocks Fortnite and App Store on iOS, (2024), https://www.gamesindustry.biz/apple-calls-epic-verifiably-untrustworthy-and-blocks-bid-to-launch-fortnite-and-mobile-store-on-ios#:~:text=The%20move%20followed%20the%20introduction,true%20competition%20on%20iOS%20devices.%22. On alternative app marketplaces, see Callum Booth, We tested Aptoide, the first free iPhone app store alternative, (2024), https://www.theverge.com/24172642/aptoide-ios-game-marketplace-hands-on-europe.

[66] The European Commission has already raised concerns that Apple’s new terms and conditions do not apply to all developers: see Commission decision opening a proceeding pursuant to Article 20(1) of Regulation (EU) 2022/1925 of the European Parliament and of the Council on contestable and fair markets in the digital sector, Case DMA.100109 – Apple – Online Intermediation Services – app stores – App Store – Article 5(4), C(2024) 2056 final, paras 7-9.

[67] See also General Court, supra note 34.

[68] In fact, most of the non-compliance procedures initiated by the European Commission due to gatekeepers’ implementation of their compliance solutions focus on their breach of legal requirements rather than on the concept of consumer harm itself: see, e.g., Commission decision opening a proceeding pursuant to Article 20(1) of Regulation (EU) 2022/1925 of the European Parliament and of the Council on contestable and fair markets in the digital sector, Case DMA.100193 – Alphabet – Online Search Engine – Google Search – Article 6(5), C(2024) 2053 final.

[69] Lewis Crofts, DMA gatekeepers must please customers, not just regulator, EU’s Vestager says, (2024) https://mlexmarketinsight.com/news/insight/dma-gatekeepers-must-please-customers-not-just-regulator-eu-s-vestager-says.

[70] See Louis-Daniel Pape and Michelangelo Rossi, Is Competition Only One Click Away? The Digital Markets Act Impact on Google Maps, (2024) CESifo Working Paper No. 11226,  https://www.cesifo.org/en/publications/2024/working-paper/competition-only-one-click-away-digital-markets-act-impact-google, reporting that, despite a significant increase in Google’s search volume for the query terms maps and google maps, traffic data shows a non-significant decrease in visits to Google Maps, suggesting minimal migration to alternative services.

[71] See European Commission, Commission sends preliminary findings to Apple and opens additional non-compliance investigation against Apple under the Digital Markets Act, supra note 8, taking issue with “Apple’s multi-step user journey to download and install alternative app stores or apps on iPhones.”

^[72] Stakeholders have already begun expressing concerns regarding Apple’s compliance with the same obligation. This concern arises from the fact that only 38 applications have been received by app developers out of the 65,000 registered developers who cater for in-app purchases: see Rachel Graf and Leah Nylen, Apple Says No Major App Developers Accept New Outside Payments, (2024), https://www.bloomberg.com/news/articles/2024-05-10/apple-says-no-major-app-developers-accept-new-outside-payments?embedded-checkout=true.

I. Introduction

We appreciate the opportunity to comment on the Australian Government’s (“Government”) consultation on the implementation of a new digital competition regime.[1]

As we outline in our comments, the Government’s proposal rests on the assumption that there exists a broad global consensus on the need for ex-ante rules for digital platforms. This purported consensus is, however, largely overstated. Australia should not feel pressured to “catch up” with a trend that does not exist. Second, the Government promotes ex-ante digital competition rules as “complementary” to an expanding web of regulatory interventions. In practice, however, each new regulation compounds a broader regulatory overload that threatens to result in net social losses. Third, ex-ante digital competition rules may reflect the European Union’s (“EU”) distinct industrial policies that are not necessarily suited to Australia. The EU may also be willing, for political reasons, to accept tradeoffs that Australians are not. Fourth, the Government’s focus on ad tech is misplaced. Ad tech is not the hub of anticompetitive behaviour that the Government suggests it is. Fifth, the Government should take lessons from the international experience, particularly that of the EU. As we show, the Digital Markets Act (“DMA”) has led to unintended consequences for businesses and consumers alike—reducing functionalities and limiting visibility for smaller players, such as hotels. Finally, and relatedly, the rules and conduct requirements the Government envisions mirror the DMA’s flawed and are therefore likely to produce similar adverse outcomes.

II. No Global Consensus About the Need for Ex-ante Digital Competition Regulation

The Government and the Australian Competition and Consumers Commission (“ACCC”) both suggest that they do not want to be left behind by regulatory trends already adopted in other jurisdictions.[2] As a preliminary point, we contend that no such consensus exists.

To date, only a handful of countries have passed ex-ante competition rules for digital platforms.[3] In addition to the EU itself, Germany, Japan, and the United Kingdom have adopted regulatory regimes for digital markets that bear some resemblance to the DMA. Granted, other countries have contemplated adoption of such rules (most notably, Brazil, Turkey, South Korea, South Africa, and India), but whether these will ultimately become law remains anyone’s guess.

In short: the number of countries that have adopted ex-ante rules pales in comparison to those that have not. The United States, most notably, has rejected the path set out by the EU, as is evident from the slow death of the congressional antitrust legislative package in 2023.[4] Moreover, as Hong Dae-Sik and Daniel Sokol have pointed out:

The United States rejected such a legislative effort and its proponents have come under significant attack by academics and Congress. Likewise, most American courts have rejected this novel approach, and antitrust authorities that have brought lawsuits under such non-traditional legal theories have lost virtually every case, especially when seeking to block corporate mergers.[5]

Other countries’ commitments to follow this purported “global regulatory trend” are also teetering.[6] For example, it was recently reported that India could scrap proposed legislation to regulate digital platforms, amid fierce backlash from lawyers.[7] The South Korean government earlier backtracked on its plans to pass the Platform Competition Promotion Act (“PCPA”), which was likewise inspired by the DMA[8] The South Korean government is instead contemplating a more modest—albeit still questionable—reform of its Fair Trade Act.[9] The Philippines competition authority also recently ruled out a DMA-style bill.[10] With the United States increasingly signalling that it will not tolerate excessive foreign regulation of American technology companies, it is possible that more countries will back away from EU-style regulation on this front.[11]

Even in those jurisdictions that have taken steps to adopt “sector specific” competition rules for digital markets, there is no consensus about how such rules should be structured. To be sure, there are important thematic commonalities across so-called digital competition regulations.^[12] But on a legal and formal level, these approaches are vastly heterogeneous.

Digital competition rules exist in a “difficult epistemological situation”,^[13] caught between competition law, sector-specific regulation (despite digital markets lacking the homogeneity of a true “sector”),^[14] or something else entirely. Some have called them the “lost child of competition law”,^[15]  reflecting deeper uncertainty about their ultimate purpose—whether it should be fairness, consumer welfare, or equality. These goals are not always compatible and can, at times, be in direct conflict.[16]

For example, some digital competition rules are structured as an extension of the competition-law framework and are sometimes even formally embedded into existing competition law. In principle, where this is the case, it means that the standard goals and rationales of competition law still apply. Germany, for instance, has amended its Competition Act to enable early intervention against threats to competition by large digital firms.^[17] The new rules prohibit certain categories of conduct and impose remedies based on structural inquiries, regardless of abuse. Unlike the DMA, the Competition Act’s Article 19a permits targeted companies to justify their conduct, but shifts the burden of proof to the defendant, diverging from competition-law norms.

With its draft amendments to Law 4054 (Turkey’s Competition Act),^[18] Turkey has followed a similar path to Germany, although some of the new provisions go significantly further than even the DMA, partly due to their open-ended nature. For instance, the Turkish draft amendment would appear to prohibit all forms of tying and bundling, as well as potentially all exclusivity agreements. It also remains unclear whether the prohibitions would apply to all conduct by the designated digital platforms, or only to the “core platform services”.^[19]

As noted above, South Korea recently scrapped plans for the PCPA.^[20] The Korea Fair Trade Commission and the government of recently impeached and indicted President Yoon Suk Yeol[21] instead announced support for amendments to the existing Fair Trade Act.^[22] Under the new rules, in cases where designated digital platforms are accused of self-preferencing, tying, or imposing most-favored nation (“MFN”) clauses or restrictions on multi-homing, the amendments would raise fines, reverse the burden of proof, and allow interim orders, including cease and desists, to be issued immediately. It also appears—although it is not certain—that the new rules would give targeted companies some leeway to mount a defense, such as by showing procompetitive efficiencies.

There are other proposed and enacted digital competition rules that are at least nominally competition-based, although their approaches differ. The United Kingdom’s Digital Competition and Consumers Bill (“DMCC”) allows the Competition and Markets Authority’s (“CMA”) newly created Digital Markets Unit (“DMU”) to impose “bespoke” conduct requirements on companies with “strategic market status”. This approach contrasts with the DMA, which contains (allegedly) self-executing blanket prohibitions by which all gatekeepers must abide.^[23] By contrast, under the DMCC, the DMU determines how each designated firm must conduct itself in order to achieve the law’s stated objectives of “fair dealing”, “open choices”, and “trust and transparency”. These conduct requirements must be chosen from a list of “permitted types” (e.g., prohibiting self-preferencing, or requiring choice screens).

S. 29 of the DMCC provides for a “countervailing benefits exception” to conduct requirements. But apart from the fact that the exemption sets a high bar to clear (the behaviour must be “indispensable”), it also only applies once an investigation into breach of a conduct requirement is underway. It is questionable how useful this defense will prove to be in practice.^[24]

India is taking a middle path between the DMCC and the DMA, wherein certain firms would be designated as “systemically significant enterprises” and subject to six obligations and prohibitions, albeit with more space for customization by the enforcer. The Indian Draft Digital Competition Bill^[25] (“DDCB”) supplements the Indian Competition Act (“ICA”) but pursues different goals. The ICA’s stated goals are the protection of the interests of consumers and free trade, while the DDCB (like the DMA) pursues fairness and contestability.^[26]

Meanwhile, in the United States, several bills have been put forward in recent years that are formally separate from existing antitrust law, but cover some of the same conduct as would typically be addressed under U.S. antitrust law—albeit with seemingly different goals and standards.^[27] While the U.S. tech bills largely fail to describe their underlying goals, the bills’ titles, as well as statements made by their sponsors, suggest a set of overlapping concerns. These include preventing “material harm to competition” (which superficially sounds like an antitrust objective, but as the American Bar Association’s Antitrust Section has pointed out, isn’t);^[28] reducing “gatekeeper power in the app economy”; and “increasing choice, improving quality, and reducing costs for consumers”.^[29] But the measures also pursue other goals that are less obviously connected to competition, such as creating opportunities for small businesses and entrepreneurs, achieving a level playing field, and ensuring “fair” prices.

Brazil’s PL 2768,^[30] which has some of the lowest quantitative thresholds for a company to be considered a “gatekeeper” (roughly AU$19.21 million), pursues an expansive grab bag of social and economic goals, including freedom of initiative; free competition; consumer protection; reduced regional and social inequality; combating the abuse of economic power; widening social participation in matters of public interest; access to information, knowledge, and culture; and fostering innovation and mass access to new technologies and access models. Like the DMCC, the obligations would be tailored to each company. The provisions are broadly phrased, however, and some appear open to expansive interpretations. For example, Art.10(IV) prohibits gatekeepers from refusing access to business users—seemingly tout court (although Art.11 then requires enforcers to act with proportionality when establishing obligations).

Japan, whose Smartphone Act is part of an overarching policy shift “towards a new form of capitalism”,^[31] covers only four core platform services. By comparison, other digital competition rules typically cover around 10, replicating the DMA’s scope. Further, the Smartphone Act’s dos and don’ts would only apply when consumers access products or services on their phones (e.g., Google is only prohibited from engaging in self-preferencing on smartphones,^[32] but not on laptops or PCs). The Smartphone Act also allows greater scope for privacy and security exemptions. Whereas the DMA only allows for such exemptions in the case of interoperability and sideloading (the Smartphone Act does not mandate sideloading), it appears that privacy, safety, and user protection constitute valid justifications for most types of conduct covered by the Smartphone Act.^[33]

The South Africa Competition Commission (“SACC”) has called for remedial actions against popular intermediation platforms.^[34] These are largely the usual “GAMMA” suspects (Google, Apple, Meta, Microsoft, and Amazon); it explicitly would include Amazon, despite the company’s absence in South Africa at the time. Presumably, the SACC would impose these remedies within the framework of the South African Competition Act. Uniquely, the SACC explicitly admits that its proposed remedies aim to redistribute wealth from the targeted digital companies to South African companies, historically disadvantaged peoples (“HDPs”), and small and medium-sized enterprises (“SMEs”).[35] The SACC recommends requiring Google to add identifiers and filters to help consumers identify and support local platforms and to directly pay competing SMEs and black-owned firms ZAR150 million (roughly AU$12.84 million) to offset Google’s competitive advantage.[36]

This has at least two implications for Australia. First, the “consensus” the Government aims to replicate domestically is vastly overstated. Second, Australia’s proposal is unlikely to be “complementary and cohesive with international practices”, because those practices themselves lack cohesion. Instead, it would introduce yet another layer of regulatory complexity, further disrupting digital platforms, their users, and the businesses that rely on them.[37]

III. Ex-Ante Digital Competition Regulation Adds Fuel to Australia’s Bonfire of Overregulation

The Government’s Proposal Paper claims that ex-ante digital competition rules would “complement” existing and forthcoming regulations, including the proposed Scams Prevention Framework, the government’s response to the Privacy Act Review, Digital ID laws, the News Media and Digital Platforms Mandatory Bargaining Code, and ongoing initiatives related to artificial intelligence (“AI”). [38]

Rather than serving as complements, however, these rules are just as likely to deepen Australia’s growing problem of overregulation, thereby further hindering digital platforms’ ability to deliver value to users and businesses. In a sea of regulations, one more regulatory overreach might seem insignificant, or it could be the final straw that breaks the camel’s back.

Studies in regulatory theory often suggest that, when multiple regulatory frameworks are implemented simultaneously, their combined effect can lead to “regulatory overload”. This can cause inefficiencies and unintended consequences that are not easily anticipated by looking at each rule in isolation. In other words, regulatory overload has synergistic effects.

In this vein, researchers have shown how multiple overlapping regulations can obscure policy objectives and hinder the development of effective and clear regulation;[39] that the total regulatory burden from multiple regulations often exceeds what might be expected by merely adding individual regulatory impacts together, causing “convex deadweight costs”;[40] and how the accumulation of regulations can lead to increased costs and inefficiencies.[41] For example, one study showed that between 1949 and 2005, the accumulation of federal regulations slowed U.S. economic growth by an average of 2% annually.[42] If regulation had stayed at its 1949 level, the 2011 U.S. GDP would have been approximately $39 trillion—3.5 times higher—resulting in a loss of around $129,300 per person in the United States. Another study mentioned earlier showed that:

By distorting the investment choices that lead to innovation, regulation has created a considerable drag on the economy, amounting to an average reduction of 0.8 percent in the annual growth rate of the US GDP. This seemingly small annual reduction has large implications. The slower economic growth associated with regulatory accumulation resulted in an economy that was $4 trillion smaller in 2012 than it could have been without such regulatory accumulation.[43]

This flips the Government’s argument about “complementarity” on its head, suggesting that the cumulative impact of regulations is likely to be greater than the sum of their individual effects, potentially doing more harm to the Australian digital sector than each regulation would on its own.

Consider the News Media Bargaining Code. These regulations have already imposed significant costs and caused unintended consequences, which could easily be exacerbated by parallel ex-ante digital rules targeting the same companies. In response to the proposed code, Meta banned the sharing and viewing of news content on Facebook in Australia. This led to a significant reduction in news consumption on the platform. One study found that, while some users sought alternative news sources, others experienced a decline in news consumption, potentially increasing their exposure to misinformation.^[44] The Independent Media Alliance opined that the ban would be “terrible for not only the industry, but for Australian democracy”.^[45] While Meta eventually reversed the ban and reached a deal that allowed news sharing to resume, the situation had significant ramifications. Larger publishers negotiated deals for compensation from Meta, but smaller news outlets faced sunk revenue losses.

While Google, in comparison, has been more willing to negotiate, there is a caveat. In Australia, Google agreed to pay news companies only after intense negotiations. In the end, Google secured terms more favourable to its business model, opting for case-by-case payments rather than a fixed, uniform payment model. While large companies like Australia’s own News Corp can absorb these transaction costs, smaller outlets may struggle. Google also had the ability to choose which content to display—and pay for—on its platform. Put simply, if you turn Google into a news buyer, it will shop around.

More recently, Australia has considered shifting the News Media Bargaining Code to function as a digital-services tax, either explicitly or de facto. The de facto version would make it compulsory for companies to carry news links. As a result, the compelled companies would subject to extraction. This shift could mean that Australian companies lose whatever arrangements they have made with Google. When New Zealand proposed legislation (currently stalled) with a similar effect, Google stated it would withdraw from the country’s news market entirely if enacted.[46]

Ultimately, major media companies with significant bargaining power, like News Corp and Nine Entertainment, were the main beneficiaries of the agreements made under the News Media Bargaining Code. These large publishers offered more varied content that was valuable to Google because it attracted a larger audience and thus increased ad revenue. In addition, large publishers were able to command higher payments, making them more likely to receive favourable treatment, in terms of visibility on Google’s platform. Conversely, smaller or independent news outlets that did not strike agreements with Google risked being excluded from Google’s news services or search results or receiving much less exposure than they would have in a but-for world.^[47]

The question of how this scenario could be seen as benefiting the public—rather than large, politically powerful entities like News Corp—remains unanswered. Additionally, there is the issue of the combined impact of regulatory overload. Smaller outlets, who less able to negotiate for visibility on Google’s search engine, may face further challenges from prohibitions on self-preferencing. When self-preferencing is banned, companies like Google tend to auction off the top search spots, favoring incumbents with deep pockets.[48] As a result, smaller outlets that could previously appear at the top due to content relevance are now unlikely to secure those prime positions.

In other words, self-preferencing bans turn the currency of search rankings from relevance into actual money. While smaller companies could once compete based on relevance, they now face being crowded out by more financially robust competitors. The combined effect of the News Media Bargaining Code and a ban on self-preferencing could therefore lead to the demotion of content from smaller, yet relevant, business users—an outcome that would harm both these businesses and, most importantly, end-users.

In addition, prohibitions on the cross-use of data, or cumbersome requirements that are tilted against consent, could affect digital platforms’ ability to provide tailored, targeted ads. This would be another nail in the coffin of small businesses, which disproportionately rely on targeted advertising to break into new markets and reach customers.

IV. Australians May Not Want the Same Tradeoffs as the EU

It is hardly surprising that some countries would get “cold feet” about enacting strict ex-ante digital competition rules.[49] To the keen observer, the prospect always loomed that such rules might be little more than a quirk of EU industrial policy. As ICLE Senior Scholar Lazar Radic has noted,^[50] prior to the DMA’s adoption, many leading European politicians touted the law’s text as a protectionist industrial-policy tool that would hinder U.S. firms to the benefit of European rivals.^[51] French President Emmanuel Macron summarized it well when he said:

If we want technological sovereignty, we’ll have to adapt our competition law, which has perhaps been too much focused solely on the consumer and not enough on defending European champions.^[52]

Insofar as these goals are—or may be—unique to a particular time and place (i.e., the EU in the 2020s), it is reasonable to assume they will not necessarily be shared by everyone. Some countries may be more interested in attracting digital platforms than in regulating,^[53] “disciplining”,^[54] or punishing them.^[55] Echoing the argument that “one size does not fit all” when it comes to digital competition regulation,^[56] Dae-sik and Sokol note that among the reasons ex-ante digital competition rules are inappropriate for South Korea is the marked differences between that nation’s economic, legal and regulatory context and that of the EU:

Europe chose to regulate heavily for protectionist reasons. It lacks the tech infrastructure, innovative companies, and unicorns that are present in other vibrant economies like Korea. […] While Korea has approximately three times more unicorns than Japan, despite having a smaller gross domestic product, the adoption of a DMA-like approach may hurt Korea’s innovation advantage.^[57]

Similarly, Samir Ghandi argues that the DMA’s “one-size-fits-all” approach would not work “for a dynamic Indian market with its own vibrant tech ecosystem”.^[58]

Other, less technologically intense countries like South Africa might have a still different set of priorities, such as attracting foreign direct investment to drive growth and the development of essential infrastructure. As Radic and ICLE President Geoffrey Manne have written:

Developing countries like South Africa should be especially wary of importing untested competition rules that impose government-mandated designs on the business models and user interfaces of innovative companies. It’s not trite to say that South Africa’s market is not the same as the EU’s. The consequences of unsound competition policy here may be to stymie foreign investment and domestic innovation exactly where they are needed most. […] This is a far cry from the untested, pre-emptive constraints contemplated by the [SACC].^[59]

The point is countries’ needs are as varied as the countries themselves. This does not preclude the possibility of common rules and standards; after all, most of the world’s competition-law systems have converged around some version of the consumer welfare standard.^[60] But one explanation for this commonality can be found in how the consumer welfare standard fares when compared to the alternatives:

The objective nature of the choice and interpretation of legal antitrust standards exists on a spectrum, and the [consumer welfare standard’s] conceptual congruence, measurability, and its connection to aspects that are almost universally considered to be relevant parameters of competition (price, innovation, quality) brings it closer to objectivity and further away from subjectivity.^[61]

Conversely, once it is understood that the DMA represents an attempt to pass off a sui generis, subjective policy choice as a universal regulatory paradigm, the case for harmonization quickly withers. Clearly, not everyone is on board with trading economic performance for a set of questionable political goals.^[62] In this sense, one frequent criticism of ex-ante competition rules is that they ignore—or, at the very least, significantly downplay—the effects on consumer welfare and innovation (the traditional bastions of competition policy). Instead of focusing on protecting competition to the benefit of consumers, digital competition rules commit the cardinal antitrust sin of protecting competitors. As former Federal Trade Commission (“FTC”) Commissioner Maureen Ohlhausen has put it:

Some recent legislative and regulatory proposals appear to be in tension with this basic premise. Rather than focusing on protection of competition itself, they appear to impose requirements on some companies designed specifically to facilitate their competitors, including those competitors that may have fallen behind precisely because they had not made the same investments in technology, innovation or product offerings. For example, the Digital Markets Act (DMA) would force a ‘gatekeeper’ company to provide business users of its service, as well as those who provide complementary services, access to and interoperability with the same operating system, hardware, or software features that are available to or used by the gatekeeper. While this would restrain gatekeepers and presumably facilitate the interests of the gatekeeper’s rivals, it is not clear how this would protect consumers, as opposed to competitors.^[63]

This, of course, is only surprising if one falls for the story that digital competition rules—and the DMA, in particular—were ever intended to protect competition or consumer welfare. The readily apparent goal is instead to redistribute rents, protect competitors, and level down gatekeepers, even if it comes at the expense of consumers.^[64] There is no better example of this than the DMA, whose preamble explicitly disavows consumer welfare and economic efficiency as irrelevant under the new rules.

As commentators around the world have pointed out, this approach is likely to stymie dynamism in digital markets and harm consumers. As noted above, Dae-sik and Sokol argue against introducing ex-ante digital competition regulations in South Korea, contending that such rules would stifle innovation, decrease investment, hurt startups and consumers, and jeopardize South Korea’s status as a regional leader in tech innovation.^[65] Carmelo Cennamo and Juan Santaló further argue that the DMA could produce a host of other harmful unintended consequences.^[66] For example, undermining gatekeepers’ ability to control access to their platforms could ultimately lead to lower levels of innovation. Obligations like data-sharing could reduce gatekeepers’ incentives to accumulate and process data, thereby diluting the competitive benefits and product improvements that result from such collection.

Some consumers and policymakers may be willing to accept these tradeoffs in pursuit of equity, fairness, contestability, “reining in” tech giants, or some other goal.^[67] But others, reasonably, may not. Thus, commentators from both within and outside the EU have increasingly questioned the need for rules that mechanically apply preset default solutions to the complex tradeoffs that have typically characterized competition-law analysis. This is of particular concern in dynamic markets driven by innovation, where uncertainty is endemic and where, except in the most egregious of cases,^[68] even the wisest enforcers can’t know a priori whether or not given conduct is procompetitive.^[69] Against this backdrop, tales of a supposed consensus in support of a special set of competition rules for digital platforms are rooted more in fantasy than in reality.

There is also the question of whether the Government can make such far-reaching decisions about tradeoffs without substantial democratic discussion and debate. The Government’s proposed framework would include broad obligations to target anticompetitive conduct contained in primary legislation and service-specific obligations to clarify the broad requirements contained in subordinate legislation (e.g., regulations). Though many of the categories of conduct sound straightforward and technical, they implicate several policy-laden decisions that broad obligations cannot capture, as well as competing interests that subordinate legislation would struggle to balance.

For instance, “restrictions on interoperability that limit effective competition” implicates multiple types of interoperability (i.e., technical, syntactic, and semantic interoperability and organization) each of which poses unique and personal tradeoffs in terms of user security, privacy, and flexibility. Other categories the Government’s proposal would seek to regulate, such as digital advertising, affect broad swathes of the economy and thus implicate substantive matters of policy. Without meaningful democratic deliberation, the Government’s framework risks imposing rigid, one-size-fits-all regulations on complex and deeply consequential tradeoffs that require a nuanced and inclusive policymaking approach.

V. Focus on ‘Ad Tech’ as a Hub of Anticompetitive Conduct Is Misguided

The Proposal Paper states that advertising technology (“ad tech”) would be a priority for the new regime.[70] In a previous report, the ACCC found that:

there is a lack of transparency in the supply chain, and that Google’s vertical integration and strength in ad-tech services has allowed it to engage in a range of conduct which has lessened competition over time and entrenched its dominant position.[71]

These findings should, however, be put into context. For years, regulators and competition watchdogs have expressed concern about competition in the digital-advertising business. Like the ACCC and the Government, they have noted that digital advertising appears to be dominated by a handful of large firms, including Google, Facebook, and—to a lesser extent—Amazon. Some claim that this dominance allows these firms—and Google, in particular—to engage in anticompetitive conduct to extend their market power and to earn supercompetitive profits at the expense of advertisers, publishers, and consumers. But Manne and ICLE Senior Scholar Eric Fruits have argued that, based on the information that is publicly available, many of the most significant claims made against Google’s ad-tech business are based on a misunderstanding of U.S. antitrust law, or of the details of the ad-tech market itself.[72] While Manne and Fruits’ study focuses on the United States, the findings can, to a significant extent, be extrapolated to Australia.

As they note, digital advertising provides the economic underpinning for much of the internet. Targeted digital advertising on independent websites is often facilitated by intermediaries that match advertisers and websites automatically, displaying ads to those users for whom they are most relevant. The technology powering this intermediation has advanced enormously over the past three decades. Some now allege, however, that the digital-advertising market is monopolized by its largest participant: Google.[73]

Ultimately, however, this is a version of the “big is bad” argument, in which conduct by dominant incumbent firms that makes competition more difficult for certain competitors is viewed as inherently anticompetitive—even if the conduct confers benefits on users. Under this approach, the largest firms are seen as acting anticompetitively if they do not share their innovations or reveal their business processes to competing firms. As a result, creating new and innovative products, lowering prices, reducing costs through vertical integration, and enhancing interoperability among existing products is miscast as anticompetitive conduct.

In contrast, competition laws—including Australia’s own—are intended to foster innovation that creates benefits for consumers, including innovation by incumbents. The law does not proscribe efficiency-enhancing unilateral conduct on the grounds that it might also inconvenience competitors, or that there is some other arrangement that could be “even more” competitive. While this might benefit some competitors in the short run, over the longer term, it will tend to stifle competition by discouraging innovation and investment and promoting free riding.

Moreover, competition law generally does not second guess unilateral conduct simply because it may hinder rivals. Any such conduct must first be shown to be anticompetitive—that is, to harm consumers or competition, not merely certain competitors. In multisided markets, this means finding not simply that some firms on one side of the market are harmed, but that the combined net effect of challenged conduct across all sides of the market is harmful.

Regulators, however, often fall into what has been deemed the “nirvana fallacy”, in which real-life conduct is compared against a hypothetical “competition-maximizing” benchmark and anything that falls short is deemed worthy of intervention. That fanciful approach would pervert businesses’ incentives to innovate and compete and would make an unobtainable “perfect” that exists only in the minds of some economists and lawyers the enemy of a “good” that exists in the market.

In the case of the Proposal Paper, many of the interventions appear to be geared toward destroying or undermining Google’s vertical integration in ad tech.[74] But these heavy-handed interventions risk hampering the quality of Google’s ad-tech service. Vertical integration plays a crucial role in streamlining supply chains by reducing inefficiencies and coordination issues, ultimately lowering transaction costs, and passing the benefit onto consumers. Additionally, forcing Google to unbundle its ad-tech operations could diminish its incentive to innovate, as it would expose proprietary advancements to potential replication by rivals. Rather than fostering competition and efficiency, these interventions may disrupt a well-functioning market, leading to higher costs, reduced service quality, and slower innovation in digital advertising.

VI. The Comparative Experience with Ex-Ante Rules for Digital Platforms

The Government is adamant that ex-ante rules for digital platforms will benefit everyone in Australia, but especially businesses and consumers. The EU’s experience with the DMA, however, tells a much more nuanced and less flattering story. Two lessons emerge from the DMA’s implementation for the Government’s ex-ante proposal: there are going to be winners and losers, and there will be unintended consequences. The Government and Australians more generally should brace themselves for both. Below are concrete examples of the inherent tradeoffs and unintended consequences following the EU’s implementation of the much-vaunted DMA.

Take, for example, self-preferencing. The DMA’s self-preferencing ban has made it increasingly difficult for platforms to offer certain functionalities in Europe. For example, Google has removed features like maps, hotel bookings, and reviews from its search results. Until it can accommodate competitors who offer similar services (if this is even possible), these specialized search results will remain buried several clicks away from users’ general searches. Not only is this inconvenient for consumers, but it has important ramifications for business users.

Take hotel bookings, for example. Early estimates suggest that clicks from Google ads to hotel websites decreased by 17.6% because of the DMA. DMA implementation also caused clicks and bookings on Google Hotel Ads to sink by as much as 30%.^[75] As a result, the volume of direct bookings dropped as much as 36%, “increasing hotel dependence on intermediaries, which seriously damages their profitability”.

By prohibiting Google from placing its own vertical services (Google Maps, Google Flights, and Google Hotel Ads) first, “the presentation of hotel offers to users based in DMA markets is less organised, clear and intuitive”.^[76] Previously, Google Search provided a direct display of hotels, featuring relevant details like prices, distance from the user, and images. Now, the top search results point to intermediaries like Booking.com and eDreams (see Figure 1). The irony, of course, is that Booking.com is itself a designated “gatekeeper” under the DMA.

FIGURE 1: Post-DMA Google Search for Madrid Hotels

This sort of regulatory intervention does not make the market more “fair or contestable”. It merely robs Peter to pay Paul, while also robbing the consumer. As a study by hotel-industry consultant Mirai finds:

Prior to DMA, Google’s taxonomy of results was the result of decades of effort by the company to refine its results in order to provide an optimized search experience that would connect supply and demand in a way that was ideal for both.

This pre-DMA search experience offered hotels participating directly in the Google Hotel Ads product, the option to present their inventory (availability and room rates) in a way that was both efficient from the standpoint of distribution cost, and enriched for the user, as it integrated the experience of other services, e.g. Google Maps. This way of presenting information was clear, relevant and intuitive, and maximized purchasing decisions such as hotel bookings for those users who were so inclined.^[77]

Users therefore now face a less intuitive booking experience, with limited access to aggregated hotel offers, simplified calendar pricing, and streamlined tools like Google Travel. Consumer frustrations include being redirected to search-engine results instead of the Travel section, and additional clicks being required to complete actions that previously required just one.

So, who has Art.6(5) really benefitted? Clearly not hotels: they have been subjected “to the toll of intermediation, strangling direct sales and holding users and hotels captive to less profitable, less independent business models”.^[78]

Google has also removed other functionalities to comply with Art. 6(5). In March 2024, the company announced it had “removed some features from the search results page which help consumers find businesses, such as the Google Flights unit”.^[79] Google noted that the DMA had produced unintended consequences, including a suboptimal user experience and impact to businesses.

We’ve always been focused on improving Google Search to help people quickly and easily find what they’re looking for. … Rules that roll back some of these advances represent a fundamental shift in competition policy. We encourage other countries contemplating such rules to consider the potential adverse consequences — including those for the small businesses that don’t have a voice in the regulatory process.^[80]

For its part, Apple has highlighted another quality-degrading consequence of the DMA: the obligation to allow competing app stores onto the iOS platform and to allow apps to be downloaded directly from their websites (commonly known as “sideloading”).[81] In practice, this “openness” means allowing third-party applications to bypass controls and protections implemented to safeguard users’ security and privacy.[82] This is already happening in Europe, where Apple has been forced to allow Epic Games to launch an alternative app store on iOS.[83] While this may seem a positive development for (some) developers and consumers, it could also harm user trust in the platform and thus decrease the total number of transactions, to the detriment of all parties involved (business users, consumers, and the owner of the platform).

Indeed, “[p]hishers are using a novel technique to trick iOS and Android users into installing malicious apps that bypass safety guardrails built by both Apple and Google to prevent unauthorized apps”.[84] This sort of attack will be more effective in the absence of the protections provided by Apple’s App Store.[85] Recently, a porn app, “Hot Tub”, made its way into the iOS, further validating at least some of Apple’s concerns over safety, privacy and security (and undermining the integrity of the iOS’ “clean” brand image in the process).[86]

In addition to diminishing the quality of existing digital services, the DMA has significantly delayed the introduction of new digital products and services in the EU. A notable example is Meta’s Threads, which launched nearly six months later in the EU than in other regions–frustrating users eager for an alternative to X.com (formerly known as Twitter) following Elon Musk’s acquisition of the company.[87]

Delayed releases appear to be a trend in the EU, as Apple recently announced that it would withhold the release of its latest features from the EU market, including Apple Intelligence, due to regulatory uncertainties.[88] Apple Intelligence is now scheduled to be released in Europe in April 2025,[89] seven months later than in the United States and closer to the release of the iPhone 17 than the iPhone 16.  These events indicate that, rather than fostering a more competitive digital landscape, the DMA risks isolating EU consumers from innovative technological advancements, undermining its intended purpose.

VII. Assessing the Government’s Proposed Interventions

The Government outlines several potential interventions, ranging from default pre-installation interventions to prohibiting self-preferencing and tying. Ultimately, these interventions must be carefully evaluated against current market realities and the risk of unintended consequences.

A. Default and Preinstallation Interventions

The Government contemplates additional restrictions on default search positions and pre-installation agreements.[90] Such interventions should, however, be evaluated against existing measures and changing user behaviour. Recent empirical work suggests that choice screens’ effectiveness depends heavily on their design and implementation.[91] Furthermore, default restrictions could have unintended consequences for competition. Many smaller search engines currently compete for default positions through revenue-sharing agreements with device manufacturers and browsers. With two-sided markets, however, restricting these agreements could paradoxically harm competition by removing a key mechanism through which alternative search engines currently reach users.[92]

B. Forced Interoperability

The Government favours mandating interoperability, including of third-party app stores.[93] As noted above, sideloading and third-party app stores can lead to significant security and privacy risks. As Jane Bambauer has observed:

EU lawmakers should be aware that the DMA is dramatically increasing the risk that data will be mishandled. Nevertheless, even though a new scandal from the DMA’s data interoperability requirement is entirely predictable, I suspect EU regulators will evade public criticism and claim that the gatekeeping platforms are morally and financially responsible.[94]

Indeed, some of these privacy and security concerns have already materialized.[95] Relatedly, the decreased control over an operating system’s content would, in turn, also eliminate one of the primary competitive differences between the iOS and Android. Indeed, centralized app distribution and Apple’s “walled garden” model increase interbrand competition because they are at the core of what differentiates Apple from Android. Apple’s business model historically has focused on being user-friendly, reliable, safe, private, and secure. For Apple (and its users), the touchstone of a good platform is not its “openness”, but its carefully curated selection and security, understood broadly as encompassing the removal of objectionable content, protection of privacy, and protection from “social engineering”, and the like.

By contrast, Android has bet on the open platform model, which sacrifices some degree of security for the greater variety and customization associated with more open distribution. These are legitimate differences in product design and business philosophy. As Jonathan Barnett has explained:

Open systems may yield no net social gain over closed systems, can impose a net social loss under certain circumstances, and . . . can impose a net social gain under yet other circumstances.[96]

Because consumers and developers could reasonably prefer either ecosystem, it is not clear that loosening Apple’s control over the App Store would necessarily improve consumer welfare or lead to more app transactions market wide. Under the guise of fostering competition on Apple’s platform, the forced standardization of interoperability mandates would thus instead eliminate competition where it matters most—i.e., at the interbrand, systems level.

C. Banning Self-Preferencing

The Proposal Paper also advocates a prohibition of self-preferencing.[97] As noted above, self-preferencing prohibitions have led to some unexpected—and probably unwelcome—outcomes in the EU.[98] The notion that the ability to give preferential treatment to one’s products is inherently anticompetitive contradicts “over a century of antitrust jurisprudence, economic study, and enforcement agency practice” that have firmly established that “the competitive effects of a vertically integrated firm’s ‘discrimination’ in favor of its own products or services… generally produce significant benefits for consumers”.^[99]

It also flatly contradicts a number of empirical studies showing that even the welfare of competitors (to say nothing of consumers) may often be improved by such self-preferencing.^[100] While enforcement of such provisions may benefit certain competitors in the short run, they create perverse incentives over the long run for rivals, who may underinvest in ensuring their own viability due to such regulations inefficiently insuring them against their own business misjudgements.^[101]

D. Limiting Product Integration

The Proposal Paper also targets tying and bundling, including the bundling of in-app payment systems (“IAPs”) with app stores.[102] The latter concern likely pertains to Apple’s imposition of a 30% fee on payments made through its iOS platform, while simultaneously prohibiting third-party in-app purchases (IAPs).

But it should be asked what outcomes the Government hopes to achieve by compelling Apple to permit third-party IAPs on iOS. Even under such a scenario, Apple would still be entitled to compensation for platform access and the use of its intellectual property. Interestingly, the 30% fee appears to align with industry norms, as Steam, Nintendo eStore, PlayStation, GOG, and Xbox Game Store all apply similar charges.[103] This raises the pertinent question of why Apple is being singled out for regulatory scrutiny. Are all these companies operating as monopolies and gatekeepers? If so, why are they not encompassed within the Government’s proposed ex-ante regulatory framework?

Moreover, even if Apple is required by law to allow third-party IAPs, the company could then allow independent payment processors to compete, charge an all-in fee of 30% when Apple’s IAP is chosen, and, in order to recoup the costs of developing and running its App Store, charge app developers a reduced, mandatory per-transaction fee (on top of developers’ “competitive” payment to a third-party IAP provider) when Apple’s IAP is not used.

Indeed, where such a remedy has already been imposed, that is exactly what Apple has done. In the Netherlands, where Apple was required by the Authority for Consumers and Markets (“ACM”) to uncouple distribution and payments for dating apps, Apple adopted the following policy:

Developers of dating apps who want to continue using Apple’s in-app purchase system may do so and no further action is needed. … Consistent with the ACM’s order, dating apps that . . . use a third-party in-app payment provider will pay Apple a commission on transactions. Apple will charge a 27% commission on the price paid by the user, net of value-added taxes. This is a reduced rate that excludes value related to payment processing and related activities.[104]

It’s not hard to see the fundamental problem with this approach. If a 27% commission, plus a competitive payment-provider fee, permits more “competition” than complete exclusion of third-party providers, then surely a 26% fee would permit even more competition. And a 25% fee more still. This would entail precisely the kind of price management by regulators that has generally been considered antithetical to competition and competition law.

VIII. Conclusion and Recommendations

The Government’s proposal rests on the mistaken premise that there is a global consensus on ex-ante digital competition regulation. Australia’s push to match similar measures enacted in a handful of other jurisdictions risks exacerbating an already burdensome regulatory landscape. While the EU has embraced strict digital platform rules, Australians may not be willing to accept the same tradeoffs in terms of innovation and consumer choice.

The Government’s focus on the ad-tech sector as a hub of anticompetitive conduct overlooks that market’s complexity and existing competitive dynamics. Comparative experience with ex-ante rules for digital platforms highlight both the risks and limited successes of such interventions, raising concerns about their effectiveness in the Australian context.

Drawing on both the empirical evidence and theoretical frameworks discussed above, the Government should carefully reconsider the need for ex-ante competition regulation of digital platforms. The rapidly evolving nature of digital search markets suggests a more nuanced approach may be appropriate.

If the Government nonetheless proceeds, we recommend the following principles for any subsequent interventions:

• Adopt an “innovation first” approach to remedies that preserves incentives for both incumbents and new entrants to develop novel search technologies.
• Focus on removing barriers to competition, rather than imposing detailed conduct requirements. Light-touch interventions often prove more effective than prescriptive regulation in fast-moving technology markets.
• Establish regular review periods to assess the continued appropriateness of any interventions.

By carefully considering the dynamic nature of competition and focusing on forward-looking analysis, the Government can help ensure that Australian consumers and businesses benefit from continued innovation in the digital economy.

[1] Digital Platforms — A Proposed New Digital Competition Regime, Aust. Gov. Treas. (2 December 2024), https://treasury.gov.au/consultation/c2024-547447 (hereinafter “Proposal Paper”).

[2] Press Release, ACCC Welcomes Consultation on New Digital Competition Regulation, Aust. Compet. Consum. Comm. (3 December 2024), https://www.accc.gov.au/media-release/accc-welcomes-consultation-on-new-digital-competition-regime. (“The proposed regime is directionally similar to reforms already being implemented or proposed in many international jurisdictions including the European Union, the United Kingdom, Japan and India…This is an opportunity to build on the progress made overseas and by introducing similar changes here, it will help ensure Australian businesses and consumers aren’t left behind… We believe the proposed regime will be fit-for-purpose for Australia while being complementary to and cohesive with international approaches”).

[3] Thomas Graf, Jackie Holland, Henry Mostyn, & Patrick Todd, Digital Markets Regulation Handbook, Cleary Gottlieb, https://content.clearygottlieb.com/antitrust/digital-markets-regulation-handbook/index.html (last visited 13 February 2025).

[4] Lazar Radic & Geoffrey A. Manne, The ABA’s Antitrust Law Section Sounds the Alarm on Klobuchar-Grassley, Truth Mark. (12 May 2022), https://truthonthemarket.com/2022/05/12/the-abas-antitrust-law-section-sounds-the-alarm-on-klobuchargrassley.

[5] Hong Dae-sik & D. Daniel Sokol, Korea Should Prioritize Innovation, Not Misguided Platform Regulation, The Korea Her. (12 May 2024), https://www.koreaherald.com/view.php?ud=20240512050148.

^[6] Sangyun Lee, LinkedIn (27 September 2024, 00:35:22), https://www.linkedin.com/posts/sangyunl_indian-digital-competition-law-teeters-lawyers-activity-7245289899409448960-0rtV?utm_source=share&utm_medium=member_desktop.

^[7] Charles McConnell, Indian Digital Competition Law Teeters, Lawyers Call for Rethink, Glob. Compet. Rev. (26 September 2024) https://globalcompetitionreview.com/article/indian-digital-competition-law-teeters-lawyers-call-rethink.

^[8] Chosun Ilbo, ‘Monopoly Platform’ Regulation Law Falls Away… Fair Trade Commission Cancels Plan Due to Industry Opposition, Naver News (9 September 2024), https://n.news.naver.com/mnews/article/023/0003857596?sid=101.

^[9] Kang Shin-woo, Amendment of the Fair Trade Act to Regulate Large Platforms… ‘Google, Apple, Naver, Kakao’ to Have Jurisdiction, Naver News (9 September 2024) https://n.news.naver.com/mnews/article/018/0005832606?sid=101; see also Heo Ji-hye, Platform Law that Changes Direction… Concerns Increase over Standards for Proof of Competition Restriction, Pressman (9 September 2024), https://www.pressman.kr/news/articleView.html?idxno=84619. Under the revisions, platforms must prove directly that their actions do not harm competitors, and that they benefit consumers and have positive impacts on the market. In other words, the reforms essentially reverse the burden of proof. Critics like Hong Dae-sik warn that stringent oversight could discourage businesses to pursue new initiatives due to a lack of confidence in their ability to meet criteria. (“Ultimately, if companies are not confident in the reasons they present to the Fair Trade Commission when taking certain actions, they will not take the actions”.)

^[10] Charles McConnell, Exclusive: Philippine Competition Watchdog Rules Out DMA-Style Bill, for Now, Glob. Compet. Rev. (20 September 2024) https://globalcompetitionreview.com/article/exclusive-philippine-competition-watchdog-rules-out-dma-style-bill-now.

[11] @KTmBoyle, X.com (11 February 2025, 9:16 AM), https://x.com/KTmBoyle/status/1889317529039913301.

^[12] Lazar Radic, Geoffrey A. Manne, & Dirk Auer. Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulation 22 Berkeley Bus. L.J. (Forthcoming 2025).

^[13] Pierre Larouche & Alexandre De Streel, The European Digital Market: A Revolution Grounded on Traditions, 12 J.E.C.L. & Pract. 542 (2021), (arguing that the DMA’s conceptual nature is in a “difficult epistemological position”).

^[14] Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth Mark. (8 November 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation.

^[15] Belle Beems, The DMA in the Broader Regulatory Landscape of the EU: An Institutional Perspective, 19 Eur. Competition J. 1–29 (January 2023), https://www.tandfonline.com/doi/full/10.1080/17441056.2022.2129766.

[16] Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, 68 Antitrust Bull. 618 (2023), (Arguing that the inherent vagueness of the “fairness” concept is likely to grant regulators excessive discretion for intervention).

^[17] Press Release, Amendment of the German Act Against Restraints of Competition, Bundeskartellamt (19 January 2021), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/19_01_2021_GWB%20Novelle.html.

^[18] Bahadir Balki, Nabi Can Acar, Helin Yüksel, Mehmet Mikail Demir, Seda Eliri, & Erdem Aktekin, A New Age for Digital Markets in Turkey? The Draft Amendment to the Law No. 4054 on the Protection of Competition, Kluwer Compet. Law Blog (25 October 2022), https://competitionlawblog.kluwercompetitionlaw.com/2022/10/25/a-new-age-for-digital-markets-in-turkey-the-draft-amendment-to-the-law-no-4054-on-the-protection-of-competition.

^[19] Henry Mostyn, Patrick Todd, & Goksu Kalayci, Turkiye, Cleary Gottlieb (December 2023), https://content.clearygottlieb.com/antitrust/digital-markets-regulation-handbook/turkey/index.html.

^[20] Ilbo, supra note 8.

[21] Jean Mackenzie & Ruth Comerford, Impeached S Korean President Charged with Insurrection, BBC News (26 January 2025), https://www.bbc.com/news/articles/cr53r1d0jz4o.

^[22] Shin-woo, supra note 9.

^[23] Robert Wildner, The Digital Markets Act: What a Difference a Month Makes, Mob. Mark. (9 April 2024), https://mobilemarketingmagazine.com/the-digital-markets-act-what-a-difference-a-month-makes.

^[24] Dirk Auer, Matthew Lesh, & Lazar Radic, Digital Overload: How the Digital Markets, Competition and Consumers Bill’s Sweeping New Powers Threaten Britain’s Economy, Inst. Econ. Aff. (18 September 2023), https://iea.org.uk/publications/digital-overload-how-the-digital-markets-competition-and-consumers-bills-sweeping-new-powers-threaten-britains-economy.

^[25] Report of the Committee on Digital Competition Law, Gov. India Minist. Corp. Aff., (27 February 2024), https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open.

^[26] The Competition Act, No. 12 of 2003, India Code (2003), available at https://www.cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf.

^[27] H.R. 3849, 117th Congress (24 June 2024), https://www.congress.gov/bill/117th-congress/house-bill/3849/text; S. 2992, 117th Congress (2 March 2022), https://www.congress.gov/bill/117th-congress/senate-bill/2992/text; S. 2710, 117th Congress (17 February 2022), https://www.congress.gov/bill/117th-congress/senate-bill/2710.

^[28] Radic & Manne, supra note 4.

^[29] Id.

^[30] PL n. 2768/2022, Câmara dos Deputados (Brazil), (10 November 2022), https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=2214237&filename=PL%202768/2022.

^[31] Grand Design and Action Plan for a New Form of Capitalism: 2023 Revised Version, Jpn. Cabinet Secr. (2023), available at https://www.cas.go.jp/jp/seisaku/atarashii_sihonsyugi/pdf/ap2023en.pdf; Outline of the Act on Promotion of Competition for Specified Smartphone Software, Jpn. Fair Trade Comm. (Jun. 2024), available at https://www.jftc.go.jp/file/240612EN3.pdf; @laz_radic, X.com (14 August 2024, 6:17 a.m.), https://x.com/laz_radic/status/1823665316200899036.

^[32] Simon Vande Walle, Is the EU’s Digital Markets Act Going Global? How Japan Is Crafting Its Own Version of Digital Regulation with the Smartphone Act, EU Renew (21 August 2024), https://eu-renew.eu/is-the-eus-digital-markets-act-going-global-how-japan-is-crafting-its-own-version-of-digital-regulation-with-the-smartphone-act.

^[33] JFTC, supra note 31.

^[34] Online Intermediation Platforms Market Inquiry, Compet. Comm. S. Afr. (2000-2019), https://www.compcom.co.za/online-intermediation-platforms-market-inquiry.

[35] Id. at 1.

[36] Id. at 3.

[37] Proposal Paper, supra note 1, at 4-5.

[38] Id., at 5.

[39] J.M.M. van den Brink, M.J.M. van Rijswick, & J.M.A. van Kempen, Regulatory Overlap: A Systematic Quantitative Literature Review, 17 Reg. Gov. 1131, 1132 (2021) (finding that “Regulatory failure caused by overlapping regulations is ubiquitous, with examples in all jurisdictions across a range of disciplines”).

[40] Economic Report of the President, Exec. Off. Pres. (March 2019), 81, available at https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019.pdf (“The deadweight cost function is convex; if the tax is increased by 10 percent, the deadweight costs of the tax increase by more than 10 percent. As we discuss in detail below, the regulatory deadweight cost function is also convex. A new regulatory action that increases regulatory costs by 10 percent increases the cumulative regulatory cost burden by more than 10 percent”).

[41] Patrick MacLaughlin, Nita Ghei, & Michael Wilt, Regulatory Accumulation and its Costs, Mercatus Policy Brief (2016).

[42] John W. Dawson & John J. Seater, The Economic Impact of Regulation: A Literature Review, 18 J. Regulatory Econ. 137 (2013).

[43] MacLaughlin, Ghei, & Wilt, supra note 41.

^[44] Ying Gu, Stephanie Lee, & Yong Tan, News in the Dark: Effects of Facebook’s Australian News Ban on News Consumption, SSRN (5 April 2024), https://ssrn.com/abstract=4790864.

^[45] Josh Taylor, Facebook’s Potential News Ban Already Affecting Smaller Australian Media Outlets, Inquiry Told, The Guardian (21 June 2024), https://www.theguardian.com/media/article/2024/jun/21/facebooks-potential-news-ban-already-affecting-smaller-australian-media-outlets-inquiry-told.

[46] Giles Dexter, Fair News Bargaining Bill in Limbo as Minister Says It Is Not Ready, Radio N.Z. (13 November 2024), https://www.rnz.co.nz/news/political/533666/fair-news-bargaining-bill-in-limbo-as-minister-says-it-is-not-ready.

^[47] Paul Karp, Amanda Meade, & Josh Butler, Meta, TikTok and Google Will Be Forced to Pay Australian News. What Does It Mean for You?, The Guardian (12 December 2024), https://www.theguardian.com/australia-news/2024/dec/12/meta-tiktok-and-google-to-be-forced-to-pay-for-australian-news.

[48] See infra, Section VI.

[49] See McConnell, supra note 7; Ilbo, supra note 8; McConnell, supra note 10.

^[50] Radic, supra note 14.

^[51] Mathieu Pollet, France to Prioritise Digital Regulation, Tech Sovereignty During EU Council Presidency, Euractiv (14 December 2021), https://www.euractiv.com/section/digital/news/france-to-prioritise-digital-regulation-tech-sovereignty-during-eu-council-presidency; Lazar Radic, Digital-Market Regulation: One Size Does Not Fit All, Truth Mark. (17 April 2023), https://truthonthemarket.com/2023/04/17/digital-market-regulation-one-size-does-not-fit-all.

^[52] Barbara Moens & Paola Tamma, Macron and Merkel Defy Brussels with Push for Industrial Champions, Politico (18 May 2020), https://www.politico.eu/article/macron-and-merkel-defy-brussels-with-push-for-industrial-champions.

^[53] Oles Andriychuk, Do DMA Obligations for Gatekeepers Create Entitlements for Business Users?, 11 J. Antitrust Enforc. 123, 123-32 (28 December 2022), https://academic.oup.com/antitrust/article/11/1/123/6964483.

^[54] Geoffrey A. Manne, Dirk Auer, & Sam Bowman, Should ASEAN Antitrust Laws Emulate European Competition Policy?, 67 Singap. Econ. Rev. 1637 (31 March 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709730.

^[55] See, e.g., Oles Andriychuk, Do DMA Obligations for Gatekeepers Create Entitlements for Business Users?, 11 J. Antitrust Enforcement 123, 127 (2022) (“The means for allowing the second-tier ersatz-Big Tech to scale up is punitive: to slow down the current gatekeepers by imposing upon them a catalogue of exceptionally demanding obligations”.) (Emphasis added); id. at 131 (“This punitive nature of the DMA also means that the obligations can be blatantly arduous and interventionist”.) (emphasis added).

^[56] Radic, supra note 51.

^[57] Dae-sik & Sokol, supra note 5.

^[58] McConnell, supra note 7.

^[59] Lazar Radic & Geoffrey A. Manne, South Africa’s Competition Proposal Takes Europe’s DMA Model to the Extreme, Truth Mark. (15 August 2023), https://truthonthemarket.com/2023/08/15/south-africas-competition-proposal-takes-europes-dma-model-to-the-extreme.

^[60] Christine S. Wilson, Welfare Standards Underlying Antitrust Enforcement: What You Measure Is What You Get, Fed. Trade Comm. (15 February 2019), available at https://www.ftc.gov/system/files/documents/public_statements/1455663/welfare_standard_speech_-_cmr-wilson.pdf; Svend Albæk, Consumer Welfare in EU Competition Policy, Eur. Comm. (2013), available at https://competition-policy.ec.europa.eu/system/files/2021-09/consumer_welfare_2013_en.pdf.

^[61] Nicolas Petit & Lazar Radic, The Necessity of a Consumer Welfare Standard in Antitrust Analysis, ProMarket (18 December 2023) https://www.promarket.org/2023/12/18/the-necessity-of-a-consumer-welfare-standard-in-antitrust-analysis.

^[62] Dirk Auer, The Broken Promises of Europe’s Digital Regulation, Truth Mark. (12 March 2024), https://truthonthemarket.com/2024/03/12/the-broken-promises-of-europes-digital-regulation.

^[63] John Taladay & Maureen Ohlhausen, Are Competition Officials Abandoning Competition Principles?, 13 J.E.C.L. & Pract. 463 (5 July 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042226.

^[64] Radic, Manne, & Auer, supra note 12.

^[65] Dae-sik & Sokol, supra note 5.

^[66] Carmelo Cennamo & Juan Santaló, Potential Risks and Unintended Effects of the New EU Digital Markets Act, Esade EcPol (February 2023), available at https://www.esade.edu/ecpol/wp-content/uploads/2023/02/AAFF_EcPol-OIGI_PaperSeries_04_Potentialrisks_ENG_v5.pdf.

^[67] Adam Cohen, New Competition Rules Come with Trade-Offs, Google Blog (5 April 2024), https://blog.google/around-the-globe/google-europe/new-competition-rules-come-with-trade-offs.

^[68] Mario Monti, Why and How? Why Should We Be Concerned with Cartels and Collusive Behaviour?, Eur. Comm. (11 September 2000), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_00_295.

^[69] Geoffrey A. Manne, Error Costs in Digital Markets, GAI Report on the Digital Economy 3 (November 2020), available at https://gaidigitalreport.com/wp-content/uploads/2020/11/Manne-Error-Costs-in-Digital-Markets.pdf.

[70] Proposal Paper, supra note 1, at 6, 9-10.

[71] Digital Advertising Services Inquiry 2020-2021, Final Report, Aust. Compet. Consum. Comm (28 September 2021) https://www.accc.gov.au/about-us/publications/digital-advertising-services-inquiry-final-report.

[72] Geoffrey A. Manne & Eric Fruits, The Antitrust Assault on Ad Tech: A Law & Econ Critique, Int’l Ctr. L. Econ. (2022), available at https://laweconcenter.org/wp-content/uploads/2022/11/ICLE-White-Paper-2022-11-03-The-Antitrust-Assault-on-Ad-Tech-A-Law-Economics-Critique.pdf.

[73] United States v. Google LLC, No. 1:23-cv-00108 (D.D.C. 2023).

[74] Proposal Paper, supra note 1, at 20-21.

^[75] Javier Delgado, DMA Implementation Sinks 30% of Clicks and Bookings on Google Hotels Ads, Mirai (7 May 2024), https://www.mirai.com/blog/dma-implementation-sinks-30-of-clicks-and-bookings-on-google-hotel-ads.

^[76] Id.

^[77] Id.

^[78] Id.

^[79] Oliver Bethell, Complying with the Digital Markets Act, Google Blog (5 March 2024), https://blog.google/around-the-globe/google-europe/complying-with-the-digital-markets-act.

^[80] Cohen, supra note 67.

[81] See Jon Porter & David Pierce, Apple Is Bringing Sideloading and Alternate App Stores to the iPhone, The Verge (25 January 2024), https://www.theverge.com/2024/1/25/24050200/apple-third-party-app-storesallowed-iphone-ios-europe-digital-markets-act.

[82] See Complying with the Digital Markets Act, Apple (2024), available at https://developer.apple.com/security/complying-with-the-dma.pdf.

[83] Kim Mackrael, Apple’s Hold on the App Store Is Loosening, at Least in Europe, Wall St. J. (16 August 2024), https://www.wsj.com/tech/epic-games-apple-app-store-europe-44ceda50.

[84] Dan Goodin, Novel Technique Allows Malicious Apps to Escape iOS and Android Guardrails, ArsTechnica (21 August 2024), https://arstechnica.com/security/2024/08/novel-technique-allows-malicious-apps-toescape-ios-and-android-guardrails.

[85] See id., at 6 (“Both mobile operating systems employ mechanisms designed to help users steer clear of apps that steal their personal information, passwords, or other sensitive data. iOS bars the installation of all apps other than those available in its App Store, an approach widely known as the Walled Garden”).

[86] Jess Weatherbed, The First “Approved” iPhone Porn App is Coming to Europe, The Verge (3 February 2025) https://www.theverge.com/news/604937/iphone-ios-porn-app-hot-tub-altstore-pal-eu.

[87] Clare Duffy, Meta’s Threads is Now Available in the EU, CNN (14 December 2023), https://www.cnn.com/2023/12/14/tech/metas-threads-eu-launch/index.html.

[88] Rohan Goswami, Apple Intelligence Won’t Launch in EU in 2024 Due to Antitrust Regulation, Company Says, CNBC (21 June 2024) https://www.cnbc.com/2024/06/21/apple-ai-europe-dma-macos.html.

[89] Apple Intelligence Is Available Today on iPhone, iPad, and Mac, Apple (28 October 2024), https://www.apple.com/ie/newsroom/2024/10/apple-intelligence-is-available-today-on-iphone-ipad-and-mac (“This April, Apple Intelligence features will start to roll out to iPhone and iPad users in the EU. This will include many of the core features of Apple Intelligence, including Writing Tools, Genmoji, a redesigned Siri with richer language understanding, ChatGPT integration, and more”).

[90] Proposal Paper, supra note 1, at 21.

[91] Omar Vasquez Duque, Active Choice vs. Inertia? An Exploratory Assessment of the European Microsoft Case’s Choice Screen, 19 J. Comp. L. & Econ 60. (2023).

[92] Erik Hovenkamp, The Competitive Effects of Search Engine Defaults, SSRN (14 November 2024), at 21, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4647211 (“If a potential entrant (if successful) can obtain a default, this increases its ex ante investment and raises the probability of entry. In this case, the default may raise dynamic consumer welfare”).

[93] Proposal Paper, supra note 1, at 22.

[94] Jane Bambauer, Reinventing Cambridge Analytica One Good Intention at a Time, Lawfare (8 June 2022) https://www.lawfaremedia.org/article/reinventing-cambridge-analytica-one-good-intention-time.

[95] See infra, Section VI.

[96] Jonathan M. Barnett, The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods, 124 Harv. L. Rev. 1861, 1927 (2011).

[97] Proposal Paper, supra note 1, at 21.

[98] See infra, Section VI.

^[99] See Geoffrey A. Manne, Against the Vertical Discrimination Presumption, Concurrences No. 2-2020 (2020), at 1; see also Barnett, supra note 96; Andrei Hagiu & Kevin Boudreau, Platform Rules: Multi-Sided Platforms as Regulators, in Platforms, Markets and Innovation (Annabelle Gawer, ed. 2009).

^[100] Manne, id., at 1-2 (citing examples from the literature showing that complementors and consumers alike often benefit from platform self-preferencing); see also Sam Bowman & Geoffrey A. Manne, Platform Self Preferencing Can be Good for Consumers and Even Competitors, Truth Mark. (4 March 2021), https://laweconcenter.wpengine.com/2021/03/04/platform-self-preferencing-canbe-good-for-consumers-and-even-competitors.

^[101] On self-inflicted dependence, see Geoffrey A. Manne, The Real Reason Foundem Foundered, Int’l Ctr. L. Econ. (2018), at 6, available at https://laweconcenter.org/wp-content/uploads/2018/05/mannethe_real_reaon_foundem_foundered_2018-05-02-1.pdf (“A content provider that makes itself dependent upon another company for distribution (or vice versa, of course) takes a significant risk. Although it may benefit from greater access to users, it places itself at the mercy of the other—or at least faces great difficulty (and great cost) adapting to unanticipated, crucial changes in distribution over which it has no control. This is a species of what economists call the ‘asset specificity’ problem”).

[102] Proposal Paper, supra note 1, at 21.

[103] Tom Marks, Report: Steam’s 30% Cut is Actually the Industry Standard, IGN (7 October 2019), https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry-standard.

[104] Distributing Dating Apps in the Netherlands, Apple, https://developer.apple.com/support/storekit-external-entitlement (last visited 13 February 2025).

Introduction

President Donald Trump signed an executive order (EO) on Inauguration Day initiating the withdrawal of the United States from the World Health Organization (WHO).[1] This action quickly provoked consternation among some public health experts; one was quoted in The New York Times claiming it “will undermine the nation’s standing as a global health leader and make it harder to fight the next pandemic.”[2] This brief offers some background on both the EO and the WHO itself, outlines the order’s likely implications, and offers some tentative suggestions for next steps.

I. Reasons the Executive Order Was Issued

President Trump’s EO offered several reasons for his decision to withdraw from the WHO, including:[3]

• The WHO’s mishandling of the COVID-19 pandemic and other global health crises;
• its failure to adopt urgently needed reforms;
• its inability to demonstrate independence from certain WHO member states; and
• its demands for payments from the United States that are disproportionate to the size of the U.S. population

The first three of these reasons are the very same ones President Trump used to justify his notification to withdraw the United States from the WHO on July 6, 2020—an order that was later revoked by President Joe Biden on his Inauguration Day in 2021.

Of note, the EO also seeks to:[4]

• pause U.S. funding for the WHO;
• withdraw U.S. government personnel and contractors working for the WHO;
• “identify credible and transparent United States and international partners to assume necessary activities previously undertaken by the WHO”; and
• cease negotiation on the WHO Pandemic Agreement and amendments to the International Health Regulations.

In other words, the EO is motivated by the WHO’s poor performance during the COVID pandemic, including, especially, its promotion of economically and socially disastrous lockdowns; a fear that this failure would be repeated through the development of a new pandemic treaty modeled, at least in part, on the response to COVID; a concern that the WHO is beholden to certain foreign powers; and a view that the U.S. funds spent on the WHO could better be deployed elsewhere.[5]

II. What Is the WHO?

Founded in 1948, the WHO comprises a permanent United Nations secretariat based in Geneva, Switzerland, which oversees public-health projects around the globe. The WHO’s constitution defines its objective as “the attainment by all peoples of the highest possible level of health.”[6] Initially, it sought to achieve this objective by combatting such widespread infectious diseases as cholera, plague, and smallpox.

In 1951, the WHO introduced the International Sanitary Regulations, which subsequently evolved into the International Health Regulations (IHR), to standardize disease reporting globally. Through standardized reporting and coordination of responses, the WHO played an important role in containing numerous pandemics, including the 1957 Asian Flu, the 1968 Hong Kong Flu, and the 2003 severe acute respiratory syndrome (SARS) outbreak. Similar techniques were used in its successful campaign to eradicate smallpox.

Over time, however, the WHO has sought to address a wider range of health problems. To do so, it changed its funding model. Originally funded by core donations from member nations, the WHO began to develop “Special Programmes,” starting in the 1970s, that would attract specific funding from donors. Over time, these grew in importance and now comprise the vast majority of the WHO’s funding and expenditure.[7]

In 2022-23, only about 13% of the WHO’s total $7.8 billion budget came from assessed contributions.[8] The remainder—fully 87%, or $6.8 billion—came from “voluntary contributions,” often given to support special programs. This increasingly heavy reliance on voluntary contributions has cast doubt on whether the WHO is setting global health priorities or reflecting the interests of private agendas, especially in light of some of the WHO’s recent activities.

Of equal concern, whereas the WHO’s funding originally came entirely from individual governments, this has been increasingly replaced over time by intergovernmental bodies and private philanthropy. In 2023, the four largest contributors, responsible for around 45% of WHO’s funding, were the United States (15.6%), the Gates Foundation (12.7%), Germany (11%), and the Global Alliance for Vaccines (7.4%).

III. What Would a United States Exit from the WHO Mean?

A U.S. exit from the WHO would have many ramifications. Here, we adumbrate a few of the most significant: the effects on pandemic management, the effects of funding cuts on the WHO, the effects on WHO reform, and the implications for the currently stalled pandemic treaty.

A. Implications for Pandemic Management

Pandemics do not respect the often-arbitrary geographical borders established by nation states. It is almost impossible for a large nation with many border-crossing points, such as the United States, to isolate itself completely from a pandemic. As such, some degree of coordination will inevitably be required if nations are to limit the harm of future pandemics.

Pandemic prevention and management have been core functions of the WHO since the body’s inception. While there are other organizations that perform some important related activities, the WHO plays a dominant role, especially with regard to the standardization of disease reporting through the International Health Regulations (IHR) and international coordination of responses.

The recent White House EO called on the secretary of state to “identify credible and transparent United States and international partners to assume necessary activities previously undertaken by the WHO.” It also called for an end to negotiations on the WHO Pandemic Treaty.

It is possible that a new group of likeminded nations working collaboratively would be considerably more effective at preventing, identifying, and responding to future pandemics than the WHO has shown itself to be. There is, however, a risk that the United States choosing to leave the WHO before such a group is established could mean that most, if not all, of the organization’s other 193 nations remain members and negotiate a pandemic treaty (however ineffectual, or even counterproductive) on which the United States will have no input. Worse still, the United States may be excluded from access to important information about disease outbreaks, making it more difficult to respond to future pandemics.

B. Loss of US Funding Is Unlikely to Kill the WHO

As noted above, while the United States has been the largest single funder of the WHO, it still only represents about 16% of total funds.[9] While the loss of such a large sum may require WHO to cut some activities, it would not likely end the organization. Indeed, the withdrawal of the United States from WHO and the termination of U.S. government funding might lead nations like China or nonprofit organizations like the Gates Foundation to increase funding, both to continue programs they favor and to curry favor with WHO leadership, possibly worsening the very outcomes that motivate the U.S. withdrawal.

C. Hindering Needed WHO Reforms

The WHO’s failures during the COVID-19 pandemic are increasingly apparent. The organization promoted deeply harmful lockdown policies that were contrary to its own guidelines, and that will arguably exacerbate global inequality and ill health for generations. It then compounded these harms by colluding with the Chinese government to obscure the disease’s origins.[10] These failures were underpinned by malignant political leadership. Under the leadership of Tedros Adhanom Ghebreyesus, the organization has consistently misled nations about the risk of future pandemics.[11]

But the WHO also employs many excellent and honorable physicians and scientists who would probably welcome change, including change in leadership. Since the WHO is unlikely to vanish, the solution must be to reform.

Exiting the WHO would prevent the United States from using its funding and participation as leverage to force through that reform. While it is difficult to change large organizations, it is possible. The WHO previously was revitalized under the leadership of former Norwegian Prime Minister Gro Harlem Brundtland from 1998 to 2003. Under new leadership—which the United States could push for if it were to remain a member—a similar beneficial change could occur.

President Trump will leave office in January 2029 and the new president could seek to rejoin the WHO. This could mean financing an organization perhaps even more beholden to corrupting private and geopolitical interests than it is today.

D. Likelihood of a Misguided Pandemic Treaty

Given the WHO’s recent history of project failure and capture by vested interests, it should not be in charge of a pandemic treaty for the entire world. Its only previous treaty—the Framework Convention on Tobacco Control—has been an expensive mess that has likely delayed the transition away from smoking.[12]

Perhaps a reformed WHO could oversee the development and implementation of an effective pandemic treaty, but today’s WHO cannot. Treaty negotiations have stalled because of opposition, including from U.S. interests. But the continued desire of WHO leadership to push for a treaty is not an argument in favor of a U.S. withdrawal from WHO. The opposite is more nearly the case: U.S. membership of the WHO is far more likely to ensure that the WHO does not pursue its pandemic-treaty fantasy.

IV. Where to Next?

Whether or not the United States exits the WHO, there is an urgent need to address the issues raised in the White House EO—including, but not limited to, the failures of the U.S. and other health-care systems to address the threat of COVID in a reasonable manner; reforming the WHO; and building a “coalition of the willing” to address future pandemic threats (with or without the WHO).

A. Understanding the Real COVID Failures and Rebuilding Trust

It is easy to blame the WHO for the policy disasters that led to and were enacted during the COVID-19 pandemic. And while the WHO certainly deserves some blame, many of those policies would have looked much the same had WHO not been involved.

The WHO did not initiate the gain-of-function research at the Wuhan Institute of Virology or the lab’s lack of appropriate biosafety controls—which in combination probably led to the pandemic.[13] Nor did the WHO claim that vaccines completely prevent transmission of COVID. Nor, for that matter, was it the WHO that first suggested lockdowns and other mandates.

In the United States, many state governments and the federal government made mistakes. In the case of the federal government, this was in no small part the result of state actors funding dangerous research, knowingly giving bad advice, and repeatedly lying to Congress about the mistakes and prior lies.[14]

But governments had willing allies in other members of the “pandemic industrial complex,” including companies that manufacture COVID tests and personal protective equipment (PPE), as well as those pharmaceutical firms that have profited from vaccine drives that have continued long after the end of the pandemic—at great expense, but little to no benefit.[15] While the WHO was a useful tool in these efforts, supported by the vested interests that funded it, it was not an essential one, nor was it the root of the problem.

Unfortunately, these mistakes have had serious consequences, including a loss of trust in governments’ advice regarding vaccines and health care more generally. Distrust of the public-health establishment is at an all-time high: a recent academic survey found that two-thirds of Americans do not trust their health-care system.[16] My own research has demonstrated massive increases in vaccine hesitancy.[17]

To earn back the trust of the American people, the Trump administration should commission a full, independent analysis of COVID, from its origins to the many policy failures, including those that came under his first administration.

B. The WHO Must Be Reformed

The White House EO does not immediately withdraw the United States from the WHO. Rather, it begins the process. It is still possible that other members of the WHO could persuade its leadership to offer concessions sufficient to keep the United States in the fold. But regardless of what drives it, the WHO urgently requires radical reform so that it can operate effectively as a coordinating body to address global health challenges.

At a minimum, the WHO should be required to refocus on activities that genuinely require global coordination. This might be achieved, in part, by changing the organization’s governance structure so that it is more directly accountable to member states. Currently, WHO programs are agreed to an annual basis at the World Health Assembly, and then implementation is left mostly in the hands of the appointed secretariat. Giving those member states more regular and direct say in the WHO’s actions could potentially reduce the influence of a few powerful multilateral and non-state donors.

Secondly, the WHO’s members could cap or prohibit contributions from non-members. While partnerships can be valuable, these should be expressly approved by members and funds should not flow via the WHO secretariat. They should instead be structured through separate, transparent, and accountable entities. Such caps would have the effect of significantly reducing the WHO’s budget, forcing it to focus on areas of critical global importance.

A reformed WHO could be an important agency. It is, after all, the only international health agency constitutionally governed by member states alone.[18] While it has been corrupted by vested interests and the inevitable self-serving decay that afflicts large unaccountable bureaucracies, a substantially reformed WHO could be useful. It would need to be less than half its current size and focused on what it is uniquely positioned to deliver, free from private influence. It can then go back to shaping the coordination standards for management of diseases like tuberculosis and malaria, and exposing the deadly international criminal industry of fake drugs. Focused on building technical capacity within countries that request such help, it could remove the need for such aid (and therefore the WHO itself) in the years to come.

C. A Coalition of the Willing

If the United States does exit WHO, one hopes it will have identified “credible and transparent … international partners to assume necessary activities previously undertaken by the WHO.” Such a coalition of the willing is sorely needed, especially to share information about new outbreaks and other emergent threats; to coordinate access to virus (and other pathogen) information (including rapid dissemination of genetic sequences); and to provide appropriate incentives for the development and delivery of suitable vaccines and treatments.[19]

[1] See Withdrawing the United States from the World Health Organization, White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/withdrawing-the-united-states-from-the-worldhealth-organization.

[2] Sheryl Gay Stolberg, Trump Withdraws U.S. from World Health Organization, N.Y. Times (Jan. 20, 2025), https://www.nytimes.com/2025/01/20/us/politics/trump-world-health-organization.html.

[3] White House, supra note 1, § 1.

[4] Id. at 2(d), 4.

[5] See Roger Bate, A Pandemic Treaty Will Double Down on all the Bad Ideas from COVID-19, Int’l Ctr. L. Econ. (Feb. 2, 2024), https://laweconcenter.org/resources/a-pandemic-treaty-will-double-down-on-all-the-bad-ideas-from-covid-19; Kevin Bardosh & Jay Bhattarcharya, The World Health Organization’s Pandemic Treaty Ignores Covid Policy Mistakes, RealClear Policy (Apr. 30, 2024), https://www.realclearpolicy.com/articles/2024/04/30/the_world_health_organizations_pandemic_treaty_ignores_covid_policy_mistakes_1028504.html; David Bell, Pandemic Preparedness and the Road to International Fascism, 82(5) Am. J. Econ. & Socio. 395 (2023), https://onlinelibrary.wiley.com/doi/10.1111/ajes.12531?msockid=3815d67b9a696639042fc67b9b0b6713.

[6] Constitution of the World Health Organization, 1 U.N.T.S. 9, (Jul. 22, 1946), available at https://treaties.un.org/doc/Treaties/1948/04/19480407%2010-51%20PM/Ch_IX_01p.pdf.

[7] See Contributor, World Health Org., https://open.who.int/2022-23/contributors/contributor (last visited Jan. 27, 2025).

[8] Id.

[9] World Health Organization, supra note 7.

[10] After Action Review of the COVID-19 Pandemic: The Lessons Learned and a Path Forward, U.S. House of Representatives, Select Subcommittee on the Coronavirus Pandemic, 118^th Cong. (Dec. 4, 2024), available at https://oversight.house.gov/wp-content/uploads/2024/12/12.04.2024-SSCP-FINAL-REPORT.pdf.

[11] See Rational Policy Over Panic: Re-evaluating Pandemic Risk Within the Global Pandemic Prevention, Preparedness and Response Agenda, U. Leeds, https://essl.leeds.ac.uk/downloads/download/228/rational-policy-over-panic (last visited Jan. 27, 2025).

[12] See Martin Cullip & Roger Bate, Lessons from the WHO Framework Convention on Tobacco Control for the WHO Pandemic Treaty, Int’l Ctr. L. & Econ. (Nov. 26, 2024), https://laweconcenter.org/resources/lessons-from-the-who-framework-convention-on-tobacco-control-for-the-who-pandemic-treaty.

[13] See Jocelyn Kaiser, NIH Says Grantee Failed to Report Experiment in Wuhan that Created a Bat Virus that Made Mice Sicker, Science (Oct. 21, 2021), https://www.science.org/content/article/nih-says-grantee-failed-report-experiment-wuhan-created-bat-virus-made-mice-sicker; Ed Browne, Fauci Was ‘Untruthful’ to Congress About Wuhan Lab Research, New Documents Appear to Show, Newsweek (Dec. 1, 2021), available at https://www.congress.gov/117/meeting/house/114270/documents/HHRG-117-GO24-20211201-SD004.pdf.

[14] See Executive Grant of Clemency: Joseph R. Biden, JR. President of the United States of America, U.S. Dep’t of Just., Off of the Pardon Att’y (Jan. 19, 2025), https://www.justice.gov/pardon/media/1385746/dl?inline.

[15] See What Next for China’s Covid-industrial Complex?, The Economist (Dec. 8, 2022), https://www.economist.com/business/2022/12/08/what-next-for-chinas-covid-industrial-complex; Bell supra note 5.

[16] See Do You Trust the American Health Care System? Can Policymakers Help you Trust It More?, Johns Hopkins Carey Bus. Sch. (Sep. 12, 2024), https://carey.jhu.edu/articles/american-health-care-policymakers-help-trust.

[17] See Roger Bate, Vaccine Hesitancy and the Pandemic: Physician Survey Responses, Int’l Ctr. L. & Econ. (Feb. 23, 2024), https://laweconcenter.org/resources/vaccine-hesitancy-and-the-pandemic-physician-survey-responses.

[18] See World Health Org., supra note 6.

[19] In addition, it may be necessary to use other methods to persuade undemocratic nations to share data and warn of impending disaster—e.g., by agreeing to send them money and vaccines quickly when problems hit.

ICLE Senior Scholar Eric Fruits was a guest on KGW-8’s Straight Talk program discussing recent waves of labor activism in Portland, Oregon. Video of the full episode is embedded below.

For more than a year, competition regulators around the globe have been unified in issuing a clarion call that artificial intelligence (AI) risks becoming dominated by just a handful of firms.

International competition agencies issued a joint statement in December warning that AI could entrench “market power” and reduce competition. Andreas Mundt, president of Germany’s Bundeskartellamt, earlier worried that AI would lead to “even deeper concentration of digital markets.”

Read the full piece here.

I. Introduction

We appreciate the opportunity to comment on the Australian Government’s (“Government”) consultation on the implementation of a new digital competition regime.[1]

As we outline in our comments, the Government’s proposal rests on the assumption that there exists a broad global consensus on the need for ex-ante rules for digital platforms. This purported consensus is, however, largely overstated. Australia should not feel pressured to “catch up” with a trend that does not exist. Second, the Government promotes ex-ante digital competition rules as “complementary” to an expanding web of regulatory interventions. In practice, however, each new regulation compounds a broader regulatory overload that threatens to result in net social losses. Third, ex-ante digital competition rules may reflect the European Union’s (“EU”) distinct industrial policies that are not necessarily suited to Australia. The EU may also be willing, for political reasons, to accept tradeoffs that Australians are not. Fourth, the Government’s focus on ad tech is misplaced. Ad tech is not the hub of anticompetitive behaviour that the Government suggests it is. Fifth, the Government should take lessons from the international experience, particularly that of the EU. As we show, the Digital Markets Act (“DMA”) has led to unintended consequences for businesses and consumers alike—reducing functionalities and limiting visibility for smaller players, such as hotels. Finally, and relatedly, the rules and conduct requirements the Government envisions mirror the DMA’s flawed and are therefore likely to produce similar adverse outcomes.

II. No Global Consensus About the Need for Ex-ante Digital Competition Regulation

The Government and the Australian Competition and Consumers Commission (“ACCC”) both suggest that they do not want to be left behind by regulatory trends already adopted in other jurisdictions.[2] As a preliminary point, we contend that no such consensus exists.

To date, only a handful of countries have passed ex-ante competition rules for digital platforms.[3] In addition to the EU itself, Germany, Japan, and the United Kingdom have adopted regulatory regimes for digital markets that bear some resemblance to the DMA. Granted, other countries have contemplated adoption of such rules (most notably, Brazil, Turkey, South Korea, South Africa, and India), but whether these will ultimately become law remains anyone’s guess.

In short: the number of countries that have adopted ex-ante rules pales in comparison to those that have not. The United States, most notably, has rejected the path set out by the EU, as is evident from the slow death of the congressional antitrust legislative package in 2023.[4] Moreover, as Hong Dae-Sik and Daniel Sokol have pointed out:

The United States rejected such a legislative effort and its proponents have come under significant attack by academics and Congress. Likewise, most American courts have rejected this novel approach, and antitrust authorities that have brought lawsuits under such non-traditional legal theories have lost virtually every case, especially when seeking to block corporate mergers.[5]

Other countries’ commitments to follow this purported “global regulatory trend” are also teetering.[6] For example, it was recently reported that India could scrap proposed legislation to regulate digital platforms, amid fierce backlash from lawyers.[7] The South Korean government earlier backtracked on its plans to pass the Platform Competition Promotion Act (“PCPA”), which was likewise inspired by the DMA[8] The South Korean government is instead contemplating a more modest—albeit still questionable—reform of its Fair Trade Act.[9] The Philippines competition authority also recently ruled out a DMA-style bill.[10] With the United States increasingly signalling that it will not tolerate excessive foreign regulation of American technology companies, it is possible that more countries will back away from EU-style regulation on this front.[11]

Even in those jurisdictions that have taken steps to adopt “sector specific” competition rules for digital markets, there is no consensus about how such rules should be structured. To be sure, there are important thematic commonalities across so-called digital competition regulations.^[12] But on a legal and formal level, these approaches are vastly heterogeneous.

Digital competition rules exist in a “difficult epistemological situation”,^[13] caught between competition law, sector-specific regulation (despite digital markets lacking the homogeneity of a true “sector”),^[14] or something else entirely. Some have called them the “lost child of competition law”,^[15]  reflecting deeper uncertainty about their ultimate purpose—whether it should be fairness, consumer welfare, or equality. These goals are not always compatible and can, at times, be in direct conflict.[16]

For example, some digital competition rules are structured as an extension of the competition-law framework and are sometimes even formally embedded into existing competition law. In principle, where this is the case, it means that the standard goals and rationales of competition law still apply. Germany, for instance, has amended its Competition Act to enable early intervention against threats to competition by large digital firms.^[17] The new rules prohibit certain categories of conduct and impose remedies based on structural inquiries, regardless of abuse. Unlike the DMA, the Competition Act’s Article 19a permits targeted companies to justify their conduct, but shifts the burden of proof to the defendant, diverging from competition-law norms.

With its draft amendments to Law 4054 (Turkey’s Competition Act),^[18] Turkey has followed a similar path to Germany, although some of the new provisions go significantly further than even the DMA, partly due to their open-ended nature. For instance, the Turkish draft amendment would appear to prohibit all forms of tying and bundling, as well as potentially all exclusivity agreements. It also remains unclear whether the prohibitions would apply to all conduct by the designated digital platforms, or only to the “core platform services”.^[19]

As noted above, South Korea recently scrapped plans for the PCPA.^[20] The Korea Fair Trade Commission and the government of recently impeached and indicted President Yoon Suk Yeol[21] instead announced support for amendments to the existing Fair Trade Act.^[22] Under the new rules, in cases where designated digital platforms are accused of self-preferencing, tying, or imposing most-favored nation (“MFN”) clauses or restrictions on multi-homing, the amendments would raise fines, reverse the burden of proof, and allow interim orders, including cease and desists, to be issued immediately. It also appears—although it is not certain—that the new rules would give targeted companies some leeway to mount a defense, such as by showing procompetitive efficiencies.

There are other proposed and enacted digital competition rules that are at least nominally competition-based, although their approaches differ. The United Kingdom’s Digital Competition and Consumers Bill (“DMCC”) allows the Competition and Markets Authority’s (“CMA”) newly created Digital Markets Unit (“DMU”) to impose “bespoke” conduct requirements on companies with “strategic market status”. This approach contrasts with the DMA, which contains (allegedly) self-executing blanket prohibitions by which all gatekeepers must abide.^[23] By contrast, under the DMCC, the DMU determines how each designated firm must conduct itself in order to achieve the law’s stated objectives of “fair dealing”, “open choices”, and “trust and transparency”. These conduct requirements must be chosen from a list of “permitted types” (e.g., prohibiting self-preferencing, or requiring choice screens).

S. 29 of the DMCC provides for a “countervailing benefits exception” to conduct requirements. But apart from the fact that the exemption sets a high bar to clear (the behaviour must be “indispensable”), it also only applies once an investigation into breach of a conduct requirement is underway. It is questionable how useful this defense will prove to be in practice.^[24]

India is taking a middle path between the DMCC and the DMA, wherein certain firms would be designated as “systemically significant enterprises” and subject to six obligations and prohibitions, albeit with more space for customization by the enforcer. The Indian Draft Digital Competition Bill^[25] (“DDCB”) supplements the Indian Competition Act (“ICA”) but pursues different goals. The ICA’s stated goals are the protection of the interests of consumers and free trade, while the DDCB (like the DMA) pursues fairness and contestability.^[26]

Meanwhile, in the United States, several bills have been put forward in recent years that are formally separate from existing antitrust law, but cover some of the same conduct as would typically be addressed under U.S. antitrust law—albeit with seemingly different goals and standards.^[27] While the U.S. tech bills largely fail to describe their underlying goals, the bills’ titles, as well as statements made by their sponsors, suggest a set of overlapping concerns. These include preventing “material harm to competition” (which superficially sounds like an antitrust objective, but as the American Bar Association’s Antitrust Section has pointed out, isn’t);^[28] reducing “gatekeeper power in the app economy”; and “increasing choice, improving quality, and reducing costs for consumers”.^[29] But the measures also pursue other goals that are less obviously connected to competition, such as creating opportunities for small businesses and entrepreneurs, achieving a level playing field, and ensuring “fair” prices.

Brazil’s PL 2768,^[30] which has some of the lowest quantitative thresholds for a company to be considered a “gatekeeper” (roughly AU$19.21 million), pursues an expansive grab bag of social and economic goals, including freedom of initiative; free competition; consumer protection; reduced regional and social inequality; combating the abuse of economic power; widening social participation in matters of public interest; access to information, knowledge, and culture; and fostering innovation and mass access to new technologies and access models. Like the DMCC, the obligations would be tailored to each company. The provisions are broadly phrased, however, and some appear open to expansive interpretations. For example, Art.10(IV) prohibits gatekeepers from refusing access to business users—seemingly tout court (although Art.11 then requires enforcers to act with proportionality when establishing obligations).

Japan, whose Smartphone Act is part of an overarching policy shift “towards a new form of capitalism”,^[31] covers only four core platform services. By comparison, other digital competition rules typically cover around 10, replicating the DMA’s scope. Further, the Smartphone Act’s dos and don’ts would only apply when consumers access products or services on their phones (e.g., Google is only prohibited from engaging in self-preferencing on smartphones,^[32] but not on laptops or PCs). The Smartphone Act also allows greater scope for privacy and security exemptions. Whereas the DMA only allows for such exemptions in the case of interoperability and sideloading (the Smartphone Act does not mandate sideloading), it appears that privacy, safety, and user protection constitute valid justifications for most types of conduct covered by the Smartphone Act.^[33]

The South Africa Competition Commission (“SACC”) has called for remedial actions against popular intermediation platforms.^[34] These are largely the usual “GAMMA” suspects (Google, Apple, Meta, Microsoft, and Amazon); it explicitly would include Amazon, despite the company’s absence in South Africa at the time. Presumably, the SACC would impose these remedies within the framework of the South African Competition Act. Uniquely, the SACC explicitly admits that its proposed remedies aim to redistribute wealth from the targeted digital companies to South African companies, historically disadvantaged peoples (“HDPs”), and small and medium-sized enterprises (“SMEs”).[35] The SACC recommends requiring Google to add identifiers and filters to help consumers identify and support local platforms and to directly pay competing SMEs and black-owned firms ZAR150 million (roughly AU$12.84 million) to offset Google’s competitive advantage.[36]

This has at least two implications for Australia. First, the “consensus” the Government aims to replicate domestically is vastly overstated. Second, Australia’s proposal is unlikely to be “complementary and cohesive with international practices”, because those practices themselves lack cohesion. Instead, it would introduce yet another layer of regulatory complexity, further disrupting digital platforms, their users, and the businesses that rely on them.[37]

III. Ex-Ante Digital Competition Regulation Adds Fuel to Australia’s Bonfire of Overregulation

The Government’s Proposal Paper claims that ex-ante digital competition rules would “complement” existing and forthcoming regulations, including the proposed Scams Prevention Framework, the government’s response to the Privacy Act Review, Digital ID laws, the News Media and Digital Platforms Mandatory Bargaining Code, and ongoing initiatives related to artificial intelligence (“AI”). [38]

Rather than serving as complements, however, these rules are just as likely to deepen Australia’s growing problem of overregulation, thereby further hindering digital platforms’ ability to deliver value to users and businesses. In a sea of regulations, one more regulatory overreach might seem insignificant, or it could be the final straw that breaks the camel’s back.

Studies in regulatory theory often suggest that, when multiple regulatory frameworks are implemented simultaneously, their combined effect can lead to “regulatory overload”. This can cause inefficiencies and unintended consequences that are not easily anticipated by looking at each rule in isolation. In other words, regulatory overload has synergistic effects.

In this vein, researchers have shown how multiple overlapping regulations can obscure policy objectives and hinder the development of effective and clear regulation;[39] that the total regulatory burden from multiple regulations often exceeds what might be expected by merely adding individual regulatory impacts together, causing “convex deadweight costs”;[40] and how the accumulation of regulations can lead to increased costs and inefficiencies.[41] For example, one study showed that between 1949 and 2005, the accumulation of federal regulations slowed U.S. economic growth by an average of 2% annually.[42] If regulation had stayed at its 1949 level, the 2011 U.S. GDP would have been approximately $39 trillion—3.5 times higher—resulting in a loss of around $129,300 per person in the United States. Another study mentioned earlier showed that:

By distorting the investment choices that lead to innovation, regulation has created a considerable drag on the economy, amounting to an average reduction of 0.8 percent in the annual growth rate of the US GDP. This seemingly small annual reduction has large implications. The slower economic growth associated with regulatory accumulation resulted in an economy that was $4 trillion smaller in 2012 than it could have been without such regulatory accumulation.[43]

This flips the Government’s argument about “complementarity” on its head, suggesting that the cumulative impact of regulations is likely to be greater than the sum of their individual effects, potentially doing more harm to the Australian digital sector than each regulation would on its own.

Consider the News Media Bargaining Code. These regulations have already imposed significant costs and caused unintended consequences, which could easily be exacerbated by parallel ex-ante digital rules targeting the same companies. In response to the proposed code, Meta banned the sharing and viewing of news content on Facebook in Australia. This led to a significant reduction in news consumption on the platform. One study found that, while some users sought alternative news sources, others experienced a decline in news consumption, potentially increasing their exposure to misinformation.^[44] The Independent Media Alliance opined that the ban would be “terrible for not only the industry, but for Australian democracy”.^[45] While Meta eventually reversed the ban and reached a deal that allowed news sharing to resume, the situation had significant ramifications. Larger publishers negotiated deals for compensation from Meta, but smaller news outlets faced sunk revenue losses.

While Google, in comparison, has been more willing to negotiate, there is a caveat. In Australia, Google agreed to pay news companies only after intense negotiations. In the end, Google secured terms more favourable to its business model, opting for case-by-case payments rather than a fixed, uniform payment model. While large companies like Australia’s own News Corp can absorb these transaction costs, smaller outlets may struggle. Google also had the ability to choose which content to display—and pay for—on its platform. Put simply, if you turn Google into a news buyer, it will shop around.

More recently, Australia has considered shifting the News Media Bargaining Code to function as a digital-services tax, either explicitly or de facto. The de facto version would make it compulsory for companies to carry news links. As a result, the compelled companies would subject to extraction. This shift could mean that Australian companies lose whatever arrangements they have made with Google. When New Zealand proposed legislation (currently stalled) with a similar effect, Google stated it would withdraw from the country’s news market entirely if enacted.[46]

Ultimately, major media companies with significant bargaining power, like News Corp and Nine Entertainment, were the main beneficiaries of the agreements made under the News Media Bargaining Code. These large publishers offered more varied content that was valuable to Google because it attracted a larger audience and thus increased ad revenue. In addition, large publishers were able to command higher payments, making them more likely to receive favourable treatment, in terms of visibility on Google’s platform. Conversely, smaller or independent news outlets that did not strike agreements with Google risked being excluded from Google’s news services or search results or receiving much less exposure than they would have in a but-for world.^[47]

The question of how this scenario could be seen as benefiting the public—rather than large, politically powerful entities like News Corp—remains unanswered. Additionally, there is the issue of the combined impact of regulatory overload. Smaller outlets, who less able to negotiate for visibility on Google’s search engine, may face further challenges from prohibitions on self-preferencing. When self-preferencing is banned, companies like Google tend to auction off the top search spots, favoring incumbents with deep pockets.[48] As a result, smaller outlets that could previously appear at the top due to content relevance are now unlikely to secure those prime positions.

In other words, self-preferencing bans turn the currency of search rankings from relevance into actual money. While smaller companies could once compete based on relevance, they now face being crowded out by more financially robust competitors. The combined effect of the News Media Bargaining Code and a ban on self-preferencing could therefore lead to the demotion of content from smaller, yet relevant, business users—an outcome that would harm both these businesses and, most importantly, end-users.

In addition, prohibitions on the cross-use of data, or cumbersome requirements that are tilted against consent, could affect digital platforms’ ability to provide tailored, targeted ads. This would be another nail in the coffin of small businesses, which disproportionately rely on targeted advertising to break into new markets and reach customers.

IV. Australians May Not Want the Same Tradeoffs as the EU

It is hardly surprising that some countries would get “cold feet” about enacting strict ex-ante digital competition rules.[49] To the keen observer, the prospect always loomed that such rules might be little more than a quirk of EU industrial policy. As ICLE Senior Scholar Lazar Radic has noted,^[50] prior to the DMA’s adoption, many leading European politicians touted the law’s text as a protectionist industrial-policy tool that would hinder U.S. firms to the benefit of European rivals.^[51] French President Emmanuel Macron summarized it well when he said:

If we want technological sovereignty, we’ll have to adapt our competition law, which has perhaps been too much focused solely on the consumer and not enough on defending European champions.^[52]

Insofar as these goals are—or may be—unique to a particular time and place (i.e., the EU in the 2020s), it is reasonable to assume they will not necessarily be shared by everyone. Some countries may be more interested in attracting digital platforms than in regulating,^[53] “disciplining”,^[54] or punishing them.^[55] Echoing the argument that “one size does not fit all” when it comes to digital competition regulation,^[56] Dae-sik and Sokol note that among the reasons ex-ante digital competition rules are inappropriate for South Korea is the marked differences between that nation’s economic, legal and regulatory context and that of the EU:

Europe chose to regulate heavily for protectionist reasons. It lacks the tech infrastructure, innovative companies, and unicorns that are present in other vibrant economies like Korea. […] While Korea has approximately three times more unicorns than Japan, despite having a smaller gross domestic product, the adoption of a DMA-like approach may hurt Korea’s innovation advantage.^[57]

Similarly, Samir Ghandi argues that the DMA’s “one-size-fits-all” approach would not work “for a dynamic Indian market with its own vibrant tech ecosystem”.^[58]

Other, less technologically intense countries like South Africa might have a still different set of priorities, such as attracting foreign direct investment to drive growth and the development of essential infrastructure. As Radic and ICLE President Geoffrey Manne have written:

Developing countries like South Africa should be especially wary of importing untested competition rules that impose government-mandated designs on the business models and user interfaces of innovative companies. It’s not trite to say that South Africa’s market is not the same as the EU’s. The consequences of unsound competition policy here may be to stymie foreign investment and domestic innovation exactly where they are needed most. […] This is a far cry from the untested, pre-emptive constraints contemplated by the [SACC].^[59]

The point is countries’ needs are as varied as the countries themselves. This does not preclude the possibility of common rules and standards; after all, most of the world’s competition-law systems have converged around some version of the consumer welfare standard.^[60] But one explanation for this commonality can be found in how the consumer welfare standard fares when compared to the alternatives:

The objective nature of the choice and interpretation of legal antitrust standards exists on a spectrum, and the [consumer welfare standard’s] conceptual congruence, measurability, and its connection to aspects that are almost universally considered to be relevant parameters of competition (price, innovation, quality) brings it closer to objectivity and further away from subjectivity.^[61]

Conversely, once it is understood that the DMA represents an attempt to pass off a sui generis, subjective policy choice as a universal regulatory paradigm, the case for harmonization quickly withers. Clearly, not everyone is on board with trading economic performance for a set of questionable political goals.^[62] In this sense, one frequent criticism of ex-ante competition rules is that they ignore—or, at the very least, significantly downplay—the effects on consumer welfare and innovation (the traditional bastions of competition policy). Instead of focusing on protecting competition to the benefit of consumers, digital competition rules commit the cardinal antitrust sin of protecting competitors. As former Federal Trade Commission (“FTC”) Commissioner Maureen Ohlhausen has put it:

Some recent legislative and regulatory proposals appear to be in tension with this basic premise. Rather than focusing on protection of competition itself, they appear to impose requirements on some companies designed specifically to facilitate their competitors, including those competitors that may have fallen behind precisely because they had not made the same investments in technology, innovation or product offerings. For example, the Digital Markets Act (DMA) would force a ‘gatekeeper’ company to provide business users of its service, as well as those who provide complementary services, access to and interoperability with the same operating system, hardware, or software features that are available to or used by the gatekeeper. While this would restrain gatekeepers and presumably facilitate the interests of the gatekeeper’s rivals, it is not clear how this would protect consumers, as opposed to competitors.^[63]

This, of course, is only surprising if one falls for the story that digital competition rules—and the DMA, in particular—were ever intended to protect competition or consumer welfare. The readily apparent goal is instead to redistribute rents, protect competitors, and level down gatekeepers, even if it comes at the expense of consumers.^[64] There is no better example of this than the DMA, whose preamble explicitly disavows consumer welfare and economic efficiency as irrelevant under the new rules.

As commentators around the world have pointed out, this approach is likely to stymie dynamism in digital markets and harm consumers. As noted above, Dae-sik and Sokol argue against introducing ex-ante digital competition regulations in South Korea, contending that such rules would stifle innovation, decrease investment, hurt startups and consumers, and jeopardize South Korea’s status as a regional leader in tech innovation.^[65] Carmelo Cennamo and Juan Santaló further argue that the DMA could produce a host of other harmful unintended consequences.^[66] For example, undermining gatekeepers’ ability to control access to their platforms could ultimately lead to lower levels of innovation. Obligations like data-sharing could reduce gatekeepers’ incentives to accumulate and process data, thereby diluting the competitive benefits and product improvements that result from such collection.

Some consumers and policymakers may be willing to accept these tradeoffs in pursuit of equity, fairness, contestability, “reining in” tech giants, or some other goal.^[67] But others, reasonably, may not. Thus, commentators from both within and outside the EU have increasingly questioned the need for rules that mechanically apply preset default solutions to the complex tradeoffs that have typically characterized competition-law analysis. This is of particular concern in dynamic markets driven by innovation, where uncertainty is endemic and where, except in the most egregious of cases,^[68] even the wisest enforcers can’t know a priori whether or not given conduct is procompetitive.^[69] Against this backdrop, tales of a supposed consensus in support of a special set of competition rules for digital platforms are rooted more in fantasy than in reality.

There is also the question of whether the Government can make such far-reaching decisions about tradeoffs without substantial democratic discussion and debate. The Government’s proposed framework would include broad obligations to target anticompetitive conduct contained in primary legislation and service-specific obligations to clarify the broad requirements contained in subordinate legislation (e.g., regulations). Though many of the categories of conduct sound straightforward and technical, they implicate several policy-laden decisions that broad obligations cannot capture, as well as competing interests that subordinate legislation would struggle to balance.

For instance, “restrictions on interoperability that limit effective competition” implicates multiple types of interoperability (i.e., technical, syntactic, and semantic interoperability and organization) each of which poses unique and personal tradeoffs in terms of user security, privacy, and flexibility. Other categories the Government’s proposal would seek to regulate, such as digital advertising, affect broad swathes of the economy and thus implicate substantive matters of policy. Without meaningful democratic deliberation, the Government’s framework risks imposing rigid, one-size-fits-all regulations on complex and deeply consequential tradeoffs that require a nuanced and inclusive policymaking approach.

V. Focus on ‘Ad Tech’ as a Hub of Anticompetitive Conduct Is Misguided

The Proposal Paper states that advertising technology (“ad tech”) would be a priority for the new regime.[70] In a previous report, the ACCC found that:

there is a lack of transparency in the supply chain, and that Google’s vertical integration and strength in ad-tech services has allowed it to engage in a range of conduct which has lessened competition over time and entrenched its dominant position.[71]

These findings should, however, be put into context. For years, regulators and competition watchdogs have expressed concern about competition in the digital-advertising business. Like the ACCC and the Government, they have noted that digital advertising appears to be dominated by a handful of large firms, including Google, Facebook, and—to a lesser extent—Amazon. Some claim that this dominance allows these firms—and Google, in particular—to engage in anticompetitive conduct to extend their market power and to earn supercompetitive profits at the expense of advertisers, publishers, and consumers. But Manne and ICLE Senior Scholar Eric Fruits have argued that, based on the information that is publicly available, many of the most significant claims made against Google’s ad-tech business are based on a misunderstanding of U.S. antitrust law, or of the details of the ad-tech market itself.[72] While Manne and Fruits’ study focuses on the United States, the findings can, to a significant extent, be extrapolated to Australia.

As they note, digital advertising provides the economic underpinning for much of the internet. Targeted digital advertising on independent websites is often facilitated by intermediaries that match advertisers and websites automatically, displaying ads to those users for whom they are most relevant. The technology powering this intermediation has advanced enormously over the past three decades. Some now allege, however, that the digital-advertising market is monopolized by its largest participant: Google.[73]

Ultimately, however, this is a version of the “big is bad” argument, in which conduct by dominant incumbent firms that makes competition more difficult for certain competitors is viewed as inherently anticompetitive—even if the conduct confers benefits on users. Under this approach, the largest firms are seen as acting anticompetitively if they do not share their innovations or reveal their business processes to competing firms. As a result, creating new and innovative products, lowering prices, reducing costs through vertical integration, and enhancing interoperability among existing products is miscast as anticompetitive conduct.

In contrast, competition laws—including Australia’s own—are intended to foster innovation that creates benefits for consumers, including innovation by incumbents. The law does not proscribe efficiency-enhancing unilateral conduct on the grounds that it might also inconvenience competitors, or that there is some other arrangement that could be “even more” competitive. While this might benefit some competitors in the short run, over the longer term, it will tend to stifle competition by discouraging innovation and investment and promoting free riding.

Moreover, competition law generally does not second guess unilateral conduct simply because it may hinder rivals. Any such conduct must first be shown to be anticompetitive—that is, to harm consumers or competition, not merely certain competitors. In multisided markets, this means finding not simply that some firms on one side of the market are harmed, but that the combined net effect of challenged conduct across all sides of the market is harmful.

Regulators, however, often fall into what has been deemed the “nirvana fallacy”, in which real-life conduct is compared against a hypothetical “competition-maximizing” benchmark and anything that falls short is deemed worthy of intervention. That fanciful approach would pervert businesses’ incentives to innovate and compete and would make an unobtainable “perfect” that exists only in the minds of some economists and lawyers the enemy of a “good” that exists in the market.

In the case of the Proposal Paper, many of the interventions appear to be geared toward destroying or undermining Google’s vertical integration in ad tech.[74] But these heavy-handed interventions risk hampering the quality of Google’s ad-tech service. Vertical integration plays a crucial role in streamlining supply chains by reducing inefficiencies and coordination issues, ultimately lowering transaction costs, and passing the benefit onto consumers. Additionally, forcing Google to unbundle its ad-tech operations could diminish its incentive to innovate, as it would expose proprietary advancements to potential replication by rivals. Rather than fostering competition and efficiency, these interventions may disrupt a well-functioning market, leading to higher costs, reduced service quality, and slower innovation in digital advertising.

VI. The Comparative Experience with Ex-Ante Rules for Digital Platforms

The Government is adamant that ex-ante rules for digital platforms will benefit everyone in Australia, but especially businesses and consumers. The EU’s experience with the DMA, however, tells a much more nuanced and less flattering story. Two lessons emerge from the DMA’s implementation for the Government’s ex-ante proposal: there are going to be winners and losers, and there will be unintended consequences. The Government and Australians more generally should brace themselves for both. Below are concrete examples of the inherent tradeoffs and unintended consequences following the EU’s implementation of the much-vaunted DMA.

Take, for example, self-preferencing. The DMA’s self-preferencing ban has made it increasingly difficult for platforms to offer certain functionalities in Europe. For example, Google has removed features like maps, hotel bookings, and reviews from its search results. Until it can accommodate competitors who offer similar services (if this is even possible), these specialized search results will remain buried several clicks away from users’ general searches. Not only is this inconvenient for consumers, but it has important ramifications for business users.

Take hotel bookings, for example. Early estimates suggest that clicks from Google ads to hotel websites decreased by 17.6% because of the DMA. DMA implementation also caused clicks and bookings on Google Hotel Ads to sink by as much as 30%.^[75] As a result, the volume of direct bookings dropped as much as 36%, “increasing hotel dependence on intermediaries, which seriously damages their profitability”.

By prohibiting Google from placing its own vertical services (Google Maps, Google Flights, and Google Hotel Ads) first, “the presentation of hotel offers to users based in DMA markets is less organised, clear and intuitive”.^[76] Previously, Google Search provided a direct display of hotels, featuring relevant details like prices, distance from the user, and images. Now, the top search results point to intermediaries like Booking.com and eDreams (see Figure 1). The irony, of course, is that Booking.com is itself a designated “gatekeeper” under the DMA.

FIGURE 1: Post-DMA Google Search for Madrid Hotels

This sort of regulatory intervention does not make the market more “fair or contestable”. It merely robs Peter to pay Paul, while also robbing the consumer. As a study by hotel-industry consultant Mirai finds:

Prior to DMA, Google’s taxonomy of results was the result of decades of effort by the company to refine its results in order to provide an optimized search experience that would connect supply and demand in a way that was ideal for both.

This pre-DMA search experience offered hotels participating directly in the Google Hotel Ads product, the option to present their inventory (availability and room rates) in a way that was both efficient from the standpoint of distribution cost, and enriched for the user, as it integrated the experience of other services, e.g. Google Maps. This way of presenting information was clear, relevant and intuitive, and maximized purchasing decisions such as hotel bookings for those users who were so inclined.^[77]

Users therefore now face a less intuitive booking experience, with limited access to aggregated hotel offers, simplified calendar pricing, and streamlined tools like Google Travel. Consumer frustrations include being redirected to search-engine results instead of the Travel section, and additional clicks being required to complete actions that previously required just one.

So, who has Art.6(5) really benefitted? Clearly not hotels: they have been subjected “to the toll of intermediation, strangling direct sales and holding users and hotels captive to less profitable, less independent business models”.^[78]

Google has also removed other functionalities to comply with Art. 6(5). In March 2024, the company announced it had “removed some features from the search results page which help consumers find businesses, such as the Google Flights unit”.^[79] Google noted that the DMA had produced unintended consequences, including a suboptimal user experience and impact to businesses.

We’ve always been focused on improving Google Search to help people quickly and easily find what they’re looking for. … Rules that roll back some of these advances represent a fundamental shift in competition policy. We encourage other countries contemplating such rules to consider the potential adverse consequences — including those for the small businesses that don’t have a voice in the regulatory process.^[80]

For its part, Apple has highlighted another quality-degrading consequence of the DMA: the obligation to allow competing app stores onto the iOS platform and to allow apps to be downloaded directly from their websites (commonly known as “sideloading”).[81] In practice, this “openness” means allowing third-party applications to bypass controls and protections implemented to safeguard users’ security and privacy.[82] This is already happening in Europe, where Apple has been forced to allow Epic Games to launch an alternative app store on iOS.[83] While this may seem a positive development for (some) developers and consumers, it could also harm user trust in the platform and thus decrease the total number of transactions, to the detriment of all parties involved (business users, consumers, and the owner of the platform).

Indeed, “[p]hishers are using a novel technique to trick iOS and Android users into installing malicious apps that bypass safety guardrails built by both Apple and Google to prevent unauthorized apps”.[84] This sort of attack will be more effective in the absence of the protections provided by Apple’s App Store.[85] Recently, a porn app, “Hot Tub”, made its way into the iOS, further validating at least some of Apple’s concerns over safety, privacy and security (and undermining the integrity of the iOS’ “clean” brand image in the process).[86]

In addition to diminishing the quality of existing digital services, the DMA has significantly delayed the introduction of new digital products and services in the EU. A notable example is Meta’s Threads, which launched nearly six months later in the EU than in other regions–frustrating users eager for an alternative to X.com (formerly known as Twitter) following Elon Musk’s acquisition of the company.[87]

Delayed releases appear to be a trend in the EU, as Apple recently announced that it would withhold the release of its latest features from the EU market, including Apple Intelligence, due to regulatory uncertainties.[88] Apple Intelligence is now scheduled to be released in Europe in April 2025,[89] seven months later than in the United States and closer to the release of the iPhone 17 than the iPhone 16.  These events indicate that, rather than fostering a more competitive digital landscape, the DMA risks isolating EU consumers from innovative technological advancements, undermining its intended purpose.

VII. Assessing the Government’s Proposed Interventions

The Government outlines several potential interventions, ranging from default pre-installation interventions to prohibiting self-preferencing and tying. Ultimately, these interventions must be carefully evaluated against current market realities and the risk of unintended consequences.

A. Default and Preinstallation Interventions

The Government contemplates additional restrictions on default search positions and pre-installation agreements.[90] Such interventions should, however, be evaluated against existing measures and changing user behaviour. Recent empirical work suggests that choice screens’ effectiveness depends heavily on their design and implementation.[91] Furthermore, default restrictions could have unintended consequences for competition. Many smaller search engines currently compete for default positions through revenue-sharing agreements with device manufacturers and browsers. With two-sided markets, however, restricting these agreements could paradoxically harm competition by removing a key mechanism through which alternative search engines currently reach users.[92]

B. Forced Interoperability

The Government favours mandating interoperability, including of third-party app stores.[93] As noted above, sideloading and third-party app stores can lead to significant security and privacy risks. As Jane Bambauer has observed:

EU lawmakers should be aware that the DMA is dramatically increasing the risk that data will be mishandled. Nevertheless, even though a new scandal from the DMA’s data interoperability requirement is entirely predictable, I suspect EU regulators will evade public criticism and claim that the gatekeeping platforms are morally and financially responsible.[94]

Indeed, some of these privacy and security concerns have already materialized.[95] Relatedly, the decreased control over an operating system’s content would, in turn, also eliminate one of the primary competitive differences between the iOS and Android. Indeed, centralized app distribution and Apple’s “walled garden” model increase interbrand competition because they are at the core of what differentiates Apple from Android. Apple’s business model historically has focused on being user-friendly, reliable, safe, private, and secure. For Apple (and its users), the touchstone of a good platform is not its “openness”, but its carefully curated selection and security, understood broadly as encompassing the removal of objectionable content, protection of privacy, and protection from “social engineering”, and the like.

By contrast, Android has bet on the open platform model, which sacrifices some degree of security for the greater variety and customization associated with more open distribution. These are legitimate differences in product design and business philosophy. As Jonathan Barnett has explained:

Open systems may yield no net social gain over closed systems, can impose a net social loss under certain circumstances, and . . . can impose a net social gain under yet other circumstances.[96]

Because consumers and developers could reasonably prefer either ecosystem, it is not clear that loosening Apple’s control over the App Store would necessarily improve consumer welfare or lead to more app transactions market wide. Under the guise of fostering competition on Apple’s platform, the forced standardization of interoperability mandates would thus instead eliminate competition where it matters most—i.e., at the interbrand, systems level.

C. Banning Self-Preferencing

The Proposal Paper also advocates a prohibition of self-preferencing.[97] As noted above, self-preferencing prohibitions have led to some unexpected—and probably unwelcome—outcomes in the EU.[98] The notion that the ability to give preferential treatment to one’s products is inherently anticompetitive contradicts “over a century of antitrust jurisprudence, economic study, and enforcement agency practice” that have firmly established that “the competitive effects of a vertically integrated firm’s ‘discrimination’ in favor of its own products or services… generally produce significant benefits for consumers”.^[99]

It also flatly contradicts a number of empirical studies showing that even the welfare of competitors (to say nothing of consumers) may often be improved by such self-preferencing.^[100] While enforcement of such provisions may benefit certain competitors in the short run, they create perverse incentives over the long run for rivals, who may underinvest in ensuring their own viability due to such regulations inefficiently insuring them against their own business misjudgements.^[101]

D. Limiting Product Integration

The Proposal Paper also targets tying and bundling, including the bundling of in-app payment systems (“IAPs”) with app stores.[102] The latter concern likely pertains to Apple’s imposition of a 30% fee on payments made through its iOS platform, while simultaneously prohibiting third-party in-app purchases (IAPs).

But it should be asked what outcomes the Government hopes to achieve by compelling Apple to permit third-party IAPs on iOS. Even under such a scenario, Apple would still be entitled to compensation for platform access and the use of its intellectual property. Interestingly, the 30% fee appears to align with industry norms, as Steam, Nintendo eStore, PlayStation, GOG, and Xbox Game Store all apply similar charges.[103] This raises the pertinent question of why Apple is being singled out for regulatory scrutiny. Are all these companies operating as monopolies and gatekeepers? If so, why are they not encompassed within the Government’s proposed ex-ante regulatory framework?

Moreover, even if Apple is required by law to allow third-party IAPs, the company could then allow independent payment processors to compete, charge an all-in fee of 30% when Apple’s IAP is chosen, and, in order to recoup the costs of developing and running its App Store, charge app developers a reduced, mandatory per-transaction fee (on top of developers’ “competitive” payment to a third-party IAP provider) when Apple’s IAP is not used.

Indeed, where such a remedy has already been imposed, that is exactly what Apple has done. In the Netherlands, where Apple was required by the Authority for Consumers and Markets (“ACM”) to uncouple distribution and payments for dating apps, Apple adopted the following policy:

Developers of dating apps who want to continue using Apple’s in-app purchase system may do so and no further action is needed. … Consistent with the ACM’s order, dating apps that . . . use a third-party in-app payment provider will pay Apple a commission on transactions. Apple will charge a 27% commission on the price paid by the user, net of value-added taxes. This is a reduced rate that excludes value related to payment processing and related activities.[104]

It’s not hard to see the fundamental problem with this approach. If a 27% commission, plus a competitive payment-provider fee, permits more “competition” than complete exclusion of third-party providers, then surely a 26% fee would permit even more competition. And a 25% fee more still. This would entail precisely the kind of price management by regulators that has generally been considered antithetical to competition and competition law.

VIII. Conclusion and Recommendations

The Government’s proposal rests on the mistaken premise that there is a global consensus on ex-ante digital competition regulation. Australia’s push to match similar measures enacted in a handful of other jurisdictions risks exacerbating an already burdensome regulatory landscape. While the EU has embraced strict digital platform rules, Australians may not be willing to accept the same tradeoffs in terms of innovation and consumer choice.

The Government’s focus on the ad-tech sector as a hub of anticompetitive conduct overlooks that market’s complexity and existing competitive dynamics. Comparative experience with ex-ante rules for digital platforms highlight both the risks and limited successes of such interventions, raising concerns about their effectiveness in the Australian context.

Drawing on both the empirical evidence and theoretical frameworks discussed above, the Government should carefully reconsider the need for ex-ante competition regulation of digital platforms. The rapidly evolving nature of digital search markets suggests a more nuanced approach may be appropriate.

If the Government nonetheless proceeds, we recommend the following principles for any subsequent interventions:

• Adopt an “innovation first” approach to remedies that preserves incentives for both incumbents and new entrants to develop novel search technologies.
• Focus on removing barriers to competition, rather than imposing detailed conduct requirements. Light-touch interventions often prove more effective than prescriptive regulation in fast-moving technology markets.
• Establish regular review periods to assess the continued appropriateness of any interventions.

By carefully considering the dynamic nature of competition and focusing on forward-looking analysis, the Government can help ensure that Australian consumers and businesses benefit from continued innovation in the digital economy.

[1] Digital Platforms — A Proposed New Digital Competition Regime, Aust. Gov. Treas. (2 December 2024), https://treasury.gov.au/consultation/c2024-547447 (hereinafter “Proposal Paper”).

[2] Press Release, ACCC Welcomes Consultation on New Digital Competition Regulation, Aust. Compet. Consum. Comm. (3 December 2024), https://www.accc.gov.au/media-release/accc-welcomes-consultation-on-new-digital-competition-regime. (“The proposed regime is directionally similar to reforms already being implemented or proposed in many international jurisdictions including the European Union, the United Kingdom, Japan and India…This is an opportunity to build on the progress made overseas and by introducing similar changes here, it will help ensure Australian businesses and consumers aren’t left behind… We believe the proposed regime will be fit-for-purpose for Australia while being complementary to and cohesive with international approaches”).

[3] Thomas Graf, Jackie Holland, Henry Mostyn, & Patrick Todd, Digital Markets Regulation Handbook, Cleary Gottlieb, https://content.clearygottlieb.com/antitrust/digital-markets-regulation-handbook/index.html (last visited 13 February 2025).

[4] Lazar Radic & Geoffrey A. Manne, The ABA’s Antitrust Law Section Sounds the Alarm on Klobuchar-Grassley, Truth Mark. (12 May 2022), https://truthonthemarket.com/2022/05/12/the-abas-antitrust-law-section-sounds-the-alarm-on-klobuchargrassley.

[5] Hong Dae-sik & D. Daniel Sokol, Korea Should Prioritize Innovation, Not Misguided Platform Regulation, The Korea Her. (12 May 2024), https://www.koreaherald.com/view.php?ud=20240512050148.

^[6] Sangyun Lee, LinkedIn (27 September 2024, 00:35:22), https://www.linkedin.com/posts/sangyunl_indian-digital-competition-law-teeters-lawyers-activity-7245289899409448960-0rtV?utm_source=share&utm_medium=member_desktop.

^[7] Charles McConnell, Indian Digital Competition Law Teeters, Lawyers Call for Rethink, Glob. Compet. Rev. (26 September 2024) https://globalcompetitionreview.com/article/indian-digital-competition-law-teeters-lawyers-call-rethink.

^[8] Chosun Ilbo, ‘Monopoly Platform’ Regulation Law Falls Away… Fair Trade Commission Cancels Plan Due to Industry Opposition, Naver News (9 September 2024), https://n.news.naver.com/mnews/article/023/0003857596?sid=101.

^[9] Kang Shin-woo, Amendment of the Fair Trade Act to Regulate Large Platforms… ‘Google, Apple, Naver, Kakao’ to Have Jurisdiction, Naver News (9 September 2024) https://n.news.naver.com/mnews/article/018/0005832606?sid=101; see also Heo Ji-hye, Platform Law that Changes Direction… Concerns Increase over Standards for Proof of Competition Restriction, Pressman (9 September 2024), https://www.pressman.kr/news/articleView.html?idxno=84619. Under the revisions, platforms must prove directly that their actions do not harm competitors, and that they benefit consumers and have positive impacts on the market. In other words, the reforms essentially reverse the burden of proof. Critics like Hong Dae-sik warn that stringent oversight could discourage businesses to pursue new initiatives due to a lack of confidence in their ability to meet criteria. (“Ultimately, if companies are not confident in the reasons they present to the Fair Trade Commission when taking certain actions, they will not take the actions”.)

^[10] Charles McConnell, Exclusive: Philippine Competition Watchdog Rules Out DMA-Style Bill, for Now, Glob. Compet. Rev. (20 September 2024) https://globalcompetitionreview.com/article/exclusive-philippine-competition-watchdog-rules-out-dma-style-bill-now.

[11] @KTmBoyle, X.com (11 February 2025, 9:16 AM), https://x.com/KTmBoyle/status/1889317529039913301.

^[12] Lazar Radic, Geoffrey A. Manne, & Dirk Auer. Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulation 22 Berkeley Bus. L.J. (Forthcoming 2025).

^[13] Pierre Larouche & Alexandre De Streel, The European Digital Market: A Revolution Grounded on Traditions, 12 J.E.C.L. & Pract. 542 (2021), (arguing that the DMA’s conceptual nature is in a “difficult epistemological position”).

^[14] Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth Mark. (8 November 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation.

^[15] Belle Beems, The DMA in the Broader Regulatory Landscape of the EU: An Institutional Perspective, 19 Eur. Competition J. 1–29 (January 2023), https://www.tandfonline.com/doi/full/10.1080/17441056.2022.2129766.

[16] Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, 68 Antitrust Bull. 618 (2023), (Arguing that the inherent vagueness of the “fairness” concept is likely to grant regulators excessive discretion for intervention).

^[17] Press Release, Amendment of the German Act Against Restraints of Competition, Bundeskartellamt (19 January 2021), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/19_01_2021_GWB%20Novelle.html.

^[18] Bahadir Balki, Nabi Can Acar, Helin Yüksel, Mehmet Mikail Demir, Seda Eliri, & Erdem Aktekin, A New Age for Digital Markets in Turkey? The Draft Amendment to the Law No. 4054 on the Protection of Competition, Kluwer Compet. Law Blog (25 October 2022), https://competitionlawblog.kluwercompetitionlaw.com/2022/10/25/a-new-age-for-digital-markets-in-turkey-the-draft-amendment-to-the-law-no-4054-on-the-protection-of-competition.

^[19] Henry Mostyn, Patrick Todd, & Goksu Kalayci, Turkiye, Cleary Gottlieb (December 2023), https://content.clearygottlieb.com/antitrust/digital-markets-regulation-handbook/turkey/index.html.

^[20] Ilbo, supra note 8.

[21] Jean Mackenzie & Ruth Comerford, Impeached S Korean President Charged with Insurrection, BBC News (26 January 2025), https://www.bbc.com/news/articles/cr53r1d0jz4o.

^[22] Shin-woo, supra note 9.

^[23] Robert Wildner, The Digital Markets Act: What a Difference a Month Makes, Mob. Mark. (9 April 2024), https://mobilemarketingmagazine.com/the-digital-markets-act-what-a-difference-a-month-makes.

^[24] Dirk Auer, Matthew Lesh, & Lazar Radic, Digital Overload: How the Digital Markets, Competition and Consumers Bill’s Sweeping New Powers Threaten Britain’s Economy, Inst. Econ. Aff. (18 September 2023), https://iea.org.uk/publications/digital-overload-how-the-digital-markets-competition-and-consumers-bills-sweeping-new-powers-threaten-britains-economy.

^[25] Report of the Committee on Digital Competition Law, Gov. India Minist. Corp. Aff., (27 February 2024), https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open.

^[26] The Competition Act, No. 12 of 2003, India Code (2003), available at https://www.cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf.

^[27] H.R. 3849, 117th Congress (24 June 2024), https://www.congress.gov/bill/117th-congress/house-bill/3849/text; S. 2992, 117th Congress (2 March 2022), https://www.congress.gov/bill/117th-congress/senate-bill/2992/text; S. 2710, 117th Congress (17 February 2022), https://www.congress.gov/bill/117th-congress/senate-bill/2710.

^[28] Radic & Manne, supra note 4.

^[29] Id.

^[30] PL n. 2768/2022, Câmara dos Deputados (Brazil), (10 November 2022), https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=2214237&filename=PL%202768/2022.

^[31] Grand Design and Action Plan for a New Form of Capitalism: 2023 Revised Version, Jpn. Cabinet Secr. (2023), available at https://www.cas.go.jp/jp/seisaku/atarashii_sihonsyugi/pdf/ap2023en.pdf; Outline of the Act on Promotion of Competition for Specified Smartphone Software, Jpn. Fair Trade Comm. (Jun. 2024), available at https://www.jftc.go.jp/file/240612EN3.pdf; @laz_radic, X.com (14 August 2024, 6:17 a.m.), https://x.com/laz_radic/status/1823665316200899036.

^[32] Simon Vande Walle, Is the EU’s Digital Markets Act Going Global? How Japan Is Crafting Its Own Version of Digital Regulation with the Smartphone Act, EU Renew (21 August 2024), https://eu-renew.eu/is-the-eus-digital-markets-act-going-global-how-japan-is-crafting-its-own-version-of-digital-regulation-with-the-smartphone-act.

^[33] JFTC, supra note 31.

^[34] Online Intermediation Platforms Market Inquiry, Compet. Comm. S. Afr. (2000-2019), https://www.compcom.co.za/online-intermediation-platforms-market-inquiry.

[35] Id. at 1.

[36] Id. at 3.

[37] Proposal Paper, supra note 1, at 4-5.

[38] Id., at 5.

[39] J.M.M. van den Brink, M.J.M. van Rijswick, & J.M.A. van Kempen, Regulatory Overlap: A Systematic Quantitative Literature Review, 17 Reg. Gov. 1131, 1132 (2021) (finding that “Regulatory failure caused by overlapping regulations is ubiquitous, with examples in all jurisdictions across a range of disciplines”).

[40] Economic Report of the President, Exec. Off. Pres. (March 2019), 81, available at https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019.pdf (“The deadweight cost function is convex; if the tax is increased by 10 percent, the deadweight costs of the tax increase by more than 10 percent. As we discuss in detail below, the regulatory deadweight cost function is also convex. A new regulatory action that increases regulatory costs by 10 percent increases the cumulative regulatory cost burden by more than 10 percent”).

[41] Patrick MacLaughlin, Nita Ghei, & Michael Wilt, Regulatory Accumulation and its Costs, Mercatus Policy Brief (2016).

[42] John W. Dawson & John J. Seater, The Economic Impact of Regulation: A Literature Review, 18 J. Regulatory Econ. 137 (2013).

[43] MacLaughlin, Ghei, & Wilt, supra note 41.

^[44] Ying Gu, Stephanie Lee, & Yong Tan, News in the Dark: Effects of Facebook’s Australian News Ban on News Consumption, SSRN (5 April 2024), https://ssrn.com/abstract=4790864.

^[45] Josh Taylor, Facebook’s Potential News Ban Already Affecting Smaller Australian Media Outlets, Inquiry Told, The Guardian (21 June 2024), https://www.theguardian.com/media/article/2024/jun/21/facebooks-potential-news-ban-already-affecting-smaller-australian-media-outlets-inquiry-told.

[46] Giles Dexter, Fair News Bargaining Bill in Limbo as Minister Says It Is Not Ready, Radio N.Z. (13 November 2024), https://www.rnz.co.nz/news/political/533666/fair-news-bargaining-bill-in-limbo-as-minister-says-it-is-not-ready.

^[47] Paul Karp, Amanda Meade, & Josh Butler, Meta, TikTok and Google Will Be Forced to Pay Australian News. What Does It Mean for You?, The Guardian (12 December 2024), https://www.theguardian.com/australia-news/2024/dec/12/meta-tiktok-and-google-to-be-forced-to-pay-for-australian-news.

[48] See infra, Section VI.

[49] See McConnell, supra note 7; Ilbo, supra note 8; McConnell, supra note 10.

^[50] Radic, supra note 14.

^[51] Mathieu Pollet, France to Prioritise Digital Regulation, Tech Sovereignty During EU Council Presidency, Euractiv (14 December 2021), https://www.euractiv.com/section/digital/news/france-to-prioritise-digital-regulation-tech-sovereignty-during-eu-council-presidency; Lazar Radic, Digital-Market Regulation: One Size Does Not Fit All, Truth Mark. (17 April 2023), https://truthonthemarket.com/2023/04/17/digital-market-regulation-one-size-does-not-fit-all.

^[52] Barbara Moens & Paola Tamma, Macron and Merkel Defy Brussels with Push for Industrial Champions, Politico (18 May 2020), https://www.politico.eu/article/macron-and-merkel-defy-brussels-with-push-for-industrial-champions.

^[53] Oles Andriychuk, Do DMA Obligations for Gatekeepers Create Entitlements for Business Users?, 11 J. Antitrust Enforc. 123, 123-32 (28 December 2022), https://academic.oup.com/antitrust/article/11/1/123/6964483.

^[54] Geoffrey A. Manne, Dirk Auer, & Sam Bowman, Should ASEAN Antitrust Laws Emulate European Competition Policy?, 67 Singap. Econ. Rev. 1637 (31 March 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709730.

^[55] See, e.g., Oles Andriychuk, Do DMA Obligations for Gatekeepers Create Entitlements for Business Users?, 11 J. Antitrust Enforcement 123, 127 (2022) (“The means for allowing the second-tier ersatz-Big Tech to scale up is punitive: to slow down the current gatekeepers by imposing upon them a catalogue of exceptionally demanding obligations”.) (Emphasis added); id. at 131 (“This punitive nature of the DMA also means that the obligations can be blatantly arduous and interventionist”.) (emphasis added).

^[56] Radic, supra note 51.

^[57] Dae-sik & Sokol, supra note 5.

^[58] McConnell, supra note 7.

^[59] Lazar Radic & Geoffrey A. Manne, South Africa’s Competition Proposal Takes Europe’s DMA Model to the Extreme, Truth Mark. (15 August 2023), https://truthonthemarket.com/2023/08/15/south-africas-competition-proposal-takes-europes-dma-model-to-the-extreme.

^[60] Christine S. Wilson, Welfare Standards Underlying Antitrust Enforcement: What You Measure Is What You Get, Fed. Trade Comm. (15 February 2019), available at https://www.ftc.gov/system/files/documents/public_statements/1455663/welfare_standard_speech_-_cmr-wilson.pdf; Svend Albæk, Consumer Welfare in EU Competition Policy, Eur. Comm. (2013), available at https://competition-policy.ec.europa.eu/system/files/2021-09/consumer_welfare_2013_en.pdf.

^[61] Nicolas Petit & Lazar Radic, The Necessity of a Consumer Welfare Standard in Antitrust Analysis, ProMarket (18 December 2023) https://www.promarket.org/2023/12/18/the-necessity-of-a-consumer-welfare-standard-in-antitrust-analysis.

^[62] Dirk Auer, The Broken Promises of Europe’s Digital Regulation, Truth Mark. (12 March 2024), https://truthonthemarket.com/2024/03/12/the-broken-promises-of-europes-digital-regulation.

^[63] John Taladay & Maureen Ohlhausen, Are Competition Officials Abandoning Competition Principles?, 13 J.E.C.L. & Pract. 463 (5 July 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042226.

^[64] Radic, Manne, & Auer, supra note 12.

^[65] Dae-sik & Sokol, supra note 5.

^[66] Carmelo Cennamo & Juan Santaló, Potential Risks and Unintended Effects of the New EU Digital Markets Act, Esade EcPol (February 2023), available at https://www.esade.edu/ecpol/wp-content/uploads/2023/02/AAFF_EcPol-OIGI_PaperSeries_04_Potentialrisks_ENG_v5.pdf.

^[67] Adam Cohen, New Competition Rules Come with Trade-Offs, Google Blog (5 April 2024), https://blog.google/around-the-globe/google-europe/new-competition-rules-come-with-trade-offs.

^[68] Mario Monti, Why and How? Why Should We Be Concerned with Cartels and Collusive Behaviour?, Eur. Comm. (11 September 2000), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_00_295.

^[69] Geoffrey A. Manne, Error Costs in Digital Markets, GAI Report on the Digital Economy 3 (November 2020), available at https://gaidigitalreport.com/wp-content/uploads/2020/11/Manne-Error-Costs-in-Digital-Markets.pdf.

[70] Proposal Paper, supra note 1, at 6, 9-10.

[71] Digital Advertising Services Inquiry 2020-2021, Final Report, Aust. Compet. Consum. Comm (28 September 2021) https://www.accc.gov.au/about-us/publications/digital-advertising-services-inquiry-final-report.

[72] Geoffrey A. Manne & Eric Fruits, The Antitrust Assault on Ad Tech: A Law & Econ Critique, Int’l Ctr. L. Econ. (2022), available at https://laweconcenter.org/wp-content/uploads/2022/11/ICLE-White-Paper-2022-11-03-The-Antitrust-Assault-on-Ad-Tech-A-Law-Economics-Critique.pdf.

[73] United States v. Google LLC, No. 1:23-cv-00108 (D.D.C. 2023).

[74] Proposal Paper, supra note 1, at 20-21.

^[75] Javier Delgado, DMA Implementation Sinks 30% of Clicks and Bookings on Google Hotels Ads, Mirai (7 May 2024), https://www.mirai.com/blog/dma-implementation-sinks-30-of-clicks-and-bookings-on-google-hotel-ads.

^[76] Id.

^[77] Id.

^[78] Id.

^[79] Oliver Bethell, Complying with the Digital Markets Act, Google Blog (5 March 2024), https://blog.google/around-the-globe/google-europe/complying-with-the-digital-markets-act.

^[80] Cohen, supra note 67.

[81] See Jon Porter & David Pierce, Apple Is Bringing Sideloading and Alternate App Stores to the iPhone, The Verge (25 January 2024), https://www.theverge.com/2024/1/25/24050200/apple-third-party-app-storesallowed-iphone-ios-europe-digital-markets-act.

[82] See Complying with the Digital Markets Act, Apple (2024), available at https://developer.apple.com/security/complying-with-the-dma.pdf.

[83] Kim Mackrael, Apple’s Hold on the App Store Is Loosening, at Least in Europe, Wall St. J. (16 August 2024), https://www.wsj.com/tech/epic-games-apple-app-store-europe-44ceda50.

[84] Dan Goodin, Novel Technique Allows Malicious Apps to Escape iOS and Android Guardrails, ArsTechnica (21 August 2024), https://arstechnica.com/security/2024/08/novel-technique-allows-malicious-apps-toescape-ios-and-android-guardrails.

[85] See id., at 6 (“Both mobile operating systems employ mechanisms designed to help users steer clear of apps that steal their personal information, passwords, or other sensitive data. iOS bars the installation of all apps other than those available in its App Store, an approach widely known as the Walled Garden”).

[86] Jess Weatherbed, The First “Approved” iPhone Porn App is Coming to Europe, The Verge (3 February 2025) https://www.theverge.com/news/604937/iphone-ios-porn-app-hot-tub-altstore-pal-eu.

[87] Clare Duffy, Meta’s Threads is Now Available in the EU, CNN (14 December 2023), https://www.cnn.com/2023/12/14/tech/metas-threads-eu-launch/index.html.

[88] Rohan Goswami, Apple Intelligence Won’t Launch in EU in 2024 Due to Antitrust Regulation, Company Says, CNBC (21 June 2024) https://www.cnbc.com/2024/06/21/apple-ai-europe-dma-macos.html.

[89] Apple Intelligence Is Available Today on iPhone, iPad, and Mac, Apple (28 October 2024), https://www.apple.com/ie/newsroom/2024/10/apple-intelligence-is-available-today-on-iphone-ipad-and-mac (“This April, Apple Intelligence features will start to roll out to iPhone and iPad users in the EU. This will include many of the core features of Apple Intelligence, including Writing Tools, Genmoji, a redesigned Siri with richer language understanding, ChatGPT integration, and more”).

[90] Proposal Paper, supra note 1, at 21.

[91] Omar Vasquez Duque, Active Choice vs. Inertia? An Exploratory Assessment of the European Microsoft Case’s Choice Screen, 19 J. Comp. L. & Econ 60. (2023).

[92] Erik Hovenkamp, The Competitive Effects of Search Engine Defaults, SSRN (14 November 2024), at 21, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4647211 (“If a potential entrant (if successful) can obtain a default, this increases its ex ante investment and raises the probability of entry. In this case, the default may raise dynamic consumer welfare”).

[93] Proposal Paper, supra note 1, at 22.

[94] Jane Bambauer, Reinventing Cambridge Analytica One Good Intention at a Time, Lawfare (8 June 2022) https://www.lawfaremedia.org/article/reinventing-cambridge-analytica-one-good-intention-time.

[95] See infra, Section VI.

[96] Jonathan M. Barnett, The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods, 124 Harv. L. Rev. 1861, 1927 (2011).

[97] Proposal Paper, supra note 1, at 21.

[98] See infra, Section VI.

^[99] See Geoffrey A. Manne, Against the Vertical Discrimination Presumption, Concurrences No. 2-2020 (2020), at 1; see also Barnett, supra note 96; Andrei Hagiu & Kevin Boudreau, Platform Rules: Multi-Sided Platforms as Regulators, in Platforms, Markets and Innovation (Annabelle Gawer, ed. 2009).

^[100] Manne, id., at 1-2 (citing examples from the literature showing that complementors and consumers alike often benefit from platform self-preferencing); see also Sam Bowman & Geoffrey A. Manne, Platform Self Preferencing Can be Good for Consumers and Even Competitors, Truth Mark. (4 March 2021), https://laweconcenter.wpengine.com/2021/03/04/platform-self-preferencing-canbe-good-for-consumers-and-even-competitors.

^[101] On self-inflicted dependence, see Geoffrey A. Manne, The Real Reason Foundem Foundered, Int’l Ctr. L. Econ. (2018), at 6, available at https://laweconcenter.org/wp-content/uploads/2018/05/mannethe_real_reaon_foundem_foundered_2018-05-02-1.pdf (“A content provider that makes itself dependent upon another company for distribution (or vice versa, of course) takes a significant risk. Although it may benefit from greater access to users, it places itself at the mercy of the other—or at least faces great difficulty (and great cost) adapting to unanticipated, crucial changes in distribution over which it has no control. This is a species of what economists call the ‘asset specificity’ problem”).

[102] Proposal Paper, supra note 1, at 21.

[103] Tom Marks, Report: Steam’s 30% Cut is Actually the Industry Standard, IGN (7 October 2019), https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry-standard.

[104] Distributing Dating Apps in the Netherlands, Apple, https://developer.apple.com/support/storekit-external-entitlement (last visited 13 February 2025).

The Federal Trade Commission is requesting public comments on “technology platform censorship,” a long-standing gripe for conservatives who believe social media companies have been censoring them and their ideas. To date, courts have rejected cases alleging censorship by the so-called Big Tech platforms on grounds that the plaintiffs failed to show “state action” on the part of government agents.

Executive Summary

Until recently, most forms of gambling were illegal in most U.S. states. Despite the recent wave of legalization efforts across many states, illegal offshore online gambling continues to thrive, due in part to factors like the convenience, variety of games, and attractive incentives that offshore apps and websites offer. Surveys and industry estimates suggest that Americans wager hundreds of billions of dollars annually through these illegal offshore sites, which remain popular even in those states where onshore gambling is legal—illustrating the limits of current regulatory efforts.

The prevalence of illegal gambling is partly a consequence of restrictive historical policies. For example, high federal excise taxes, especially combined with state tax burdens and regulatory requirements, raise prices and reduce payouts for legal sites, pushing consumers toward cheaper illicit alternatives.

Illegal offshore gambling siphons revenue away from U.S. businesses and governments, reducing tax receipts and limiting the economic multipliers that arise from regulated gambling markets. Offshore operators are also not bound by U.S. consumer-protection laws. Players risk losing their deposits if sites shut down or withhold payouts, lack legal recourse to resolve disputes, and may face inadequate security and responsible-gambling measures relative to regulated domestic platforms.

Traditional “stick” approaches—including high-profile crackdowns—have not eradicated illegal offshore gambling. Enforcement is hampered by enforcers’ lack of jurisdiction, as well as the existence of technological workarounds and persistent demand for illicit options. Instead of focusing primarily on prohibitions and penalties, authorities should ensure that gamblers have ready access to legal sites that implement harm-reduction measures (e.g., deposit and time limits, self-exclusion tools, and transparency). Beyond government enforcement, private actors—such as the operators of legal betting operations—might be given appropriately circumscribed authority to request that internet-service providers (ISPs) block illicit sites, thereby leveraging private incentives to curtail illegal gambling.

More importantly, lawmakers should consider eliminating federal excise taxes on the handle. This would do more than anything to close the price gap between legal and illegal operators, making authorized U.S. platforms more competitive, providing incentives for consumers to choose regulated options, and mitigating the illegal market’s allure. Combining tax reform, targeted harm-reduction measures, expanded self-help mechanisms, and private enforcement tools could help to create an environment in which legal gambling operations may flourish, and consumers will be better protected.

Introduction

Until recently, most forms of gambling were illegal in much of the United States, but millions of Americans nonetheless found ways to place wages. Some did so by visiting legal casinos in Nevada or on Indian reservations. Others participated in parimutuel betting at racetracks, which was also legal. The majority, however, participated in various forms of illegal gambling. Until 30 years ago, that meant office pools or bookmakers (“bookies”), or both.

The emergence of online gambling websites in the mid-1990s suddenly expanded the opportunities for illegal betting. Lacking available legal onshore options, many U.S. residents chose to use offshore gambling sites that are not licensed domestically. The ramifications have been widespread and continue to this day: despite the legalization of gambling in many states, millions of Americans wager billions of dollars illicitly through offshore gambling websites.

This white paper describes the various policy options available to reduce illegal gambling, using the methodology of law & economics to assess those options. It begins with an examination of the underlying causes of illegal online gambling. Section 2 discusses the harms that arise from illegal offshore gambling. Section 3 considers the current approaches policymakers have taken to curb offshore gambling, analyzing their successes and limitations. Section 4 considers alternative solutions, evaluating their potential. Section 5 considers the federal taxation of gambling, and potential reforms in that area. Finally, Section 6 offers conclusions and recommendations, emphasizing in particular the potential benefits of reducing federal taxation and using diplomatic channels to enhance the effectiveness of site blocking.

I. Illegal Online Gambling in the United States

In 2022, the American Gaming Association (AGA) commissioned a survey of roughly 5,200 Americans to understand their gambling habits.[1] The AGA survey results found that Americans bet around $400 billion annually on illegal online gambling sites. Of that, the AGA attributes roughly $60 billion to illegal sportsbooks and $340 billion to illegal online casinos. A recent survey by sportsbook aggregator Covers of 5,100 sports bettors in states where betting is currently legal found that about a third admitted to using at least one offshore sports-betting website.[2] Meanwhile, gambling intelligence company Yield Sec has estimated that approximately 75% of the gross gaming revenue earned in the United States in the first half of 2024 went to illegal offshore operators.[3]

As these data show, illegal online gambling continues to thrive, despite at least some forms of gambling now being legal in 38 states and the District of Columbia. Factors affecting this demand include:

• Convenience and Accessibility: The ability to gamble from the comfort of one’s home or via mobile devices in states where online gambling remains illegal.
• Variety of Offerings: Offshore sites often provide a wider array of games and betting options than regulated domestic platforms, including sports betting, casino games, poker, and eSports betting.
• Attractive Incentives: Bonuses, promotions, and loyalty programs offered by offshore sites are often more generous than those provided by U.S.-licensed operators, due to a combination of tax and regulatory burdens on legal sites that are not imposed on illegal sites.

More generally, illegal gambling is the result of historic and contemporary restrictive legal frameworks—especially the federal taxation of betting handles—that fail to align with consumer demand. This section will first consider the development of U.S. legal frameworks around gambling, providing historical context, and then offer a brief overview of the federal taxation of gambling. It concludes with a brief discussion of the current situation.

A. A Brief History of Gambling in the United States

The current pattern of legal and illegal gambling in the United States is largely a result of the shifting legal landscape of gambling of the past two centuries. Legal gambling is now a multifaceted industry—comprising state lotteries, tribal casinos, commercial casinos, “racinos,” and online and brick-and-mortar betting platforms. These operate under a complex patchwork of state and federal law.

Illegal gambling, meanwhile, emerged to fill the gaps created by prior laws. It continues, in part, due to inertia, but primarily due to a combination of legal restrictions and taxes, especially those imposed at the federal level. This subsection offers a brief overview of the historic and current laws, as well as other factors that have affected the development of legal and illegal gambling in the United States.

1.  Origins of gambling in the United States

Gambling arrived on the eastern shores of North America with the earliest European settlers. In England, from which many colonists originated, wagering on cards, dice, and other games was a familiar pastime.

Yet the American colonies were not monolithic in their attitudes. In Puritan New England, authorities discouraged gambling on moral grounds. They saw it as a frivolous activity that risked corrupting the soul and fostering sinful behavior, and the Massachusetts Bay Colony enacted the first colonial-era law against gambling in 1638.[4]

Despite this, lotteries early on became an essential method of raising revenue for public works, churches, schools, and even the fledgling institutions of higher education such as Harvard and Yale.[5] While frowned upon by some, these early lotteries were not clandestine operations; they were widely advertised, openly discussed, and legally sanctioned. Indeed, the American Revolutionary War was financed in part by a lottery organized by the Continental Congress, which raised $5 million.[6]

2. Criminalization and the rise of illegal gambling

By the early 1800s, the pendulum began to swing further from legally sanctioned gambling. While lotteries had financed much of the nation’s early infrastructure—including roads, bridges, and educational institutions—scandals involving misappropriated funds and rigged drawings eroded public trust.[7] These scandals were used to justify bans on private lotteries, while some state lotteries continued to operate.[8]

Pressure from prohibitionists led the federal government to enact a series of laws restricting the transportation of lottery tickets by mail, thereby ostensibly restricting access to lottery tickets in states where lotteries were banned.[9] This culminated in the federal Anti-Lottery Act of 1890, which broadened the definition of prohibited material to newspapers that contained lottery advertisements.[10] In response, the Louisiana Lottery Co. moved its operations to Honduras—an early example of using a foreign jurisdiction to avoid U.S. anti-gambling legislation—and Congress responded in kind in 1895 with a provision barring importation of foreign lottery materials—thereby terminating the business.[11]

The private betting that continued—on horse races, cockfights, or card games—often moved underground, as legal constraints on these other forms of betting tightened.[12] This would set a pattern: as legal gambling avenues closed, illicit ones flourished.

Rapid urbanization and industrialization in the late 1800s created new communities of wage earners looking for leisure and excitement, including gambling. This demand was met largely by illegal gambling operations, especially in big cities.[13] Gambling transitioned from riverboats and trains to saloon-based card rooms.[14] Numbers rackets run by organized-crime syndicates, and clandestine betting parlors proliferated.[15] Horse racing, once openly celebrated, faced moral crusades and state crackdowns, leaving only a handful of states with legal racetracks. Yet even these state-authorized tracks often coexisted uneasily with illegal bookmakers, who offered odds on everything from races to prize fights. Organized crime found fertile ground in the public’s enduring appetite for wagering, stepping in to provide illegal gambling services wherever legal outlets were lacking.[16]

In 1871, Jerome Park Racetrack, in Westchester, New York, introduced parimutuel betting machines for the first time.[17] In Paris Mutuels or “parimutuel” betting, there is no bookmaker; rather, funds are pooled, and odds vary in accordance with the amounts wagered on each outcome. The system spread rapidly across this United States. Despite the absence of a bookmaker and thus reduced likelihood of race fixing, however, states soon introduced prohibitions.[18] In a twist, the New York State Court of Appeals ruled that oral betting in the absence of a bookmaker or clerk did not violate the 1908 Hart-Agnew anti-betting law—perhaps a sop to the businesses that had developed around betting.[19]

As the country endured economic turmoil during the Great Depression, policy began to shift. Legal gambling venues became, once again, a fiscal lifeline. Nevada’s legalization of casino gambling in 1931 laid the groundwork for Las Vegas to become the world’s preeminent gambling destination by the post-war period.[20] Casinos, once seen as a vice-ridden novelty, became accepted as tourist attractions and revenue engines for Nevada. Organized crime elements initially facilitated the growth of Las Vegas casinos, but over time—and especially after the Nevada Gaming Control Act of 1959, which shifted regulation from the state Tax Commission to the Nevada Gaming Commission—these establishments were cleaned up and corporatized, appealing to middle-class vacationers.[21]

3. State and federal developments

The mid-1960s marked a shift in state gambling policy driven by revenue needs. New Hampshire’s 1964 introduction of the first modern state lottery catalyzed widespread adoption, with dozens of states following suit by the late 1970s.[22] Casino gambling expanded beyond Nevada when New Jersey legalized casinos in Atlantic City in 1976, establishing a regulatory framework through the Casino Control Act that became a model for other jurisdictions.[23]

The rise of tribal gaming in the 1970s and 1980s culminated in the landmark 1987 Supreme Court decision in California v. Cabazon Band of Mission Indians, which affirmed tribal rights to conduct gaming free from most state interference, so long as the state allowed some form of gambling.[24] Congress responded with the Indian Gaming Regulatory Act (IGRA) in 1988, creating a federal framework that classified gaming into tiers and required tribes to negotiate compacts with states for certain types of games.[25] IGRA’s passage, while providing a clear regulatory structure through the National Indian Gaming Commission, fostered complex state-tribal relationships through revenue-sharing agreements.[26] Tribal gaming evolved into a significant economic force, generating employment, infrastructure, and social services for tribal communities.[27]

Federal intervention in the post-war period initially focused on combating organized crime’s influence through the Federal Wire Act of 1961, which prohibited interstate telecommunications for sports betting,[28] and the Racketeer Influenced and Corrupt Organizations Act (RICO) of 1970, which strengthened prosecution tools against illegal gambling syndicates.[29] These measures, however, produced unintended consequences. They made legal sports betting harder to establish in states that might have considered regulated frameworks. With fewer legitimate outlets and stringent federal restrictions on interstate wagering, many Americans turned to clandestine operators.[30] Moreover, organized crime adapted by diversifying its methods and exploiting new communications technologies, creating an ongoing enforcement challenge.[31]

4. PASPA (1992–2018)

In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA),[32] which effectively prohibited states from authorizing sports betting, except for those jurisdictions like Nevada that had pre-existing frameworks. PASPA reflected a federal desire to maintain the integrity of sports, but it also stymied the growth of legal sports wagering for more than two decades. Ironically, this helped to fuel a large illegal market serviced by offshore bookmakers and local illicit operations, illustrating again that restrictive policies often push demand underground, rather than eliminating it.[33]

The Supreme Court’s 2018 decision in Murphy v. NCAA struck down PASPA.[34] The decision cleared the path for states to legalize and regulate sports betting as they saw fit. Almost immediately, states from Indiana to Colorado enacted legislation authorizing sportsbooks at casinos, racetracks, and online platforms.[35] This rapid liberalization transformed the sports-betting market into a mainstream industry, replete with partnerships between sportsbook operators and major professional sports leagues.[36] To regulate these markets, states have employed a range of mechanisms, which may include formal licensing requirements, integrity monitoring, consumer-protection standards, and tax structures—resulting in a dynamic, competitive environment.

5. Online gambling, the UIGEA, and the 2011 DOJ opinion

The rise of the internet presented new challenges for federal and state regulators. Online casinos and poker rooms first sprang up in the late 1990s, with many operating from offshore jurisdictions. Initially, the  Interstate Wire Act of 1961 and other pre-internet statutes proved ill-equipped to govern this new frontier.[37] In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA), which attempted to curtail illegal online wagering by barring financial institutions from processing payments related to unlicensed online gambling sites. While UIGEA did not make online gambling a federal crime per se, it complicated offshore platforms’ operations and led some to withdraw from the U.S. market.[38] Nonetheless, consumer demand persisted, pushing states to experiment with intrastate legalization.

A 2011 U.S. Justice Department (DOJ) memorandum, often referred to simply as the “2011 DOJ opinion” or the “Seitz opinion,” significantly reshaped the legal landscape for online gambling.[39] The DOJ memo reconsidered the scope of the Wire Act, which the DOJ had previously interpreted as prohibiting all forms of interstate online gambling. The 2011 opinion concluded that the Wire Act’s prohibitions were limited specifically to sports betting, thereby clarifying that non-sports betting activities—such as online lottery sales or other forms of online gambling, including poker—were not covered by the act when conducted solely within a state’s borders.

This reinterpretation did not legalize online poker or other forms of gambling, but it removed a major federal obstacle. States were thus free to explore intrastate online gaming platforms without fear of violating the Wire Act. This led to the subsequent licensing and regulation of online poker and other online gambling formats in states like Nevada, New Jersey, and Delaware.

6. Contemporary trends and legislative refinements

Today, the federal role in gambling tends to be limited to enforcement actions against illegal operators and oversight in areas like tribal gaming, in addition to federal taxation.[40] States, conversely, have become the principal laboratories of gambling policy. This division of authority reflects both constitutional design and practical necessity, as states are better positioned to calibrate gambling policy to their distinct demographic compositions, existing gaming infrastructure, professional sports presence, and localized political preferences.

Many states continue to revise their statutes, expanding their offerings beyond traditional casinos to include mobile sports betting and online casino games. The expansion of legal gambling products has also raised concerns about problem gambling and consumer protection, leading to legislative efforts aimed at supporting addiction-treatment programs, improving self-exclusion lists, and requiring online and offline operators to adopt responsible gambling programs.

B. Federal Taxation of Gambling

The second prong of federal involvement in gambling has been the imposition of federal taxes. Over time, these taxes—initially designed to combat organized crime and ensure revenue collection—have interacted with changing market conditions, including the rise of online wagering. As with other federal legislation, taxation has had perverse effects on the incentives to participate in illegal offshore gambling.

1. Wagering excise taxes

As already noted, alongside the growth of gambling markets in the mid-20th century, the federal government sought to stifle illegal betting and the involvement of organized crime. Early on, a key tool was the imposition of special federal taxes on wagers. In 1951, Congress passed legislation that included a federal excise tax on wagering, as well as occupational taxes on individuals engaged in the business of accepting bets.[41] These measures, codified in the Internal Revenue Code (IRC), imposed substantial tax burdens on bookmakers—especially those operating illegally. Initially, the wagering excise tax was set at 10% on the amount wagered, a rate set deliberately high so as to discourage illegal operations.[42]

This heavy taxation was intended to serve a dual purpose:

• Revenue Generation: The government collected funds from a market that continued to thrive underground, turning a previously untapped source of revenue into a fiscal asset.
• Crime Deterrence: By making it risky and expensive to conduct illicit gambling operations, federal authorities hoped to drive illegal bookmakers out of business or push them to become legitimate taxpaying entities.

These taxes, however, had a mixed impact. The high excise rate and aggressive enforcement did not eradicate illegal gambling. Instead, they contributed to a cat-and-mouse dynamic: legal bookmakers passed the tax burden onto bettors through less-favorable odds, but many bookmakers remained underground, evading detection.[43] Together with the other federal legislation discussed above, this has served to fuel a persistent illegal market.

2. Adjustments to tax rates and enforcement

The federal government has over the years realized that excessively high taxes could inadvertently strengthen the underground economy. Extremely high taxation left no realistic pathway for illegal bookmakers to transition to legally compliant businesses, as it would squeeze their margins excessively. As a result, Congress gradually reduced the wagering excise tax from its original 10% to its current rate of 0.25% for legal wagers, making compliance more palatable for legitimate businesses.[44]

For illegal wagers, however, the tax rate was kept at a punitive 2%—effectively a penalty tax designed to discourage unlicensed activities. This two-tiered system persists, reflecting the government’s attempt to encourage legitimacy while punishing illegality. Nonetheless, the degree to which these tax measures have proven effective has always been tied to how vigorously they have been enforced. In periods when IRS crackdowns were sporadic or resources were limited, the illegal market still found room to maneuver.

3. The rise of online gambling and the offshore question

By the late 1990s and early 2000s, many internet-enabled remote-wagering platforms were located offshore, beyond the immediate reach of U.S. authorities. Illegal online operators leveraged technology and legal grey areas to offer services to U.S. bettors without incurring U.S. taxes or adhering to U.S. regulations. Because federal tax laws were originally designed for land-based bookmakers and did not anticipate the borderless nature of the internet, they proved less than effective against these offshore entities. Such entities could not easily be monitored, and collecting taxes from them proved nearly impossible.[45]

As a result, while the federal wagering excise tax remained on the books, it exerted minimal influence over the burgeoning illegal online gambling market. Operators established themselves in jurisdictions with lenient regulatory and tax regimes, operating without the burden of either U.S. excise taxes or regulatory scrutiny.[46] This tax avoidance made offshore illegal sites more competitive, enabling them to offer better odds or bigger bonuses to attract U.S.-based players.

4. Taxation of winnings and its limited impact on illicit markets

At the federal level, gamblers’ winnings—whether from legal or illegal sources—are considered taxable income.[47] Players are supposed to report such winnings on their federal income tax returns, and certain winnings from legally regulated venues are subject to automatic withholding. Enforcement of this reporting requirement for illegal online gambling is, however, quite limited. Anonymous offshore sites do not issue W-2G forms or other documentation that would prompt accurate reporting. Consequently, players on illegal platforms often pay no tax on their winnings, inadvertently giving illicit sites another competitive edge over lawful, tax-reporting competitors.

C. Conclusion

Since the end of World War II, U.S. federal gambling regulation has shifted from a narrow regime focused primarily on Nevada’s casinos to one putatively responsible for oversight of a legally and technologically complex industry. Key statutes at the federal level—from 1961’s Federal Wire Act to PASPA in 1992 and UIGEA in 2006—have alternately constrained and reshaped the market.

At the state level, legislation authorizing lotteries, casinos, and online betting has been introduced to respond to changing economic and social realities. The introduction of IGRA in 1988 and the relaxation of federal constraints on sports betting after 2018 reflect an evolving consensus that carefully regulated gambling can provide economic benefits and consumer choice.

The proliferation of regulated online gambling at the state level in the 2010s and beyond—enabled by the 2011 DOJ opinion and further boosted by the Supreme Court’s Murphy v. NCAA decision—have fostered the conditions for legitimate online operations to emerge. As states legalized online casinos, poker rooms, and sports betting, licensed operators became subject to state taxation and regulatory oversight, and by extension, to proper federal tax reporting for their U.S.-based activities.

While federal excise taxes continue to apply to illegal bookmakers, in principle, the taxation of regulated online gambling operators is far easier to enforce. Legal sites must comply with both state and federal regulations, issue tax forms to winners, and maintain clear records. The presence of legitimate taxpaying online operators has, however, clearly not displaced the illegal segment entirely. Many consumers still prefer offshore platforms for various reasons, including their anonymity, more favorable odds, avoidance of taxes on winnings, and access to games not permitted in their home states. This market displacement is further compounded by the difficulty consumers experience in distinguishing legal and illegal operators, particularly when the latter use legitimate payment processors and financial services that convey an impression of regulatory compliance.

Federal taxes on gaming revenue—conceived in an era of telephone bookmakers and physical racing tracks, and intended to keep both legal and illegal gambling in check—now arguably serve as the strongest incentives for Americans to continue using illegal offshore gambling sites. Ironically, by diverting tens of billions of dollars of betting activity offshore, the federal wagering tax not only harms legitimate U.S. business, but also significantly reduces revenue both for the federal government, in the form of corporate and personal-income taxes, and state governments, in the form of various taxes and license fees.

II. Harmful Consequences of Illegal Offshore Gambling

While offshore gambling platforms often entice consumers with attractive odds and lavish promotions, they expose users to significant risks that legal, regulated platforms are designed to mitigate. The absence of consumer protections on offshore platforms creates vulnerabilities that can result in severe financial consequences. In addition, when gamblers use offshore sites, businesses and governments in the U.S. lose revenue. This section briefly discusses these issues.

A. Harm to Consumers

One of the most alarming risks arising from U.S. consumers participating in offshore gambling is the lack of legal recourse in the event of disputes. Gambling websites operating from such jurisdictions as Curaçao, Malta, and the Isle of Man are not subject to U.S. laws and regulations. Moreover, it is illegal for U.S. bettors to use such sites from within the United States. Thus, when a U.S.-based bettor experiences issues like incorrect payouts, sudden account closures, or withheld funds, they are likely to find themselves with limited, if any, legal pathways to recover their money. In some cases, offshore operators have closed user accounts arbitrarily and blocked access to funds, leaving bettors with little ability to appeal or reclaim their balances.[48] Consumers may also find that winnings are recalculated or denied outright, with no transparency in the process or accountability from the platform.[49]

The absence of meaningful age-verification requirements on offshore platforms enables access by individuals below legal gambling age, creating a risk of early-onset problem-gambling behaviors that can persist in adulthood. This vulnerability is particularly concerning in light of research demonstrating strong correlations between early gambling exposure and subsequent addiction patterns.[50]

Moreover, these platforms typically lack responsible-gaming safeguards that are standard on regulated sites. Without automated detection of problematic betting patterns, mandatory cooling-off periods, or self-exclusion tools, users who exhibit signs of problem gambling behavior have no access to interventions that could prevent negative outcomes. This absence of protective measures stands in stark contrast to regulated platforms, where sophisticated algorithms and mandatory responsible-gaming programs help to identify and assist at-risk players.

TABLE 1: US Versus Offshore Gambling Websites

Many fly-by-night offshore gambling platforms operate with little regard for business continuity or user security. There have been documented cases of platforms abruptly shutting down, taking all user deposits and winnings with them.[51] While U.S. states and some offshore jurisdictions require operators to segregate operational funds from user deposits, operators in other jurisdictions (such as Curaçao) face no such obligations.[52] As such, users’ funds may be lost if the platform goes bankrupt or engages in fraudulent practices. This is also a risk where operators can simply shut down and reopen under a different name, thereby evading restitution to affected users.

In addition to financial risks, users of offshore platforms may also be vulnerable to data breaches and identity theft. These platforms are not necessarily subject to rigorous cybersecurity standards, leaving sensitive user information—such as payment details and personal identification—exposed to hackers. In contrast, operators based in the United States are required to adhere to strict data-security protocols.[53]

Finally, offshore platforms may engage in predatory practices, such as offering excessively high bonuses with hidden, nearly impossible-to-meet wagering requirements. These practices exploit consumers’ trust and encourage reckless gambling behavior, further exacerbating financial risks.

B. Loss of Revenue to Business and Government

U.S. gaming companies must comply with stringent regulations and taxes, while offshore operators face fewer constraints, allowing them to offer more attractive terms to consumers. The consequent diversion of funds to offshore gambling sites has significant economic implications for U.S. companies, which lose potential customers to offshore sites, limiting their growth and profitability. In addition, uncertainty in the regulatory environment deters investment in the online gambling sector, stifling innovation and job creation.

The AGA estimates that the illegal online gambling market siphons about $4 billion annually from the legal U.S. gaming industry and about $13 billion in tax revenue that would otherwise be paid to the states.[54] This loss affects not only casino operators and sports-betting sites, but also such ancillary industries as software development, payment processing, and marketing.

Illegal offshore gambling also deprives state governments of substantial tax revenues in three ways. First, taxes on gambling revenues, licensing fees, and excise taxes are not collected from offshore operators. Second, reduced business activity leads to lower income-tax collections from employees and corporate taxes from businesses. Third, legal gambling establishments contribute to the economy through construction, hospitality, tourism, and other sectors. By siphoning business, offshore gambling sites reduce this business multiplier.

III. Addressing Illegal Online Gambling Through Enforcement

This section considers the main approaches currently employed by U.S. authorities to limit illegal online gambling.

A. Enforcement of Federal Legislation

As noted, several pieces of federal legislation have been developed specifically to address illegal gambling, but enforcement challenges have hindered their effectiveness.

1. The ‘Black Friday’ crackdown

The most notable enforcement action taken against offshore gambling websites was the “Black Friday” crackdown.[55] On April 15, 2011, the U.S. Justice Department (DOJ) unsealed indictments against the founders of several major online-poker sites, including Isle-of-Man-based PokerStars, Ireland-based Full Tilt Poker, and Costa-Rica-based Absolute Poker. The charges included bank fraud, money laundering, and violations of the UIGEA[56] and the Illegal Gambling Business Act.[57] The DOJ seized domain names and froze bank accounts associated with these sites, effectively shutting down their U.S. operations.[58]

PokerStars eventually reached a settlement with the DOJ, paying substantial fines but without admitting wrongdoing regarding the alleged UIGEA violations.[59] As part of the deal, PokerStars acquired Full Tilt Poker and repaid its customers, whose accounts had been frozen.[60] Absolute Poker and Ultimate Bet effectively ceased operations for U.S. customers and struggled to return player balances.[61]

2. Bodog.com

In 2012, the DOJ indicted the founder of Bodog Entertainment Group (which had employees in Canada and Costa Rica) on charges of illegal gambling and money laundering.[62] The Bodog.com domain was seized, and significant assets were frozen.[63] But this enforcement action illustrated a persistent challenge. Despite the domain seizure, Bodog’s operations effectively continued under the Bovada brand name, maintaining similar infrastructure and customer base but operating through different URLs and corporate entities.[64] The case exemplifies how illegal operators can quickly adapt to enforcement actions by migrating their operations to new domains and corporate structures while retaining their fundamental business model. The ability to rapidly reconstitute operations under new identities significantly undermines the effectiveness of individual enforcement actions.

B. International Cooperation

These traditional enforcement approaches face significant limitations. Given the transnational nature of online gambling, international cooperation is crucial for effective enforcement. The United States has engaged in various initiatives toward that end, including:

• Mutual Legal Assistance Treaties (MLATs): The United States has MLATs with numerous countries, facilitating the exchange of information and assistance in legal proceedings related to criminal matters, including illegal gambling activities.
• Financial Action Task Force (FATF): As a member of the FATF, the United States collaborates with other nations to combat money laundering and terrorist financing, which are often associated with illegal gambling operations.

Ironically, another multilateral treaty to which the United States is a party, the World Trade Organization (WTO) has magnified some of the challenges surrounding U.S. online gambling restrictions. Notably, Antigua and Barbuda filed a complaint alleging U.S. law discriminated against foreign online gambling operators. The WTO ruled in Antigua’s favor, but the United States has yet to fully comply with the ruling, leading to ongoing tensions.[65]

Despite the MLATs, the FATF, and other U.S. efforts to engage in international cooperation, jurisdictional constraints remain a primary challenge, as illegal operators deliberately locate in jurisdictions with weak enforcement regimes.[66] Persuading jurisdictions such as Malta, Curaçao, and the Isle of Man—renowned for their permissive licensing regimes and established roles as global hubs for online gambling—to enforce U.S. gambling restrictions is a challenging proposition. Each of these jurisdictions has built its international reputation, regulatory framework, and economic strategy to attract and sustain online betting operators. Thus, their willingness to curtail operations serving U.S. customers ultimately depends on a mix of legal, economic, diplomatic, and practical considerations.

Even when jurisdiction can be established, sophisticated actors continually develop new methods to evade blocking and monitoring efforts, creating a perpetual technological arms race between regulators and illegal operators.[67] The resource-intensive nature of investigating and prosecuting illegal operators further complicates enforcement efforts.[68]

C. Effectiveness

Enforcement actions like the “Black Friday” crackdown and the takedown of Bodog.com temporarily disrupted the operations of significant offshore gambling sites, reducing their accessibility to U.S. consumers. While these enforcement actions were clearly disruptive and dissuaded some Americans from using offshore poker websites, at least temporarily, they came at significant cost to Americans who were using the affected websites. Those who used Absolute Poker and Ultimate Bet, for example, lost significant sums of money.

Market dynamics pose additional challenges to enforcement-focused approaches. Perhaps most significantly, compliance costs for legitimate operators can create pricing and convenience advantages for illegal alternatives, inadvertently strengthening their competitive positions.[69]

These enforcement challenges have led to several regulatory inefficiencies. The heavy reliance on enforcement diverts public resources from other potential regulatory approaches, often with diminishing returns.[70] Multiple enforcement agencies and jurisdictions frequently struggle to coordinate effectively, while metrics of success tend to focus excessively on bringing enforcement actions, rather than actual market outcomes.

The emphasis on prohibitory measures can also produce several counterproductive effects. Strict regulations may inadvertently segment markets, making illegal alternatives more attractive to certain consumer segments.[71] Compliance requirements can impede legitimate operators from developing new products or services, while driving activity underground may expose consumers to greater risks from unregulated illegal operators. Over time, the limited success of prohibition efforts may gradually erode public and institutional support for enforcement itself.

In the longer term, however, these efforts have had limited effect. In part, this is due to the “Whack-a-Mole” phenomenon; when one site is shut down, others quickly fill the void. New operators emerge, and existing ones adapt by changing their domain names, server locations, or corporate structures. In addition, offshore operators employ sophisticated technologies to evade detection, such as mirror sites, encrypted communications, and anonymous payment methods.

Moreover, enforcement has done little to diminish U.S. consumers’ appetite to participate in illegal offshore online gambling. Technological advancements have significantly lowered the barriers to access offshore gambling sites. Tools such as virtual private networks (VPNs) and proxy domain-name servers allow users to mask their internet-protocol (IP) addresses, making it appear as though they are accessing the internet from a different country. This circumvention of geo-restrictions enables U.S. residents to register and participate on offshore platforms that are officially barred from serving the U.S. market.[72]

In addition, cryptocurrencies have introduced new avenues for pseudonymous transactions, which make it harder to trace funds. These digital currencies are decentralized and operate outside the traditional banking system, impeding authorities’ ability to monitor or block financial transactions related to online gambling.

Finally, differing legal systems and priorities among relevant jurisdictions can hinder effective international enforcement. In spite of MLATs and FATF commitments, some jurisdictions lack the resources and/or willingness to cooperate fully with U.S. authorities.

These limitations suggest the need to complement traditional enforcement with strategies that leverage market forces and address consumer incentives. Such approaches would create conditions where legitimate operators can effectively compete with illegal alternatives, while providing businesses with the tools and frameworks to protect their interests. The optimal regulatory framework would balance enforcement efforts with other approaches based on their relative effectiveness.

IV. Incentive-Compatible Solutions to the Problem of Illegal Offshore Online Gambling

Federal approaches to the regulation of illegal gambling have primarily relied on prohibitory legislation and punitive criminal-enforcement mechanisms—i.e., regulatory and tax “sticks” designed to deter and punish illegal behavior.[73] While stick-based enforcement efforts may have achieved some success in curtailing illegal online gambling, the predominance of these mechanisms reflects an enforcement-first mindset that overlooks opportunities for more efficient and effective solutions. Complementary regulatory approaches are needed that use market-based solutions and adopt incentive-compatible “carrots” to guide consumer behavior toward legitimate, regulated alternatives.[74]

Incentive-compatible regulation aims to align market participants’ interests with policymakers’ goals, thereby creating a framework under which compliance becomes the rational choice, rather than a burden. By leveraging a calibrated combination of rewards (“carrots”) and enforcement measures (“sticks”), these strategies seek to reduce market distortions, encourage lawful behavior, and promote innovation.

This section explores how such frameworks operate across different contexts, emphasizing the importance of balancing incentives to achieve sustainable regulatory outcomes. It begins with some context, describing the general approach of “market-based” regulation. It then delves more specifically into three approaches that offer complementary means of achieving socially desired outcomes: harm reduction, self-help, and private rights of action.

A. Market-Based Regulation

Market-based regulatory strategies can complement enforcement efforts in several crucial ways. First, they acknowledge the reality that consumer choice is heavily influenced by convenience, price, and accessibility, especially in the online world.[75] When regulatory frameworks inadvertently disadvantage legitimate businesses on these dimensions, they may unintentionally drive consumers toward illegal alternatives, regardless of enforcement efforts.[76]

A market-oriented regulatory approach also recognizes the importance of private ordering and self-help mechanisms. Rather than relying solely on government enforcement, this framework empowers legitimate businesses to protect their interests through market mechanisms and technological tools.[77] The success of content-delivery networks in preventing certain forms of piracy, for instance, illustrates how private-sector innovation can complement traditional enforcement approaches.[78]

Critically, this shift toward market-based strategies does not imply abandoning enforcement efforts. Instead, it suggests calibrating regulation to create conditions under which enforcement and market mechanisms work in tandem. This might involve reducing regulatory barriers that disadvantage legitimate operators, while simultaneously providing them with better tools to combat illegal competition. The goal is to create regulatory frameworks that align private incentives with public-policy objectives.

The effectiveness of such “carrot” approaches depends on careful attention to market dynamics and consumer behavior. Regulatory interventions must be designed with a sophisticated understanding of how they will affect competitive conditions in digital markets. This requires moving beyond simple prohibitions to consider how regulatory frameworks influence the relative attractiveness of legal and illegal options. Three “carrot” approaches that might be applied in the context of online gambling are harm reduction, self-help, and new private rights of action.

B. Harm-Reducing Regulatory Carrots

The recent expansion of legal, regulated online gambling in many states is a good example of such a regulatory “carrot.” Pure prohibition does not address the underlying consumer demand that drives illegal markets.[79] By permitting online gambling but subjecting the operators of legally sanctioned websites to various rules, states have been able to ensure legitimate businesses can compete against illegal operators.[80]

Currently, 38 states and the District of Columbia offer regulated sports-betting operations.[81] Of these, 30 states permit online/mobile betting, while seven also permit online/mobile casino gambling.[82] The legal market has shown substantial growth, with the U.S. commercial gaming industry recording $66.6 billion in 2023 revenue and contributing $14.67 billion in direct gaming-tax revenue to state and local governments.[83]

1. Harm reduction as regulatory strategy

Harm reduction is a public-health strategy and philosophical approach aimed at limiting the negative consequences associated with certain behaviors, conditions, or substances, without necessarily requiring their complete cessation. Rather than focusing solely on elimination or abstinence, harm reduction acknowledges that some individuals may continue to engage in potentially risky activities. It therefore seeks to reduce risks and adverse effects—such as disease transmission, injury, or social harm—through practical, evidence-based interventions and policies.[84]

Common examples of harm reduction include cannabis legalization in order to mitigate the harmful effects of underground drug markets; offering designated-driver programs to prevent impaired driving; or implementing safer-gambling tools to limit financial and psychological harm. By meeting people “where they are” and prioritizing their immediate well-being, harm-reduction strategies empower individuals to make informed choices that improve their health and safety, even if their behavior does not fully align with traditional abstinence-based goals.

2. Applying harm reduction to gambling

Applied to gambling, harm-reduction strategies aim to mitigate financial, psychological, and social risks without demanding outright cessation of play. These approaches recognize that some individuals will continue to gamble, and therefore focus on minimizing potential harms. Examples include:

• Deposit and Loss Limits: Allow players to predetermine the amount of money they can deposit or lose within a given period. Once they hit the limit, they cannot continue until the set timeframe is reset.
• Time Limits: Allow players to restrict the length of each gambling session, helping players to maintain greater control and prevent extended, impulsive play.
• Voluntary Exclusion Lists: Players can voluntarily ban themselves from online or land-based gambling venues for a specified period, or indefinitely.
• Cool-Off Periods: Temporary breaks from gambling platforms that grant players the time and distance to reassess their behavior.
• Real-Time Feedback and Prompts: Pop-up messages or periodic notifications that remind players how long they have been playing and how much money they have spent, and providing responsible-gambling information.
• Informed-Choice Tools: Clear disclosure of odds, payout rates, and risk levels helps players to understand the nature of the games and make more informed decisions.
• Analytics-Based Interventions: Operators can use data to identify problematic patterns—such as escalating bets—and prompt players with educational messages, or suggestions to take breaks.
• Player Dashboards: Personal gambling histories, spending summaries, and time-tracking features enable players to monitor and reflect on their habits.
• Content Restrictions: Limiting promotional materials that glorify large wins or target vulnerable populations.
• Incorporating Responsible-Gambling Messages: Ensuring all marketing communications encourage safe play and clearly state the risks involved.
• Onsite and Online Help Links: Quick and prominent links to helplines, self-help tools, and counseling services.
• Collaboration with Treatment Providers: Operators cooperating with health professionals and support groups to offer referrals and interventions for those exhibiting signs of problem gambling.

When such harm-reduction measures are implemented, the gambling environment becomes safer, more transparent, and better equipped to help players maintain control, detect risk behaviors early, and seek help when needed.

3. The economics of harm reduction

From an economic perspective, such harm-reduction strategies offer efficiency advantages over prohibition. Not only do they reduce government expenditure on enforcement (which is now channeled toward ensuring that operators comply with regulations, rather than inefficiently pursuing prosecution of every last illegal bookie) but they can also reduce the social costs associated with problem gambling, while ensuring that consumers are, at minimum, able to avail themselves of common-law protections.

But successful implementation of harm-reduction strategies requires careful attention to market incentives and substitution effects between legal and illegal alternatives. This includes ensuring that regulatory frameworks and tax structures are calibrated to make compliance more attractive than evasion.[85] When regulatory frameworks inadvertently advantage illegal alternatives, they may increase, rather than reduce, aggregate harm.

4. Age-verification and geo-blocking requirements in state gambling legislation

Ancillary to explicit harm-reduction rules, states that have legalized online gambling demand age and location verification. These requirements aim to ensure that only those who are legally permitted to gamble (i.e., adults of at least 21 years of age in most states) and physically located within the state’s borders can place a bet.

Age verification typically requires players to provide such personal details as their name, address, and the last four digits of their Social Security number. Operators use this information to validate the individual’s age against government databases or trusted third-party identity-verification services. In some cases, players may also be asked to submit scans of a driver’s license, passport, or other government-issued identification if the automated checks are inconclusive. Additionally, players must meet multi-factor authentication measures on a regular basis in order to access their accounts.

In many states, players must use approved geolocation plug-ins or mobile apps that run location checks.[86] If the user’s location cannot be verified or is detected outside state lines, access to real-money wagering is denied. These typically utilize multiple data points—such as a device’s GPS data, IP-address location, and nearby Wi-Fi networks—to ensure a high degree of accuracy.

The technological sophistication of age- and location-verification tools help to maintain the integrity of regulated markets. While these measures can sometimes add friction to the user experience, they are generally well-accepted as necessary consumer protections and a way for states to uphold their legal responsibilities. As a result, these rules have become a standard component of the licensing and regulatory requirements for online gambling operators in those U.S. states that have chosen to legalize and regulate the industry.

C. Self-Help

From a law & economics perspective, the concept of self-help refers to actions taken by individuals to enforce their own rights, reclaim property, or resolve disputes without directly involving the state’s formal legal apparatus (courts, police, or regulatory agencies). In essence, self-help is a form of private enforcement or private ordering that circumvents the often lengthy and expensive processes associated with litigation, statutory enforcement, or arbitration.

When individuals believe that the formal legal system is too costly, slow, or uncertain, they may find it more efficient to take matters into their own hands. The immediate costs of self-help—as measured in time, effort, and potential risk—may be lower than the attorney fees, court costs, and prolonged uncertainty associated with the formal legal system. This calculation reflects the basic law & economics principle that rational actors seek to minimize their enforcement and transaction costs. Formal legal remedies often entail substantial transaction costs: filing fees, legal representation, delays due to procedural rules, and the cost of verifying and proving claims in court. If self-help can achieve a similar outcome more quickly and affordably, it may appear economically efficient.

For example, when a limb of a tree growing in Alan’s garden overhangs Beth’s garden, it is technically trespassing, and Beth could take legal action to require Alan to remove it. Alternatively, Beth could avoid the costs of pursuing the formal legal route and ask Alan to cut the limb off. But if Alan refuses to remove the limb or does not respond, or if the limb poses an imminent threat, Beth might simply remove the limb herself. [87]

In theory, such direct and swift self-help is economically desirable if it saves resources and reduces uncertainty. But while self-help may appear efficient from a particular individual’s perspective, it can also produce negative externalities—i.e., costs imposed on third parties or on society at-large. Self-help can, for example, lead to violence, retaliation, or other forms of disorder that undermine overall social welfare. These negative spillover effects are a key reason why most legal systems regulate or limit self-help rights. Without legal constraints, private enforcement risks devolving into cycles of revenge or arms races in security measures, raising social costs substantially.

From a law & economics perspective, the optimal legal regime finds a balance: allowing some forms of self-help where it efficiently remedies minor issues (e.g., repossession of collateral under certain conditions), but prohibiting it where it might cause disproportionate harm or risk (e.g., the use of baseball bats to enforce debt collection). Legal frameworks may thus grant limited self-help rights—like the right to retake wrongfully held chattel or to delimb an overhanging tree without going to court—while imposing rules that minimize violence or wrongful deprivation.

In the context of illegal online gambling, self-help would likely come primarily in the form of public-information campaigns. Thus, operators of legal online gambling websites and apps might communicate the dangers of illegal operators, emphasizing the risk that those operators fail to mitigate. Part of this process might include, for example, purchasing domain names similar to those of the illegal operators, and redirecting the URL to a webpage highlighting these dangers and providing links to one or more legitimate operators.

D. Site Blocking

If the legal system reliably enforces rights at relatively low cost, individuals will be less tempted to engage in self-help. Well-defined property rights, contract-enforcement mechanisms, and efficient dispute-resolution institutions enable private parties to resolve conflicts, reducing the need for either regulatory intervention or self-help.[88] In other words, the presence of a competent and accessible formal legal system can be seen as a public good that deters suboptimal actions and prevents wasteful conflicts.

One way the legal system could facilitate more effective protection of legal online gambling in the United States would be to provide those legal operators with a private right of action to require internet service providers (ISPs) to block access to illegal operators, or to require or encourage other intermediaries to prevent access to specific web domains. Indeed, this strategy (“site blocking”) has been considered and, in some cases, implemented to curb illegal online gambling. By making it harder for users to reach unlicensed or unauthorized gambling sites, governments and regulatory bodies can steer bettors toward legal, regulated platforms or deter them from wagering altogether. Mechanisms for site blocking include:

1. Domain Name System (DNS) Filtering: ISPs are instructed to filter out or redirect traffic from certain domain names. When users attempt to access these domains, they are either blocked outright or redirected to a warning page.
2. IP Address Blocking: Similar to DNS filtering, but more direct. ISPs block traffic to specific IP addresses known to host illegal gambling services.

Site blocking makes it more difficult for customers to access illegal gambling sites, making those sites less attractive and harder to find. As a result, players are encouraged to use regulated, taxed, and monitored platforms that protect consumers and support public revenue. Since legal sites in U.S. states generally have stronger age-verification and responsible gambling tools, blocking unregulated sites can help to prevent vulnerable populations from accessing unsafe environments.

There are, however, numerous technological workarounds to evade site-blocking restrictions. Motivated users can often circumvent site blocking through VPNs, mirror sites, or the use of alternative DNS services. This undermines the effectiveness of blocking strategies.

In addition, as noted, many illegal gambling sites operate from jurisdictions that have not, historically, been terribly cooperative with U.S. authorities. Site blocking, therefore, becomes yet a Whack-a-Mole game, with sites frequently changing their domain names and IP addresses.

Mandating that ISPs block sites in response to demands from private actors also raises questions about free speech and the respective roles of government and private actors in regulating the internet. These are not trivial matters, as they may inadvertently affect legitimate activities, leading to overblocking and potential legal challenges. In addition, implementing and maintaining site-blocking infrastructure can be resource-intensive.

Notwithstanding these concerns, several countries have experimented with site blocking as part of broader efforts to control illegal gambling. For instance, Italy, France, and Denmark have used site blocking in conjunction with licensing regimes. While results have been mixed, some jurisdictions that have employed site blocking have seen reductions in the visibility and market share of illegal operators.

If implemented cautiously, site blocking may serve as a partial deterrent to illegal online gambling by making it less convenient to access unregulated platforms. It is not, however, a silver bullet. In practice, site blocking’s effectiveness is likely to depend on the overall regulatory ecosystem. It should be seen, at best, as a complement to consumer education, international cooperation, and the creation of attractive legal gambling options.

E. Conclusion

In digital markets, where rapid technological change and information asymmetries often make public enforcement costly or impractical, self-help and private enforcement through new rights of action, such as site blocking, can be more efficient and effective than government intervention. This is in no small part because legitimate businesses typically have significant informational and technological advantages over regulators in identifying and responding to illegal competition. As such, regulatory frameworks should seek to facilitate private ordering, rather than relying primarily on public enforcement.[89] This approach, however, requires careful attention to potential externalities and the risk that private enforcement might exceed socially optimal levels.

The self-help framework thus suggests that optimal digital regulation should focus not just on direct enforcement, but on creating conditions for legitimate market participants to effectively protect their interests while serving broader regulatory goals. This insight provides theoretical support for examining how current regulatory frameworks might be refined to better leverage private ordering to address illegal online activities.

V. The Perverse Effects of Federal Excise Taxes

As noted above, the federal excise tax on gambling, introduced in 1951, was originally designed to suppress illegal bookmaking operations by imposing financial burdens on those engaging in sports betting.[90] At the time, the gambling industry operated almost entirely outside legal frameworks, making enforcement difficult and the tax a tool for deterrence. But with sports betting now legal in most U.S. states, it is far from clear that the tax serves any useful purpose; indeed, as discussed below, it is now likely counterproductive.

A. Structure of the Tax

The federal tax now comprises two key components: a 0.25% tax on all legal wagers (known as the “handle tax”) and a $50 annual head tax per employee involved in accepting wagers.[91] While these rates might appear modest at first glance (certainly compared to the original, intentionally punitive 10% tax), their structural design and cumulative impact create significant competitive disadvantages for legal operators.

The handle tax’s design is particularly problematic in that it applies to the total amount wagered, rather than operator revenue. This means operators pay taxes on their entire betting volume regardless of whether they ultimately profit from those wagers. Further, when combined with state-specific taxes, legal operators face a large overall tax burden that offshore competitors simply circumvent. The impact of this tax structure manifests directly in market pricing, creating measurable competitive disadvantages for legal operators.

For example, to cover these tax obligations and compliance costs, legal sportsbooks typically must charge a higher house take than their offshore competitors. A typical spread bet at a legal sportsbook requires bettors to wager $110 to win $100, while offshore operators can offer more favorable odds, requiring only $105 to win $100.[92] This difference, while seemingly small per individual bet, compounds significantly for frequent bettors and creates a powerful incentive to seek illegal alternatives.

The $50 annual head tax per employee, though also seemingly nominal, can further distort the market by discouraging job creation and pushing operators toward automation, rather than hiring additional staff for customer service and compliance functions.

What was once a tool to combat illegal gambling now inadvertently undermines the very legal market it seeks to protect. By failing to adjust the tax structure to reflect modern regulatory realities, the federal excise tax creates a paradoxical outcome: it weakens the competitiveness of legal operators while bolstering the appeal of unregulated alternatives.

B. Competitive Disadvantages for Legal Operators

As noted, one of the clearest ways that offshore gambling platforms outcompete their legal counterparts is through pricing. Although a difference of, say, $5 may seem trivial on a single wager, it accumulates substantially for frequent bettors, making offshore platforms far more appealing to price-sensitive consumers. Additionally, the pricing gap compounds the competitive disadvantage when combined with other operational disparities. Offshore platforms, for example, routinely offer larger bonuses and promotions—e.g., 100% deposit matches of up to $1,000, compared to the more modest 50% matches with stringent wagering requirements typical of legal sportsbooks.[93] These incentives, coupled with better odds, make offshore platforms particularly attractive, even as they expose users to significant risks, such as a lack of consumer protections or legal recourse.

The compounding effect of these various tax burdens creates another paradox: measures intended to generate public revenue may actually reduce total tax receipts by driving activity toward untaxed illegal markets. This dynamic is exacerbated by the digital nature of these markets, where consumers can easily compare odds and switch between legal and illegal platforms. When regulatory costs force legal operators to offer consistently worse value propositions than their illegal competitors, even consumers who would prefer to use regulated platforms may find the price differential too significant to ignore.

The pricing gap is not merely a reflection of business efficiency, but a structural disadvantage created by outdated regulatory frameworks. While legal operators invest heavily in compliance measures, responsible-gaming programs, and state-mandated reporting, offshore platforms avoid these costs entirely. This disparity enables illegal operators to channel their cost savings directly into consumer-attractive pricing and promotions, drawing bettors away from the regulated market.

This dynamic highlights the paradox of current U.S. gambling regulations: policies designed to promote fairness and consumer protection can inadvertently push consumers toward unregulated alternatives that lack these safeguards. Addressing these competitive disadvantages through measures such as tax reform and enhanced enforcement tools would represent a critical step toward restoring the integrity and appeal of the legal gambling market.

IV. Conclusion and Recommendations

The online gambling market illustrates how outdated tax and regulatory frameworks can inadvertently strengthen the illegal markets they were designed to combat. Our analysis suggests the need for a two-pronged approach that combines tax reform with enhanced enforcement tools to create conditions under which legitimate operators can compete effectively, while maintaining robust consumer protections.

The single change likely to generate the greatest benefit would be to repeal federal excise taxes on gambling. Several pieces of legislation proposed in the 118^th Congress would do just that. For example, the Withdrawing Arduous Gaming Excise Rates (WAGER) Act would eliminate the federal handle tax.[94] Meanwhile, the Discriminatory Gaming Tax Repeal Act would repeal the excise tax on sports wagering.[95] These reforms are aimed directly at addressing the competitive disadvantages that legal operators face, while aligning with broader harm-reduction principles.

If excise-tax repeal of is not possible, Congress should consider approaches like those in the UK and Denmark that assess tax on gross gaming revenue (GGR)—that is, a tax on the profit a bookmaker takes, rather than on the entire handle.[96] Admittedly, this approach is imperfect, and both jurisdictions have apparently steep tax rates (with more increases promised in the future).[97] Nonetheless, a GGR-based approach would better align operator incentives with public-policy goals by taxing actual gambling profits, rather than total betting volume.

Tax reform alone would, however, be insufficient. As discussed in earlier sections, self-help actions such as educating gamblers about the dangers of using offshore websites, as well as the introduction of private rights of action such as site blocking, represent crucial complementary tools to channel consumers toward legitimate services. Just as site blocking has helped to combat online piracy, it can effectively restrict access to offshore gambling platforms. Moreover, both self-help and private rights of action are likely to be more effective when combined with policy reforms that enable legitimate operators to offer competitive products.

[1] See Sizing The Illegal And Unregulated Gaming Markets In The United States, Am. Gaming Ass’n (Nov. 2022), at 3, available at https://www.americangaming.org/wp-content/uploads/2022/11/Sizing-the-Illegal-and-Unregulated-Gaming-Markets-in-the-US.pdf (because this figure includes bookmakers, the total attributable to offshore websites may be slightly lower; in addition, the AGA estimates that roughly $110 billion is wagered using “unregulated machines” in bars, taverns, and other venues).

[2] See James Bisson, One-Third of Sports Bettors in Legal States Still Use Offshore Sportsbooks, Covers (Aug. 12, 2024), https://www.covers.com/politics/covers-betting-habits-survey.

[3] See Yield Sec Report: Illegal US Gross Gaming Revenue Continues to Significantly Outpace Legal GGR, iGB Ed. Team (Aug. 27, 2024), https://igamingbusiness.com/gaming/yield-sec-sports-betting-illegal-market.

[4] George G. Fenich, A Chronology of Gaming in the U.S., 3 (2) Gaming Rsch. & Rev. J. 65, 66 (1996), https://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=1223&context=grrj.

[5] Jonathan D. Cohen, How Lottery Money Helped Build the United States: The Secret History of American Lotteries, Vox (Oct. 24, 2018), https://www.vox.com/first-person/2018/10/24/18018720/mega-millions-lottery-power-ball-drawing.

[6] Fenich, supra note 4 at 66.

[7] Cohen, supra note 5.

[8] G. Robert Blakey & Harold A. Kurland, The Development of the Federal Law of Gambling, 63 (6) Cornell L. Rev. 923, 1021 (1978), https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=4158&context=clr.

[9] Id. at 931.

[10] Id. at 939.

[11] David G. Schwartz, Cutting the Wire: Gaming Prohibition and the Internet (U. Nev. Press, 2005), at 24.

[12] See Matthew Vaz, Gambling in the Northern City: 1800 to 2000, Oxf. Res. Encycl. Am. Hist. (Nov. 20, 2018), https://doi.org/10.1093/acrefore/9780199329175.013.560.

[13] Id.

[14] Schwartz, supra note 11, at 33-34.

[15] Vaz, supra note 12.

[16] See Steven Riess, Horse Racing the Chicago Way: Gambling, Politics, and Organized Crime, 1837-1911 (Syracuse U. Press, 2022).

[17] Arne K. Lang, Sports Betting and Bookmaking: An American History (Rowman Littlef. Publ., 2016).

[18] See History of Monmouth Park, Monmouth Park, https://www.monmouthpark.com/about (last visited Dec. 16, 2024), (for example, the New Jersey Legislature banned both horse racing and parimutuel betting in 1894); New Jersey Sports Betting, Knup Sports, https://knupsports.com/sports-betting/usa/new-jersey (last visited Dec. 16, 2024), (in an 1897 referendum, voters approved a proposal to ban all gambling in the state; New York State followed suit, banning betting with the Hart-Agnew Law of 1908).

[19] Oral Betting Upheld by Appellate Court, N.Y. Times (Nov. 21, 1908), at 12, https://timesmachine.nytimes.com/timesmachine/1908/11/21/104813454.html?pageNumber=12.

[20] Legalized Gambling in Nevada: Its History, Economics and Control, Nev. Gaming Comm’r & St. Gaming Control Bd. (1963), at 7.

[21] Jennifer Roberts et al., Practical Perspectives on Gambling Regulatory Processes for Study by Japan: Eliminating Organized Crime in Nevada Casinos, U. Nev. Las Vegas Int’l Gaming Inst. (Aug. 25, 2017), available at https://www.unlv.edu/sites/default/files/page_files/27/JapanEliminatingOrganizedCrime.pdf.

[22] See Kevin Flynn, How NH Defied the Feds, Mob and Church to Create the First State Lottery, N.H. Mag. (Dec. 14, 2015), https://www.nhmagazine.com/how-nh-defied-the-feds-mob-and-church-to-create-the-first-state-lottery; see also Chapter 2: Gambling in the United States, Nat’l Gambling Impact Study Comm’n Rep., available at https://govinfo.library.unt.edu/ngisc/reports/2.pdf (last visited Dec. 14, 2024).

[23] Casino Gaming in New Jersey, St. of N.J. Casino Control Comm’n, https://www.nj.gov/casinos/law/gamingnj (last visited Dec. 14, 2024); see also Julie Hunsaker, The Impact of Riverboat Casinos on the Demand for Gambling at Casino Resorts: A Theoretical and Empirical Investigation, 22 Managerial & Dec. Econ. 98 (2001), (by the mid-1990s, these riverboat casinos were netting about the same GGR as Las Vegas and Atlantic City combined).

[24] California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).

[25] 25 U.S.C. § 2701 et seq. (1988).

[26] See American Indian Communities in Minnesota Gaming, Minn. St. S. Couns. & Rsch., https://www.senate.mn/departments/scr/report/bands/gaming.htm (last visited Dec. 15, 2024).

[27] James Schaap & Angel Gonzalez, The Growth of the Native American Gaming Industry: An Update, 16 (1) S.U. Coll. Bus. E-J. (2021), https://digitalcommons.subr.edu/cbej/vol16/iss1/1.

[28] 18 U.S.C. §§ 1081, 1084 (2012); see also Schwartz, supra note 11, 80-113.

[29] 18 U.S.C. §§ 1961-1968 (2018).

[30] See Schwartz, supra note 11, at 169-170.

[31] Id. at 176-197.

[32] 28 U.S.C. §§ 3701-3704 (2012).

[33] Id.

[34] 138 S. Ct. 1461 (2018)

[35] US Legal Sports Betting by State: 2024, Gambling Indus. News, https://gamblingindustrynews.com/usa-legal-sportsbetting (last visited Dec. 15, 2024).

[36] The Rise of Sports Betting: Market Trends and Business Opportunities, Bus. Matters (Nov. 4, 2024), https://bmmagazine.co.uk/business/the-rise-of-sports-betting-market-trends-and-business-opportunities.

[37] See Benjamin C. Wickert, All In, But Left Out: How the Unlawful Internet Gambling Enforcement Act Seeks to Eradicate Online Gambling in the United States, 10 (1) Vand. J. Ent. & Tech. L. 215, 221-22 (2017), https://scholarship.law.vanderbilt.edu/cgi/viewcontent.cgi?article=1349&context=jetlaw.

[38] See New AGA Report Shows Americans Gamble More Than Half a Trillion Dollars Illegally Each Year, Am. Gaming Ass’n (Nov. 30, 2022), https://www.americangaming.org/new/new-aga-report-shows-americans-gamble-more-than-half-a-trillion-dollars-illegally-each-year.

[39] See Virginia A. Seitz, Whether Proposals by Illinois and New York to Use the Internet and Out-Of-State Transaction Processors to Sell Lottery Tickets to In-State Adults Violate the Wire Act, Dep’t. Just. Off. Legal. Couns. (Sep. 20, 2011), available at www.justice.gov/sites/default/files/olc/opinions/2011/09/31/state-lotteries-opinion.pdf.

[40] See notes 41-47 and accompanying text.

[41]  John E. Coons, The Federal Gambling Tax and the Constitution, 43 (5) J. Crim. L. Criminology & Police Sci. 637, 637 (1953), https://www.jstor.org/stable/1139648?origin=crossref.

[42] Id.

[43]  See Wayne Taylor et al., Online Gambling Policy Effects on Tax Revenue and Irresponsible Gambling (SMU Cox Sch. of Bus. Rsch. Paper No. 24-7, Jun. 2024), at 3 & n.2, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4856684.

[44] See Press Release, Cortez Masto, Hyde Smith Introduce Bipartisan Bill to Boost Local Sports Tourism and Gaming Economy, Sen. Catherine Cortez Masto (Jun. 31, 2024), https://www.cortezmasto.senate.gov/news/press-releases/cortez-masto-hyde-smith-introduce-bipartisan-bill-to-boost-local-sports-tourism-and-gaming-economy/#:~:text=Established%20in%201951%20to%20suppress,for%20legal%20sports%20betting%20businesses.

[45] Amanda V. McCormick & Irwin M. Cohen, A Review of Online Gambling Literature 2007 (Univ. Fraser Val., 2007), at 19-20, available at https://cjr.ufv.ca/wp-content/uploads/2017/01/Review-of-Online-Gambling-Literature.pdf.

[46] Joel Weinberg, Everyone’s A Winner: Regulating, Not Prohibiting, Internet Gambling, 35 Sw. U. L. Rev. 293, 295 (2006), https://heinonline.org/HOL/LandingPage?handle=hein.journals/swulr35&div=19&id=&page=.

[47] 26 U.S.C.A. § 61 (2017), (the federal tax code requires payment of taxes on “all income from whatever source derived”).

[48] See Mike Lukas, AGA Calls on US Attorney General to Prosecute Illegal Offshore Sportsbooks, WSN (Oct. 14, 2022), https://www.wsn.com/betting/aga-prosecute-illegal-offshore-sportsbooks; Katarina Vojvodic, Illegal Offshore Online Gambling Targeted by Seven State Regulators, PlayUSA (Jan. 8, 2024), https://www.playusa.com/seven-states-ask-doj-fight-illegal-online-gambling.

[49] See Rob Davies, Revealed: How Bookies Clamp Down on Successful Gamblers and Exploit the Rest, The Guardian (Feb. 19, 2022), https://www.theguardian.com/society/2022/feb/19/stake-factoring-how-bookies-clamp-down-on-successful-gamblers; Josh Schwartz, Blacklisted and Offshore Casinos: Avoid to Play Here!, Captain Gambling (Dec. 12, 2024), https://www.captaingambling.com/blacklisted-casino; Jonathan, Dangers of Offshore Sportsbooks: States Cracking Down, Birches Health (Jun. 8, 2024), https://bircheshealth.com/resources/offshore-sportsbooks.

[50] See, e.g., Rachel A. Volberg et al., An International Perspective on Youth Gambling Prevalence Studies, 22(l) Int. J. Adolescent Med. Health 38 (2010).

[51] See Chav Vasilev, Cryptocasino BC.Game Appears on the Verge of Going Out of Business, Bonus.com (Nov. 28, 2024), https://www.bonus.com/news/cryptocasino-bc-game-appears-on-the-verge-of-going-out-of-business; Jill R. Dorson, Offshore Sportsbook 5Dimes Is Shutting Down to U.S. Customers, Eyeing Rebirth in States, Handle (Sep. 7, 2020), https://sportshandle.com/5dimes-sportsbook-offshore-legal.

[52] Vasilev, id.

[53] See Kathryn R. L. Rand & Steven Andrew Light, Sports Betting and Data Security: Cybersecurity, Data Protection, and Privacy Rights in Gaming Law Practice, ABA Bus. L. Today (Feb. 10, 2021), https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-february/sports-betting-and-data-security.

 

[54] See Am. Gaming Ass’n, supra note 38.

[55] United States v. Scheinberg et al., No. 1:10-cr-00336 (S.D.N.Y. Apr. 11, 2011), available at https://www.justice.gov/archive/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf; Jon Sofen, Full Tilt Poker Scandal in 2011: The Darkest Days in Poker History, PokerNews (Dec. 6, 2022), https://www.pokernews.com/news/2022/11/full-tilt-poker-cheating-scandal-42534.htm.

[56] The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 prohibits financial institutions from processing transactions related to online gambling services not authorized under federal or state law (31 U.S.C. §§ 5361–5367). While the UIGEA does not criminalize the act of placing bets online, by prohibiting banks and payment processors from facilitating payments to unlicensed gambling websites, the act aims to choke off the financial lifeline of offshore operators.

[57] The Illegal Gambling Business Act (IGBA) of 1970 makes it a federal crime to operate an illegal gambling business that violates state laws (18 U.S.C. § 1955). This act provides federal authorities with jurisdiction to prosecute illegal gambling operations that have a substantial impact on interstate commerce.

[58] See Sofen, supra note 55.

[59] See Tiffany Hsu, PokerStars Settles for $731 Million, Buys Full Tilt, Pays Players, L.A. Times (Jul. 31, 2012), https://www.latimes.com/business/la-fi-mo-pokerstars-full-tilt-20120731-story.html; United States v. Pokerstars et al., No. 11-cv-2564 (S.D.N.Y. Mar. 16, 2016), ECF No. 304, https://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv02564/377900/304; United States v. Pokerstars et al., No. 11-cv-2564 (S.D.N.Y. July 14, 2014), EFC No. 241 (Motion to Dismiss), https://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv02564/377900/241; Press Release, Manhattan U.S. Attorney Announces $731 Million Settlement of Money Laundering and Forfeiture Complaint with PokerStars and Full Tilt Poker, Fed. Bur. Investig. (Jul. 31, 2012), https://archives.fbi.gov/archives/newyork/press-releases/2012/manhattan-u.s.-attorney-announces-731-million-settlement-of-money-laundering-and-forfeiture-complaint-with-pokerstars-and-full-tilt-poker.

[60] Id.

[61] Sofen, supra note 55.

[62] See Press Release, Bodog and Four Canadian Individuals Indicted for Conducting Internet Gambling Business Generating Over $100 Million in Sports Gambling Winnings, Dep. Justice (Feb. 28, 2012), https://www.justice.gov/archive/usao/md/news/2012/BodogandFourCanadiansIndictedforConductingInternetGamblingBusinessGeneratingover100Million.html.

[63] Id.

[64] Bodog Is Now Bovada in the US, Sports Gambl. Websites (2018), https://www.sportsgamblingwebsites.com/bodog-is-now-bovada-in-the-us.

[65] Jonathan Lynn, Antigua Wins Modest Sanctions in U.S. Gambling Case, Reuters (Dec. 21, 2007), https://www.reuters.com/article/technology/antigua-wins-modest-sanctions-in-us-gambling-case-idUSL21601574.

[66] Tomer Broude & Doron Teichman, Outsourcing and Insourcing Crime: The Political Economy of Globalized Criminal Activity, 62 Vand. L. Rev. 795, 818 (2009); Jack L. Goldsmith, Against Cyberanarchy, 65 U. Chi. L. Rev. 1199, 1222 (1998).

[67] See Derek E. Bambauer, Ghost in the Network, 162 (5) U. Pa. L. Rev. 1011 (2014), https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=9439&context=penn_law_review.

[68] See Pierre-Hugues Verdier, Transnational Enforcement Leadership and the World Police Paradox, 64 Va. J. Int’l L. 239, 264–66 (2024), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4755507; Anupam Chander, The Electronic Silk Road, How the Web Binds the World in Commerce (Yale Univ. Press, 2013), https://scholarship.law.georgetown.edu/facpub/2297.

[69] See Richard A. Posner & William M. Landes, Market Power in Antitrust Cases, 94 (5), Harv. L. Rev., 937 (1980), https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2551&context=journal_articles.

[70] See Gary S. Becker, Crime and Punishment: An Economic Approach, 76 (2) J. Pol. Econ. 169 (1968), https://www.jstor.org/stable/1830482.

[71] See, e.g., infra notes 90-93 and accompanying text (discussing how U.S. tax policy inadvertently makes illegal offshore betting a more viable industry).

[72] What Is Geo-Blocking and How to Bypass It Successfully?, 01net, https://www.01net.com/en/vpn/geo-blocking (last visited Dec. 14, 2024).

[73] Pierre-Hugues, supra note 68, at 239, 257.

[74] Id. at 267.

[75] See Hal R. Varian, Computer Mediated Transactions, 100 (2) Am. Econ. Rev. 1 (2010), available at https://people.ischool.berkeley.edu/~hal/Papers/2010/cmt.pdf (noting how the “bits” that string together to form the internet constitute solutions to emergent demand based on user and consumer preferences).

[76] See Friedrich Schneider, Shadow Economics and Corruption all Over the World: What do we Really Know? (IZA Discussion Paper No. 2315, 2006), available at https://docs.iza.org/dp2315.pdf.

[77] See Robert P. Merges, Compulsory Licensing vs. the Three “Golden Oldies” Property Rights, Contracts, and Markets, Policy Anal. (Jan. 15, 2004), available at https://www.cato.org/sites/cato.org/files/pubs/pdf/pa508.pdf (discussing the development of market solutions and collective-rights organizations as obviating the need for such crude legislative approaches to content distribution as compulsory licenses).

[78] See Chris Cooke, Cloudflare Must Block Piracy Site, German Court Confirms, Complete Music Update (Nov. 29, 2023), https://completemusicupdate.com/cloudflare-must-block-piracy-site-german-court-confirms; Leveraging CDNs to Combat Content Piracy in Music Streaming, Cachefly (Mar. 7, 2024), https://www.cachefly.com/news/leveraging-cdns-to-combat-content-piracy-in-music-streaming.

[79] Julie E. Cohen, Between Truth and Power: The Legal Constructions of Informational Capitalism (Oxford U. Press, 2019), https://academic.oup.com/book/37371.

[80] See David J. Teece, Profiting from Innovation in the Digital Economy: Standards, Complementary Assets, and Business Models in the Wireless World, 47 (8) Res. Pol’y 1367 (2018), https://www.sciencedirect.com/science/article/abs/pii/S0048733318300763 (Teece describes the complex business environments needed to ensure innovative businesses can thrive, highlighting the need for law and regulation to take seriously the idea that modern dynamic firms are not mere “widget” sellers but are part of highly complicated industries with dynamic cost structures; even apparently marginal changes in a legal environment can have large effects on legitimate operators).

[81] See Interactive U.S. Map: Sports Betting, Am. Gaming Ass’n, https://www.americangaming.org/research/state-gaming-map/ (last visited Dec. 14, 2024).

[82] See Ian Macintyre, States Where Online Gambling Is Legal in the USA, Altenar (Apr. 9, 2024), https://altenar.com/blog/states-where-online-gambling-is-legal-in-the-usa.

[83] See Press Release, AGA Statement on New Legislation to Repeal the Federal Sports Betting Excise Tax on Legal Operations, Am. Gaming Ass’n (Jul. 31, 2024), https://www.americangaming.org/new/aga-statement-on-new-legislation-to-repeal-the-federal-sports-betting-excise-tax-on-legal-operators.

[84] See Cass R Sunstein, The Limits of Quantification, (Harv. Pub. L. Working Paper No. 14-13, 2014), at 1, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2424878 (in regulatory theory, this approach aligns with literature on the “good enough,” which recognizes that pursuing theoretical optima may prove less effective than pragmatic interventions that account for real-world constraints; noting that, in imperfect-information environments, regulatory activity can nonetheless approximate good decisions); H.L.A. Hart, The Concept of Law (3d ed., Oxford U. Press, 2012), https://www.jstor.org/stable/2183110 (discussing how rule-based systems inevitably gravitate toward practical functional states, rather than theoretical purity).

[85] See Ian Ayres, & John Braithwaite, Responsive Regulation, Transcending the Deregulation Debate (Oxford U. Press, 1992), at 51-53, available at https://johnbraithwaite.com/wp-content/uploads/2016/06/Responsive-Regulation-Transce.pdf.

[86] See Beyond Compliance: Reaping the Benefits of Geolocation Services, iGB Ed. Team (Dec. 3, 2024), https://igamingbusiness.com/gaming/beyond-compliance-reaping-the-benefits-of-geolocation-services-radar/#:~:text=In%20some%20cases%2C%20an%20operator,use%20a%20respective%20gambling%20app.

[87] In Lemmon v. Webb [1894] 3 Ch. 1, the English Court of Appeal clarified the principles governing the self-help remedy available to a property owner when a neighbor’s trees intrude onto their land. Specifically, the court recognized that a landowner has the right to cut back branches (or roots) of a neighbor’s tree that extend onto their property, so long as the trimming is done up to, but not beyond, the boundary line. The right to self-help was not contingent on giving prior notice to the tree’s owner, although doing so might be prudent. The landowner performing the trimming must ensure that no unnecessary damage is inflicted on the neighbor’s property, and the severed branches or roots should be offered back to the neighbor if they hold value.

[88] Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 (6) Harv. L. Rev. 1089, (1972), available at https://www.amherst.edu/media/view/123372/original/CalabresiMelamed.PDF (Calabresi & Melamed note that legal systems often choose between protecting entitlements through public or private enforcement based on transaction costs and institutional competence).

[89] See R.H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1 (1960), available at https://www.law.uchicago.edu/sites/default/files/file/coase-problem.pdf (Coase observed that private ordering often allows for externalities to be effectively handled by market processes and contracting); Henry G. Manne, Insider Trading and the Stockmarket, 57 (4) Duke L.J. 456 (1969), https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2096&context=dlj; Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge Univ. Press, 1990).

[90] See The Federal Gambling Tax and the Constitution, 43 (5) J. Crim. L. Criminology & Police Sci. 637 (1953), https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=4067&context=jclc.

[91] See Sports Wagering, Inter. Revenue Serv., https://www.irs.gov/businesses/small-businesses-self-employed/sports-wagering (last visited Dec. 16, 2024); id.

[92] Damjan Jugovic Spajic, What Is a Sportsbook? The Basics Explained, PlayToday (Feb. 28, 2024), https://playtoday.co/blog/guides/what-is-a-sportsbook; Cole Rush & Brian Pempus, What Is the Vig in Betting?, Forbes Betting (Nov. 5, 2024), https://www.forbes.com/betting/guide/vig (noting that “discount” sportsbooks require a lower wager to win an equivalent payout as legitimate sportsbooks).

[93] See Offshore Sportsbook Authority Since 1999, BMR Bookmakers Rev., https://www.bookmakersreview.com (last visited Dec. 17, 2024), (comparing the various incentives offered by online sportsbooks).

[94] S. 4872, 118^th Cong. (2024), available at https://www.congress.gov/118/bills/s4872/BILLS-118s4872is.pdf.

[95] Discriminatory Gaming Tax Repeal Act, H.R. 1661, 118^th Cong. (2023), https://www.congress.gov/bill/118th-congress/house-bill/1661.

[96] See Robert Fletcher, Operator Share Price Tumble as UK Government Considering Gambling Tax Increase, iGB (Oct. 14, 2024), https://igamingbusiness.com/legal-compliance/britain-gambling-tax-increase; Rocco Porreca et al., Sports Gambling in Select Nations, Aspen Inst., https://www.researchgate.net/publication/329246249_Sports_Gambling_in_Select_Nations (last visited Dec. 16, 2024); Nina Henningsen, Gaming Law 2024, Denmark, Chambers and Partners, https://practiceguides.chambers.com/practice-guides/gaming-law-2024/denmark/trends-and-developments (last visited Dec. 20, 2024).

[97] See Fletcher, supra note 96 (the UK is currently at 21%, with rumors that an increase may be in the offing); Denmark Online Gambling Market-Impact Analysis, Indep. Rep. (2020), available at https://www.egba.eu/uploads/2020/06/Tax-analysis-Denmark.pdf (Denmark’s tax rate is 28%).

ICLE Senior Scholar Mario Zúñiga took part in a recent panel organized by Telefónica del Perú and moderated by Mario Cortijo, editor of journalistic projects at the El Comercio newspaper, titled “Sustainability in Telecommunications: A Key for the Economic and Social Development of Peru.” Other panelists in this Spanish-language discussion included Elena Maestre of Telefónica; Lucas Gallitto, director for Latin America for the Global System for Mobile Association; and Virginia Nakagawa, a Peruvian lawyer and arbitrator with more than 30 years of experience as a senior executive in the public and private sector. Video of the full panel is embedded below. 

ICLE Director of Law & Economics Programs Gus Hurwitz was cited by the Associated Press in a story about the TikTok case before the U.S. Supreme Court. You can read the full piece here.

U.S. TikTok users with Android devices might also be able to continue to update the platform through third-party app stores, a method called sideloading. But bypassing the security protocols that well-known app stores have in place might also leave users more vulnerable to malware, said Gus Hurwitz, a professor at the University of Pennsylvania with expertise in telecommunications and technology.

 

ICLE Editor-in-Chief R.J. Lehmann was quoted by Reason in a story about California’s fragile property-insurance market. You can read the full piece here.

As of November 2022, nearly 2.4 million policies were in ZIP codes covered by non-renewal moratoriums, according to a September 2023 report by the International Center for Law and Economics (ICLE).

…Insurers’ non-renewal rates increased 36 percent in the years following the 2017 and 2018 fires, according to ICLE. Over the same period, the number of policies written by FAIR, the state’s insurer of last resort, increased by 225 percent.

…The trouble is that reinsurance rates (which are not regulated under Prop. 103) have been rising to account for increased wildfire risk. The concentration of wildfire losses in recent years and the rising risk of future wildfire losses means that basing premiums on past averages of wildfire losses is “wholly inadequate” to cover insurers’ risks, says the ICLE report.

…California was “really on the precipice about a year ago of basically all the major carriers just pulling out of the state,” says Ray Lehmann, one of the co-authors of the ICLE report.

ICLE Chief Economist Brian Albrecht was a guest on the Cato Daily Podcast to discuss the current tariff threats and how they may impact business decisions. Audio of the full episode is embedded below.

ICLE Senior Scholar Miko?aj Barczentewicz was a guest on the Mobile Dev Memo podcast to discuss the EU’s AI Act and the state of AI regulation in the EU more generally, as well as the European Data Protection Board’s updated guidance on the ePrivacy Directive. Audio of the full episode is embedded below.

ICLE Senior Scholar in Competition Policy Dan Gilman offers his perspective on the new FTC’s flawed merger guidelines on this recent story in Reason Magazine. See full story here.

Daniel Gilman, senior scholar of competition policy at the International Center for Law and Economics (ICLE), explains that merger guidelines are not federal regulations; they do not carry the force of law. Still, these guidelines can exert “some influence on the courts,” which can cite them as persuasive authority, similar to law-review articles, noted treatises, and other expert opinions, per Gilman.

ICLE Director of Innovation Policy Kristian Stout was quoted in the Communications Daily story about FCC employees coping with the latest Elon Musk directive on accountability. Read full story here.

FCC staff on Saturday received the same email that most federal employees did from the Office of Personnel Management, asking them to justify their work, but it was unclear Monday how or if FCC staff would respond. The FCC didn’t comment Monday. The leaders of unions that represent federal employees slammed the email. President Donald Trump said Monday he supports the effort.

The email instructed federal employees to submit five bullet points detailing what they had accomplished in the last week to both OPM and their manager by 11:59 p.m. ET Monday. 

Kristian Stout, director-innovation policy at the International Center for Law & Economics, said FCC Chairman Brendan Carr may welcome FCC employees having to justify themselves. If regulated companies are required to serve the public interest, “the FCC, responsible for stewarding taxpayer dollars, should also serve the public interest by ensuring that every dollar spent internally is also used efficiently,” Stout said. Carr has been “actively trying to streamline FCC operations,” even establishing a dedicated Department of Government Efficiency group within the agency, he said.

ICLE President Geoffrey A. Manne was cited in this recent Reason article regarding the The Department of Justice’s revised proposed final judgment in its antitrust case against Google. Read full story here.

The claim that these remedies would substantially diminish Google’s near-90 percent share of the general search engine market is highly dubious. Geoffrey A. Manne, president and founder of the International Center for Law and Economics, described the proposed remedies as “fail[ing] to meet antitrust’s requirement of a tight causal connection between offense and relief,” while threatening browser competition—Firefox received 86 percent of its funding from Google in fiscal year 2021—and “dissuading venture capital in AI more broadly.”

Manne tells Reason that the “new proposal shows that the DOJ under President Donald Trump intends to continue the highly politicized approach to Big Tech antitrust.” A substantive continuation of the anti-Big Tech antitrust policy begun by the first Trump administration and intensified under former President Joe Biden bodes poorly for domestic investment, innovation, and consumer welfare.