ICLE Comments to the FCC on High-Cost Universal Service Support Programs

I. Introduction and Overview

The International Center for Law & Economics (ICLE) submits these comments in response to the Federal Communications Commission’s (FCC) notice of proposed rulemaking on modernizing the high-cost program.[1] ICLE is a nonprofit, nonpartisan research center that applies law & economics to public policy. Its work promotes sound economic analysis and consumer welfare, particularly in dynamic, technology-driven markets such as telecommunications.

The Commission asks what should become of three legacy support mechanisms: Connect America Fund Broadband Loop Support (CAF BLS), High-Cost Loop Support (HCLS), and the expiring Alternative Connect America Cost Model (A-CAM) programs. The shift to Internet Protocol (IP)-based networks has sharply reduced their relevance. Unsubsidized competitors now offer qualifying service to most locations these programs support, while low-Earth-orbit (LEO) satellites can reach nearly all the rest.[2] Congress also has committed $42.5 billion through the Broadband Equity, Access, and Deployment (BEAD) Program to serve remaining unconnected areas. Meanwhile, lower-cost IP infrastructure continues to displace the copper and time-division multiplexing (TDM) networks that these legacy subsidies sustain.[3]

The Commission should wind down CAF BLS and HCLS and allow the A-CAM programs to expire on schedule, without extension or replacement. Doing so would reduce annual high-cost spending by roughly $1.6 billion. Competition, technological advances, and other federal programs have eliminated the need for much of that support.

This proceeding must weigh the benefits of continued support against the programs’ full costs, rather than cataloging benefits alone. Consumers fund every dollar through a surcharge on their bills that has climbed to 38.8% of assessable revenue.[4] Support for areas the market can serve more efficiently also discourages the private investment and competition that could serve those areas without subsidies.

Against those mounting costs, the programs’ benefits have narrowed to a small and shrinking residual. Support is redundant where competitors already provide service, duplicative where other federal programs are funding new networks, and concentrated in legacy voice service that consumers continue to abandon.

The principal objections in the record do not justify preserving these programs. LEO satellite service provides a functional substitute for legacy service in precisely the sparse, high-cost areas at issue, where capacity constraints are least likely to bind.[5] Claims that ongoing operating costs require perpetual support fare no better. They mistake the cost of maintaining obsolete infrastructure for an unavoidable cost of serving rural communities.

II. Continued Support Must Be Judged by Its Current Costs

Every subsidy entails a tradeoff. The central question here is not whether high-cost support has produced benefits, but whether those benefits still justify the costs of continuing it.[6] A subsidy may make economic sense when a genuine market failure prevents private investment from reaching customers who value service above its cost.[7] Without such a failure, subsidies distort investment, encourage rent-seeking, and often miss their intended beneficiaries.[8]

Subsidies also replace the decentralized decisions of consumers and investors with an administrative judgment about who should build and operate a network. The government finances that intervention by taxing the same market activity that could support further expansion. The FCC should therefore weigh the benefits of continued support against the deployment, competition, and consumer welfare that those subsidies crowd out.

Commenters seeking to preserve the programs identify real benefits, but they define the need for support by reference to network costs rather than a continuing market failure.[9] NTCA–The Rural Broadband Association (NTCA) calls high-cost support an “ideal public-private partnership” that must continue so carriers can “maintain service, repay loans, and keep rates affordable.”[10] The National Rural Electric Cooperative Association (NRECA) asks the Commission to create a “new program to support ongoing operating costs.”[11] The Blooston Rural Carriers urge the Commission to measure sufficiency against “the cost of operating a network, and not just the cost of building one.”[12]

Each proposal severs support from the condition that justifies it. Every network has operating costs, and every carrier would prefer a subsidy. If operating costs alone warrant support, the subsidy has no logical endpoint. A program designed to correct a market failure instead becomes a permanent entitlement, regardless of whether the failure persists.

Support also can suppress market expansion once unsubsidized providers begin reaching an area. A subsidized incumbent with assured cost recovery competes on terms that an unsubsidized entrant cannot match. Investors respond by deploying capital elsewhere.[13] Each additional year of support in an area open to competition deters entry, directs capital toward incumbents rather than expansion, and requires consumers to fund a transfer whose original justification may have disappeared.

That asymmetry makes a simple catalog of benefits inadequate. A subsidy’s benefits are concentrated and readily observed. Its costs are dispersed and harder to measure: surcharges on consumers, networks that competitors never build, capital unavailable for more productive investments, and the lower prices and better service that foreclosed competition might have delivered. An evaluation that counts only what the subsidy sustains will systematically favor continued support because the investment it discourages never appears in the record. Sound economic analysis must account for both.

The Commission should therefore ask whether the market failure that once justified support still exists in each area receiving it. Where no such failure remains, continued support sacrifices deployment, competition, and consumer gains that the market could otherwise deliver—and charges consumers to do so. The Commission must evaluate that present tradeoff, not the undisputed value of support provided in the past.

III. Legacy Support No Longer Justifies Its Costs

The Communications Act incorporates the same economic principle. Section 254 requires universal-service support to be “sufficient,” while the Commission has long treated “minimizing the universal service contribution burden on consumers and businesses” as a goal equal to expanding service.[14] The Commission must therefore weigh benefits against costs, not examine benefits in isolation.

For each legacy high-cost mechanism, the relevant question is whether continued support produces service that the market would not otherwise provide. That benefit must justify both the surcharges imposed on consumers and the harm to competition and private investment. The answer increasingly is no. Competitors and new technologies already serve many supported locations, other federal programs fund deployment in many others, and some legacy support sustains voice and copper infrastructure that consumers and carriers are leaving behind.

The appropriate transition should reflect each program’s structure and recipients’ reasonable expectations. The Commission should promptly wind down the open-ended HCLS and CAF BLS mechanisms, which impose no prospective deployment obligations. It should allow the fixed-term A-CAM programs to expire as scheduled without extension or replacement. That approach would lower consumer costs, remove barriers to private investment, encourage modern network deployment, and end legacy support on a predictable schedule.

A. Legacy Support Raises Costs and Distorts Competition

Extending legacy programs beyond their useful lives imposes two principal costs. Consumers bear the first. The Commission finances the high-cost program through universal-service contributions assessed on interstate and international telecommunications revenue. Because providers generally recover those contributions through surcharges on customers’ bills, preserving unnecessary support increases the fees consumers pay.[15]

The market bears the second cost. Subsidizing incumbents in areas that competitors and new technologies can serve discourages the entry and private investment that could deliver service without public support.[16] A subsidy intended to correct a market failure can thereby suppress the competition that would eliminate the need for it.

1. Unnecessary Support Raises Consumers’ Bills

Mandatory contributions from telecommunications providers fund the Universal Service Fund (USF). Providers generally recover those contributions through line-item surcharges on customers’ bills. As ICLE has explained, the contribution factor is “essentially a tax on consumer phone bills” and, at its current level, “has become one of the largest hidden taxes on American telecommunications consumers.”[17] The factor reached 38.8% in the third quarter of 2026, up from 37% in the second quarter. That rate approaches two-fifths of assessable interstate and international telecommunications revenue.[18]

The contribution factor rises when required disbursements increase or the assessable revenue base contracts. That base consists largely of legacy interstate telecommunications revenue, which has declined for two decades. If the Fund’s obligations remain fixed or increase while assessable revenue falls, the contribution factor must continue rising.

The Commission has two ways to relieve that pressure. It can change how it raises money through contribution reform, or it can reduce how much the Fund spends through distribution reform. Reducing unnecessary disbursements offers the more direct and less distortionary approach. It eases pressure on the shrinking contribution base without extending assessments to additional services or providers.[19]

Reducing disbursements also may lessen demands for contribution reforms that would burden consumers elsewhere. Proposals to broaden the assessment base often target broadband service or large online content and application providers, sometimes called edge providers.[20] Such reforms would relocate the assessment rather than reduce it, imposing new costs on the broadband services and internet applications that consumers increasingly use.

The Commission should therefore address unnecessary distributions before expanding the contribution base. Contribution reform undertaken first would preserve a large Fund and spread its costs across more services, entrenching the underlying expense. Phasing out legacy high-cost support would instead reduce the Fund’s obligations, ease consumers’ burden, and diminish pressure to impose new assessments—all “without imposing new burdens on the broadband networks and services that consumers and the broader economy increasingly rely upon.”[21] Cutting unnecessary disbursements reduces consumers’ costs. Expanding the contribution base merely changes where those costs appear.

2. Legacy Subsidies Deter Competition and Investment

Broadband support should complement private investment. The Commission therefore should avoid subsidizing areas that private providers already serve or would serve without support.[22] Subsidies in those areas can encourage duplicative construction, depress private returns, and redirect capital away from network expansion.[23] The resulting harm continues as long as public support distorts investment decisions.

A provider assured of federal cost recovery can compete on terms that unsubsidized rivals cannot match. Investors respond by deploying capital in markets where they do not face subsidized competition.[24] Support in areas already served by unsubsidized providers therefore distorts competition and weakens private providers’ incentives to invest, potentially reducing total investment through crowding out.[25]

The deterred competitor need not already serve the area when the Commission calculates support. The prospect of competing against a subsidized incumbent can prevent entry before it occurs.[26] The subsidy may then appear justified simply because no competitor has entered, even though the subsidy itself helped keep that competitor away.

The Commission should protect competition, not particular competitors. Universal service aims to ensure that consumers receive service, not to preserve any incumbent’s revenue or market position. Yet commenters seeking to retain the legacy programs often frame support as necessary specifically to sustain particular carriers and networks.[27] That approach elevates the recipient over the statutory objective. Where the market can provide service, protecting an incumbent from competition undermines the competitive process. Subsidized overbuilding also can allow favored providers to benefit from infrastructure investments that unsubsidized rivals have already made.

LEO satellite broadband illustrates the market’s ability to reach even the most difficult locations. LEO service is “uniquely equipped to reach many of the remaining unserved areas in the United States, especially rural, remote, and other hard-to-reach locations that are difficult to service through traditional terrestrial means.”[28] Those are precisely the locations once assumed to depend exclusively on subsidized incumbents.

LEO service also “has dramatically expanded the geographic reach of high-speed internet access.” Starlink has been “made available to all locations in the United States,” while satellite and other technologies “now offer robust competition in areas previously served by, at most, one or two fixed-broadband providers.”[29] The Notice confirms that nearly all supported locations lacking a terrestrial connection at 100 megabits per second downstream and 20 megabits per second upstream—known as 100/20 Mbps service—already appear served by an LEO provider at that speed.[30] The Commission’s latest Section 706 Report likewise finds that LEO service meets the 100/20 Mbps benchmark for advanced telecommunications capability and reaches 99.7% of Americans.[31]

That expansion occurred without high-cost support. LEO investment represents the unsubsidized entry that continued support for legacy incumbents may deter. The private sector has already reached these markets. Continuing to subsidize incumbents against that competition would charge consumers to weaken the very entry that is closing the digital divide.

B. Legacy Support Delivers Diminishing Benefits

A subsidy’s benefit is the additional service that exists because of the subsidy and would not exist without it.[32] By that measure, these legacy programs deliver small and shrinking benefits because modern IP networks already serve many supported locations. NCTA–The Internet & Television Association (NCTA) notes that recent federal broadband funding generally finances fiber or hybrid networks capable of operating for a decade or longer without further support. Continuing high-cost subsidies in those areas buys little or no additional connectivity.[33] The Information Technology and Innovation Foundation likewise concludes that the programs “have achieved their original objectives” and that market changes have “substantially reduced the policy rationale for continuing them.”[34] Where qualifying service already exists, another subsidy purchases redundancy rather than universal service.

Support can even produce negative benefits when it discourages network upgrades. Subsidies tied to legacy operations encourage carriers to retain TDM and copper infrastructure rather than transition to more efficient IP networks.[35] IP networks offer greater reliability, higher call quality, and more effective robocall mitigation. Delayed transitions leave customers with outdated technology that cannot meet modern needs.[36] Subsidizing aging infrastructure also weakens carriers’ incentives to replace it, raises maintenance costs, and diverts investment from next-generation services.[37] Support intended to benefit rural consumers can therefore leave them on inferior networks longer than market forces would.

Much of this support does not fund future deployment. CAF BLS and HCLS impose no prospective buildout obligations, so their funding secures no new construction. It reimburses costs for networks already built.[38] More than one-quarter of CAF BLS—roughly $250 million—subsidizes traditional voice-only service. All $202 million in HCLS supports legacy voice loops without any deployment obligation.[39]

Consumers are rapidly abandoning those services. Switched-access lines now account for a small fraction of voice connections as households move to mobile service and interconnected Voice over Internet Protocol (VoIP). Mobile voice service is available at essentially every supported location.[40] Continued subsidies for a declining service that consumers are leaving deliver little incremental benefit.

Other federal programs further reduce that benefit. Where the BEAD Program, Enhanced A-CAM, or another enforceable commitment requires deployment of 100/20 Mbps broadband, additional legacy support adds little universal-service value and duplicates public spending.[41] The incremental benefit approaches zero when an unsubsidized competitor already serves a location, a satellite provider offers 100/20 Mbps service, and BEAD will fund another network—yet the cost of the legacy subsidy continues.

These programs now provide benefits that are narrow and declining. Their support is redundant where competitors already serve consumers, duplicative where other programs fund deployment, and concentrated in legacy voice service that consumers are abandoning. At the margin, it also discourages the upgrades that would improve rural service. The record therefore supports a rapid phaseout that frees consumers and carriers from continued investment in networks the market is replacing.

C. Wind Down Support on a Predictable Schedule

The principles above apply to each program under review. The legacy rate-of-return mechanisms—HCLS and CAF BLS—reimburse carriers based on their costs but impose no prospective deployment obligations or end dates. They also create weaker reliance interests than the model-based programs and should be affirmatively wound down. The A-CAM programs already have defined expiration dates. The Commission should let them expire as scheduled and reject proposals to extend or replace them.

Eliminate High-Cost Loop Support first. HCLS presents the clearest case for elimination and should end on the shortest timeline. The program shifts cost recovery from the intrastate to the interstate jurisdiction to subsidize traditional switched-voice loops. It supports no new deployment. Annual support already has fallen from $741 million in 2015 to roughly $202 million as customers migrate to mobile and IP service.[42] HCLS buys no additional broadband, sustains infrastructure that newer IP networks are replacing, and weakens carriers’ incentives to retire aging equipment. It offers no prospective universal-service benefit that justifies preserving it. The Commission should sunset HCLS promptly.

Wind Down Connect America Fund Broadband Loop Support. CAF BLS is the largest program at issue. Although it supports broadband-capable loops as well as voice service, its structure no longer fits its purpose. Its only deployment obligation—providing service at 25 megabits per second downstream and 3 megabits per second upstream, or 25/3 Mbps—came due at the end of 2023 and has been satisfied. Continued support therefore secures no new construction and functions as open-ended cost reimbursement.[43] More than one-quarter of CAF BLS, roughly $250 million, subsidizes voice-only service. A large and increasing share also flows to locations that an unsubsidized competitor already serves.[44]

The Commission should place CAF BLS on a defined, declining schedule. It should first eliminate support for voice-only service and locations served by an unsubsidized competitor or covered by an enforceable deployment commitment. Support would then contract as competition and other federal programs reach additional locations instead of continuing indefinitely by default.

Allow A-CAM I to expire in 2026. Only nine carriers still receive A-CAM I support, totaling roughly $8 million annually, and the program will expire at the end of 2026.[45] The Commission should reject the Notice’s proposal to extend it through 2028 merely to align its expiration date with other A-CAM programs. Administrative symmetry does not justify two additional years of support absent evidence that the subsidy remains necessary. Allowing A-CAM I to expire as scheduled honors the terms its recipients accepted and ends the program as designed.

Allow revised A-CAM I and A-CAM II to expire in 2028 without replacement. Revised A-CAM I and A-CAM II provide roughly $166 million and $218 million, respectively, to 71 carriers each. Both programs will expire at the end of 2028.[46] Recipients accepted fixed support for a defined period in exchange for deployment obligations. The Commission should honor those terms by allowing support to continue through 2028 and then end on the schedule carriers have long expected.

The Commission should reject proposals to replace these programs with a new, ongoing model-based support stream.[47] Such a program would convert fixed-term support into the kind of open-ended entitlement this proceeding should retire. Letting the existing programs expire provides an orderly phaseout, respects legitimate reliance interests, and avoids renewing the underlying subsidies.

This sequence would produce a rapid but orderly wind-down. HCLS would end first because it has the weakest justification. CAF BLS would decline on a defined schedule, and the A-CAM programs would conclude on the dates their recipients already anticipate. Together, these steps would eliminate roughly $1.6 billion in annual support that competition, new technology, and other federal programs have overtaken, without disrupting fixed-term commitments midstream.[48]

IV. LEO Satellite Is a Viable Substitute in High-Cost Areas

Several commenters urge the Commission to disregard satellite broadband because they do not consider it a genuine substitute for subsidized terrestrial networks. NRECA asks the Commission to abandon technological neutrality—the principle of applying the same standards regardless of transmission technology—and count only terrestrial service.[49] NTCA argues that no LEO operator currently meets universal-service standards because of limitations involving capacity, consistency, and voice service.[50] Both objections rest on the concern that a shared satellite network cannot reliably deliver benchmark performance to every subscriber.

That concern warrants scrutiny, but capacity constraints matter most when providers oversubscribe service in densely populated areas. Starlink can reliably meet the 100/20 Mbps benchmark in areas with fewer than roughly seven serviceable locations per square mile.[51] High-cost areas, by contrast, “are largely those in hard-to-reach, rural, remote areas.” They are costly to serve precisely because they are “sparsely populated.”[52] That explains why 85% of Starlink subscribers live in rural areas and why LEO systems “may be their best option available for the foreseeable future” in “remote and hard-to-reach areas.”[53] The capacity objection is therefore strongest in dense areas that generally do not receive high-cost support and weakest in the sparse areas that do.

The remaining objections do not alter the analysis. Voice is an IP application that can operate over a LEO broadband connection without a separate circuit-switched network. The absence of legacy carrier-grade voice reflects the technology’s modern architecture, not an inability to provide voice service.

LEO subscription prices also are “comparable to other rural provider costs,” and competition among satellite, wireless, and terrestrial providers should constrain them further. Where price limits adoption, the Commission should provide targeted aid to consumers in the highest-cost areas rather than continue subsidizing obsolete networks. Such demand-side support would address affordability directly without preserving a less efficient technology.

V. Legacy Operating Costs Do Not Justify Permanent Support

The strongest argument for preserving these programs concerns operating costs rather than deployment. It assumes that the cited costs are inherent in serving rural areas. Much of the burden instead comes from the aging copper and TDM infrastructure that continued subsidies keep in service. The appropriate benchmark is the cost of operating the IP networks that will replace it.

IP infrastructure costs substantially less to operate than legacy plant. Copper degrades over distance and relies on energy-intensive repeaters and TDM switches distributed throughout neighborhoods. Fiber carries data as pulses of light over largely passive infrastructure, lowering maintenance and energy costs while reducing the need for centralized switching facilities and related real estate.[54] Verizon’s migration of 4.5 million circuits to fiber, for example, produced roughly $180 million in annual savings, reduced maintenance dispatches by about 60%, and allowed the company to retire dozens of central offices.[55] Fiber also uses less electricity because it eliminates TDM switches and neighborhood electronics. It also relies less on the shrinking pool of technicians trained to maintain legacy copper.[56]

The operating burden cited by commenters is therefore neither fixed nor unavoidable. It largely reflects the cost of maintaining infrastructure that carriers should be retiring. Treating that expense as an inherent cost of rural service would lock the program into financing the inefficiencies created by obsolete technology.

These networks will transition to IP regardless of the outcome here. The BEAD Program and Enhanced A-CAM already require modern 100/20 Mbps networks designed to operate for a decade or longer without continuing support. Consumers are abandoning legacy switched networks, and the Commission has made the IP transition a policy priority. Subsidizing legacy operating costs gives carriers an incentive to delay the modernization that would reduce those costs. The subsidy then preserves the high-cost structure invoked to justify further subsidies.

The Commission should decline to transform transitional deployment support into a permanent operating subsidy. Phasing out support would accelerate the move to lower-cost IP infrastructure that the market and federal deployment programs are already delivering. Universal service will become more sustainable when policy stops financing the networks that make it unnecessarily expensive.

VI. Conclusion

The Commission should wind down the legacy high-cost mechanisms rather than preserve or replace them. The record and the Commission’s data show that unsubsidized terrestrial competitors and LEO satellites now reach the overwhelming majority of supported locations. The BEAD Program and Enhanced A-CAM are funding modern networks in many remaining areas. Meanwhile, lower-cost IP infrastructure continues to replace the copper and TDM networks that legacy support sustains.

These programs now provide little incremental service. Support is redundant where competitors already operate, duplicative where other federal programs fund deployment, and concentrated in legacy voice service that consumers are abandoning. It also raises consumers’ bills, discourages private investment, and gives carriers an incentive to retain costly infrastructure. The 38.8% contribution factor makes those tradeoffs impossible to ignore. The Commission should measure each program by the service it adds, not the network it preserves.

The Commission should eliminate HCLS on the shortest feasible timeline, place CAF BLS on a defined and declining schedule, and allow the A-CAM programs to expire under their existing terms without extension or replacement. This sequence would respect legitimate reliance interests while removing roughly $1.6 billion in annual obligations that competition, technological change, and other federal programs have overtaken.

Reducing unnecessary disbursements would directly ease pressure on the USF and the consumers who finance it. Where genuine affordability gaps remain, targeted consumer support offers a better response than permanent subsidies for obsolete networks. Universal service will endure only if the Commission allows its programs to end when their work is done.

[1] Reforming the High-Cost Program for an All-IP Future, Notice of Proposed Rulemaking, WC Docket Nos. 26-96 & 10-90, ¶ 33 (rel. May 21, 2026) [hereinafter High-Cost NPRM].

[2] Id. ¶ 31.

[3] Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, div. F, tit. I, § 60102(b)(2), 135 Stat. 429, 1184 (2021).

[4] Proposed Third Quarter 2026 Universal Service Contribution Factor, Public Notice, DA 26-546, CC Docket No. 96-45 (rel. June 12, 2026), https://docs.fcc.gov/public/attachments/DA-26-546A1.pdf.

[5] LEO Policy Working Group, Low Earth Orbit Satellites: Policies to Promote Spectrum Sharing, Foster Competition, and Close Digital Divides 75–76 (Int’l Ctr. for L. & Econ. 2025), https://laweconcenter.org/resources/low-earth-orbit-satellites-policies-to-promote-spectrum-sharing-foster-competition-and-close-digital-divides-a-report-of-the-leo-policy-working-group.

[6] See Kristian Stout & Ben Sperry, Guiding Principles & Legislative Checklist for Broadband Subsidies (Int’l Ctr. for L. & Econ. 2022), https://laweconcenter.org/resources/guiding-principles-legislative-checklist-for-broadband-subsidies.

[7] Jonathan E. Nuechterlein & Howard Shelanski, Building on What Works: An Analysis of U.S. Broadband Policy, 73 Fed. Commc’ns L.J. 219, 257 (2021).

[8] Kristian Stout, Infrastructure Is Destiny: The Geography of the Next Technology Race 19 (Int’l Ctr. for L. & Econ. 2026), https://laweconcenter.org/resources/infrastructure-is-destiny-the-geography-of-the-next-technology-race.

[9] See, e.g., Comments of NTCA–The Rural Broadband Association, Reforming the High-Cost Program for an All-IP Future, WC Docket Nos. 26-96 & 10-90 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069420/1 [hereinafter NTCA Comments]; Comments of the National Rural Electric Cooperative Ass’n, WC Docket Nos. 26-96 & 10-90 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069460/1 [hereinafter NRECA Comments]; Comments of the Blooston Rural Carriers, WC Docket Nos. 26-96 & 10-90 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069494/1 [hereinafter Blooston Comments].

[10] NTCA Comments, supra note 9, at i.

[11] NRECA Comments, supra note 9, at 4–5.

[12] Blooston Comments, supra note 9, at 2.

[13] T. Randolph Beard, George S. Ford, Lawrence J. Spiwak & Michael Stern, The Law and Economics of Municipal Broadband, 73 Fed. Commc’ns L.J. 1, 10 (2020), http://www.fclj.org/wp-content/uploads/2020/09/MunicipalBroadbandArticleFINAL.9.2.20.pdf (“Entry by a subsidized . . . firm . . . reduces the incentives of private firms to invest in modern communications infrastructure . . .. [E]ither the municipal entrant will fail or a private provider will exit or materially reduce its investments.”).

[14] 47 U.S.C. § 254(b)(5), (e); Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking, WC Docket No. 10-90, ¶ 17 (2011), https://docs.fcc.gov/public/attachments/FCC-11-161A1.pdf.

[15] High-Cost NPRM, supra note 1, ¶ 6.

[16] See Stout & Sperry, supra note 6 (arguing that broadband support should “work in tandem with private investment” because subsidizing already-served areas risks “overbuilding in ways that can depress returns to incumbent providers”); Ben Sperry, Doublespeak in the Debate About Rural Broadband Buildout, Truth on Mkt. (Aug. 6, 2020), https://truthonthemarket.com/2020/08/06/doublespeak-in-the-debate-about-rural-broadband-buildout (explaining that government-subsidized entry “can discourage private investment and grow the size of the ‘donut hole,’ . . . leading to demand for even greater subsidies”).

[17] Jeffrey Westling, The Lifeline Program’s Afterlife Problem, Truth on Mkt. (May 6, 2026), https://truthonthemarket.com/2026/05/06/the-lifeline-programs-afterlife-problem.

[18] Proposed Third Quarter 2026 Universal Service Contribution Factor, supra note 4; Proposed Second Quarter 2026 Universal Service Contribution Factor, Public Notice, DA 26-218, CC Docket No. 96-45 (rel. Mar. 16, 2026).

[19] Comments of the Int’l Ctr. for L. & Econ., Reforming Legacy Rules for an All-IP Future & Accelerating Network Modernization, WC Docket Nos. 25-311 & 25-208, at 7 (filed May 22, 2026), https://laweconcenter.org/resources/icle-comments-to-the-fcc-on-accelerating-network-modernization [hereinafter ICLE Network Modernization Comments].

[20] Id. at 7–8.

[21] Id. at 8.

[22] Stout & Sperry, supra note 6.

[23] Id.

[24] See Beard et al., supra note 13, at 10 (“[T]he asymmetric subsidization of . . . entrants . . . reduces the incentives of private firms to invest”); cf. Richard A. Epstein, The Assault That Failed: The Progressive Critique of Laissez Faire, 97 Mich. L. Rev. 1697, 1714 (1999), https://repository.law.umich.edu/mlr/vol97/iss6/22 (arguing that rational actors will not “make private investments” where “the state could launch a competitor nearby . . . with a handsome government subsidy”).

[25] Comments of the Int’l Ctr. for L. & Econ. & TechFreedom, Connect America Fund, WC Docket No. 10-90, RM-11703, at 9 (filed Sept. 26, 2013), https://www.fcc.gov/ecfs/document/6017468701/1 [hereinafter ICLE CAF Comments].

[26] See Epstein, supra note 24, at 1714.

[27] See, e.g., NTCA Comments, supra note 9, at 21.

[28] LEO Policy Working Grp., supra note 5, at 70.

[29] Comments of the Int’l Ctr. for L. & Econ., Safeguarding and Securing the Open Internet, WC Docket No. 23-320, at 16–17 (filed Dec. 14, 2023), https://laweconcenter.org/wp-content/uploads/2023/12/ICLE-Comments-on-2023-FCC-Title-II-NPRM.pdf.

[30] See High-Cost NPRM, supra note 1, ¶¶ 18, 31.

[31] Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, 2026 Section 706 Report, GN Docket No. 25-223, FCC 26-55, ¶ 28 (2026).

[32] See ICLE CAF Comments, supra note 25, at 9 (arguing that universal-service support should “subsidize the construction of networks and the provision of services in parts of the country where doing so would otherwise be uneconomical”).

[33] Comments of NCTA–The Internet & Television Ass’n, Reforming the High-Cost Program for an All-IP Future, WC Docket Nos. 26-96 & 10-90, at 6–7 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069456/1 [hereinafter NCTA Comments].

[34] Comments of the Info. Tech. & Innovation Found., Reforming the High-Cost Program for an All-IP Future, WC Docket Nos. 26-96 & 10-90, at 1 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069402/1.

[35] ICLE Network Modernization Comments, supra note 19, at 9.

[36] Jeffrey Westling, Subsidizing Obsolescence: How FCC Rules Keep Copper Alive, Truth on Mkt. (Mar. 18, 2026), https://truthonthemarket.com/2026/03/18/subsidizing-obsolescence-how-fcc-rules-keep-copper-alive.

[37] Comments of the Int’l Ctr. for L. & Econ., Lifeline and Link Up Reform and Modernization et al., WC Docket No. 11-42 et al., at 8 (filed May 4, 2026), https://laweconcenter.org/wp-content/uploads/2026/05/Lifeline-Comments.pdf.

[38] See High-Cost NPRM, supra note 1, ¶¶ 3, 7.

[39] Id. ¶¶ 9–10 & n.15.

[40] Id. ¶ 32 & n.62.

[41] See, e.g., NCTA Comments, supra note 33, at 2–4; Comments of INCOMPAS, Reforming the High-Cost Program for an All-IP Future, WC Docket Nos. 26-96 & 10-90, at 1–2 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069447/1 (arguing that support should remain “targeted, accountable, and competitively neutral” and account for locations covered by enforceable Broadband Equity, Access, and Deployment or other commitments); Comments of WISPA–The Ass’n for Broadband Without Boundaries, WC Docket Nos. 26-96 & 10-90, at 2 (filed Aug. 4, 2026), https://www.fcc.gov/ecfs/document/26110069453/1 (arguing that the Commission should identify locations that lack 25/3 Mbps service and “are not subject to an enforceable commitment to deploy at least 100/20 Mbps” before maintaining support).

[42] High-Cost NPRM, supra note 1, ¶ 10.

[43] Id. ¶ 9 & nn.14–15.

[44] Id.

[45] Id. ¶ 12.

[46] Id. ¶ 14.

[47] See, e.g., NTCA Comments, supra note 9, at 34 (urging the Commission to “offer rural carriers an extended A-CAM program based on the successful Enhanced A-CAM” by 2028).

[48] High-Cost NPRM, supra note 1, ¶ 8.

[49] NRECA Comments, supra note 9, at 10.

[50] NTCA Comments, supra note 9, at 44.

[51] LEO Policy Working Grp., supra note 5, at 75.

[52] Id. at 76–77.

[53] Id.

[54] ICLE Network Modernization Comments, supra note 19, at 3.

[55] Eric Fruits & Brian Albrecht, Paying to Stand Still: Legacy Copper Mandates in a Fiber World 6 (Int’l Ctr. for L. & Econ. 2026), https://laweconcenter.org/resources/paying-to-stand-still-legacy-copper-mandates-in-a-fiber-world.

[56] Comments of the Int’l Ctr. for L. & Econ., Advancing IP Interconnection et al., WC Docket No. 25-304 et al., at 4 (filed Jan. 20, 2026), https://laweconcenter.org/wp-content/uploads/2026/01/ICLE-Comments-on-Advancing-IP-Interconnection.pdf.

I. Introduction

The International Center for Law & Economics (ICLE) welcomes the opportunity to respond to the Office of the Trade Competition Commission of Thailand’s (TCCT) public consultation on rules governing digital-platform businesses. ICLE is a nonprofit, nonpartisan global research and policy center that applies law & economics methodologies to public-policy debates. ICLE scholars have commented on digital-market legislation and enforcement guidelines in the European Union, the United Kingdom, the United States, Canada, Brazil, Japan, and Vietnam. They have also published extensively on the design and effects of ex ante digital-competition regimes.

We understand the consultation to cover three principal materials:

1. The TCCT Notification on unfair trade practices and monopolization in multisided platform businesses engaged in e-commerce, which took effect March 25, B.E. 2569 (2026) (the “Guidelines”);
2. The TCCT’s market-study report on the size of the market for online marketplace platform providers, or e-marketplaces (the “Market Study”); and
3. The TCCT’s proposal to classify large “gatekeeper” platforms by size and impose corresponding duties (the “Proposal”). The Proposal would establish ex ante regulation of digital markets.

The questionnaire asks how the Guidelines should be developed and improved. We answer in light of the consultation’s broader stated purpose of developing rules to oversee digital-platform businesses. We therefore address all three materials because the Proposal presents the central policy choice now before the TCCT.

Our comments make four points:

• The Market Study depicts a sector marked by active and changing competition, rather than entrenched market power.
• The TCCT should enforce and evaluate the months-old Guidelines before adding another layer of ex ante regulation.
• Several provisions of the Guidelines warrant targeted revisions.
• Any designation-based regime, if pursued, would require substantial safeguards.

II. The Market Study Shows Active Competition

The TCCT’s E-Marketplace Market Study presents concrete evidence of active competition. It reports that platform operators earned THB 98.08 billion, or approximately $3 billion, in B.E. 2567 (2024). Shopee accounted for 50.94% of that revenue, followed by Lazada at 28.85%, TikTok Shop at 12.30%, LINE Shopping at 6.45%, and all other operators at 1.46%. The study treats these shares as evidence of durable market power sustained by first-mover advantages and network effects, through which a platform becomes more valuable as more users join.

Evidence elsewhere in the study cuts against that interpretation. TikTok Shop entered Thailand in B.E. 2565 (2022) and captured 12.30% of platform revenue within roughly two years. Its gross merchandise value grew by more than 500% during the first eight months of B.E. 2568 (2025), and it attracted approximately 2.4 million sellers.

The regional evidence is equally significant. TikTok Shop reached second place in Indonesia with an approximately 39% market share, just behind Shopee at 40%. It also reached second place in Vietnam with roughly 24%. The study acknowledges that TikTok Shop could challenge Thailand’s leading platforms, as it has in neighboring countries. That record contradicts claims that high entry barriers have entrenched the incumbent platforms. A new entrant has already shown that those barriers are surmountable.

Concentration at a single point in time differs from entrenchment. Concentration describes current market shares. Entrenchment concerns whether rivals can challenge those positions and therefore requires evidence about entry, expansion, and switching over time. The TCCT’s data establish concentration. Where the data address entrenchment, they weigh against it.

The study also defines the relevant market to include social-commerce services with full-featured capabilities, yet calculates revenue using registered platform entities. That measure likely omits at least some informal social-commerce channels and cross-border sellers. The reported CR3 and CR4 figures, which measure the combined shares of the three and four largest firms, should therefore be treated as upper bounds. We encourage the TCCT to publish parallel market shares based on gross merchandise value and transaction volume.

The TCCT should also examine seller multihoming, which occurs when a seller uses several platforms at once. Measure 10 of the Proposal protects businesses’ right to do so and thus assumes that multihoming is feasible. When sellers can list on several platforms at low cost, revenue share overstates any single platform’s power to raise prices or reduce quality.

The study’s account of rising seller commissions deserves particular scrutiny because it bears much of the case for intervention. Commissions increased from roughly 1% in B.E. 2565 (2022) to between 5% and 8% by B.E. 2568 (2025). According to the study, platforms spent the preceding decade subsidizing buyers and sellers through below-cost fees and consumer discounts. The subsequent increase is consistent with the end of a price war and a shift away from artificially low introductory rates. It does not, by itself, establish exploitation. Current commission rates also remain a fraction of the distribution margins that sellers bear in offline retail.

Two-sided platforms serve interdependent groups, such as buyers and sellers. The allocation of prices between those groups is itself a form of competition, and charging below cost on one side can be efficient (Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 1 Journal of the European Economic Association 990 (B.E. 2546 (2003))).

III. Regulate Conduct by Its Effects

The Guidelines identify several practices that may constitute unfair conduct: below-cost pricing, rate-parity clauses, resale price maintenance, default carrier settings, mandatory use of a platform’s payment channel, coerced advertising purchases, exclusive dealing, quantity discrimination among carriers, data use, and self-preferencing. Each practice can harm competition, but none is inherently anticompetitive. Several are ordinary methods of competition in multisided markets.

The TCCT should assess these practices under the standard rule of reason, which weighs competitive harms against benefits based on market evidence. None should carry a prima facie presumption of unlawfulness in e-commerce or any other market. The Proposal also should not prohibit them categorically through ex ante regulation.

A multisided platform sets a structure of prices across its user groups, rather than a single price. Output depends on how the total charge is allocated between buyers and sellers. Serving one group below cost while the other funds the difference can therefore be both routine and efficient. This principle is central to the economics of two-sided markets. The U.S. Supreme Court adopted it in Ohio v. American Express, holding that courts cannot assess conduct affecting one side of a transaction platform without considering its effects on the other.

A presumption against below-cost pricing to buyers would penalize a mechanism that builds the buyer base on which sellers depend, including the small and medium-sized enterprises (SMEs) that the Proposal seeks to protect. The Guidelines appropriately recognize recoupment, which occurs when a firm later raises prices enough to recover the losses incurred through below-cost pricing. The TCCT should require proof of recoupment for any predatory-pricing finding, rather than treating it as merely one factor among several.

Parity clauses require the same effects-based analysis. The clause’s breadth does not establish its competitive effects. A wide parity clause governs a seller’s prices across all sales channels, including the seller’s own website. Authorities most often condemn this form, yet it also addresses the most direct form of free riding. A buyer can use a platform to search, compare offers, and read reviews compiled at the platform’s expense, then complete the purchase on the seller’s website at a price that a platform charging a commission cannot match.

A narrow parity clause does not prevent this diversion because it constrains only the seller’s prices on rival platforms. A wide clause can protect investments in product discovery, matching, and consumer trust that helped produce the sale. European practice has not converged. Some European Union member states prohibit wide clauses but allow narrow clauses, while others prohibit both. Empirical research on the effects of these bans remains mixed.

Either form of parity clause can foreclose rival platforms when the platform imposing it has become unavoidable for buyers and sellers. Establishing that harm requires evidence about customer diversion, multihoming, and entry. The TCCT should decide such cases on their evidence, rather than treating a clause’s form as conclusive.

Self-preferencing, the tying of logistics and payment services, and default settings present similar questions. A platform that integrates delivery and payment services and makes them the default can reduce fraud, delivery failures, and dispute-resolution costs. These concerns are central when buyers transact with distant sellers whose goods and business practices they cannot inspect in advance.

A general requirement that a platform treat rivals’ offerings at least as favorably as its own would impose a duty that no integrated offline retailer bears. Comparable digital integration does not warrant a different rule without evidence of distinct competitive harm. The relevant economic question is whether the conduct forecloses an equally efficient rival and thereby harms consumers. Each prohibition should require proof of foreclosure and consumer harm, while allowing platforms to offer objective business justifications.

Measure 15 of the Proposal would restrict a platform’s use of nonpublic commercial data. We urge the TCCT not to adopt it. Platforms use transaction data generated in their marketplaces, including data concerning individual sellers, to identify unmet demand and develop products that serve it. This is competition on the merits. It can create a second source of supply in a product category that previously had only one.

Physical retailers have used scanner and supplier data to develop private-label goods for decades. Competition law generally treats that practice as stronger competition. A supermarket need not disregard its own sales figures before developing a store brand, and no economic basis supports treating comparable conduct by a digital platform differently. The affected seller may lose sales, but consumers gain another source of supply, often at a lower price. The new product also constitutes entry into the seller’s market.

A ban would shield incumbent sellers against entry, contrary to the Trade Competition Act’s focus on protecting competition. Any restriction should apply only when the TCCT establishes that the data use forecloses an equally efficient rival and harms consumers.

The Guidelines took effect March 25, B.E. 2569 (2026). They already address in detail much of the conduct that the Proposal would regulate ex ante, including self-preferencing, reduced visibility, tying, restrictions on multihoming, discrimination, commercial-data use, mandatory use of affiliated logistics and payment services, and unilateral changes to contractual terms without notice. The Trade Competition Act backs these rules with substantial penalties.

The Proposal would principally add a designation process and affirmative duties for large platforms. The evidence presented in the consultation does not establish the need for that regime. The TCCT should enforce the Guidelines and evaluate their results before imposing another regulatory layer.

If the TCCT nevertheless proceeds, the experience of earlier regimes should inform its expectations and design. Initial empirical assessments of the European Union’s Digital Markets Act (DMA) report measurable costs to consumers without corresponding gains in market contestability. The forced separation of Google Maps from other Google services increased European users’ search steps by more than 21% without shifting traffic to rival mapping services (Pape & Rossi, Marketing Science, forthcoming B.E. 2569 (2026)). Amazon displayed 18% fewer products in its European search results following the DMA (Peukert et al., B.E. 2568 (2025)).

Consumer surveys also report added friction without perceived improvements in prices or privacy (ECIPE, What About Us?, B.E. 2568 (2025)). Gatekeepers have delayed European product launches or released versions with fewer features, imposing an “innovation tax” on European users (Manne, Oliveira Neto & Auer, B.E. 2569 (2026)). Mario Draghi’s report attributes much of Europe’s productivity gap with the United States to weaknesses in its technology sector and the burdens imposed by regulation (Draghi, The Future of European Competitiveness, B.E. 2567 (2024)).

If the TCCT pursues a designation regime, it should include at least five safeguards:

1. Designation based on demonstrated and durable market power in a specific service. Revenue, user numbers, and transaction value measure size or commercial success. They do not, by themselves, establish market power. The Market Study’s own evidence of changing market shares shows the risk. Thresholds calibrated in B.E. 2564 (2021) would have designated Lazada while missing both TikTok Shop and TEMU.
2. Service-specific and time-limited designation. Each designation should apply for three to five years and undergo mandatory review based on subsequent market developments.
3. A consumer-welfare requirement and a genuine efficiencies defense. The TCCT should require each intervention to promote consumer welfare and preserve the Guidelines’ justification-based approach. Security, privacy, quality, and other efficiencies should qualify as legitimate justifications.
4. Proportionate measures that begin with transparency. The TCCT should use disclosure and notice requirements before prohibiting self-preferencing, requiring unbundling, or mandating data access. Any data-use rules should define their scope precisely. Platforms should remain free to use aggregated and anonymized data, subject to privacy and security safeguards. Japan’s narrowly tailored Mobile Software Competition Act offers a more targeted model than the DMA.
5. A regulatory impact assessment and clear legal authority. The TCCT should assess the Proposal’s likely costs and benefits before adoption. It should also determine whether Section 17(3) of the Trade Competition Act authorizes notifications imposing affirmative duties on designated firms or whether those duties require legislation. Built-in coordination with the Electronic Transactions Development Agency (ETDA) would reduce duplicative enforcement.

IV. Regulation Must Be Certain and Proportionate

The Proposal identifies Certainty, Transparency, and Proportionality as its organizing principles. We share those commitments. Applying them raises several concerns.

Several provisions of the Notification depend on whether conduct occurred “without reasonable justification,” yet do not identify who must establish that justification or what evidence would suffice. Firms cannot plan around a standard whose meaning becomes clear only after enforcement begins. The TCCT should not place the entire burden of proving a legitimate business justification on defendants. It should also establish safe harbors that identify conduct the TCCT will not pursue.

The compliance costs contemplated in Chapters 2, 4, and 6 are largely fixed. They would therefore burden smaller platforms and new entrants most heavily, even though those firms are the most likely to constrain incumbents. Regulating fees on one side of a platform also tends to shift charges to the other side instead of eliminating them. A restriction on seller fees may produce higher advertising prices or reduced discounts and services for buyers. Any assessment of Measures 4 through 6 should model these responses.

Measures 1 and 2 would use quantitative thresholds to designate large platforms as gatekeepers and impose corresponding conduct duties. This design follows the European Union’s Digital Markets Act. The DMA’s obligations reflect a market structure, institutional capacity, and enforcement history that differ from Thailand’s. Its costs and benefits also remain contested within the European Union. Adopting the same list of per se duties would accept the costs of mistaken intervention before evidence establishes the need for those duties in Thailand.

Those costs are asymmetric. A false positive occurs when a rule prohibits beneficial conduct. In a dynamic market, that error can harm consumers, deter similar conduct by other firms, and prevent products or features from being developed. The resulting losses may be difficult to detect or reverse. A false negative allows harmful conduct to continue temporarily, but entry and later enforcement can correct it.

The TCCT’s own evidence shows two entrants gaining substantial shares within four years, indicating that entry can provide such correction in this market. The likely sources of complaints also warrant attention. Rivals commonly initiate complaints under conduct rules because they have a commercial interest in constraining competitors. That interest may conflict with consumer welfare. A fairness standard that does not require proof of consumer harm would give rivals a direct means of influencing enforcement priorities.

V. Conclusion and Recommendations

The record supports targeted revisions to the newly effective Guidelines, followed by a defined period of enforcement and evaluation. It does not establish a need for an additional designation-based regime. We therefore recommend that the TCCT:

1. Retain case-by-case enforcement as the primary instrument. Defer any designation-based regime imposing ex ante conduct duties until evidence shows that entry no longer disciplines the leading platforms. Make implementation and evaluation of the existing Guidelines the principal outcome of this consultation, and publish an assessment after a defined enforcement period.
2. Require proof of likely recoupment for predatory-pricing findings. Apply price-cost tests to the platform as a whole, accounting for both the buyer and seller sides.
3. Refine the Guidelines’ pricing and self-preferencing provisions. Require evidence of an agreement before imposing liability for “parallel pricing.” Remove the excessive-pricing benchmark based on a firm’s own past rates. Eliminate the prohibitions based on prices below average total cost while retaining the predation standard. Recast the self-preferencing provisions to require deception or demonstrated exclusionary effects.
4. Assess parity clauses according to their effects. Do not infer unlawfulness from a clause’s width. Wide clauses address the diversion of platform-generated sales to a seller’s own channel, which narrow clauses cannot prevent. Any challenge should require evidence that the clause forecloses rival platforms under the circumstances of the case.
5. Require proof of foreclosure and consumer harm. Apply this requirement to prohibitions on self-preferencing, tying, default settings, and exclusive dealing. Platforms should have a defense based on objective business justification.
6. Do not adopt Measure 15. Retailers have long used their own sales data to develop and improve private-label products. A platform’s comparable use of marketplace data, including seller-specific data, can give buyers a second source of supply. Any restriction should require proof that the data use forecloses an equally efficient rival and harms consumers.
7. Publish additional measures of market share. Provide shares based on gross merchandise value and transaction volume, together with evidence on seller multihoming, before using those shares to designate a platform or trigger an obligation.
8. Clarify the burden of proof and establish safe harbors. Require the TCCT to establish the absence of a legitimate business justification. Publish safe harbors identifying conduct that the TCCT will not pursue so firms can plan under a known standard.

ICLE would be pleased to provide further analysis or the supporting economic literature upon request. Automated translation tools were used to prepare the Thai version of these comments. ICLE can provide the original English version upon request.

Introduction

The International Center for Law & Economics (“ICLE”) respectfully submits these comments on the draft revised Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (the “Draft Guidelines”), published for public comment July 17, 2026. ICLE is a nonprofit, nonpartisan global research and policy center dedicated to developing the intellectual foundations for sensible, economically grounded policy. We have commented on merger-enforcement policy and proposed merger guidelines before competition authorities in the United States, the European Union, the United Kingdom, Canada, Australia, France, Korea, India, and Vietnam.^[1] We also have submitted comments to the Japan Fair Trade Commission (JFTC) on the Mobile Software Competition Act.^[2]

We commend the JFTC for the approach reflected in this revision. The Draft Guidelines recognize that most business combinations do not substantially restrain competition and that a large post-combination market share alone does not establish a substantial restraint. They also seek expressly to explain how the JFTC will account for the procompetitive effects of business combinations. The Draft Guidelines expand the analysis of countervailing competitive pressure in several economically sound ways, introduce a coherent counterfactual framework for comparing a transaction with the likely conditions absent that transaction, and recognize that structural relief is not always the appropriate remedy. Among the merger-guideline revisions now under consideration in major jurisdictions, these Draft Guidelines give the greatest attention to the benefits that business combinations can produce.

Our comments focus primarily on provisions that do not fully carry this approach through. The principal concern is the Draft Guidelines’ asymmetric treatment of harms and benefits. The revised efficiency provision requires procompetitive effects to exceed any loss of competition and to be “reliably brought about.” At the same time, Part VI adds a theory of harm that includes no substantiality requirement, specifies no causal mechanism, and—so far as the published materials disclose—draws on no case, empirical study, or economic literature. The requirement that efficiencies be passed on to users also remains framed in terms that the newly recognized supply-security and environmental benefits will rarely satisfy. The Draft Guidelines further permit a forward-looking counterfactual to support intervention without confirming that the JFTC will assess benefits over the same time horizon.

Guidelines of this kind do not bind courts or businesses as law. Their influence depends on the confidence that businesses, advisers, and courts place in them as an accurate synthesis of the statute, economic learning, and the JFTC’s experience. Each provision should therefore help a party or court predict how the JFTC will assess a transaction.

The Introduction states that “[t]he vast majority of business combinations do not substantially restrain competition, and it is possible to implement them as originally planned after undergoing review by the JFTC.” Part IV adds that “even if the market share of the company group after the business combination is large, it is not immediately determined that the business combination substantially restrains competition.” The Introduction also commits the JFTC to describing “the approach for taking into account the pro-competitive effects of such business combinations in the review of business combinations.” We agree with each proposition. The first may be the most important sentence in the Draft Guidelines.

That proposition has an implication the Draft Guidelines should make explicit. Merger review creates three kinds of cost: the cost of prohibiting or deterring transactions that would benefit users, the cost of permitting transactions that would harm them, and the cost of the review process itself. Most transactions benefit users or are competitively neutral. Erroneously prohibiting a transaction is also largely irreversible, while entry, repositioning, and later enforcement under the Antimonopoly Act’s conduct provisions may partly correct an erroneous clearance. The framework should therefore resolve genuinely ambiguous cases in favor of nonintervention.

As Frank H. Easterbrook explained in The Limits of Antitrust, 63 Tex. L. Rev. 1, 15 (1984), “(i)f presumptions let some socially undesirable practices escape, the cost is bearable . . . . One cannot have the savings of decision by rule without accepting the costs of mistakes.” His argument concerns the allocation of residual risk when the evidence does not clearly resolve a case, as well as the best use of finite investigative resources.

The concern is especially acute in merger review because the analysis is necessarily prospective. A conduct case examines what a firm has done. A merger case forecasts what a combination may do. An instruction to resolve uncertainty in favor of intervention affects the transactions the JFTC reviews and those that firms abandon or never propose. The latter transactions never enter the case record, so an overinclusive framework imposes costs that are real yet systematically unobservable.

Japan’s experience makes this concern concrete. The government has expressly identified acquisitions of emerging firms as a policy objective. The Startup Development Five-Year Plan (Cabinet Secretariat, Nov. 24, 2022) states that “[i]t is required that the M&A ratio be raised.” It identifies startup acquisitions as important both as an exit route for startups and as a means of advancing open innovation within established enterprises.

Since the government issued that plan, acquisitions have risen to 88% of Japanese startup exits, up from roughly three-quarters. Acquisitions accounted for 1,908 of the 2,450 recorded exits between 2015 and 2025. (Japan Investment Corporation, Sutātoappu Fainansu Shijō Rebyū (2025) [Startup Finance Market Review (2025)] (Apr. 2026).) The Ministry of Economy, Trade and Industry has since published guidance intended to accelerate startup acquisitions. Acquisitions now provide the principal channel through which Japan recoups venture investment and redeploys it into a new generation of firms. A merger framework that increases the cost or uncertainty of acquiring emerging firms could impede the innovation that the Introduction seeks to promote.

We therefore recommend that the Introduction state the governing principle expressly. Because most business combinations do not restrain competition and many improve outcomes for users, and because erroneous prohibition imposes costs in part through transactions that are never proposed, the JFTC will require an affirmative basis for concern before treating a transaction as problematic. The JFTC will not treat uncertainty alone as a ground for intervention.

I. Revisions That Strengthen the Draft Guidelines

Several proposed revisions are well-founded, and ICLE supports them. The Draft Guidelines sharpen the analysis of causation and the counterfactual, broaden the treatment of countervailing competitive pressure, and improve the measurement of market shares and import pressure. They also place sound limits on customer-foreclosure theories, recognize that external shocks can weaken a firm before it meets the failing-firm criteria, and allow greater flexibility in selecting remedies.

These revisions share a common principle. Merger review should assess likely competitive effects through transaction-specific mechanisms, objective evidence, and the constraints firms face in practice. We identify these improvements first because our recommendations seek to apply that principle consistently throughout the Draft Guidelines.

A. Causation Requires a Specified Mechanism

Part I correctly explains that the phrase “by means of such business combination” requires a causal connection between the combination and the restraint of competition. It also directs the JFTC to compare the likely competitive conditions with the combination against those that would likely prevail without it. This counterfactual framework improves the Draft Guidelines’ analytical clarity. Causation also requires a merger-specific mechanism—a defined path by which the transaction itself would produce the alleged competitive effect. We return to this requirement below.

The Draft Guidelines do not yet specify the probability required to establish that causal connection. Because merger review is prospective, the JFTC need not prove that harm is certain. It should identify objective evidence showing a reasonable probability that the transaction, through a specified mechanism, will substantially restrain competition in a particular field of trade. Market structure and uncertainty may support an inference, but neither should determine the outcome. The parties should have a meaningful opportunity to rebut that inference, and the JFTC should reach its ultimate conclusion only after considering the full record.

B. Countervailing Pressure Extends Across Products

The Draft Guidelines expand the analysis of countervailing competitive pressure in several useful ways. They add “indirectly similar goods,” recognize that customers farther downstream may transmit competitive pressure upstream, and account for bargaining power derived from other products and users’ knowledge of the company group’s cost structure. Each reflects a constraint that operates in practice but may escape an analysis confined to a single market.

The treatment of bargaining power across products deserves particular attention. A broad product range can constrain a supplier’s ability to raise prices because customers may respond by reducing purchases of the supplier’s other important products. A single-product customer lacks that source of bargaining power. The Draft Guidelines properly recognize product breadth as a potential constraint on market power.

The JFTC should apply this reasoning consistently throughout the Draft Guidelines. Other provisions, including the discussion on page 64, appear to treat the accumulation of capabilities across products as a presumptive source of competitive concern. The analysis should consider in each instance whether product breadth increases or constrains the combined firm’s market power.

C. Market Shares Should Reflect Competitive Conditions

The Draft Guidelines introduce welcome flexibility in measuring market shares. Using transaction data across several years when customers place large orders irregularly can prevent a single year from producing a distorted picture. Using pre-shock shares when a temporary demand or supply disruption skews the latest data can likewise prevent false conclusions about market structure. More accurate measurement is a clear improvement.

The Draft Guidelines also correctly recognize that tariffs alone do not establish weak import pressure and that excess foreign capacity caused by declining overseas demand may increase that pressure. Both clarifications direct the analysis toward actual competitive conditions.

D. Limits on Customer Foreclosure

Part V properly limits the customer-foreclosure theory, under which a vertically integrated firm may deny an upstream rival access to an important buyer. A firm may hold a large share downstream while accounting for only a modest share of purchases of the upstream input, particularly when that input is used primarily to make other products. If an upstream rival can redirect its sales to other customers, losing access to the merged firm will not produce foreclosure.

The JFTC should state the broader principle expressly. Customer foreclosure requires the ability and incentive to deny rivals access to customers, as well as a likely adverse effect on competition. The share of the market allegedly foreclosed remains relevant, but it should never determine the outcome by itself.

E. External Shocks and Competitive Weakness

The Draft Guidelines properly recognize that demand trends, regulatory changes, or significant international developments may weaken a firm’s financial performance. Treating this factor separately from the stricter failing-firm criteria acknowledges that a firm’s competitive constraint can weaken by degrees before the firm faces imminent exit.

The JFTC should clarify that this factor applies independently. A party need not satisfy the failing-firm criteria before the JFTC considers competitive weakness caused by an external shock.

F. Greater Flexibility in Remedies

The Draft Guidelines properly take a more flexible approach to behavioral remedies, which govern a firm’s future conduct. We have argued against the categorical preference for structural relief that several jurisdictions have adopted, particularly when authorities dismiss binding access commitments without weighing their likely effects. See Brief of Amici Curiae International Center for Law & Economics and Law & Economics Scholars in Support of Petitioners, Illumina, Inc. v. FTC, No. 23-10707 (11th Cir. June 12, 2023).

The Draft Guidelines correctly recognize that divestiture may be impracticable in markets with declining demand and that behavioral measures may be appropriate until an expected structural change occurs. Our recommendations at the end of these comments address the presumptions the Draft Guidelines apply when selecting remedies. We support their willingness to consider behavioral relief.

II. A Symmetrical and Workable Efficiency Framework

The Draft Guidelines’ expanded recognition of procompetitive effects is welcome, but the operative requirements may prevent those effects from influencing merger review. The Draft appears to demand greater certainty for efficiencies than for predicted harm. Its “returned to users” condition may exclude long-term supply-security and environmental benefits, while its merger-specificity test may require parties to disprove purely theoretical alternatives.

The JFTC should apply comparable evidentiary standards and time horizons to harms and benefits, recognize competitively relevant benefits that accrue across markets or periods, and assess merger specificity against realistic alternatives. These changes would give practical effect to the new efficiency categories and make the Draft Guidelines internally consistent.

A.  Efficiencies Should Not Require Greater Certainty

Part IV, 2(7) (p. 43) adds the following requirement:

[W]hen the degree of competition lost through a business combination is large, for such a business combination to be justified by efficiency improvements, the degree of pro-competitive effects from the efficiency improvements must be greater than the degree of competition lost, and such effects must be reliably brought about.

The proportionality requirement is sound. Greater predicted harm requires greater offsetting benefits. The phrase “reliably brought about,” though, appears to impose a materially higher evidentiary standard on benefits than on harm. The Antimonopoly Act prohibits business combinations whose effect “may be substantially to restrain competition,” and the Draft Guidelines interpret that language to require probability rather than certainty. The same probabilistic standard should govern the efficiencies offered to offset the predicted harm.

United States v. Baker Hughes Inc. illustrates the problem. The government argued that a defendant could rebut a prima facie case under Section 7 of the Clayton Act only through a “clear showing.” Then-Judge Clarence Thomas, joined by then-Judge Ruth Bader Ginsburg, rejected that standard. Requiring a defendant to disprove predicted anticompetitive effects clearly “must essentially persuade the trier of fact on the ultimate issue in the case,” collapsing the distinction between the burden of producing evidence and the burden of persuasion. The court explained that “[r]equiring a ‘clear showing’ in this setting would move far toward forcing a defendant to rebut a probability with a certainty.” United States v. Baker Hughes Inc., 908 F.2d 981, 991–92 (D.C. Cir. 1990).

We cite Baker Hughes as an analogy. Japan need not adopt the prima facie case and burden-shifting framework used in U.S. merger litigation. The narrower principle applies directly here. The JFTC should not subject efficiencies to an evidentiary standard materially more demanding than the one governing predicted harm.

The Draft Guidelines expand the recognized efficiencies to include research and development involving next-generation technologies and improved environmental capabilities. They also recognize better access to funding that expands investment and produces new products, as well as improvements in supply security. These effects are inherently probabilistic and often take years to emerge. Additional evidence can strengthen the basis for predicting them, but it cannot make them certain. A reliability standard calibrated to verifiable, near-term cost savings would render these new efficiency categories largely ineffective.

The JFTC has already articulated a sound evidentiary principle. Its Study Group on Innovation and Competition Policy recommended that firms claiming a transaction will promote innovation actively present objective supporting evidence. Japan Fair Trade Commission, Inobēshon to Kyōsō Seisaku ni Kansuru Kentōkai Saishū Hōkokusho [Final Report of the Study Group on Innovation and Competition Policy] (June 28, 2024). We agree. The JFTC should demand comparable objective evidence for predicted harm.

The Draft Guidelines permit forward-looking assessments of import pressure, entry, competitive pressure from related markets and users, efficiencies, financial condition, and market size. Benefits should receive the same temporal scope as harms and countervailing factors. Allowing the JFTC to project harm while demanding that parties establish benefits with greater reliability would create an asymmetric inquiry.

The assessment should weigh likelihood and magnitude together. It also should not discount procompetitive effects solely because they resist precise quantification. Innovation and resilience effects rarely permit precise numerical estimates. Coordinated-effects and foreclosure theories often present the same difficulty, and the Draft Guidelines routinely assess them through qualitative evidence. The JFTC should apply comparable evidentiary standards to predicted harms and benefits.

The Draft Guidelines should explain how the JFTC will weigh likelihood and magnitude, what qualitative evidence it will accept when precise quantification is unavailable, and how it will discount benefits expected over longer periods.

Recommendation: Replace “must be reliably brought about” with language matching the probabilistic threshold established by the Antimonopoly Act. The Draft Guidelines should state expressly that the same temporal horizon, standard of proof, admissible evidence, and expectations about quantification apply to procompetitive effects and theories of harm. Admissible evidence should include internal documents and forward-looking business projections.

B. Clarify the ‘Returned to Users’ Requirement

Part IV, 2(7)(iii) requires that the outcome of efficiency improvements “must be returned to users.” The Draft Guidelines add improved supply security and environmental performance to the recognized categories of efficiency. They also incorporate the JFTC’s Guidelines Concerning the Activities of Enterprises, etc. Toward the Realization of a Green Society (Green Guidelines), which address the procompetitive effects of business combinations that advance environmental goals

That cross-reference leaves the “returned to users” condition unchanged. The business-combination section of the Green Guidelines restates the existing framework and identifies certain environmental outcomes as procompetitive effects. It provides no separate test, burden of proof, or method for weighing those effects against competitive harm. Any claimed benefit therefore must improve the welfare of users in the particular field of trade and within the period covered by the competitive-effects analysis.

Parties will often struggle to prove that connection. Supply-resilience and emissions-reduction benefits frequently accrue to different groups or arise later than the alleged price effects. A combination that diversifies procurement may protect users several years later against a disruption that has yet to occur. A combination that finances lower-emissions products may increase near-term costs while producing a different or improved product later. A narrow interpretation of “returned to users” would prevent the JFTC from crediting these benefits and render the new efficiency categories largely inoperative.

The JFTC’s only published application of the Green Guidelines’ business-combination provision illustrates the problem. The JFTC recognized a substantial reduction in carbon dioxide emissions because it could characterize the reduction as an improvement in the quality of the product supplied to the same users. The JFTC should not exclude benefits solely because they cannot be characterized in those terms.

The Draft Guidelines already recognize forward-looking benefit accounting. Note 12 states that “improvement of security of supply includes maintaining such security of supply in cases where it would otherwise deteriorate.” This is a counterfactual benefit measured against future deterioration that the combination would prevent. The JFTC should apply that reasoning consistently to other procompetitive effects.

Two clarifications would help. First, the JFTC should explain why environmental performance and supply security qualify as efficiencies. Suppliers may compete on those dimensions, or the improvements may increase product quality. Both fit within the conventional assessment of effects on users. A broader public-benefit category would require the JFTC to weigh objectives that users have not expressed through their choices. Such benefits fall outside ordinary merger analysis.

Second, environmental performance and supply resilience require distinct treatment. Environmental attributes can often be tied to demonstrated user preferences, as the JFTC’s treatment of reduced carbon dioxide emissions as a quality improvement illustrates. Supply-resilience benefits may instead accrue primarily to the national interest without benefiting identifiable purchasers. To that extent, they belong within policy instruments designed to protect supply security.

Recommendation: State that the JFTC may consider procompetitive effects arising outside the particular field of trade in which harm is alleged or accruing over a longer period than the predicted price effects. Such benefits should have a competitive character and a causal connection to the combination. Confirm that efficiencies may accrue to different users or over a longer period.

For each asserted benefit, the parties should identify the relevant market and beneficiaries, the causal mechanism, and the expected timing, likelihood, and magnitude. They should also present evidence supporting the benefit and explain how it will reach users. The Draft Guidelines should explain how the JFTC will compare effects on price, quantity, quality, innovation, environmental performance, and supply resilience.

C. Merger Specificity Requires Realistic Alternatives

Part IV, 2(7)(i) requires that the expected efficiencies “cannot be achieved by other means that are less restrictive on competition.” Merger specificity asks whether the transaction is reasonably necessary to produce the claimed efficiencies. If the provision requires parties to disprove every conceivable alternative, few efficiencies will qualify. Parties can almost always imagine some contractual or collaborative arrangement after the fact.

Organizational economics supports a practical inquiry. Contracts, licenses, joint ventures, and integration impose different costs and risks. Contracts require negotiation, implementation, and monitoring. They may also create dependence on jointly developed assets and require parties to specify knowledge or future contingencies that remain difficult to anticipate. Firms generally choose contracts when contracting is more efficient and mergers when integration is more efficient. Contractual alternatives may also create liability under the Antimonopoly Act, and that legal risk may make integration more attractive. (Geoffrey A. Manne & Kristian Stout, Comments of the International Center for Law & Economics on the Draft Vertical Merger Guidelines, Matter No. P810034, https://laweconcenter.org/resources/comments-of-icle-on-the-draft-vertical-merger-guidelines-matter-number-p810034.)

The Draft Guidelines also contain an internal tension. Part VII treats long-term supply agreements at cost-based prices and nondiscrimination commitments as capable of replacing the competitive constraint imposed by an independent rival. For merger-specificity purposes, Part IV may treat contractual arrangements as capable of reproducing the efficiencies of common ownership. These propositions rely on conflicting assumptions about what contracts can accomplish. At least one requires qualification.

Recommendation: Ask whether the claimed efficiencies could realistically or reasonably be achieved through materially less restrictive means. That assessment should account for timing, execution risk, legal risk, and the transaction costs of the proposed alternative.

III. Data Accumulation and User Lock-In

Part VI, 2(3) (p. 64) adds a theory of harm for conglomerate business combinations, which join firms offering complementary or otherwise noncompeting products. The provision applies even when the combination creates no foreclosure or exclusion and eliminates no potential competition:

[I]f the accumulation of data or the lock-in of users resulting from the conglomerate business combination causes the overall business capabilities of the company group to increase and its competitiveness to rise significantly, making it difficult for competitors to take competitive action, the impact of this on competition shall be examined.

User lock-in commonly refers to costs or frictions that discourage users from switching suppliers. This provision raises our most serious concerns. It lacks a defined theory of harm, omits the statutory substantial-restraint requirement, and finds no stated support in the JFTC’s experience, cited policy documents, or economic literature. These defects are cumulative.

The provision conflicts with Part VI’s structure. Part VI, 1(1) explains that a conglomerate combination does not reduce the number of competitive units and ordinarily will not substantially restrain competition unless it causes foreclosure, eliminates potential competition, or facilitates coordinated conduct. The new note applies expressly when neither foreclosure nor the elimination of potential competition occurs. It therefore creates an additional theory of harm without defining its elements. It also places that theory in a note instead of the operative text.

It omits the substantial-restraint requirement. The new text asks whether the company group’s competitiveness will rise “significantly” and whether competitors will find it “difficult to take competitive action.” The Antimonopoly Act asks whether the combination may substantially restrain competition. Any acquisition that improves a firm’s capabilities may make its rivals’ task more difficult. That consequence alone does not satisfy the statutory standard.

The substantial-restraint requirement distinguishes merger control from a general prohibition on combinations. Courts ordinarily presume that different language serves a different function. The new formulations could therefore be read to reach transactions that fall below the Act’s primary standard.

The provision treats competitive success as a source of concern. Accumulated data, scale, and customer retention often result from investment and commercial success that users have rewarded. Making rivals’ difficulty competing a trigger for review risks insulating those rivals from competition. The Introduction itself identifies the combination of complementary capabilities as an important way for business combinations to promote innovation and address identified challenges. The new note subjects the resulting capability gains to additional scrutiny. The Draft Guidelines should reconcile those positions.

The cited policy statement provides no support. The Introduction cites the JFTC’s Jan. 28, 2026, policy statement on promoting innovation as support for the revision. That document contains no economic citations or data. It mentions business-combination review once as one item in a list of JFTC activities. It does not discuss data accumulation, user lock-in, interconnected product systems, or overall business capabilities. It mentions only network effects, or the tendency for a service’s value to increase as more people use it. (See Japan Fair Trade Commission, Proactive Development of Competition Policy for Promotion of Innovation—Roles of the Japan Fair Trade Commission in Our Changing Times (Jan. 28, 2026), https://www.jftc.go.jp/en/about_jftc/Innovation2.pdf.)

The JFTC’s summary of the revision omits the provision. The explanatory document accompanying the Draft Guidelines identifies three areas of change. They concern procompetitive effects involving supply stability, environmental performance, and innovation, assessments over longer periods, and additions based on recent cases and other jurisdictions’ guidelines. It does not mention Part VI or conglomerate combinations. We also found no discussion of the provision in the secretary-general’s remarks previewing the revision.

No expert study group examined the theory. The JFTC convened a study group before the 2019 revision but not before this one. The most relevant panel, the Study Group on Innovation and Competition Policy, reported in June 2024. It examined mechanisms through which transactions affect incentives to invest in research and development. It developed no theory of harm based on data accumulation or user lock-in in conglomerate combinations.

The JFTC’s case record supports established theories. Every conglomerate combination in which the JFTC identified a competitive concern involved foreclosure or exclusivity.^[3] Every case that considered data accumulation, user lock-in, or network effects as independent concerns resulted in clearance, usually without remedies.^[4] In one prominent transaction, the JFTC considered whether combining the parties’ data would confer a competitive advantage and found that the data lacked distinctive competitive value.^[5]

Two cases are particularly instructive. In the only conglomerate case in which the JFTC used the phrase “overall business capabilities,” it used those capabilities to establish entry pressure. An operator with such capabilities planned to enter an adjacent business, and the JFTC treated that prospect as a competitive constraint supporting clearance.

In a 2025 conglomerate case, the JFTC attributed the acquirer’s high share in a data-intensive service to its having offered the service since the 1970s, ahead of other suppliers. It also found that competing services adequately met users’ needs. The JFTC treated accumulated data and the installed user base as explanations for the firm’s market share and found no resulting restraint of competition (Sysmex Corp./BioMajesty (2025)).

The new use of “overall business capabilities” lacks the safeguards applied in horizontal cases. The concept already appears in Part IV’s analysis of unilateral effects in horizontal combinations. There, the JFTC considers it alongside market shares, the closeness of competition between the parties, competitors’ positions, and the countervailing factors in Part IV, 2(2) to (9). The new note uses the same concept in Part VI without any of that context. The Draft Guidelines do not explain why a factor requiring contextual analysis in horizontal cases can operate independently in conglomerate cases.

The provision treats cross-market harms and benefits asymmetrically. Conglomerate and adjacent-market combinations connect different markets, so their benefits and alleged harms may arise in different places. The new note would count capability gains across markets as potential harm, while the “returned to users” requirement may exclude benefits arising outside the market where harm is alleged. If the JFTC retains the provision, it should apply the same cross-market treatment to harms and benefits. Equal treatment would substantially narrow the provision’s reach, indicating that its current breadth depends materially on this asymmetry.

Existing conduct rules address exclusionary practices. If a firm uses accumulated data or user relationships after a combination to engage in exclusionary conduct, Articles 3 and 19 of the Antimonopoly Act address that conduct. The Mobile Software Competition Act also applies in the sectors it covers. Those provisions allow the JFTC to assess conduct on an actual record and avoid a speculative merger forecast.

Recommendation: Delete the note. If the JFTC retains a provision addressing data accumulation or user lock-in, it should require all the following elements:

1. Durable, preexisting market power in a properly defined market, established without aggregating positions across markets.
2. Acquired data or other assets that are genuinely scarce and cannot reasonably be replicated by competitors.
3. An identified mechanism specific to the combination through which competitors will be excluded or their costs raised.
4. A likelihood that the mechanism will substantially restrain competition in a particular field of trade to the detriment of users.
5. Recognition of integration efficiencies, including efficiencies arising in other markets, under the same evidentiary standards applied to the alleged harm.

The final Guidelines or the JFTC’s response to comments should also identify the merger-review experience that the provision addresses.

IV. Nonprice Parameters Should Reflect User Choice

The The Draft Guidelines identify several “other terms” over which a company group may acquire greater latitude. These include payment terms, supply-security conditions such as timing, volume, and product variety, environmental performance such as greenhouse-gas emissions, protection of personal information, and other attributes users value when choosing products.

We agree with much of this approach. Firms compete on price, delivery reliability, product range, payment terms, environmental attributes, and other dimensions. Recognizing those forms of competition also provides the necessary counterpart to the expanded efficiency provisions discussed above.

The Draft Guidelines need a limiting principle. Attributes on which firms compete for users belong in merger analysis. Broader social objectives that users do not express through their choices belong to policymaking under the statutes designed to address them.

Philadelphia National Bank drew this distinction correctly. The Supreme Court declined to weigh civic and regional-development benefits against lost competition because courts lack the institutional competence to rank those objectives. The Court based that conclusion on institutional competence, independent of the market in which the asserted benefits arose. Social objectives ultimately require value judgments and political tradeoffs that competition authorities are poorly equipped to make.

Three consequences follow.

First, nonprice parameters operate in both directions, which the Draft Guidelines do not make clear. If improved environmental performance can constitute a procompetitive effect, deterioration may constitute competitive harm. If supply security is a parameter of competition, a combination that reduces it may substantially restrain competition on that basis alone. The Draft Guidelines should state expressly whether a nonprice parameter can independently support a finding of substantial restraint. The answer will materially affect the scope of Japanese merger control.

Second, Japan already addresses these objectives through specialized laws. The Foreign Exchange and Foreign Trade Act and the Act on the Promotion of Ensuring Security by Integrated Implementation of Economic Measures address supply security. The Act on the Protection of Personal Information governs personal data, while environmental regulations govern emissions. Asking the JFTC to rank social objectives that lack a common measure would expand its discretion, reduce predictability, and duplicate reviews conducted by authorities with more suitable legal tools.

Third, expressly naming environmental performance and supply security while describing other procompetitive effects only in general terms creates two tiers of benefits. Parties may frame transactions to fit the named categories. A general principle covering all verifiable procompetitive effects would better serve the JFTC’s purpose, with environmental performance and supply security presented as illustrations.

The Draft Guidelines should also clarify how the incorporated Green Guidelines affect market definition. The business-combination section of the Green Guidelines principally considers environmental differentiation when defining markets. It permits separate or overlapping fields of trade when users distinguish among products based on emissions characteristics. That approach can narrow the relevant market and increase measured market shares.

The Draft Guidelines incorporate the Green Guidelines’ treatment of environmental benefits in the efficiency analysis but do not address their use in market definition. The JFTC should apply environmental attributes consistently in both inquiries.

Recommendation: State that nonprice parameters are relevant when suppliers compete on those attributes for users, as shown by users’ choices among suppliers. Clarify whether a nonprice parameter may independently support a finding that competition may be substantially restrained. Recast the listed parameters as illustrations of a general principle applicable to all verifiable procompetitive effects

V. Distinguish Monopsony from Bargaining Power

The Draft Guidelines apply the framework for defining a particular field of trade and assessing competitive effects to transactions in which the company group purchases raw materials or other inputs. We agree that the Antimonopoly Act protects competition among buyers as well as competition among sellers. The Draft Guidelines should explain more clearly what constitutes buyer-side harm.

The primary concern in a purchasing market is monopsony. A buyer exercises monopsony power when it profitably reduces purchases below the competitive level, harming suppliers and ultimately downstream users. Greater bargaining power presents a different issue. If a combined firm negotiates lower input prices while maintaining its purchase volume, the gain represents a transfer from suppliers.

Productive efficiencies improve the use of resources through measures such as better logistics, lower transaction costs, or the integration of complementary assets. Their productive character may also make them specific to the combination. Lower prices attributable solely to greater bargaining power do not establish such an improvement.

A transfer may still benefit downstream users if the combined firm passes on the lower input prices. Intervention ordinarily will not be warranted when purchasing competition and output remain unchanged and downstream users suffer no harm. That conclusion follows from the absence of competitive harm rather than proof of an efficiency.

The Draft Guidelines already treat users’ countervailing bargaining power as a factor that mitigates competitive harm. The same economic principles apply when the company group exercises bargaining power as a purchaser.

Recommendation: Define buyer-side harm and explain how the JFTC will adapt the tools in Parts II and IV to purchasing markets. The analysis should address supplier substitution, alternative sales opportunities, switching and search costs, geographic constraints, procurement shares, and suppliers’ capacity to expand.

Classify procurement savings as efficiencies when they result from a productive improvement specific to the combination. Treat lower prices attributable solely to greater bargaining power as a transfer. Confirm that a substantial restraint in a purchasing market requires an identified mechanism that impairs competition among buyers. A likely reduction in purchase volumes should serve as the principal evidence of such harm, though other evidence may also support the finding.

VI. Clarify Diversion Ratios and Upward Pricing Pressure

We welcome Note 9’s introduction of diversion ratios and upward pricing pressure measures. A diversion ratio estimates the share of sales lost by one product that shifts to another. Upward pricing pressure uses diversion, margins, and efficiencies to estimate how a merger may change pricing incentives. These measures can improve the rigor and transparency of unilateral-effects analysis and align JFTC practice with that of other major jurisdictions. Four clarifications would improve the provision.

First, these measures are screening tools. Diversion-based measures estimate the merged firm’s incentive to raise prices based on assumptions about margins and substitution patterns. They do not incorporate repositioning by the parties or their rivals, entry, countervailing buyer power, or the pass-through of merger-specific cost reductions. They can identify transactions that merit closer examination, but they cannot establish by themselves that competition may be substantially restrained. The Draft Guidelines already treat concentration thresholds as screens and should give these measures the same treatment.

Second, the efficiency credit remains unspecified. Note 9 describes upward pricing pressure as an index from which “the efficiency improvement effect from the business combination” is subtracted. It does not identify the efficiency credit that the JFTC will apply. The measure’s original formulation proposed a default credit because transaction-by-transaction proof of merger-specific marginal-cost reductions is difficult.^[6]

We take no position on the amount of any default credit. The Draft Guidelines should state whether the reported measure includes efficiencies, what credit the JFTC will assume, and what empirical evidence supports that choice. Without clarification, the efficiency credit may become zero in practice, converting the measure into a gross index that omits efficiencies.

Third, diversion may also identify potential efficiencies. Note 9 correctly observes that a higher diversion ratio indicates closer competition between the parties and a potentially greater competitive effect. The same closeness of substitution may create opportunities for merger-specific efficiencies. Firms producing close substitutes may have overlapping assets or activities that integration could combine or streamline.

A higher diversion ratio does not establish greater efficiencies as a general rule. The JFTC should examine the possibility in each transaction. Treating diversion solely as evidence of harm ignores information that may bear on efficiencies.

Fourth, the Draft Guidelines should specify the relationship with market definition and provide exact formulas. Diversion-based measures do not require a completed market definition. Economists developed them partly to supplement or replace concentration-based analysis. Note 9 nonetheless calculates them within a defined particular field of trade. Attaching consequences to threshold values makes the result more sensitive to market definition, which remains among the least determinate parts of competition analysis. The JFTC should explain how diversion-based measures interact with market definition and other evidence of unilateral effects.

The English translation also leaves a term undefined. It describes one measure using the other party’s “margin” and another using the “margin rate” together with the price ratio between the parties’ products. These formulations match the standard definitions only if “margin” means the absolute margin, calculated as price minus marginal cost, and “margin rate” means the percentage margin. The final Guidelines should provide the formulas expressly, including the direction of the price ratio and the units used for the efficiency credit.

The Guidelines should also identify the data period and source and explain how the JFTC will estimate diversion, incremental cost, and margins. They should specify whether the JFTC will examine diversion in both directions and across all materially affected products. The methodology should address missing data, promotions, multiproduct pricing, and pass-through, and should state whether each reported measure includes efficiencies. Subject to appropriate confidentiality protections, the parties should receive the material assumptions and calculations with enough time to test them and submit a reasoned response.

VII. Preserve Predictability Through Clear Limits and Safe Harbors

The Draft Guidelines provide that when competitive conditions would change independently of the combination, the JFTC should compare the transaction against those expected future conditions. Note 11 extends this forward-looking counterfactual to import pressure, entry, competitive pressure from related markets and users, efficiencies, financial condition, and market size. It retains approximately two years as a guideline while allowing consideration of later developments.

We support this approach. It asks the correct question and recognizes that current conditions may provide a misleading benchmark in an economy undergoing the structural changes described in the Introduction.

The framework should operate symmetrically. A contracting market or expected structural change may support clearance, as Part IV, 2(9) recognizes. A prediction that the target would have entered or that the market would have become contested may support intervention. Note 11 relaxes the two-year guideline without supplying another limiting principle. That flexibility can improve the analysis of countervailing factors, but it should not permit indefinite projections of harm.

A potential-competition theory should require three cumulative showings:

1. Objective evidence that the target was uniquely positioned and likely to enter.
2. An absence of other plausible entrants, since the incumbent cannot profitably acquire every potential entrant.
3. Evidence that the combined firm would profitably discontinue or degrade the target’s activity.

The JFTC should also discount the predicted harm for uncertainty and the timing of entry. A potential competitor ordinarily constrains prices less than an actual competitor.

Recommendation: Apply the same standard of proof and temporal horizon whether the future counterfactual supports intervention or clearance. The party relying on a departure from pre-combination conditions should bear the burden of substantiating that departure.

A. Reaffirm the Safe Harbors

Concentration hresholds serve as screening devices that direct JFTC resources toward transactions most likely to warrant scrutiny. Safe harbors, meaning thresholds below which transactions ordinarily raise no competitive concern, provide value only when parties can rely on them.

The final Guidelines should state expressly that transactions falling within the safe harbors carry a strong practical expectation of clearance. That clarification would preserve the JFTC’s enforcement discretion while giving parties greater predictability.

B. Narrow the Important-Assets Exception

Note 6 permits the JFTC to depart from the horizontal safe harbors when the parties hold “certain important assets for competition purposes such as data or intellectual property rights.” Read together with the new text in Part VI, this provision makes data a general basis for extending scrutiny to horizontal, vertical, and conglomerate combinations without defining a limiting criterion.

Data is an intangible asset comparable to reputation, know-how, or brand value. It is often nonrival, meaning one firm’s use does not reduce its availability to others. Data may also be replicable and subject to diminishing returns as additional quantities provide progressively less value.

Note 6 should apply only when the assets are scarce and cannot readily be replicated. The JFTC should also require transaction-specific evidence showing how those assets affect competition in the particular field of trade. It should not presume competitive significance from the existence of data or intellectual property alone.

C. Link Safe Harbors to Shortened Review

The Attachment permits the JFTC to shorten the waiting period when it is evident that a transaction may not substantially restrain competition. It also recognizes that transactions satisfying the safe-harbor criteria are highly likely to meet that standard. For those transactions, the JFTC should make shortened review automatic upon written request. This procedural benefit would accelerate review without compromising enforcement and would advance the Introduction’s emphasis on predictability.

The JFTC should also reconsider whether the vertical and conglomerate safe harbors remain appropriately calibrated. Those thresholds require a market share of 10% or a Herfindahl-Hirschman Index (HHI), a measure of market concentration, of 2,500 combined with a market share of 25%. The empirical literature on vertical integration is markedly more favorable than the literature on horizontal combinations, which may support broader safe harbors.

VIII. Calibrate Remedies to the Identified Risk

The remedies revisions are welcome in principle, but several new default rules appear disproportionate. We support the Draft Guidelines’ recognition that structural relief, such as divestiture, may be unavailable or inappropriate. We also support their formal recognition of nondiscrimination commitments and measures that limit the exchange of competitively sensitive information. Three default rules require further calibration.

Prior approval of the purchaser. The Draft Guidelines require JFTC approval when the purchaser of a transferred business will be selected after the review concludes. That requirement is difficult to reconcile with the Draft Guidelines’ acknowledgment that finding a purchaser may prove difficult when demand is declining. In a market with few potential purchasers, an upfront-purchaser requirement may make divestiture impracticable and lead to prohibition of the transaction. The JFTC should reserve prior approval for cases presenting a material risk that the parties will fail to find a suitable and viable purchaser.

Monitoring by an independent third party. The Draft Guidelines state that an independent third-party monitor is “in principle required” to oversee implementation. The JFTC has properly appointed monitoring trustees when circumstances warrant. A default requirement would impose disproportionate costs on a straightforward divestiture of a discrete business to an identified and capable purchaser. Third-party monitoring adds little assurance when few parties are affected and those parties have strong commercial incentives to report noncompliance. The JFTC should require a monitor only when the remedy’s complexity, duration, or enforcement risks justify the cost.

Mandatory information-blocking measures. The Draft Guidelines state that information-blocking measures “are required” when a remedy involves cost-based purchasing rights, measures promoting imports or entry, or nondiscrimination commitments. Such safeguards will often be appropriate, but a mandatory rule would prevent case-specific calibration. The final Guidelines should state that the JFTC may require information-blocking measures when necessary to address an identified risk.

The expanded behavioral-remedy toolkit also requires safeguards. Nondiscrimination commitments, restrictions on personnel transfers and information sharing, and long-term supply obligations at production-cost-equivalent prices require the JFTC to supervise the merged firm’s conduct over time.

Requiring supply at cost-based prices constitutes price regulation. It may weaken incentives to invest in the affected assets. Transparent and stable input costs for rivals may also facilitate coordination. Behavioral remedies should therefore have defined durations and scheduled review periods. The JFTC should conduct those reviews on its own initiative. The Draft Guidelines currently permit review only upon a party’s application.

IX. Priority Recommendations

In order of priority, ICLE respectfully recommends that the JFTC:

• Replace the requirement that procompetitive effects be “reliably brought about” with language matching the probabilistic threshold established by the Antimonopoly Act. Apply the same temporal horizon, standard of proof, admissible evidence, and expectations about quantification to procompetitive effects and theories of harm.
• Delete the new note at the end of Part VI, 2(3). If the JFTC retains a provision, require the five cumulative elements identified above and explain which merger-review experience supports it.
• Confirm that the JFTC may consider procompetitive effects arising outside the particular field of trade in which harm is alleged or accruing over a longer period than predicted price effects, provided they are competitive in character and causally connected to the combination.
• Revise the merger-specificity condition to ask whether the claimed efficiencies could realistically be achieved through materially less restrictive means. Consider the alternative’s timing, execution risk, legal risk, and transaction costs.
• Limit the nonprice parameters in Part III to attributes on which suppliers compete for users, as demonstrated by users’ choices. State expressly whether those parameters may independently support a finding that competition may be substantially restrained.
• Clarify that the diversion ratios and upward pricing pressure measures in Note 9 are screening tools and cannot independently establish a substantial restraint of competition. Specify the efficiency credit, state whether the reported measures include efficiencies, and provide formulas consistent with standard definitions.
• Reaffirm the safe harbors and state that transactions satisfying them carry a strong practical expectation of clearance. Limit Note 6 to assets that are scarce and cannot readily be replicated. Make shortening of the waiting period automatic upon written request for transactions within the safe harbors.
• Apply the same standard of proof and temporal horizon to a forward-looking counterfactual whether the expected future conditions support intervention or clearance.
• Require an identified mechanism that impairs competition among buyers before finding a substantial restraint in a purchasing market. Treat a likely reduction in purchases as the principal evidence of such harm, while allowing other evidence. Classify improved purchasing terms obtained without a reduction in purchases as a transfer.
• Require prior approval of a remedy purchaser, independent third-party monitoring, and information-blocking measures only when the corresponding enforcement risk is material.

If the JFTC retains a provision addressing capability gains in conglomerate combinations, it should apply only under the cumulative conditions identified above. The firm must possess durable, preexisting market power in a properly defined market. The acquired assets must be genuinely scarce and incapable of reasonable replication. The JFTC must identify a merger-specific mechanism through which competitors would be excluded or their costs raised. The predicted restraint must be substantial and detrimental to users. The analysis must credit integration efficiencies, including those arising in other markets, under the same evidentiary standards applied to the alleged harm.

A provision confined in this manner would reach transactions that genuinely warrant concern while avoiding the defects discussed in these comments.

ICLE appreciates the opportunity to comment on the Draft Guidelines and would welcome the opportunity to provide further analysis.

We also thank Professor Toshiaki Takigawa for his helpful comments on an earlier draft of this submission.

^[1] See, e.g., Geoffrey A. Manne et al., Comments of the International Center for Law & Economics on the FTC & DOJ Draft Merger Guidelines, Docket No. FTC-2023-0043-0001 (Int’l Ctr. for L. & Econ. Sept. 18, 2023); Geoffrey A. Manne et al., Comments of the International Center for Law & Economics: EU Draft Merger Guidelines—Public Consultation (Int’l Ctr. for L. & Econ. June 22, 2026); Dirk Auer, Selcukhan Ünekbas & Mario A. Zúñiga, Comments of the International Center for Law & Economics: UK Competition and Markets Authority Call for Evidence for Merger Efficiencies Review (Int’l Ctr. for L. & Econ. Feb. 25, 2026); Ian Adams et al., Comments of the International Center for Law & Economics to the Competition Bureau Canada: Proposed Merger Enforcement Guidelines (Int’l Ctr. for L. & Econ. Feb. 10, 2026); Geoffrey A. Manne, Dirk Auer & Lazar Radic, Comment of the International Center for Law & Economics Concerning the Proposed Amendments to Korea’s Merger Review Guidelines (Int’l Ctr. for L. & Econ. Dec. 5, 2023).

^[2] Dirk Auer et al., Comments of the International Center for Law & Economics to the Japan Fair Trade Commission on the Mobile Software Competition Act (Int’l Ctr. for L. & Econ.).

^[3] Qualcomm Inc./NXP Semiconductors N.V. (2017); Broadcom Ltd./Brocade Communications Systems, Inc. (2017); M3, Inc./Nihon Ultmarc, Inc. (2019); Google LLC/Fitbit, Inc. (2020). Each transaction presented concerns about foreclosure or exclusivity, and the JFTC accepted remedies tailored to those concerns.

^[4] Salesforce.com, Inc./Slack Technologies, Inc. (2021); Microsoft Corp./Activision Blizzard, Inc. (2022); Sumitomo Mitsui Financial Group, Inc./Sumitomo Mitsui Card Co./CCCMK Holdings, Inc. (2022); Sysmex Corp./BioMajesty (2025); Google LLC/Wiz, Inc. (2025).

^[5] Z Holdings Corp./LINE Corp. (2020). The JFTC considered whether combining the parties’ data would confer a competitive advantage and found that the data lacked distinctive competitive value. It accepted remedies addressing a horizontal overlap in code-payment services.

^[6] Joseph Farrell & Carl Shapiro, Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition, 10 B.E. J. Theoretical Econ. art. 9 (2010), https://doi.org/10.2202/1935-1704.1563 (proposing a default credit for merger-specific reductions in marginal costs because case-by-case proof is difficult).

Brief Profile of the Respondent and Their Organization

ICLE is a nonprofit, nonpartisan global research and policy centre that develops the intellectual foundations for sensible, economically grounded policy. It applies law & economics methods to public-policy debates and has extensive expertise in competition law and digital-market regulation.

Which of the following digital services does your Organization provide, if any, based on the current definitions set out in the Schedule I to the DCB? (Select all those services which are applicable and write NA if not applicable)

ICLE does not provide a Core Digital Service and is not a market participant in any category listed in Schedule I. We respond as an independent research organisation.

ICLE previously submitted comments to the MCA on the April 2024 Report of the Committee on Digital Competition Law and Draft Digital Competition Bill. We have also filed submissions on digital-competition regulation with authorities in the European Union, the United Kingdom, Australia, Brazil, Canada, Japan, South Africa, Vietnam, and the United States. We seek to ensure that competition law rests on clear rules, established precedent, robust evidence, and sound economic analysis.

What challenges do you face as a service provider in the digital services as provided under the Schedule I of the Draft DCB?

Not applicable directly, as ICLE is not a digital-service provider. Comparable regimes nonetheless illustrate the challenges these rules can create for regulated firms and, more importantly, the businesses and consumers that rely on them.

The principal challenge under the EU’s Digital Markets Act (DMA) has been pervasive legal uncertainty. Gatekeepers report that the DMA leaves key concepts undefined and that the European Commission has offered conflicting interpretations. Apple observed during its compliance workshop that, when no two parties agree on what an obligation requires, the resulting ambiguity undermines the rule of law. The Commission has largely declined requests for guidance, leaving regulated firms to interpret a terse statute without meaningful direction.

Compliance costs present a second challenge. The European Commission originally projected that DMA compliance would cost all gatekeepers combined roughly €10 million annually. Amazon has since reported costs several orders of magnitude greater than that estimate. Meta has involved more than 11,000 employees and devoted nearly 600,000 engineering hours to compliance. Google assigned approximately 3,000 employees to work full time for two years on compliance with a single article. These demands divert resources from product improvement and weigh most heavily on firms with smaller compliance budgets.

Regulatory fragmentation presents a third challenge. The DMA was intended to create a single European rulebook, yet firms still face parallel national proceedings concerning conduct that the DMA squarely covers. The DCB risks creating similar duplication alongside the Competition Act, 2002, the Digital Personal Data Protection Act, the Information Technology Rules, foreign-direct-investment policy, and sectoral regulation.

Response on Core Digital Services (CDS)

Whether the following CDSs, provided under the Schedule I of the DCB, should be included in the CDS list or not? Please state your reasons accordingly.

Preliminary note on our answers below. Our answer is “No” for each of the nine services. Competition problems can plainly arise in these sectors, and the Competition Commission of India (CCI) has active proceedings in several of them. Our point is narrower and more important. Listing a service ex ante substitutes the question “What kind of product is this?” for the question that should determine whether intervention is warranted—whether a particular firm possesses substantial and entrenched market power in a properly defined relevant market that actual or potential competition cannot discipline within a reasonable period.

Abandoning market power as the organising principle of enforcement is an arbitrary choice with predictable consequences. Without a market-power requirement, an authority may pursue cases regardless of how many citizens or businesses the alleged conduct affects. It will also systematically condemn conduct that is pro-competitive or competitively neutral. As Petit and Radić explain, the market-power screen filters out claims involving mere transfers of surplus between firms rather than genuine harm to the competitive process. Removing that screen is the largest single source of false positives in the DMA’s design and would produce the same result under the DCB.

The category-based approach also rests on the questionable premise that digital markets tend inexorably towards entrenched monopoly. As Herbert Hovenkamp observes, little empirical evidence supports the claim that digital-platform markets are winner-take-all. Nor are network effects, zero prices, and multisidedness unique to digital services. Print newspapers operate in multisided markets, while broadcast radio has long offered zero-price services. Treating nine heterogeneous service categories as a single regulatory object obscures far more than it clarifies.

In your opinion, should any other emerging digital service(s) be added to the list of CDS in the DCB?

No. The list should not be expanded. We urge particular caution regarding artificial intelligence, the service most often proposed for inclusion in comparable consultations.

AI is neither a single technology nor a single service, and no clearly defined “AI market” exists. The AI stack extends from semiconductors and cloud computing to data preparation, model training, and deployment, with distinct firms, business models, and competitive conditions at each layer. Large-language models for text generation do not belong in the same service category as computer-vision systems for medical imaging. Nor should autonomous drones and self-driving cars form a single category merely because both use AI. Grouping these disparate products under one label offers no more analytical value than referring broadly to “food markets.”

Generative AI has also not reached what David Teece termed the paradigmatic stage of development. The dominant service architectures remain uncertain. Subjecting today’s most successful services to rigid rules could impede experimentation with alternative features, business models, and platform designs. As with Web 2.0, startups rather than incumbents took the early lead in generative AI. Users also multihome freely across competing assistants at essentially no cost.

Designating AI could distort assessments of market power in both directions. An artificially broad market that includes products consumers do not regard as substitutes may conceal dominance in genuine niches. At the same time, claims that AI is both vast and dangerously concentrated often reflect technological anxiety more than economic analysis. The better approach is a principled inquiry under the Competition Act 2002, conducted case by case and focused on the relevant consumers, the product at issue, and its actual substitutes.

What are the implications of the Draft DCB on these services and their stakeholders particularly in terms of competition and market entry?

The Draft DCB would have four principal implications.

1. The DCB would prohibit pro-competitive conduct without an efficiency defence. When regulators design rules under imperfect information, the evidentiary burden should decline only as confidence in harm rises. Competition law therefore gives enforcers greater latitude to challenge practices that are always or almost always harmful, such as price fixing. None of the conduct covered by the DCB falls into that category. No consensus holds that self-preferencing, tying, or bundling is generally anti-competitive. In multisided markets, vertical integration and self-preferencing often reduce transaction costs, improve the user experience, and strengthen investment incentives. A per se prohibition that provides no consumer-welfare or efficiency defence imposes a steep, and potentially irrational, price for administrative expediency.
2. The DCB would make market entry harder for the smallest participants. The DCB’s intended beneficiaries—micro, small, and medium enterprises (MSMEs) and startups—depend most heavily on platforms’ reputations and goodwill among end users because they have yet to establish their own. Rules that impede a platform’s ability to curate content, vet applications, and integrate services can degrade platform quality and drive away users. That, in turn, makes it harder for new entrants to reach a critical mass of customers. The DMA’s experience illustrates the risk. The accommodation sector experienced a shortfall in direct bookings through Google Hotel Ads, while traffic shifted towards intermediaries, several of which were themselves large platforms. The regime created clear winners and losers, with small businesses among the losers.
3. The DCB would cover Indian firms and could deprive Indian consumers of valuable services. The DCB’s thresholds would capture domestic enterprises such as Paytm, Zomato, Ola, Nykaa, MakeMyTrip, Flipkart, and Meesho. The EU’s experience shows what consumers could face. Compliance uncertainty delayed the launch of Meta’s Threads and Google’s Gemini in the EU. Apple withheld Apple Intelligence, iPhone Mirroring, and enhanced SharePlay. Google removed integrated maps and hotel and flight results from search. Clicks from Google advertisements to hotel websites fell 17.6%, while searches for mapping services rose 21% without producing a corresponding gain for rival map providers. Users still preferred Google Maps. The intervention merely made it harder for them to reach it.
4. The DCB would add another regulatory layer to an already regulated sector. Digital platforms in India already fall under the Competition Act 2002, foreign-direct-investment policy, the Digital Personal Data Protection Act 2023, the Information Technology Rules, and sectoral regulation. The CCI also has active proceedings against Google, Amazon, Meta, Apple, and Flipkart. Nobody argues that platforms should stand above the law. The relevant question is whether the costs of a special per se regime are justified when existing instruments already incorporate time-tested analytical tools and procedural safeguards.

Response on Quantitative and Qualitative Thresholds

What is your opinion about the quantitative thresholds provided under the DCB?

Our answer is “Yes” in every row for the same reason. Each metric measures size, but none measures market power. A large firm may face vigorous competition, while a smaller firm may possess durable power in a narrow market. Turnover, market capitalisation, gross-merchandise value, and user numbers indicate commercial scale or success. Using them to trigger ex ante obligations would penalise success itself.

This approach marks the DCB’s sharpest departure from the trajectory of Indian competition policy. The Raghavan Committee’s 2000 report helped move Indian competition analysis away from blunt structural presumptions and towards careful assessment of economic effects, paving the way for the Competition Act 2002. Designating firms based on size without analysing competitive effects would move Indian law back towards the approach of the Monopolies and Restrictive Trade Practices Act 1969. India should not take such a consequential step based on thresholds modelled after a European regulation whose results remain contested.

Merely raising the thresholds would not solve the underlying problem. Quantitative thresholds should serve only as a preliminary filter for identifying candidates for a substantive market-power assessment. They should never establish a sufficient condition for designation. Firms should also have a meaningful opportunity to rebut designation under the same evidentiary standard that the Commission applies to its own analysis.

11.  What could be the threshold for Active End Users (If a user has conducted the transaction in a financial year)?

We selected “Any other” for this question and the next three questions. Proposing a specific figure would wrongly imply that a particular number of users, merchants, or amount of revenue makes a firm suitable for ex ante regulation. The appropriate threshold depends on the competitive conditions surrounding the service at issue. No single figure can reliably capture market power across nine heterogeneous categories.

If the DCB nonetheless retains a bright-line screening filter for administrative convenience, the threshold should be no lower than the highest option offered—more than 25 crore active end users. It should count genuinely active users who rely on a single service, rather than registered accounts, and should serve only to identify candidates for a substantive market-power inquiry. Crossing the threshold should trigger a designation proceeding, not designation itself.

12.  What could be the threshold for annual revenue?

“Any other,” for the reasons stated above. If the DCB retains a revenue-based screening filter, it should set the threshold at or above the highest listed band—INR 30,000 crore—and measure only revenue attributable to the Core Digital Service in India, rather than group-wide turnover. Using group-wide revenue to assess a single service would capture diversified firms that lack market power in the market subject to regulation.

13.  What could be the GMV (Gross Merchandise Value) threshold?

“Any other.” We recommend eliminating GMV rather than recalibrating it because it is the least informative of the four metrics. GMV measures transaction volume, not the platform’s economic position. It may rank a low-margin marketplace above a highly profitable service with substantially greater pricing power. If retained, the threshold should fall within or above the highest listed band and serve only as a screening filter, combined with an assessment of the platform’s commission rate and the realistic alternatives available to its merchants.

14.  What could be the Business User threshold?

“Any other,” at or above the highest listed band. The number of business users primarily measures how many Indian enterprises have chosen to use a platform. Treating a high user count as a trigger for regulatory burdens would make serving more small merchants a liability. If the DCB retains this threshold, it should focus on the proportion of merchants that lack a realistic alternative route to market, rather than their absolute number.

15.  According to you, should any other quantitative threshold be used for the designation of an SSDE with respect to CDS? Or should any threshold be dropped?

Thresholds to drop. The DCB should remove global turnover and global market capitalisation. Neither reflects competitive conditions in India. Both also introduce volatility and legal uncertainty while operating, in practice, as proxies for nationality. Their inclusion risks making the regime appear to pursue industrial policy rather than competition policy. The DCB should also remove gross merchandise value for the reasons stated in response to Question 13.

The threshold to add. As a necessary condition for designation, the DCB should require a finding that an enterprise possesses substantial and entrenched market power in a properly defined relevant market that actual or potential competition cannot discipline within a reasonable period. The United Kingdom adopted this approach in the Digital Markets, Competition and Consumers Act (DMCC), which requires market power to be both “substantial” and “entrenched.” Authorities must establish each element separately—an important distinction because virtually every firm possesses some degree of market power.

Why this matters more than calibrating any numerical threshold. Without a market-power requirement, the Commission could pursue cases regardless of actual harm to citizens or businesses. The predictable results would be more false positives and excessive deterrence of lawful conduct. Error costs are asymmetric in dynamic markets. As Frank Easterbrook argued, and as ICLE scholars have explained in the context of digital platforms, wrongly condemning pro-competitive conduct can chill innovation in ways that are difficult to detect and even harder to reverse. By contrast, competition tends to erode market positions unsupported by genuine advantages.

Two further additions. First, the DCB should create a de minimis carve-out for enterprises below a meaningful share of the relevant Indian market. This would prevent the regime from capturing firms that are large in absolute terms but competitively insignificant in the market at issue. Second, the DCB should impose a statutory sunset and require periodic review, allowing designations to lapse unless current evidence justifies their renewal. Digital markets can change quickly. A designation imposed in 2026 based on 2024 data may address a competitive problem that no longer exists.

16.  What is your opinion about the qualitative thresholds provided under the DCB?

Preliminary observation: Most of the factors listed below can inform a market-power analysis. Our concern is the role they play under the DCB. The Bill treats them as a designation checklist untethered from any finding of market power, even though several describe ordinary features of efficient digital businesses rather than indicators of durable power. Where we answer “No,” the factor generally duplicates a measure of size, reflects an efficiency, or lacks a sufficiently determinate standard for consistent administration. This does not mean the factor could never prove relevant in a properly structured, effects-based analysis.

Additional Information:

Our answers above should not be interpreted as endorsing the eight factors marked “relevant” as stand-alone designation criteria. These factors belong within a market-power analysis under the Competition Act 2002, where the Commission can weigh them against one another and the evidence of competitive effects. Even sound factors will produce arbitrary outcomes when detached from that analysis because the framework does not specify how many criteria an enterprise must satisfy, how the Commission should weight them, or what evidence would suffice under each one.

17.  In your opinion, should any other qualitative threshold be used for the designation of an SSDE with respect to CDS?

Yes. We recommend three additions that would turn the designation framework from a checklist into a substantive analysis.

First, a market-power requirement. The Commission should designate an enterprise only if it finds that the enterprise possesses substantial and entrenched market power in a properly defined relevant market and that actual or potential competition cannot discipline that power within a reasonable period. Relevant indicators would include substantial entry barriers, limited competitive pressure from rivals, weak responsiveness among market participants, and evidence of consumer harm.

Second, an efficiency and objective-justification defence. Jurisdictions that prohibit conduct without allowing efficiency defences tend to experience less innovation because pre-emptive rules replace careful, case-by-case enforcement and impede experimentation. Japan’s Mobile Software Competition Act, although narrow in scope, provides justification defences relating to security, privacy, and the protection of minors. The DCB contains no equivalent. The DMA’s failure to provide such a defence has become one of the most criticised aspects of its design—particularly when interoperability mandates conflict with platform security.

Third, a symmetrical and meaningful right of rebuttal. An enterprise should be able to challenge designation under the same evidentiary standard that the Commission applies when seeking designation. It should receive adequate time to prepare economic evidence, access to the material on which the Commission relies, an oral hearing, and a reasoned decision addressing its arguments. Under the DMA, qualitative factors may support the European Commission’s designation decision but cannot equally support a firm’s rebuttal. This asymmetry raises equal-treatment and due-process concerns that India can avoid through careful drafting. Because the DCB contemplates penalties calculated by reference to global turnover, its procedural safeguards should reflect the severity of those potential sanctions.

18.  How does the Draft DCB impact your organization and what changes can be expected in the market dynamics? Please elaborate on three impacts in order of their priority.

ICLE is not a regulated enterprise and would face no direct effect. We identify below the three most significant effects on Indian market dynamics, in order of priority.

First, degraded services and delayed innovation for Indian consumers. We rank this effect highest because it would affect the greatest number of people while remaining largely invisible in enforcement statistics. Under the DMA, firms removed or degraded features to avoid exposure under self-preferencing rules and delayed or withheld new products entirely. Commentators have described a “digital curtain” separating European users from services available elsewhere. India faces even greater exposure because it remains underserved by many advanced consumer and business technologies relative to its peers, making the harm from each delayed or withheld service more severe. Policy should attract and nurture investment in digital infrastructure, not slow its deployment.

Second, false positives that burden Indian firms and MSMEs. A regime that designates firms based on size and imposes per se prohibitions will predictably condemn pro-competitive conduct. The burden will not fall solely on foreign firms. The current thresholds could capture domestic enterprises such as Paytm, Zomato, Ola, Nykaa, MakeMyTrip, Flipkart, and Meesho. MSMEs would bear substantial indirect costs through lower platform quality, less effective and more expensive customer acquisition, and reduced access to the integrated services on which they currently rely at no charge.

Third, enforcement costs and lost institutional capacity at the CCI. The DMA was presented as self-executing and collaborative, but it has proved to be neither. Observers widely regard the European Commission’s Directorate-General for Competition as understaffed for the task despite the European Commission’s substantial resources. Enforcing the DCB would require expertise in competition law, data protection, telecommunications, cybersecurity, and consumer protection. The government would need to develop or recruit those experts or divert them from other priorities. Resources devoted to supervising designated firms would then become unavailable for cartel enforcement, merger review, and other matters involving clearer competitive harms. Unless the government can demonstrate that each rupee spent enforcing the DCB would produce commensurate public benefits, it should redesign the regime.

19.  What approach / criteria should the DCB follow for designating an entity as an SSDE?

We selected “Any other approach” because none of the four specified options addresses the central defect. “Both qualitative and quantitative thresholds” comes closest, but combining two sets of criteria that measure size and structure does not produce a meaningful measure of market power.

We recommend a three-stage process.

First, a quantitative screening filter. The DCB should set this filter high and use it solely to identify candidates for examination. Crossing it should create no obligations by itself.

Second, a substantive market-power assessment. The Commission should define the relevant market properly and use the qualitative factors as analytical inputs rather than boxes to tick. Designation should require a finding that the enterprise possesses market power that is both substantial and entrenched.

Third, a reasoned designation decision. The enterprise should have a meaningful opportunity to rebut designation under a symmetrical evidentiary standard, followed by meaningful judicial review. Any resulting obligations should target the specific service and conduct found to create competition concerns rather than apply uniformly to every designated firm.

This approach broadly follows the United Kingdom’s DMCC regime and represents its principal advantage over the DMA. The DCB should also allow firms to present efficiency and objective justifications for their behaviour, provide for full merits review, and require the Commission to trial remedies before imposing them permanently.

20.  What strategies and measures can be adopted to address your concerns while ensuring a level playing field for all participants in the digital ecosystem?

• Start with the existing framework. The Competition Act 2002 is a functioning instrument, and the CCI has active proceedings against Google, Amazon, Meta, Apple, and Flipkart. Before creating a permanent ex ante regime, the government should determine whether existing law can address the same conduct case by case, at lower cost and with fewer unintended consequences. India’s Competition Law Review Committee concluded in 2019 that no special law was necessary.
• Invest in the CCI’s capacity rather than create new prohibitions. Frustration with the pace of enforcement motivates much of the support for ex ante The better response is to strengthen the Director General’s technical capacity by recruiting economists, data scientists, and engineers, while adopting procedural reforms that shorten enforcement timelines. Removing the analytical requirements that make enforcement accurate would sacrifice substance for speed.
• Preserve an efficiency defence. Whatever form the regime takes, firms should be able to justify conduct by demonstrating consumer benefits or other pro-competitive effects. This safeguard distinguishes competition policy from industrial policy and provides the most important protection against false positives.
• Remove regulatory barriers to entry. Licensing, compliance, and market-access rules can impede entry and expansion more durably than most platform conduct. Because the government directly controls these barriers, reforming them offers a more reliable way to promote entry with far less risk of regulatory error.
• Prevent overlapping proceedings and penalties. The DCB would overlap with the Competition Act 2002, the Digital Personal Data Protection Act 2023, the Information Technology Rules, foreign-direct-investment policy, and sectoral regulation. Without express coordination, firms could face several proceedings and penalties for the same conduct. Jurisdictional disputes would also consume enforcement resources better devoted to substantive analysis.
• Publish a cost-benefit analysis before enactment. The analysis should account for administrative expenses and the costs of both overenforcement and underenforcement. The EU adopted the DMA without such an assessment or clear measures of success. As a result, supporters and critics still lack a common basis for determining whether the regime works.
• Include periodic-review and sunset provisions. Designations should lapse unless current evidence supports their renewal. The government should also review the regime against defined outcomes, including consumer prices, service quality, innovation, and market entry, rather than the number of investigations opened or decisions issued.

21.  What according to you are the best practices from regimes such as: EU’s DMA, UK’s DMCC, and Japan’s MSCA that India should incorporate in the new ex-ante DCB (assuming it is enacted and enforced)?

From the UK’s DMCC—the market-power requirement and tailored obligations. The DMCC offers the strongest of the three models, principally because designation requires both substantial and entrenched market power and a “position of strategic significance.” The authority must establish each element separately. It then imposes conduct requirements for each firm and activity rather than applying uniform obligations. The regime also includes a countervailing-benefits exemption, while the Competition and Markets Authority consults affected parties on proposed remedies before adopting them. One caveat remains. Implementation of the DMCC has begun to drift towards prescribing terms of trade rather than policing anti-competitive conduct. India should draw that boundary more clearly.

From Japan’s MSCA—narrow scope and justification defences. The MSCA covers only mobile ecosystems, including operating systems, app stores, browsers, and search, rather than attempting to regulate nine heterogeneous service categories at once. It also provides justification defences relating to security, privacy, and the protection of minors. Both features recognise what the DMA does not—openness mandates impose costs, and the regulated firm is often best placed to identify and explain them.

From the EU’s DMA—principally what to avoid. We do not recommend importing the DMA’s core design. Its per se prohibitions allow no efficiency justification. Its central concepts of “fairness” and “contestability” lack definitions precise enough for firms to demonstrate compliance, leaving regulators and rivals to define success after the fact. Compliance costs have exceeded official projections by orders of magnitude, while studies have found negative consumer effects in the areas examined. The DCB could usefully adopt the DMA’s practice of publishing compliance reports and holding public workshops. That transparency has value only if the regulator seriously engages with firms’ submissions rather than dismissing them as self-interested.

A general observation. The DMA does not rest on universal economic principles. It is an industrial-policy instrument designed around the EU’s particular strengths, weaknesses, and strategic priorities. Those conditions do not necessarily apply to India, whose digital sector remains at a different stage of development. India’s primary need is to attract and retain investment in innovative technologies, not to fine-tune the distribution of their rewards.

22.  Are there any points relevant to this study which are not covered? Please specify and elaborate.

Yes. Several foundational issues require further examination.

The threshold question remains unanswered. The Committee on Digital Competition Law (CDCL) argues that competition investigations in digital markets take too long. Yet the time required may reflect the complexity of the inquiry. Digital markets often involve novel business models and zero-price products, meaning that conduct frequently has a plausible pro-competitive explanation. Competition law’s structured burden-shifting framework exists precisely to test those explanations. Achieving speed by abandoning that inquiry would impose substantial error costs on the market.

No cost-benefit analysis has been published. The government has not quantified the DCB’s expected benefits or estimated its compliance, administrative, error, and opportunity costs. Although this study focuses on thresholds, it must first ask what those thresholds are intended to achieve. We encourage MDI to treat the absence of a published cost-benefit analysis as a significant finding in its own right.

The DCB’s goals depart from those of competition law. Competition law protects the competitive process for the ultimate benefit of consumers. The DCB, like the DMA, appears more concerned with protecting individual competitors. Removing consumer welfare as the governing standard makes it harder to distinguish anti-competitive exclusion from a rival’s failure to offer a better product. It also invites firms to seek regulatory advantages that they could not obtain through competition. The European Commission cited stakeholder dissatisfaction as a principal reason for opening noncompliance investigations only weeks after the DMA took effect.

Institutional capacity requires a separate study. Policymakers expected the DMA to operate largely without continual regulatory intervention, but that expectation has proved incorrect. If enforcement has strained the European Commission’s resources, MDI should examine what the DCB would require from the CCI and what other enforcement work those demands would displace.

The analysis should include trade and investment consequences. Dollar-denominated, size-based designation thresholds will predominantly affect foreign firms. The DMA’s experience demonstrates how readily other countries may characterise such a regime as a trade measure rather than a competition measure. Whatever one’s view of the DCB’s merits, that perception carries real costs, particularly while India seeks to position itself as a leading investment destination.

A concluding observation. This study can make its most valuable contribution by asking the questions the EU failed to answer before legislating. What problem is the DCB intended to solve? How will the government measure its expected benefits? What costs will it impose? Will those benefits exceed the costs? If the evidence cannot answer these questions convincingly, the government should reconsider the need for the regime rather than merely recalibrate its thresholds.

I.    Introduction

The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research center that applies economic analysis to legal and regulatory questions. These comments respond to the Securities and Exchange Commission’s request for comment in File No. S7-2026-20 concerning Rule 611 and Rule 610(e) of Regulation NMS. ICLE welcomes the Commission’s reconsideration of Rule 611. The rule is a notably prescriptive form of mandated market integration. It can constrain execution choices and turn connectivity, data, and access to protected venues partly into regulatory purchases. These are legitimate reasons for liberalization.

However, the record supports broadening exceptions and exemptions more clearly than it supports immediate universal rescission. Rule 611’s rescission could transfer discretion to brokers and other order-handling intermediaries whose incentives and choices may be difficult for customers to observe or evaluate after the fact. The Commission acknowledges uncertainty about displayed liquidity and exchange entry, as well as customer prices and transfers between retail investors and intermediaries.[1]

ICLE’s principal recommendation is that the Commission consider limited Rule 611(d) relief for alternative execution mechanisms, including DLT-enabled models. Such relief could be structured as a pilot or class exemption. The case is prospective rather than based on a large existing market already burdened by Rule 611. It could allow covered trading centers to test new architectures while preserving the existing market as a comparator. The Commission may also wish to consider targeted relief for large trades and low-share venues.

We do not comment on the proposed rescission of Rule 610(e).

II.    Targeted Relief Is a Better First Experiment Than Universal Rescission

Rule 611 need not remain permanent merely because universal rescission is premature. However, full rescission would make the entire national market system the experiment while weakening the benchmark needed to measure the result.

We note that a coalition of 15 asset managers and institutional investors representing more than $1.45 trillion in assets under management supports a narrower experiment. As an alternative to universal rescission, their letter suggests a venue-share threshold, giving 1% as an example, and a trial period during which a new exchange could receive protected status. The trial period addresses the concern that a threshold could entrench incumbent exchanges before an entrant can attract order flow.[2]

Large trades present a further setting in which targeted relief may be appropriate. An investor may rationally accept a committed price outside the NBBO to avoid execution-induced price movement and information leakage. The Council of Institutional Investors notes that ISO and benchmark exceptions accommodate some blocks. But an ISO still requires better protected quotations to be cleared, while the benchmark exception generally applies only when the price is not based directly or indirectly on the quoted price at execution and the material terms were not reasonably determinable when the commitment was made. Neither necessarily accommodates a committed principal block where a small away quotation is economically immaterial relative to the complete order.[3]

The Commission could consider whether the existing exceptions leave a material residual problem for certain large trades. Any additional relief could be conditioned on safeguards the Commission considers appropriate to preserve best execution and deter evasion.

III.    The DLT Case Is Prospective and Architectural

Tokenization alone does not create a distinctive Rule 611 problem. While security remains a security when represented onchain, Rule 611 turns on whether the instrument is an NMS stock, whether a covered trading center executes it, and whether an away quotation is protected.[4] In the Nasdaq model approved by the Commission, tokenized and conventional forms share instrument identifiers and an order book; execution priority and market data are unchanged. The tokenization instruction is principally a post-trade election communicated to DTC.[5]

The stronger concern is prospective: covered trading centers may seek to use DLT-enabled or other mechanisms in which price, quantity, or completion depends on order-specific or conditional processes, or in which execution and settlement are closely linked. In some designs, Rule 611 could require routing or other modifications that materially alter the mechanism to address a comparatively small protected quotation elsewhere [6]

While we do not propose a catalogue of qualifying features, relevant considerations could include whether Rule 611 would prevent or materially distort an otherwise lawful design and whether existing exceptions are adequate. The Commission could define eligibility by reference to functional features rather than blockchain use alone, and decide how to treat comparable non-DLT mechanisms as the record develops.

Rule 611(d) expressly permits the Commission to grant conditional relief by order.[7] The Commission is best placed to determine the appropriate form of relief, covered entities and transactions, and participation conditions. Any order should remain limited to the specified Rule 611(a) constraint and should not displace other applicable regulatory requirements.

IV.    Relief Should Not Expand Rule 611’s Existing Perimeter

Any exemption should be drafted so that it does not imply that Rule 611 reaches DLT activity beyond its existing definitions. Professor J.W. Verret argues that Rule 611 does not itself impose duties on unregistered decentralized protocols because those protocols are not trading centers and their prices are not protected quotations. He expressly excludes tokenized instruments traded on registered exchanges or ATSs from that conclusion.[8] Any relief could therefore focus on entities already subject to Rule 611, without resolving the status of decentralized protocols or other actors.

The Commission need not endorse every possible characterization of a decentralized system or its associated actors. It should instead make clear that the exemption neither decides nor expands those questions. This caution is familiar in experimental DLT relief.[9] A Commission order is legally different, but the same drafting discipline is appropriate.

V.    Any Relief Should Be Limited and Informative

The Commission should retain flexibility to develop any pilot or other conditional relief in light of the record and potential participants. Participants should identify covered activity and provide enough information to explain the basis for relief and evaluate material risks and outcomes.

The Commission could tailor recordkeeping and reporting to the mechanism. Evidence could include execution quality for the order size, total costs, completion and settlement, price impact, information leakage, and operational incidents. These factors should support a contextual comparison with conventional execution where feasible, not a mandatory formula or connectivity obligation. The Commission should determine the method and level of detail.

Relief would remove only the specified Rule 611 constraint; it would not authorize a venue or determine status under other regimes. Best execution requirements would remain separate.[10] Participation should neither confer protected status on a DLT quotation nor require other brokers to connect.

VI.    Conclusion

The Commission need not choose between preserving Rule 611 and universal rescission. On this record, targeted, reversible relief is the better first experiment. We recommend considering limited relief for covered trading centers testing alternative architectures, including DLT-enabled models, with proportionate safeguards and reporting. The Commission can determine form, scope, eligibility, duration, and procedure while preserving Rule 611’s perimeter and avoiding any implication that relief expands jurisdiction over decentralized systems. Large trades and low-share venues may warrant separate consideration.

[1] Securities and Exchange Commission, The Trade-Through Rule and Locked and Crossed Markets Provisions of Regulation NMS, Exchange Act Release No. 34-105655, at 76–77, 158–72, 231–33 (June 11, 2026) [hereinafter Trade-Through Rule Proposal].

[2] Acadian Asset Management LLC et al., Comment Letter on File No. S7-2026-20, at 1–3 (Aug. 12, 2026).

[3] Securities and Exchange Commission, Trade-Through Rule Proposal, supra note 1, at 102–04, 163–66, 249; Council of Institutional Investors, Comment Letter on File No. S7-2026-20, at 3–6 (Aug. 13, 2026).

[4] Securities and Exchange Commission & Commodity Futures Trading Commission, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Securities Act Release No. 33-11412, Exchange Act Release No. 34-105020, at 23–24 (Mar. 17, 2026); 17 C.F.R. §§ 242.600(b), 242.611.

[5] Securities and Exchange Commission, Order Approving a Proposed Rule Change to Enable the Trading of Equity Securities in Tokenized Form, Exchange Act Release No. 34-105047, at 3–7, 11–13 (Mar. 18, 2026).

[6] Solana Policy Institute, Comment Letter on File No. S7-2026-20, at 2–4 (Aug. 13, 2026); Ondo Finance Inc., Comment Letter on File No. S7-2026-20, at 1, 3–8, 11–12 & annex A (Aug. 11, 2026).

[7] 17 C.F.R. § 242.611(d); Securities and Exchange Commission, Regulation NMS, Exchange Act Release No. 34-51808, at 520 (June 9, 2005).

[8] J.W. Verret, Comment Letter on File No. S7-2026-20, at 3 (Aug. 13, 2026).

[9] Securities and Exchange Commission, Division of Trading and Markets, No-Action Letter re DTC Tokenization Services, at 6–7 (Dec. 11, 2025).

[10] Trade-Through Rule Proposal, supra note 1, at 40–42; FINRA, FINRA Requests Comment on Modernizing FINRA’s Best Execution Guidance, Regulatory Notice 26-15, at 6–8, 16–17 (July 24, 2026).

I.          Introduction and Statement of Interest

The International Center for Law & Economics (“ICLE”) is a nonprofit, nonpartisan research center that promotes the use of law & economics methodologies to inform public-policy debates. ICLE welcomes the U.S. Trade Representative’s decision to open this investigation.[1] These comments are the latest in a series of ICLE submissions examining how foreign governments’ pharmaceutical-pricing regimes function as trade distortions that transfer the cost of global drug development to American patients.[2] Because this proceeding asks for a focused record, we compress much of that prior analysis here and cite the fuller treatments—particularly ICLE’s 2025 comments to USTR on foreign pharmaceutical pricing and its 2026 report Don’t Import the Distortion—for readers who want the complete argument and evidence.[3]

Our submission makes three points. First, Germany’s pricing apparatus works as an integrated system to hold reimbursement for innovative medicines below fair market value. This includes the AMNOG benefit-assessment process, a statutory rebate that has just more than doubled, a long-running price freeze, and a new surcharge on pricing confidentiality. Second, analyzed as anticompetitive market distortions, these measures are “unreasonable” within the meaning of Section 301(b) and impose a quantifiable burden on U.S. commerce, even though Germany violates no formal treaty obligation. Third, the appropriate response is a negotiated restructuring of the offending institutions based on the model of the December 2025 U.S.-UK pharmaceutical-pricing agreement and backed, if necessary, by calibrated and conditional trade remedies. What the United States should not do is answer German price suppression by importing administered foreign prices into its own programs.

II.          Germany’s Acts, Policies, and Practices Suppress the Prices of Innovative Medicines Below Fair Market Value

Since 2011, every medicine launched in Germany has been routed through an “early benefit assessment” under the Medicines Market Reorganization Act (“AMNOG”). The Federal Joint Committee (“G-BA”), advised by the Institute for Quality and Efficiency in Health Care (“IQWiG”), decides whether a new drug offers an “additional benefit” over a comparator therapy that the G-BA itself selects. That determination then drives the mandatory price negotiation with the national association of sickness funds: an arbitration board imposes terms if the parties fail to agree, and a finding of no additional benefit effectively caps reimbursement at the level of the comparator, which is often a generic.[4]

The procedural deck is essentially stacked against pharmaceutical innovators.  The G-BA declines to credit widely accepted surrogate and intermediate endpoints such as progression-free survival, HbA1c, and the like unless sponsors satisfy unusually demanding validation criteria, which systematically depresses the measured “benefit” and, with it, the negotiated price.[5] The predictable output of these choices is that, across a large share of assessed patient subgroups, the G-BA recognizes no additional benefit at all, anchoring prices for genuinely novel therapies to decades-old comparators.[6] A price generated this way is an artifact of administrative design rather than an actual approximation of value.

A.             Statutory Rebates Have Just More Than Doubled, Combined With a 15-Year Price Freeze

The Initiation Notice describes draft legislation that would have layered a dynamic, expenditure-linked rebate onto Germany’s existing mandatory manufacturer rebate.[7] But events have overtaken that description, and not in a direction that should be comforting. The GKV-Beitragssatzstabilisierungsgesetz, enacted in July 2026 abandoned the variable mechanism and raised the fixed statutory rebate on patented medicines from 7% to 15.5%, effective January 1, 2027.[8] This single change nearly triples manufacturers’ statutory-rebate burden, from roughly €1.1 billion to €3.2 billion in 2027 alone.[9] And the rebate operates on top of a price moratorium that has frozen list prices, subject only to partial inflation adjustment, continuously since 2010.[10] In short, the conduct under investigation has been codified and enlarged while the present comment period was running.

B.             Germany Taxes Pricing Confidentiality, Exporting Its Suppressed Prices Worldwide

Germany’s 2024 legislation reforms nominally permit manufacturers to keep negotiated reimbursement amounts confidential, but only if they accept an additional 9% discount and cover added administrative costs.[11] In essence, this scheme borders on pure rent extraction. Germany conditions a manufacturer’s ability to avoid propagating an artificially low reference price to other jurisdictions on the surrender of additional rents to the German government.

This additional rent extraction is underscored by the fact that Germany is among the most frequently referenced countries in other governments’ external-reference-pricing baskets. A German price suppressed through the AMNOG machinery does not stay in Germany: it becomes the benchmark that ratchets down administered prices across dozens of markets.[12] Charging manufacturers a premium to avoid that propagation is a candid admission of how the system works: Germany monetizes the very spillover that makes its price suppression a matter of legitimate U.S. trade concern. It also moves pricing further from the differential, Ramsey-style structure that economists across the spectrum recognize as the efficient way to finance the global joint costs of pharmaceutical R&D.[13]

III.          Germany’s Practices Are Unreasonable and Burden or Restrict U.S. Commerce

Section 301(b) reaches conduct that is “unreasonable or discriminatory” and that “burdens or restricts” U.S. commerce; the statute is explicit that a practice may be unreasonable because it is unfair and inequitable without violating any international legal obligation of the United States.[14] Sustained, state-imposed suppression of pharmaceutical prices that shifts global R&D cost-recovery onto American firms and patients arguably qualified under the statute.[15]

The harder analytical question that is central to the investigation undertaken in this docket  is how to distinguish a trading partner’s legitimate health-care regulation from an actionable distortion. Framing the conduct of foreign jurisdictions as “anticompetitive market distortions” (ACMD) may be helpful here. An ACMD is a government intervention that (1) substantially lessens competition; (2) lacks an overriding, legitimate public-policy justification; and (3) confers an artificial advantage on some market participants at others’ expense.[16] Germany’s regime satisfies each element. Its sickness-fund system confronts manufacturers with a monopsonistic single dominant buyer whose “negotiations” are conducted in the shadow of statutory fallbacks, arbitration, and reference-price caps.  Cost containment alone cannot supply the justification, because a pricing system that refuses to internalize any meaningful share of the innovation costs its population consumes is not containing costs alone, but is also generating a negative externality on everyone else in the world. Thus the positive local effects of cost containment measures must be judged in proportion to the negative harms they generate abroad.

That conclusion has particular force for Germany, Europe’s largest economy, which plainly has the capacity to pay for the innovation from which its patients benefit.[17] German patients receive American-financed breakthroughs at administered prices, while U.S. firms must recover their global R&D outlays disproportionately from American and other non-German payers. Although, increasingly, it is the case that America alone is being forced to bear this cost. Nothing in this analysis condemns universal coverage or health-technology assessment as such; it condemns the particular institutional choices that disproportionately push prices below fair market value and free-ride on U.S.-funded innovation.

A.             The Burden on U.S. Commerce Is Substantial and Quantifiable

USTR’s own figures put U.S. brand-name prices at roughly 3.9 times German levels.[18] That gap is consistent with the broader pattern: U.S. branded prices average 2.56 to 3.44 times those in the EU and OECD,[19] and American consumers supply more than 70% of OECD pharmaceutical profits from a country representing about 40% of OECD output.[20] Critically, the distortion is confined to the branded segment. When prescription costs are weighted by actual prescription volumes, Medicare and Medicaid net costs run roughly 18% below those in Germany and other peer countries, because American generic prices are the lowest in the developed world.[21] The United States does not pay high prices for medicines across the board, but suffers price distortions precisely where foreign administered-pricing systems target their suppression. That asymmetry is the result of deliberate policy choices.

The burden is not merely distributive. A substantial empirical literature ties pharmaceutical innovation to expected revenue: recent estimates imply that innovation by U.S.-headquartered firms responds to U.S. expected revenue with an elasticity of 0.23 to 0.43,[22] and quasi-experimental evidence from Medicare’s durable-medical-equipment price cuts shows that administered price compression translates into steep declines in R&D, patenting, and domestic entry.[23] One estimate on this docket attributes to Germany’s price controls the loss of roughly three new drugs per year.[24] These effects fall on a sector that attracted 13% of U.S. venture capital in 2023 and supports millions of American jobs.[25] And these price controls further erode the practical value of U.S. patent rights, since a patent whose returns a foreign government administratively confiscates is a diminished asset.

IV.          The Action USTR Should Take

Negotiation should come first, and it should target institutions rather than outcomes. A durable resolution would include: (1) rescission or phase-down of the 15.5% statutory rebate and a commitment against expenditure-linked escalators; (2) reform of G-BA assessment methods, beginning with recognition of validated surrogate endpoints and neutral comparator selection; (3) elimination of the confidentiality surcharge, so that manufacturers can shield negotiated prices from reference-pricing propagation without paying extractive rents; and (4) a commitment that Germany’s spending on innovative medicines bear a reasonable relationship to its economic capacity—an approach we have previously elaborated in the form of GDP-indexed expenditure floors and binding consultation timelines.[26] The December 2025 agreement in principle with the United Kingdom, under which the UK committed to raise net prices for new medicines by 25% and cap its clawback scheme, in exchange for tariff relief and Section 301 forbearance, demonstrates that this model can produce concrete, measurable reform.[27]

If Germany declines to engage, USTR should deploy remedies that are calibrated to the measured distortion, time-limited, and expressly conditioned on reform—trade measures designed to change the offending institutions, not to punish trade as such. We have previously developed the case for such “distortion-calibrated tariffication” at length in submissions to USTR, and contrasted it with blunt sectoral tariffs that raise costs for American patients without moving foreign policy.[28] Just as important is the boundary condition: Section 301 leverage should never be converted into a domestic most-favored-nation pricing benchmark. Importing Germany’s administered prices into U.S. programs would replicate at home the very distortion this investigation exists to discipline, and would do more damage to pharmaceutical innovation than Germany’s policies themselves.[29] Finally, the Committee should be mindful of the demonstration effect: a disciplined, analytically grounded resolution with Germany will shape the behavior of every other wealthy country now watching whether the United States is willing to defend the returns to its biomedical innovation.[30]

V.          Conclusion

Germany’s pricing regime is a set of deliberate institutional choices that hold the prices of innovative medicines below fair market value, export those suppressed prices through reference pricing, and shift the cost of global pharmaceutical innovation onto American patients and firms. Those choices are unreasonable within the meaning of Section 301, and they burden U.S. commerce in ways that are concrete and measurable. USTR should pursue negotiated structural reform on the UK model, hold calibrated remedies in reserve, and decline any path that would import the distortion it has set out to correct.

[1] Initiation of Section 301 Investigation; Hearing; and Request for Public Comments: Germany’s Persistent Underpayment for Innovative Pharmaceutical Products, 91 Fed. Reg. 38,072 (June 24, 2026), https://www.federalregister.gov/documents/2026/06/24/2026-12671/initiation-of-section-301-investigation-hearing-and-request-for-public-comments-germanys-persistent [hereinafter “Initiation Notice”].

[2] See Kristian Stout, ICLE Comments to USTR on Pharmaceutical Pricing, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-to-ustr-on-pharmaceutical-pricing [hereinafter “ICLE Pharmaceutical Pricing Comments”]; Eric Fruits, Lazar Radic, Mario A. Zúñiga & Mikołaj Barczentewicz, ICLE Comments to the USTR on Significant Foreign Trade Barriers § VII, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-to-the-ustr-on-significant-foreign-trade-barriers; Kristian Stout, ICLE Comments on Section 232 Investigation into Pharmaceuticals, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-on-section-232-investigation-into-pharmaceuticals [hereinafter “ICLE Section 232 Comments”].

[3] Kristian Stout, Don’t Import the Distortion: Why MFN Drug Pricing Would Weaken U.S. Innovation, Int’l Ctr. for L. & Econ. (2026), https://laweconcenter.org/resources/dont-import-the-distortion-why-mfn-drug-pricing-would-weaken-u-s-innovation [hereinafter “Stout, Don’t Import the Distortion”].

[4] Sozialgesetzbuch (SGB) V § 35a, https://www.gesetze-im-internet.de/sgb_5/__35a.html; see also Kristian Stout, ICLE Comment on FTC/DOJ Listening Session on Anticompetitive Conduct by Pharmaceutical Companies Impeding Generic or Biosimilar Competition, at 3 (2025), https://laweconcenter.org/resources/icle-comment-on-ftc-doj-listening-session-on-anticompetitive-conduct-by-pharmaceutical-companies-impeding-generic-or-biosimilar-competition (describing the AMNOG assessment-and-negotiation sequence).

[5] See European Federation of Statisticians in the Pharmaceutical Industry (EFSPI), German Benefit Assessment – White Paper: Latest Methodological Requirements in the German Benefit Assessment, at 39 (May 2025), https://www.efspi.org/wp-content/uploads/2025/05/GermanHTA_WhitePaper_2025.pdf.

[6] See Comment of Kristen Jakobsen Osenga, Docket No. USTR-2026-0463 (Aug. 6, 2026) (reporting that no additional benefit is found for more than half of new medicines); cf. vfa, 10 Jahre AMNOG: Eine Bilanz, https://www.vfa.de/de/gesundheit-versorgung/amnog/bilanz-10-jahre-amnog (reporting a lower share when tallied at the level of active ingredients rather than patient subgroups).

[7] Initiation Notice, supra note 1, at 3-4.

[8] See Bundesministerium für Gesundheit, Bundestag beschließt GKV-Beitragssatzstabilisierungsgesetz (July 10, 2026), https://www.bundesgesundheitsministerium.de/ministerium/meldungen/bundestag-beschliesst-gkv-beitragssatzstabilisierunggesetz-pm-10-07-2026; Germany Pushes Through Healthcare Reform Package Despite Pharma’s Drug Discount Resistance, Fierce Pharma (July 2026), https://www.fiercepharma.com/pharma/germany-pushes-through-healthcare-reform-package-despite-pharmas-drug-discount-resistance.

[9] Id. (reporting vfa estimates that the fixed-rebate increase alone will raise the industry’s statutory-rebate burden from roughly €1.1 billion to €3.2 billion in 2027).

[10] SGB V § 130a(3a). The moratorium has been in continuous effect since 2010 and has been repeatedly extended, most recently in connection with the 2026 reform legislation. See Pricing & Reimbursement Laws 2026: Germany, Global Law Experts, https://globallawexperts.com/germany-drug-pricing-reimbursement-2026.

[11] Sozialgesetzbuch Fünftes Buch [SGB V], Dec. 20, 1988, BGBl. I at 2477, as amended, § 130b (1)(c), https://www.gesetze-im-internet.de/sgb_5/__130b.html (Ger.); Initiation Notice, supra note 1, at 3; Brendan Melck, All change in Germany – confidential pricing in, IRP out, Pharmaceutical Technology (Jan. 31, 2025), https://www.pharmaceutical-technology.com/analyst-comment/all-change-germany-confidential-pricing-irp.

[12] See Stout, Don’t Import the Distortion, supra note 3, § II (describing the external-reference-pricing “ratchet”); Kristian Stout, MFN Drug Pricing: Importing the Wrong Cure, Int’l Ctr. for L. & Econ. (July 9, 2026), https://laweconcenter.org/resources/mfn-drug-pricing-importing-the-wrong-cure.

[13] See Patricia M. Danzon, Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU, 4 Int’l J. Econ. & Bus. 301 (1997); Stout, Don’t Import the Distortion, supra note 3, § III.A (collecting the Ramsey-pricing literature).

[14] 19 U.S.C. § 2411(b), (d)(3)(B)(i) (an act, policy, or practice is “unreasonable” if, “while not necessarily in violation of, or inconsistent with, the international legal rights of the United States,” it “is otherwise unfair and inequitable”).

[15] See Jeffrey E. Depp, Borrowed Prices: Pharmaceuticals and the American Tab, Truth on the Market (Feb. 25, 2026), https://truthonthemarket.com/2026/02/25/borrowed-prices-pharmaceuticals-and-the-american-tab.

[16] See Shanker A. Singham, Market Distortions and How Best to Deal with Them: Sugar Sector Case Study, Competere (2024); ICLE Pharmaceutical Pricing Comments, supra note 2, § III (applying the three-part ACMD test to foreign pharmaceutical-pricing regimes in detail).

[17] See Comment of the Center for American Principles, Docket No. USTR-2026-0463 (Aug. 6, 2026); Osenga Comment, supra note 6.

[18] Initiation Notice, supra note  1, at 3.

[19]Andrew W. Mulcahy et al., International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies (RAND Corp. Research Report No. RR-2956-ASPEC, 2021), https://www.rand.org/pubs/research_reports/RR2956.html.

[20] Council of Economic Advisers, Funding the Global Benefits to Biopharmaceutical Innovation, at 17 (2020), https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/02/Funding-the-Global-Benefits-to-Biopharmaceutical-Innovation.pdf; World Bank, GDP (Current US$), https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=OE.

[21] Tomas J. Philipson, Deyu Zhang & Qi Zhao, International Comparison of Prices for Drug Prescriptions (Univ. of Chicago Policy Brief, 2025), https://ecchc.economics.uchicago.edu/files/2025/06/Policy-Brief-International-Price-Differences-for-Drug-Prescriptions-June-7.docx.pdf.

[22] Pierre Dubois, Olivier de Mouzon, Fiona Scott Morton & Paul Seabright, Market Size and Pharmaceutical Innovation, 46 RAND J. Econ. 844 (2015); Pierre Dubois, Pharmaceutical Regulation and Incentives for Innovation in an International Perspective, tbl. 4 (Toulouse Sch. of Econ., Working Paper No. 1674, Dec. 2025); see generally Stout, Don’t Import the Distortion, supra note 3, § III.A (surveying this literature and the Congressional Budget Office revenue projections).

[23] Yunan Ji & Parker Rogers, The Long-Run Impacts of Regulated Price Cuts: Evidence from Medicare (NBER Working Paper No. 33083, 2024), https://www.nber.org/papers/w33083.

[24] See Comment of Market Access Solutions LLC, Docket No. USTR-2026-0463 (Aug. 6, 2026) (estimating that German price controls prevent the development of roughly three new drugs per year, and noting average development costs of approximately $2.7 billion and clinical failure rates near 90%).

[25] Osenga Comment, supra note 6 (noting that biopharmaceutical companies attracted 13% of all U.S. venture capital in 2023 and that the sector supports nearly five million U.S. jobs).

[26] See ICLE Pharmaceutical Pricing Comments, supra note  2, § IV (proposing, inter alia, GDP-indexed floors on innovative-medicine expenditures and binding consultation timelines in bilateral instruments).

[27] Press Release, Office of the U.S. Trade Representative, U.S. Government Announces Agreement in Principle with the United Kingdom on Pharmaceutical Pricing (Dec. 1, 2025), https://ustr.gov/about/policy-offices/press-office/press-releases/2025/december/us-government-announces-agreement-principle-united-kingdom-pharmaceutical-pricing; see also CAP Comment, supra note 17; Market Access Solutions Comment, supra note 24.

[28] See Stout, Don’t Import the Distortion, supra note 3, § IV.C (developing the case for distortion-calibrated tariffication); ICLE Section 232 Comments, supra note 2, § IV.B (arguing that responses to foreign distortions should be targeted, temporary, and evidence-based).

[29] See generally Stout, Don’t Import the Distortion, supra note 3; ICLE Pharmaceutical Pricing Comments, supra note 2, § I.

[30] Osenga Comment, supra note 6.

The International Center for Law & Economics (“ICLE”) respectfully submits these comments on Memorandum 2026-29 (“the Memorandum”) in advance of the Commission’s August 17, 2026, meeting. ICLE is a nonprofit, nonpartisan global research and policy center founded to build the intellectual foundations for sensible, economically grounded policy. We have submitted comments earlier in this study on the Commission’s single-firm-conduct proposals,[1] and we have commented on merger-enforcement policy and proposed merger guidelines before the U.S. federal antitrust agencies and before competition authorities in Europe, Canada, and elsewhere.[2]

Our comments here address the operative text of the draft options. We will not relitigate the Memorandum’s account of the past half-century of federal enforcement, although we disagree with much of it. But whatever one’s view of that history, the draft language would not produce the results the Memorandum attributes to it.

The draft options share five features, each of which would make California a national outlier in merger law: (1) a codified structural presumption bearing a rebuttal standard federal courts abandoned decades ago; (2) statutory concentration thresholds that convert an enforcement-screening device into a decision rule; (3) a liability standard (“appreciable risk”) that deletes the substantiality element present in every version of the Clayton Act since 1914; (4) a command that courts treat a revisable federal enforcement-policy document as persuasive authority, even as federal case law is demoted to nonbinding status; and (5) a freestanding “tend to create a monopoly or monopsony” prohibition with no limiting principle. And the Commission would adopt all of this just months before SB 25 begins producing the first systematic data on the transactions a California merger statute would govern.

The Memorandum’s Own Account Does Not Support the Case for “Restoration”

The draft options rest on a shared premise: that federal courts have subverted the Clayton Act’s “may be substantially to lessen competition” standard with a more demanding one, and that California should legislate its way back to the original. The Memorandum’s own materials undercut that premise, however. As the Memorandum recounts, the 1950 Senate Report explained that the words “may be” mean the statute “would not apply to the mere possibility but only to the reasonable probability” of the proscribed effect.[3] Brown Shoe used the same formulation.[4] And so do the federal courts today—including the Ninth Circuit, whose decisions would most inform California courts. The Memorandum itself cites the Ninth Circuit’s 2025 decision in FTC v. Microsoft applying “reasonable probability,”[5] and Saint Alphonsus, under which no proof of actual anticompetitive effects is required at all, but under which it is still required that “the merger create an appreciable danger of such consequences in the future.”[6] The standard the Memorandum describes as the original one is the standard the governing case law imposes. There is nothing to “restore.”

The enforcement record also cuts against the idea that there is a problem that needs fixing. The Memorandum suggests that the 2023 Merger Guidelines’ enforcement “reset” has not materialized in practice, citing recent state challenges to federally approved transactions.[7] Those cases show states challenging mergers in federal court under the existing federal standard—and in Live Nation, the enforcers, California among them, won the verdict the Attorney General celebrated. Last month, California led a twelve-state coalition in filing suit under Section 7 to block Paramount Skydance’s acquisition of Warner Bros. Discovery and secured a temporary restraining order in record time.[8] Indeed, the combined shares alleged in that case—roughly 27 to 30 percent of the pleaded markets—track the share Philadelphia National Bank (PNB) itself found sufficient. In other words, whatever constrains California merger enforcement, on this record it is not the substantive standard. A new statute along the proposed lines will not add enforcement resources or better information about transactions. Rather, it will add uncertainty, and the costs of uncertainty fall on every transaction—including the overwhelming majority that are competitively benign or beneficial.

Codifying Philadelphia National Bank Would Freeze the Doctrine at the Point Federal Courts Found Unworkable

Subsection (c) of every option deems a merger that produces “an undue percentage share” and “a significant increase in . . . concentration” to lessen competition substantially “in the absence of evidence clearly showing” the contrary, and states that it “is intended to codify the holding in United States v. Philadelphia National Bank.”[9]

PNB remains good law, and structural evidence retains an established role in merger litigation. But the Memorandum treats the six decades of subsequent doctrine as an erosion of PNB. Those cases didn’t reject the structural presumption. What they actually did was relax the demanding “clearly showing” formulation for rebutting the presumption.

In United States v. Baker Hughes, the government argued that a Section 7 defendant can rebut a prima facie case only by a “clear showing.” The D.C. Circuit—in an opinion by then-Judge Thomas, joined by then-Judge Ruth Bader Ginsburg—rejected that standard as “devoid of support in the statute, in the case law, and in the government’s own Merger Guidelines.”[10] A defendant required to produce evidence “clearly” disproving future anticompetitive effects, the court explained, “must essentially persuade the trier of fact on the ultimate issue in the case,” collapsing the distinction between the burden of production, which shifts, and the burden of persuasion, which remains with the plaintiff throughout.[11] “Requiring a ‘clear showing’ in this setting would move far toward forcing a defendant to rebut a probability with a certainty.”[12] Yet that is the formulation subsection (c) would enact as California statutory text.

A judicially administered presumption can be adjusted as evidence accumulates. A statutory one cannot. The federal presumption has been reworked over six decades as courts learned when market shares predict anticompetitive effects and when they mislead.[13] But fixed in statutory text—and expressly tied to a 1963 holding—no California court could learn from experience and reweight the presumption, whatever the evidence in a given case showed, leaving only the meaning of “undue” and “significant” open to construction.

And the economic learning gives no reason for confidence in the 1963 formulation. The premise the PNB Court drew from the economics of its day—that concentration reliably predicts competitive harm—has not survived the subsequent half-century of empirical work. The staff’s own cited authority on the HHI notes that the measure’s “link to market power is equivocal.”[14] And when the federal agencies considered lowering their concentration thresholds in 2022, a group of economists including Aviv Nevo—who then became director of the FTC’s Bureau of Economics under Chair Lina Khan and helped produce the 2023 Guidelines—warned that the empirical literature couldn’t support such a move:

The existing body of research on this question is, today, thin and mostly based on individual case studies in a handful of industries. Our reading of the literature is that it is not clear and persuasive enough, at this point in time, to support a substantially different threshold that will be applied across the board to all industries and market conditions.[15]

A statute codifying a strong structural presumption in 2026 would erroneously enshrine an outdated economic premise that the economics profession has spent over half a century studying and finding wanting.

Statutory HHI Thresholds Would Convert a Screening Device into a Merits Rule, and Put Market Definition in Place of Competitive Effects

The option presented as “Basic Merger Framework and Federal Merger Guidelines” goes further, presuming unlawful any merger that produces an HHI above 1,800 with a change greater than 100 points, or a 30 percent share with a change greater than 100 points.[16]

Concentration thresholds in enforcement guidelines are screening devices; they tell the agencies which of the thousands of transactions notified each year warrant a closer look. In contrast, a statutory presumption of illegality is a decision rule. The draft converts one into the other, and it does so at threshold levels that are themselves outliers.

The 2010 Horizontal Merger Guidelines placed the presumption at an HHI of 2,500 with a change of 200;[17] the 2023 Guidelines lowered both numbers and added the 30-percent trigger, without new empirical support—exactly the change the Nevo comments cautioned against. Nor is the 30-percent trigger grounded in PNB: as the Congressional Research Service observed, the merger in that case involved an HHI increase of roughly 600—six times the Guidelines’ trigger—prompting doubts “whether the Guidelines’ approach is firmly rooted in existing doctrine.”[18]

The proposed lower thresholds would apply the presumption to ordinary transactions in markets that still have five or six real competitors. A merger between a firm with a 10-percent share and a firm with 6 percent produces a change in HHI of 120, and an HHI of 1,800 corresponds roughly to a market shared among five or six significant competitors. In any such market, then, the acquisition of a 6-percent rival by a 10-percent firm—a transaction no empirical literature identifies as systematically harmful—would be presumptively unlawful, with the burden on the parties to prove otherwise.

Moreover, because the HHI is computed within a defined relevant market, a low statutory threshold makes market definition outcome-determinative. The narrower the market a plaintiff alleges, the higher the shares and the more readily the presumption attaches. Litigation then turns on market boundaries rather than competitive effects, and market definition is the most manipulable stage of any antitrust case, as the divergent recent treatments of “accessible luxury handbags” and “premium mattresses” illustrate.[19] As Baker Hughes put the point: “The Herfindahl-Hirschman Index cannot guarantee litigation victories.”[20]

Further compounding the problem, the proposed rebuttal provision then makes the presumption virtually conclusive. Subdivision (e) permits rebuttal only by a preponderance showing “no likely anticompetitive effects”—proof of a negative—or a showing that harmful effects are de minimis and “clearly outweighed by the cognizable procompetitive benefits of the transaction in the same relevant market.”[21] Federal law has never required so much.

Subdivision (e) further enshrines the most constrained reading of PNB by recognizing only procompetitive benefits arising “in the same relevant market” in which harm is alleged.[22] That limitation would exclude real competitive benefits merely because they occur outside the market as pleaded by the plaintiff. It also gives market definition a further importance it shouldn’t have: the narrower the alleged market, the more benefits the defendant is forbidden to offer in response.

The limitation also claims more authority than its source provides. The in-market rule traces to PNB’s response to the banks’ “final contention”—that Philadelphia needed a larger bank to attract business and stimulate the region’s economic development. The Court refused to weigh that kind of claim: a merger is not saved “because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial,” a “value choice” the Court considered “beyond the ordinary limits of judicial competence.”[23] What the Court declined to entertain, in other words, was a non-competition-related justification—civic betterment offered as an offset to lost competition. It did not hold that evidence of a transaction’s competitive benefits ceases to count the moment those benefits cross a hypothetical market boundary. Subdivision (e) would enact that further step by statute, and in its most rigid available form.

Many mergers create benefits that don’t fit within a single product-market box. A transaction may accelerate commercialization, improve a platform or ecosystem, combine complementary technologies, place assets under better management, support follow-on investment, or make entry more attractive to other firms. Acquisitions of nascent or adjacent firms often entail acquisitions of firms that operate in different market from their acquirers, so the transaction’s benefits and its alleged harms almost by definition don’t arise in the same place.[24] Excluding such benefits by statute would require courts to assess only part of a transaction’s competitive effect and to ignore the rest even when it bears directly on whether the transaction, taken as a whole, promotes or harms competition.

To be sure, federal courts generally decline to offset harm in one market with benefits in another. But the general rule has never been the absolute one that subdivision (e) would make of it. The federal agencies’ own guidelines have long reserved discretion to credit out-of-market efficiencies “inextricably linked” to the relevant market.[25] Courts reach benefits spread across distinct customer groups through market definition itself—Ohio v. American Express requires both sides of a two-sided platform to be weighed within a single market—and nothing prevents a court from defining a market broadly enough that the efficiencies fall within it.[26] Recently, the court in the FTC’s monopolization case against Meta canvassed this “unsettled question” and permitted the defendant to present evidence of procompetitive effects outside the alleged market.[27] Daniel Crane argues that the rule “is best operationalized as a presumption . . . that can be rebutted based on compelling evidence in particular cases.”[28]

Whatever the right resolution, this is a question federal courts and commentators are actively working out. A statute answering it in the most restrictive available form would foreclose that development for California—codifying, once again, the 1963 high-water mark as if the ensuing sixty years had nothing to teach.

“Appreciable Risk of Lessening Competition More Than a De Minimis Amount” Is an Expansion, Not a Restoration, of the Section 7 Standard

Supporters present the “appreciable risk” option as recapturing Clayton Act Section 7’s original meaning. The Memorandum’s own history refutes that characterization, however. Substantiality has been an element of Section 7 continuously since 1914; the 1950 Celler-Kefauver amendments, as the Memorandum notes, merely unsplit an infinitive—“may be to substantially lessen” became “may be substantially to lessen.”[29] As the Celler-Kefauver legislative history makes clear, Congress was concerned that Section 7 not reach every acquisition between competitors,[30] and the resulting language required a reasonable probability of a substantial lessening of competition in a line of commerce. A standard that deletes “substantially” and substitutes “more than a de minimis amount” has no antecedent in any version of the Clayton Act.[31] Its actual source is Senator Klobuchar’s CALERA bill, which Congress has had before it since 2021 and has declined to enact.[32]

Substantiality is what separates Section 7 from an outright prohibition on horizontal acquisitions. As Judge Posner observed of the statutory “may be,” the term “should not be taken literally, for if it were, every acquisition would be unlawful.”[33] Every acquisition of one competitor by another eliminates some rivalry between the parties; that is what makes them competitors. A prohibition on transactions carrying an “appreciable risk” of a more-than-trivial lessening of competition therefore covers, on its face, nearly every horizontal transaction of any size—leaving the actual scope of liability to be set by enforcement discretion and by the settlement calculus of private treble-damages plaintiffs.[34]

The costs of such a standard would be real yet largely unobservable. A liability standard’s most significant effect is on transactions that are abandoned or never proposed. For the startups and early-stage firms that populate California’s technology and life-sciences sectors, acquisition is a principal channel through which investment is recouped and redeployed. Between 2004 and 2020, 92 percent of United States venture-backed exits were mergers or acquisitions.[35] A merger regime that deters acquisitions also deters the investment that precedes them.[36] The Commission has heard exactly this from California’s own life-sciences industry.[37]

And the cases cited in the Memorandum—Saint Alphonsus and Hospital Corp.—applied “appreciable danger” to particular facts; they did not turn that phrase into a general burden of proof, much less use it to dispense with substantiality.[38] Option Four simply lifts the adjective, “appreciable,” from those cases, while dropping the discussion of the specific and substantial harms the word was used to describe.

Revised subdivision (c) of Option Four deems a qualifying merger to create “an appreciable risk of lessening competition more than a de minimis amount” unless the defendant clearly shows that anticompetitive effects are unlikely. The defendant must therefore disprove a risk—that is, prove a negative about a probability. If (and when) courts are unable to give that burden a workable meaning, the purportedly rebuttable presumption becomes effectively conclusive.

If the Commission concludes that Section 7’s “may be” language needs clarification, the proposed alternative of a “reasonable probability” provision is the only option presented that clarifies the standard rather than changing it.[39] But still, we would urge two conditions. First, the provision should govern the court’s assessment of the record as a whole—including entry, efficiencies, and dynamic competition—rather than operating asymmetrically on the plaintiff’s showing alone. Second, it should not be paired with subsection (c): a codified presumption rebuttable only by “evidence clearly showing” would reinstate, in presumption form, the heightened-certainty regime the clarification is meant to disavow.

The Draft’s Treatment of Federal Authority Is Selective, and the Guidelines Provision Is Unsound by Design

The proposed purpose statement provides that federal case law “is not binding on California state courts” and may be considered persuasive only “to the extent [courts] find it consistent with California law.”[40] The revised version pending in AB 1776 goes further, describing federal interpretations as “at most instructive, not conclusive.”[41] The proposed text simultaneously commands that the 2023 Merger Guidelines “shall be considered persuasive authority and understood to complement and be harmonized with this section.”[42]

The combination is difficult to explain on any neutral principle. Decisions of Article III courts construing the very statutory language California proposes to borrow are demoted, while a policy statement of two federal executive agencies—one that binds no court, federal or state—is elevated. So far as we can discern, the discrepancy in treatment between these two bodies of federal authority is based on the direction in which each cuts and not on their respective legal persuasiveness.

The provision is also unsound on its own terms. Merger guidelines are enforcement-policy documents; they carry weight in litigation only insofar as they persuade courts that they accurately describe the law, and the agencies revise them—1968, 1982, 1992, 2010, 2023—in ways the Memorandum itself describes as reversals of enforcement philosophy.[43] A California statute tied inexorably to the 2023 edition guarantees divergence: When the federal agencies next revise their guidelines, California courts will be statutorily directed to a superseded document—recreating, in permanent form, the federal-state divergence the Memorandum elsewhere counts as a cost.[44]

And the instruction that the Guidelines be “harmonized with this section”[45] supplies no direction to a court confronting a conflict between the two. If the Commission’s aim is a California merger law that stands on its own foundations, incorporating by reference a revisable document produced by federal officials whom California neither appoints nor supervises is a strange way to achieve it.

We also note our continuing objection to the purpose statement itself, which directs courts to interpret the statute “liberally” in service of “maximizing” deterrence and of goals extending to “democratic, political, and social institutions.” We explained in our single-firm-conduct comments why it would be unwise “to untether California antitrust law from U.S. antitrust law’s error-cost framework, effects-based analysis, and consumer welfare standard.”[46] The provision does more damage in merger review than in conduct cases, because merger enforcement is predictive. A conduct case examines what a firm did. A merger case forecasts what a combination might do, and an instruction to resolve that uncertainty in one direction also affects every transaction that is never proposed.

The Freestanding “Monopoly or Monopsony” Prong Has No Limiting Principle

Subsection (b) of every option restates, as a freestanding prohibition, the “may be to tend to create a monopoly or monopsony” clause drawn from Section 7 and that subsection (a) already contains. Courts presume that statutory language is not redundant, so subsection (b) will be read to do independent work: to condemn acquisitions that could not be shown to lessen competition substantially, on the ground that they “tend” toward monopoly or monopsony “in any section of the state.” The provision contains no substantiality element, no threshold of any kind, and no definition of the markets—including local labor markets—in which the “tendency” is to be assessed.

Monopsony analysis is an area in which basic questions of market definition and measurement remain unsettled in the economic literature, as we detailed in our earlier comments.[47] A tendency-toward-monopsony prohibition of unbounded geographic granularity, uncertain composition, and enforceable in treble-damages actions, would place at legal risk routine acquisitions by any employer of local significance—hospitals, grocers, processors—without any showing of harm to competition.

The Commission Should Let SB 25 Produce a Record Before California Adopts a Liability Standard

California has only just enacted the legislative instrument that would tell the Commission what problem, if any, a California merger statute needs to solve. SB 25, the California Uniform Antitrust Premerger Notification Act, was signed on February 10, 2026, and requires qualifying HSR filers to provide their federal filings to the Attorney General beginning January 1, 2027.[48] No one today—including the Attorney General—knows how many California-affecting transactions that regime will surface, how many federal clearances California would wish to contest, or what that residual set of transactions looks like. Enacting a liability standard first and discovering the caseload afterward inverts the sensible order of operations, and it forfeits the opportunity to align the statute’s scope with SB 25’s thresholds. Indeed, the current draft attempts no alignment at all: it contains no size-of-transaction threshold, reaching acquisitions of “any part of the stock . . . or assets” of another person, of any size.[49] And the Memorandum does not address whether private treble-damages actions under Section 16750 would attach to the new provisions.

Recommendations

In order of priority, we respectfully recommend that the Commission:

• Decline to adopt the “appreciable risk . . . more than a de minimis amount” formulation. If the Commission wishes to clarify “may be,” the staff’s “reasonable probability” alternative is a defensible route, provided it is drafted to govern the assessment of the record as a whole and not paired with codified presumptions.
• Decline to codify the PNB presumption in statutory text, leaving structural inference to case law. At a minimum, replace “evidence clearly showing” with a burden-of-production standard consistent with Baker Hughes, and resolve the conflict between subsections (c) and (e).
• Strike the statutory HHI and market-share thresholds or recast them as triggers for closer scrutiny rather than presumptions of illegality.
• Strike the 2023 Merger Guidelines provision. At most, permit courts to consider contemporaneous federal merger guidelines as nonbinding interpretive aids to the extent consistent with California law.
• Return the “tend to create a monopoly or monopsony” clause to subsection (a) where it operates alongside the substantiality requirement or add a substantiality element to subsection (b).
• Add a size-of-transaction threshold harmonized with SB 25 and the federal HSR thresholds, and specify the remedies and private rights of action, if any, that attach.
• Defer adoption of a substantive merger standard until the Commission has at least one filing cycle of data under SB 25.

Should the Commission nonetheless wish to proceed now, a restrained statute—one tracking Section 7’s operative text, retaining substantiality, keeping both prongs within a single competitive-effects analysis, and leaving market definition, concentration, entry, and efficiencies to case law—would give California courts ample room to reach anticompetitive mergers without the difficulties described above.

We appreciate this opportunity to comment on the draft language, and we would welcome the opportunity to provide further analysis on any of these points.

[1] Geoffrey A. Manne, Dirk Auer, Brian Albrecht & Lazar Radic, ICLE Comments to California Law Revision Commission on Single-Firm Conduct, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-to-california-law-revision-commission-on-single-firm-conduct [hereinafter ICLE SFC Comments].

[2] See, e.g., Geoffrey A. Manne et al., Comments of the International Center for Law & Economics on the FTC & DOJ Draft Merger Guidelines, Docket No. FTC-2023-0043-0001, (Int’l Ctr. for L. & Econ., Sept. 18, 2023), https://laweconcenter.org/wp-content/uploads/2023/09/ICLE-Draft-Merger-Guidelines-Comments-1.pdf [hereinafter ICLE Merger Guidelines Comments]; Ian Adams et al., Comments of the International Center for Law & Economics to the Competition Bureau Canada: Proposed Merger Enforcement Guidelines (Int’l Ctr. for L. & Econ., Feb. 10, 2026), https://laweconcenter.org/wp-content/uploads/2026/02/Competition-Bureau-Canada-Merger-Comments-2026.pdf; Dirk Auer, Selcukhan Ünekbas & Mario A. Zúñiga, Comments of the International Center for Law & Economics: UK Competition and Markets Authority Call for Evidence for Merger Efficiencies Review (Int’l Ctr. for L. & Econ., Feb. 25, 2026), https://laweconcenter.org/wp-content/uploads/2026/02/UK-CMA-Merger-Review-Comments.pdf; Geoffrey A. Manne et al., Comments of the International Center for Law & Economics: EU Draft Merger Guidelines—Public Consultation (Int’l Ctr. for L. & Econ., June 22, 2026), https://laweconcenter.org/wp-content/uploads/2026/06/EU-merger-guidelines-edited.pdf.

[3] Memorandum 2026-29 at 4 (quoting S. Rep. No. 81-1775 at 4298 (1950)) (emphasis omitted).

[4] Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962); Memorandum 2026-29 at 4–5.

[5] FTC v. Microsoft Corp., 136 F.4th 954, 964 (9th Cir. 2025); Memorandum 2026-29 at 5 n.25.

[6] Saint Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d 775, 788 (9th Cir. 2015) (quoting Hospital Corp. of Am. v. FTC, 807 F.2d 1381, 1389 (7th Cir. 1986)); Memorandum 2026-29 at 5 n.26 (citing this passage).

[7] Memorandum 2026-29 at 9 & n.48.

[8] See Press Release, Off. of the Cal. Att’y Gen., Attorney General Bonta Files Lawsuit to Block $110 Billion Warner Bros./Paramount Merger (July 2026), https://oag.ca.gov/news/press-releases/attorney-general-bonta-files-lawsuit-block-110-billion-warner-brosparamount; Press Release, Off. of the Cal. Att’y Gen., Quiet on the Set! Attorney General Bonta Secures Critical, Early Win in Lawsuit to Block Warner Bros./Paramount Merger (July 2026), https://oag.ca.gov/news/press-releases/quiet-set-attorney-general-bonta-secures-critical-early-win-lawsuit-block-warner.

[9] Memorandum 2026-29 at 10; id. at EX 2 (Option Two, subd. (c)). See also United States v. Philadelphia National Bank, 374 U.S. 321 (1963).

[10] United States v. Baker Hughes Inc., 908 F.2d 981, 983 (D.C. Cir. 1990) (Thomas, J., joined by Ginsburg, J.).

[11] Id. at 991.

[12] Id. at 992.

[13] See United States v. General Dynamics Corp., 415 U.S. 486, 503–04 (1974); Baker Hughes, 908 F.2d at 991 (a defendant rebuts by showing “that the prima facie case inaccurately predicts the relevant transaction’s probable effect on future competition”).

[14] Paolo M. Adajar, Ernst R. Berndt & Rena M. Conti, The Surprising Hybrid Pedigree of Measures of Diversity and Economic Concentration (Nat’l Bureau of Econ. Rsch., Working Paper No. 26512, 2019) (abstract); Memorandum 2026-29 at 15 n.78 (quoting the same passage).

[15] John Asker et al., Comments on the January 2022 DOJ and FTC RFI on Merger Enforcement, available at https://www.regulations.gov/comment/FTC-2022-0003-1847, at 15-16.

[16] Memorandum 2026-29 at 14, id. at EX 3–4.

[17] U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 5.3 (2010).

[18] Jay B. Sykes, 2023 Merger Guidelines: Analysis and Issues for Congress, Cong. Rsch. Serv. at 2–3 (Mar. 28, 2024) (quoted in Memorandum 2026-14 at 8–9). See also Carl Shapiro, Evolution of the Merger Guidelines: Is This Fox Too Clever by Half?, 65 Rev. Indus. Org. 147 (2024).

[19] Compare FTC v. Tapestry, Inc., 755 F. Supp. 3d 386 (S.D.N.Y. 2024) (accepting a market for “accessible luxury handbags”), with FTC v. Tempur Sealy Int’l, Inc., 768 F. Supp. 3d 787 (S.D. Tex. 2025) (rejecting a proposed “premium mattresses” market as resting on inconsistent industry usage).

[20] Baker Hughes, 908 F.2d at 992.

[21] Memorandum 2026-29 at EX 3 (Option Three, subd. (e)).

[22] Id.

[23] PNB, 374 U.S. at 370–71.

[24] See FTC v. Meta Platforms, Inc., 775 F. Supp. 3d 16, 69 (D.D.C. 2024).

[25] 2010 Horizontal Merger Guidelines § 10 n.14.

[26] Ohio v. Am. Express Co., 585 U.S. 529 (2018).

[27] Meta Platforms 775 F. Supp 3d at 69.

[28] Daniel Crane, Balancing Effects Across Markets, 80 Antitrust L.J. 397, 397 (2015).

[29] Memorandum 2026-29 at 3–4 & n.19.

[30] See S. Rep. No. 81-1775 at 4 (1950) (“[I]t was not desired that the bill go to the extreme of prohibiting all acquisitions between competing companies.”). As former Assistant Attorney General William Baer put it (also cited in the Memorandum), “[w]ith this revision, Congress declared that lessening competition between the combined firms was not quite the issue. . . .” William J. Baer, Assistant Att’y Gen., Antitrust Div., Dept. of Just., Origins of the Species: The 100 Year Evolution of the Clayton Act, Address at American Bar Association Clayton Act 100th Anniversary Symposium 5 (Dec. 4, 2014) (transcript available at https://www.justice.gov/atr/file/517721/dl).

[31] See Geoffrey A. Manne & Justin (Gus) Hurwitz, Build, Buy, or Both?: On the Antitrust Laws’ Supposed Preference for “Internal Growth” over Acquisitions, 26 Nev. L.J. 53, 69–77 (2025).

[32] S. 225, 117th Cong. (2021), reintroduced as S. 130, 119th Cong. (2025); see Memorandum 2026-29 at 17 n.89.

[33] FTC v. Elders Grain, Inc., 868 F.2d 901, 906 (7th Cir. 1989) (Posner, J.), quoted in Memorandum 2026-29 at 5.

[34] See Cal. Bus. & Prof. Code § 16750(a).

[35] Nat’l Venture Capital Ass’n, NVCA 2021 Yearbook 39-40 (2021), https://nvca.org/wp-content/uploads/2021/03/NVCA-2021-Yearbook.pdf.

[36] See Manne & Hurwitz, supra note 31.

[37] See Memorandum 2025-42 at 6–7 (summarizing the comment of California Life Sciences).

[38] Saint Alphonsus, 778 F.3d at 788; Hospital Corp., 807 F.2d at 1389.

[39] Memorandum 2026-29 at 18.

[40] Id. at 19–20.

[41] Id. at EX 1 (revised purpose statement, subd. (d)).

[42] Id. at 10–11; id. at EX 2–4 (Basic Framework subd. (d); Options Three and Four subd. (f)).

[43] See id. at 7–8 (recounting the 1982 guidelines’ break with the 1968 guidelines); id. at 13–14 (summarizing the California Chamber of Commerce’s objection that earlier editions staked out “dramatically different policy positions”).

[44] Id. at 11(noting “concerns that significant differences in federal and state merger review standards would cause confusion and uncertainty.”)

[45] See, e.g., Memorandum 2026-29 at EX 2 (Option Two, subd. (d)).

[46] ICLE SFC Comments, supra note 1, at 2–3.

[47] See id. (discussing unsettled questions of market definition and measurement in monopsony analysis, particularly in labor markets).

[48] S.B. 25, 2025–2026 Reg. Sess. (Cal. 2026) (California Uniform Antitrust Premerger Notification Act; signed Feb. 10, 2026; operative Jan. 1, 2027).

[49] Memorandum 2026-29 at EX 2 (Option Two, subd. (a)).

I write on behalf of the International Center for Law & Economics (ICLE), a nonprofit, nonpartisan research center that uses law-and-economics analysis to evaluate law, regulation, and public policy. ICLE has written extensively on “junk fee” regulation, including comments to the Federal Trade Commission on proposed rules governing rental-housing fees and online food-delivery fees.[1] We submit these comments to the Department of Consumer and Worker Protection’s (“DCWP” or “the Department”) proposed rule relating to junk fees, codified at proposed § 5-16 of Title 6 of the Rules of the City of New York (“Proposed Rule”).

The underlying problem is real, but uncommon, and does not justify this rule. When a business advertises one price and later reveals additional mandatory charges, consumers may pay more than they expected or choose a product they would not have chosen with full information up front.

Economists call this “drip pricing” or “partitioned pricing,” and there is credible evidence that some firms have an incentive to obscure mandatory add-on charges from price-sensitive shoppers, even in competitive markets.[2] ICLE does not dispute that this kind of deception harms consumers or that DCWP has the authority to police it. Our concern is that the Proposed Rule, as drafted, will impose costs on New York City businesses and consumers well beyond any transparency it delivers, for four reasons.

1. The rule’s core terms are too vague to give businesses a predictable standard.

The Proposed Rule defines a “mandatory fee” partly by reference to whether it is “reasonably avoidable” by the consumer or covers something “a reasonable person would expect” to be included in a purchase. These are not settled economic or legal concepts and therefore invite case-by-case, after-the-fact adjudication.

Consider a restaurant that charges $5 for delivery. That fee is not obviously avoidable or unavoidable. A customer can often skip it by picking up the order, which makes the fee look avoidable. But delivery is the service the customer is buying from a delivery service, so a “reasonable person” could just as easily expect that cost to be built into the advertised price. Nothing in the words “reasonably avoidable” or “a reasonable person would expect” tells the restaurant which reading DCWP will adopt. Whether the charge is a “mandatory fee” therefore turns not on any objective feature of the fee, but on how an enforcer later construes an open-ended standard—a call the business cannot make when it sets its price, and DCWP will make only after the sale.

A restaurant, retailer, or service provider faces the same uncertainty about a processing fee or an “optional” upgrade, as well as a delivery charge.

Law-and-economics research on mandated disclosure finds that mandatory disclosure regimes routinely fail on their own terms: consumers lack the literacy, time, and capacity to analyze complex terms, while firms fulfill their legal requirements by flooding consumers with fine print and boilerplate caveats that convey little useful information.[3] A vague standard provides little consumer protection while imposing a hidden tax on every business that must guess at its content. That hidden tax is ultimately passed on to consumers through higher prices or reduced product variety.

2. The reversed evidentiary presumption punishes honest uncertainty, not just deception.

The Proposed Rule requires businesses to maintain records “sufficient to establish the basis for” each fee. If a business cannot produce such records on DCWP’s request, the Department’s factual allegations are presumed true. This is a significant departure from ordinary consumer-protection enforcement, which requires the government to prove its case.

Economically, the reversed presumption converts every ambiguous compliance judgment into a standing strict-liability risk. Because a business cannot know today which fee will be second-guessed years from now, it faces a permanent incentive to over-document, or simply to abandon pricing structures that are convenient for consumers, such as optional add-ons, tiered service levels, or bundled subscriptions, because they are harder to justify to DCWP’s future satisfaction. Smaller businesses, which lack in-house counsel and compliance staff, will bear this cost disproportionately.

The delivery fee illustrates the point. To avoid the burden of documenting and defending a separate delivery charge, a restaurant can drop the charge, advertise “free delivery,” and raise the price of every item to cover the cost. That restructuring complies with the rule because a bundled price contains no separate fee to disclose. It also leaves consumers worse off. Customers who pick up their own orders would then subsidize those who receive delivery, and a single bundled price would conceal the delivery cost rather than reveal it. The restaurant may further narrow the area over which it offers “free” delivery, cutting off customers it once served. The rule would then have relocated the opacity into a pooled price and trimmed consumer choice, rather than delivering the transparency it promises.

Such supply responses are the ordinary economics of regulation, and the literature measuring them is more than half a century old. A compliance obligation is a tax on covered transactions, whether or not any money changes hands, and part of any such tax is borne by consumers through higher prices and narrower choices. The evidence dates back to Sam Peltzman’s 1973 evaluation of the 1962 drug amendments, which required sellers to document their claims to regulators’ satisfaction before selling. The mandate was designed to protect consumers from ineffective drugs. It sharply reduced the flow of new drugs instead, and Peltzman found the losses to consumers exceeded the gains.[4] The pattern holds in modern data with modern methods. When federal ability-to-repay rules exposed mortgage lenders to liability for loans a regulator might later second-guess, lenders raised prices barely at all. Instead, they eliminated roughly 15% of the affected market.[5]

The general lesson is that rules that look costless because they “merely” require disclosure or recordkeeping still change the incentives facing regulated businesses, and those changes can hurt the consumers the rule is meant to help, for example, by pushing smaller, independent businesses out of the New York City market and leaving consumers with fewer choices.[6]

3. The rule duplicates existing federal, state, and City total-price requirements without a matching gain in protection.

New York City consumers are not unprotected today. The Federal Trade Commission’s Rule on Unfair or Deceptive Fees requires businesses that offer, display, or advertise prices for live-event tickets or short-term lodging to clearly and conspicuously disclose an all-in “total price”—inclusive of all mandatory fees—more prominently than other pricing information, nationwide.[7] These are two of the sectors most associated with drip pricing.

As proposed in 2023, the FTC’s rule would have applied to all industries nationwide, just as the Proposed Rule would reach every business in New York City.[8] After more than 60,800 public comments, the Commission declined to adopt an industry-neutral rule, choosing instead “to use its rulemaking authority incrementally,” beginning with the two industries where it had documented consumer harm for more than a decade.[9] The agency with the deepest record on this question could not justify economy-wide coverage in quantitative terms, and the Department’s own hotel rule already follows its incremental template.

New York State requires “all-in” ticket pricing for places of entertainment.[10] New York City’s Department of Consumer and Worker Protection has separately adopted a hotel “junk fee” rule, making it a deceptive practice to advertise a room rate without clearly and conspicuously disclosing the total price of the stay, including all mandatory fees, effective February 21, 2026.

Layering a fourth, city-specific, industry-neutral definition of “total price” and “mandatory fee” on top of these existing regimes means a business operating in New York City must reconcile several overlapping, non-identical compliance standards for what is fundamentally the same disclosure obligation. This is a clear case of duplicative regulation. Because the FTC, state, and city already address a large share of the highest-profile drip-pricing conduct, the marginal consumer-protection benefit of a new, broader rule is small. In contrast, the marginal compliance cost, spread across every other industry now newly covered, is not.

It is also worth remembering that itemized, multi-part pricing is not itself evidence of deception; it often reflects legitimate cost recovery and consumer choice among service levels. A rule that treats ordinary itemization with suspicion, on top of regimes that already police true deception, risks discouraging efficient pricing practices without producing real transparency.

4. DCWP’s existing enforcement authority is a better-targeted tool than a broad new rule.

DCWP already has authority under the City’s consumer-protection law to act against businesses that conceal mandatory fees or misrepresent their nature, amount, or refundability, which is the precise conduct the Department identifies as most harmful.

Targeted enforcement, built on a developed evidentiary record of actual deception, would allow DCWP to address genuine bad actors without imposing the same compliance burden on the much larger number of businesses that already itemize their fees honestly. If the Department nonetheless proceeds with a generally applicable rule, we respectfully urge it to: (a) narrow “mandatory fee” and “reasonably avoidable” to concrete, administrable standards rather than open-ended reasonableness tests; (b) eliminate or substantially limit the reversed evidentiary presumption in proposed § 5-16(f); and (c) harmonize the definition of “total price” with the FTC’s existing rule and New York’s own ticket- and hotel-fee laws so that New York City businesses face one workable standard rather than four.

We appreciate DCWP’s attention to consumers’ concerns, and we share the Department’s goal of ensuring that New York City consumers can see, before they buy, what they will actually pay. But a rule built on vague standards, a reversed burden of proof, and a duplicative, city-specific set of definitions is likely to raise prices and reduce the range of pricing options available to New York City consumers and businesses alike, without a matching improvement in transparency.

We respectfully urge DCWP to withdraw the Proposed Rule in its current form or, at a minimum, to revise it substantially along the lines described above before it moves to adoption.

Thank you for your consideration. Please do not hesitate to contact us with any questions.

[1] Eric Fruits & Daniel J. Gilman, Comments on FTC Unfair or Deceptive Rental Housing Fee Practices, ANPRM (Project No. R207011), Int’l Ctr. for L. & Econ. (Apr. 9, 2026), https://laweconcenter.org/wp-content/uploads/2026/04/FTC-Rental-Housing-Fee-Practices-2026.pdf; Brian Albrecht, Eric Fruits, Daniel J. Gilman & Geoffrey A. Manne, ICLE Comments to FTC on Online Food-Delivery Service Fees, Int’l Ctr. for L. & Econ. (May 18, 2026), https://laweconcenter.org/wp-content/uploads/2026/05/FTC-Delivery-Fees-2026.pdf.

[2] See Xavier Gabaix & David Laibson, Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets, 121 Q.J. ECON. 505 (2006).

[3] See Omri Ben-Shahar & Carl E. Schneider, The Failure of Mandated Disclosure, 159 U. PA. L. REV. 647 (2011).

[4] Sam Peltzman, An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments, 81 J. POL. ECON. 1049 (1973)

[5] Anthony A. DeFusco, Stephanie Johnson & John Mondragon, Regulating Household Leverage, 87 REV. ECON. STUD. 914 (2020).

[6] See Lloyd Dixon, Susan M. Gates, Kanika Kapur, Seth A. Seabury & Eric Talley, The Impact of Regulation and Litigation on Small Businesses and Entrepreneurship: An Overview, in IN THE NAME OF ENTREPRENEURSHIP? 17 (Susan M. Gates & Kristin J. Leuschner eds., 2006).

[7] 90 Fed. Reg. 2066 (Jan. 10, 2025) (effective May 12, 2025) (codified at 16 C.F.R. pt. 464).

[8] 88 Fed. Reg. 77420 (Nov. 9, 2023); see 90 Fed. Reg. at 2119.

[9] 90 Fed. Reg. at 2119; id. at 2068 (comment count).

[10] N.Y. Arts & Cult. Aff. Law § 25.07(4) (requiring disclosure of the total ticket cost, inclusive of all ancillary fees, prior to selection for purchase).

 

I.         Introduction and Overview

The International Center for Law & Economics (ICLE)[1] submits these comments to Office of the Privacy Commissioner of Canada (OPC) regarding the regarding the draft guidance, “Assessing whether and how to use age assurance – Guidance for websites and online services.”[2] ICLE is a nonprofit, nonpartisan research center that applies law & economics to public-policy questions, with a focus on consumer welfare. ICLE scholars have written extensively on the intersection of online platform regulation, protecting children online, and free speech, including white papers, regulatory comments, and amicus briefs.[3]

While we share the OPC’s goal of mitigating genuine online harms to minors, we caution against guidance that implicitly encourages or effectively mandates the widespread adoption of age assurance across the internet to avoid the alleged harm of targeted advertising. Pushing platforms to verify or estimate the ages of their users to restrict access or restrict data-collection practices introduces massive transaction costs, fundamentally alters the economics of the internet, and paradoxically, could degrade user privacy.

The claimed benefits of these interventions are limited and uncertain. The economic, operational, and privacy costs are substantial. The guidance should make clear that age assurance is only applicable when content leads to legally cognizable harms to minors and not merely protected free expression or targeted advertising.

To this point, the OPC guidance identifies practices such as “detailed profiles of users… used to create exploitative or age-inappropriate advertising” as potential harms that might necessitate age assurance.[4] However, as ICLE scholarship has consistently demonstrated, legislation and regulatory guidance often miss the mark by focusing on data collection and targeted advertising instead of real dangers like cyberbullying, predation, and severe mental health drivers. Age-gating the internet to stop targeted ads does not stop malicious actors, but it does disrupt the economic engine that funds high-quality, moderated online spaces, including the development of content for minors.

Moreover, through the lens of the Coase theorem and general principles of good governance,[5] the burden of avoiding negative externalities (spillover harms) should be placed on the party that can avoid them at the lowest cost. For minors using the internet, parents—working in tandem with their children—are overwhelmingly the least-cost avoiders. They possess localized knowledge of their child’s maturity, vulnerabilities, and needs. Shifting this burden to platform operators via mandatory age-assurance schemes introduces massive friction and inefficiencies. It should only be imposed when the harms to minors accessing online content are clearly so high that it is worth the cost, i.e. online pornography or other content which is illegal for minors to access.

Broad age assurance requirements erect barriers to entry for accessing entire platforms rather than placing barriers around specific malicious conduct. This “collateral censorship” excludes minors from valuable educational, social, and community resources, while significantly inconveniencing adults who wish to browse anonymously or cannot easily provide identity documentation.

II.       The Economics of Multisided Platforms: Why Targeted Ads are Not a Harm

Most of organizations operating websites and online services subject to the OPC guidance are what economists call multisided markets, or platforms.[6] Such platforms derive their name from the fact that they serve at least two different types of customers and facilitate their interaction. Multisided platforms generate “indirect network effects,” described by one economist as a situation where “participants on one side value being able to interact with participants on the other side… lead[ing] to interdependent demand.”[7] Online platforms provide content to one side and access to potential consumers on the other side. In order to keep demand high, online platforms often offer free access to users, whose participation is subsidized by those participants on the other side of the platform (such as advertisers) that wish to reach them.[8] This creates a positive feedback loop in which more participants on one side of the platform leads to more participants on the other.

This dynamic is also true of platforms with a “non-trivial number of children” accessing their content.[9] Revenue is collected not from those users, but primarily from the other side of the platform—i.e., advertisers who pay for access to the platform’s users. To be successful, online platforms must keep enough of the right type of users engaged to maintain demand for advertising.

Moreover, many websites and online services are platforms that rely on user-generated content. Thus, they must also consider how to attract and maintain high-demand content creators, often accomplished by sharing advertising revenue. If platforms fail to serve the interests of high-demand content creators, those creators may leave the platform, thus reducing its value.

Online platforms acting within the market process are usually going to be the parties best positioned to make decisions balancing the interests of platforms users, in general. Websites and online services which attract a lot of children often compete on privacy policies and protections for them by providing tools to help users avoid what they (including, in this context, their parents and guardians) perceive to be harms, while keeping users on the platform and maintaining value for advertisers.[10] Part of this is driven by a recognition that children have little income or ability to spend money online at all without parental involvement.

There may, however, be examples where negative externalities[11] stemming from internet use are harmful to society more broadly. A market failure could result, for instance, if platforms’ incentives lead them to collect too much (or the wrong types of) information for targeted advertising, or to offer up content that is harmful for children. But this does not necessarily imply that all (or even the majority of) targeted advertising is “exploitative or age-inappropriate” as the OPC guidance suggests.[12] If anything, accurate age profiles of users could allow platforms to help advertisers reach them with more age-appropriate and relevant advertising. Again, the interests of the various platforms are in making sure that all the various parties (which includes the parents of children) are content with their services.

III.    Transaction Costs: The Burden of Avoiding Harm Should be on the Least Cost Avoider of that Harm

In situations where there are negative externalities from internet use, there may be a case to regulate online platforms in specific, well-defined ways keyed to demonstrable and quantifiable harms. Any case for regulation must, however, acknowledge potential transaction costs, as well as how platforms and users may respond to changes in those costs. To get regulation right, the burden of avoiding a negative externality should fall on the least-cost avoider.

The Coase Theorem, derived from the work of Nobel-winning economist Ronald Coase[13] and elaborated subsequent economic research,[14] helps to explain the issue at-hand:

1. The problem of externalities is bilateral;
2. In the absence of transaction costs, resources will be allocated efficiently, as the parties bargain to solve the externality problem;
3. In the presence of transaction costs, the initial allocation of rights does matter; and
4. In such cases, the burden of avoiding the externality’s harm should be placed on the least-cost avoider, while taking into consideration the total social costs of the institutional

In one of Coase’s examples, the noise from a confectioner using his candy-making machine is a potential cost to the doctor next door, who consequently cannot use his office to conduct certain testing. Simultaneously, the doctor moving his office next door to the confectioner is a potential cost to the confectioner’s ability to use his equipment.

In a world of well-defined property rights and low transaction costs, the initial allocation of rights would not matter, because the parties could bargain to overcome the harm in a mutually beneficial manner—i.e., the confectioner could pay the doctor for lost income or to set up sound-proof walls, or conversely, the doctor could pay the confectioner to reduce the sound of his machines.[15] But since there are transaction costs that prevent this sort of bargain, it is important whether the initial right is allocated to the doctor or the confectioner. To maximize societal welfare, the cost should be placed on the entity that can avoid the harm at the lowest cost.[16]

In the context of the OPC guidance in question here, websites and online services create incredible value for their users, but they also can, at times, impose negative externalities relevant to children who use their services. In the absence of transaction costs, it would not matter whether policy requires age assurance and possible age-gating by platforms or makes it the parents’ responsibility to avoid those potential harms.

But since transaction costs involved in age assurance certainly do exist, and the corresponding responsibilities of platforms in response to children accessing “harmful” content are likely high, then defining those alleged harms is very important. For example, if, for argument’s sake, we assume that targeted ads, per se, are a harm to children, the cost involved in banning then will be the proliferation of less relevant ads, or even less relevant content available to children as creators find less ability to monetize without the extra revenue generated by targeted ads.

Further, since most minors can’t afford the basic means to access the internet on their own, parents already have a large role to play in when and how their children engage online. Thus, the actual least cost avoider in controlling both positive and negative content available to children (including targeted ads) is their own parents. Nearly every major provider of an online service (including device manufacturers) provides a plethora of tools to allow parents to restrict how their devices are used, when purchases can be made, as well as a host of other parenting-relevant preferences.[17] Moreover, a targeted ad itself is only effective insofar is it leads to a parent purchasing something on behalf of their child. Assuming parents have set their children’s devices up with their preferred controls, there is simply no easy way for children to even respond to targeted ads (relevant or irrelevant) without their parents’ involvement. Thus, the OPC guidance aimed at restricting such targeted advertising comes with little benefit, but considerable cost in lost content generation.

The lessons from Children’s Online Privacy Protection Act (COPPA) in the United States illustrate this point. Scholars have found that after the Federal Trade Commission’s settlement with YouTube that required the limiting of personalization for made-for-kids (MFK) content, both the quantity and quality of children’s content decreased along with views for such channels.[18] This is because “COPPA’s definition of personal information includes persistent identifiers, which are often used for personalized advertising and platform interaction features.”[19] And since “obtaining verifiable parental consent for free online services is difficult, COPPA acts as a de facto ban on personal information collection by free MFK content providers.”[20] In other words, the transaction costs of gaining verifiable parental consent is high enough that it operated as a ban on targeted advertising, and creators were no longer able to monetize their content if it was aimed at children. This directly led to a “COPPAcalypse” where the market for child-directed content was severely harmed.[21]

By wrongly placing the burden on operators to avoid harms associated with targeted advertising, societal welfare can be reduced, including the welfare of children who no longer get the benefits of quality content designed for them. Here, the OPC guidance should focus on real harms that are not easily avoided.

For instance, there are situations where operators of websites and online services are the least-cost avoiders because they are the parties best placed to monitor and control harms associated with internet use, especially in cases where it is difficult or impossible to hold those using their platforms accountable for the harms they cause.[22] A prime example is deterring child predators. The OPC is right to be concerned about the facilitation of adults’ ability to message children, or making it easier for children to access illegal content like online pornography or gambling. Placing the burden on children or their parents to avoid such harms could allow operators to impose un- or undercompensated harms on society. There is a case to be made that, given their access to user data, platforms have better intelligence for detecting and deterring these harmful activities. On the other hand, given the vast amount of legal content and heterogeneous preferences of different parents, parents themselves are better positioned to determine what legal content is appropriate for their children to access in most cases.

Thus, in order to get the balance right, it is important to determine whether it is the operators or their users (and parents) who are the least-cost avoiders. Placing the burden on the wrong parties would harm societal welfare, either by reducing the value that online platforms confer to their users, or in placing more uncompensated negative externalities on society. Here, the OPC should differentiate between the alleged harms associated with online advertising, which can be avoided by parents who largely control the power of the purse, and harms from accessing illegal content or unwanted contacts from adults.

IV.    Conclusion

We appreciate the OPC’s openness to public input through this consultation. ICLE remains available to provide further analysis or clarification on any of the issues raised in these comments. But the OPC should refocus its guidance on real harms to children and recognize the importance of targeting in delivering age-appropriate ads and funding vibrant and safe content for children online.

[1] The International Center for Law & Economics (ICLE) has received financial support from numerous companies, foundations, and individuals, including firms with interests both supportive of and in opposition to the ideas expressed in this and other ICLE-supported works. Unless otherwise noted, all ICLE support is in the form of unrestricted, general support. The ideas expressed here are the authors’ own and do not necessarily reflect the views of ICLE’s advisors, affiliates, or supporters.

[2] Office of the Privacy Comm’nr of Canada, Assessing whether and how to use age assurance – Guidance for websites and online services, https://www.priv.gc.ca/en/privacy-topics/age-assurance/aa-gd-web (last accessed Aug. 4, 2026).

[3] Much of these comments are adapted from previous work. See Ben Sperry, A Coasean Analysis of Online Age-Verification and Parental-Consent Regimes, INT’L CTR. L. & ECON. (ICLE Issue Brief, Nov. 9, 2023), https://laweconcenter.org/resources/a-coasean-analysis-of-online-age-verification-and-parental-consent-regimes; ICLE Comments to FTC on Children’s Online Privacy Protection Rule NPRM (Mar. 11, 2024), https://laweconcenter.org/resources/icle-comments-to-ftc-on-childrens-online-privacy-protection-rule-nprm.

[4] Supra note 2.

[5] See generally Geoffrey A. Manne, Kristian Stout, & Ben Sperry, Who Moderates the Moderators?: A Law & Economics Approach to Holding Online Platforms Accountable Without Destroying the Internet, 49 RUTGERS COMPUTER & TECH. L. J. 26 (2022).

[6] See, e.g., Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 1 J. EUR. ECON. ASS’N 990 (2003).

[7] David S. Evans, Multisided Platforms in Antitrust Practice, at 3 (Oct. 17, 2023), forthcoming, Michael Noel, ed., ELGAR ENCYCLOPEDIA ON THE ECONOMICS OF COMPETITION AND REGULATION, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4606511.

[8] For instance, many nightclubs hold “ladies’ night” events in which female patrons receive free admission or discounted drinks in order to attract more men, who pay full fare for both.

[9] Supra note 2.

[10] See, e.g., Ben Sperry, Congress Should Focus on Protecting Teens from Real Harms, Not Targeted Ads, THE HILL (Feb. 16, 2023), https://thehill.com/opinion/congress-blog/3862238-congress-should-focus-on-protecting-teens-from-real-harms-not-targeted-ads.

[11] An externality is a side effect of an activity that is not reflected in the cost of that activity—basically, what occurs when we do something whose consequences affect other people. A negative externality occurs when a third party does not like the effects of an action.

[12] Supra note 2.

[13] See Ronald H. Coase, The Problem of Social Cost, 3 J. L. & ECON. 1 (1960)

[14] See Steven G. Medema, The Coase Theorem at Sixty, 58 J. ECON. LIT. 1045 (2020).

[15] See Coase, supra note 12, at 8-10.

[16] See id. at 34 (“When an economist is comparing alternative social arrangements, the proper procedure is to compare the total social product yielded by these different arrangements.”).

[17] See, e.g., Children Online Safety Tools, COMPETITIVE ENTERPRISE INSTITUTE (last accessed Aug. 4, 2026), https://cei.org/children-online-safety-tools.

[18] See Garrett A. Johnson, Tesary Lin, Liang Zhong, & James C. Cooper, COPPAcalypse? The YouTube Settlement’s Impact on Kids’ Content, MANAGEMENT SCIENCE, ARTICLES IN ADVANCE 1, 6 (Mar 4, 2026) (“Overall, our descriptive analysis suggests that, after the YouTube settlement, YouTube MFK channels reduce both MFK video production and content originality, and views and subscriptions for MFK content fall compared with the non-MFK counterparts… us, both mechanisms—deactivating personalized ads and plat-form engagement features—may contribute to reduced content production and viewership.”).

[19] Id. at 3.

[20] Id.

[21] Id. ay 13-14 (“Removing ad personalization may have reduced ad revenue substantially. Personalized advertising generates value by enabling advertisers to target, measure, and optimize ad effectiveness… Removing content engagement features may have reduced the demand for content. These features helped users engage with their preferred content… and creators.”

[22] See Geoffrey A. Manne, Kristian Stout, & Ben Sperry, Twitter v. Taamneh and the Law & Economics of Intermediary Liability, TRUTH ON THE MARKET (Mar. 8, 2023), https://truthonthemarket.com/2023/03/08/twitter-v-taamneh-and-the-law-economics-of-intermediary-liability; Ben Sperry, Right to Anonymous Speech, Part 2: A Law & Economics Approach, TRUTH ON THE MARKET (Sep. 6, 2023), https://truthonthemarket.com/2023/09/06/right-to-anonymous-speech-part-2-a-law-economics-approach.