ICLE Comments to the CMA on Technology-Transfer Agreements

I. Introduction and Summary

The International Center for Law & Economics (ICLE) respectfully submits these comments in response to the Competition and Markets Authority’s (CMA) consultation on its draft guidance concerning the application of the Chapter I prohibition in the Competition Act 1998 to technology-transfer agreements.[1] ICLE is a nonprofit, nonpartisan research centre dedicated to the scholarly study of law and economics. Our scholars have written extensively on intellectual property and competition policy, including the licensing of standard-essential patents (SEPs).

These comments address a single question raised in the consultation: the CMA’s proposal not to provide specific guidance on licensing negotiation groups (LNGs).[2] The CMA has elected to assess LNG arrangements on a case-by-case basis, taking account of the specific factual and economic circumstances of each arrangement,[3] rather than establishing a categorical safe harbour of the kind the European Commission initially proposed in its draft revised Technology Transfer Guidelines.[4] That is the correct approach for three related reasons.

First, LNGs are not the mirror image of patent pools, and the analogy underlying the draft EU safe harbour does not withstand economic scrutiny. Second, a categorical safe harbour is poorly suited to a form of conduct that remains novel, untested in practice, and capable of operating either benignly or as a vehicle for collective holdout and buyer-side coordination. These are precisely the circumstances in which the error-cost framework favours case-specific assessment over a blanket exemption. Third, the EU experience is instructive. Even after the Commission retreated from a formal safe harbour, its decision to retain a bespoke analytical framework for LNGs has not resolved the underlying concerns. The CMA is therefore right to decline to follow suit at this stage.

These comments build on positions ICLE has advanced in related consultations and proceedings.[5] They conclude that the CMA’s restraint reflects sound institutional and economic judgment and that the final guidance should preserve that approach.

II. A Safe Harbour for LNGs Would Be Premature

The CMA has explained that it does not consider it appropriate to include specific guidance on LNGs in the draft guidance. It notes that LNGs have emerged only recently in technology-transfer licensing, that the CMA has no institutional experience assessing LNG arrangements, and that, to the best of its knowledge, no LNGs currently operate in the United Kingdom.[6] In light of those considerations, the CMA concluded that LNGs should be assessed on a case-by-case basis, while reserving the possibility of revisiting the issue as market practice, enforcement activity, or institutional experience evolves.

This is a measured and defensible position. Competition guidance should provide businesses with a reasonable degree of predictability about how an authority will exercise its enforcement discretion in recurring and well-understood circumstances. A safe harbour, in particular, signals that a defined category of conduct is sufficiently unlikely to harm competition that it generally does not warrant scrutiny. Extending such a signal to a category of arrangement that remains novel, largely untested in practice, and economically ambiguous would be premature. It would commit the CMA to a posture of forbearance before acquiring the experience necessary to determine whether such forbearance is justified.

Nor is any special rule required. LNGs can be assessed under the existing analytical framework that the draft guidance already sets out for agreements that may restrict competition by effect. That framework examines the nature and content of the agreement, the market position of the parties, competitors and buyers, barriers to entry, and the broader competitive dynamics of the market. Nothing about LNGs requires the CMA to displace that framework with a categorical rule.

The case-by-case approach is therefore not a gap in the guidance. It reflects the considered application of established competition-law principles to a form of conduct that does not yet warrant special treatment.

III. LNGs Are Not the Buyer-Side Equivalent of Patent Pools

The principal justification for an LNG safe harbour is that LNGs are the buyer-side analogue of patent pools, which competition authorities generally regard as procompetitive.[7] That analogy underpinned the draft EU safe harbour,[8] and it is mistaken. Once that premise falls away, the case for a categorical exemption largely falls with it.

Patent pools involve the collective licensing of complementary patents—separately owned technologies that must be combined to implement a standard. By aggregating those rights into a single package, a pool can reduce transaction costs and mitigate royalty stacking, whereby multiple overlapping royalty demands inflate the total cost of implementing a standard. Because the pool integrates complements, it can reduce aggregate royalties while increasing the joint returns earned by contributing innovators, benefiting downstream implementers and, ultimately, consumers.[9]

LNGs operate on the opposite side of the transaction and according to a different economic logic. Rather than coordinating the sale of complementary technologies, an LNG coordinates the purchase of licences among implementers that would otherwise negotiate independently. In substance, LNG members are buyers acting collectively to determine the price they are willing to pay for technology licences. That structure more closely resembles a buyers’ cartel than a patent pool.

Treating the two arrangements as equivalent collapses the fundamental distinction between coordinating complements and coordinating substitutes. It also extends the efficiency rationale that justifies patent pools to conduct that does not share the same economic characteristics.[10]

The distinction is not merely formal. Buyers’ cartels can be just as harmful as sellers’ cartels. Just as sellers acting collectively can raise prices above competitive levels, buyers acting collectively can suppress prices below them. In the SEP context, royalties driven below competitive levels reduce returns to innovation and weaken incentives to invest in the technologies on which future standards will depend.

Competition authorities have long recognised this principle. In the music-licensing context, for example, the U.S. Department of Justice (DOJ) filed a statement of interest arguing that collective rate-negotiation strategies could constitute per se unlawful buyers’ cartels.[11] More recently, a senior DOJ official described the European Commission’s support for an automotive LNG as ‘unfortunate’ and difficult to reconcile with sound competition-law principles, warning that comparable arrangements would likely be treated as per se unlawful buyers’ cartels under U.S. law.[12]

Nor do the constraints that make patent pools generally benign have any clear analogue on the buyer side. A pool’s ability to charge supra-competitive rates is constrained by the continued availability of bilateral licensing. Because pool licences and bilateral licences are functional substitutes, a pool cannot sustainably charge more than the aggregate cost of available bilateral alternatives, net of the efficiencies the pool creates.[13] Pools are also typically limited to essential, complementary patents and are subject to FRAND commitments and non-discrimination obligations.

LNGs face no comparable built-in constraints. They are not limited to complements, they owe no non-discrimination obligations to patent holders, and their purpose is to consolidate bargaining power against sellers. Consolidating buyer-side bargaining power is not, by itself, a cognisable procompetitive efficiency. It is an exercise of collective monopsony power.[14]

IV. LNGs Do Not Warrant a Categorical Safe Harbour

Because the economic character of an LNG depends heavily on how it is structured and operated, the choice between case-by-case assessment and a categorical safe harbour matters. In one configuration, an LNG may reduce transaction costs and improve the quality of negotiations. In another, it may suppress royalties, facilitate collective holdout, or obscure whether individual implementers are genuinely willing licensees under the good-faith framework governing SEP disputes.

A safe harbour necessarily treats heterogeneous conduct as homogeneous. It draws a bright line and exempts everything that falls below it. That approach may be appropriate where the conduct is well understood, grounded in a demonstrated market failure, and reliably benign. It is ill-suited to novel conduct whose competitive effects turn on fact-specific features that a categorical rule cannot capture.

For LNGs, the better course is the one the CMA has chosen: case-by-case assessment under the existing effects-based framework.

A. No Market Failure Justifies an LNG Safe Harbour

The premise underlying calls for an LNG safe harbour is that implementers face a systemic ‘patent holdup’ problem that collective negotiation would correct. The empirical record does not support that premise. Studies have found no indication that SEP holders systematically extract supra-competitive royalties or undermine technology adoption.[15] A comprehensive 2023 study commissioned by the European Commission likewise found no discernible evidence that FRAND-licensing frictions have caused patent holders to contribute less to standards or induced implementers to avoid standardised technologies.[16] Standard-reliant industries have flourished under the prevailing licensing system.

As noted above, granting an antitrust exemption to LNGs would not be a neutral choice. Collective buying arrangements raise familiar competition-law concerns associated with horizontal cooperation among competitors. For policymakers, weighing the possible benefits and risks of LNGs therefore presupposes a market failure in need of correction. Absent evidence of a systemic holdup problem, favourable treatment for LNGs would risk introducing new distortions into SEP licensing, rather than correcting existing ones.[17]

The opposite concern—‘patent holdout’, in which implementers strategically delay or avoid taking licences to devalue SEPs and shift leverage against innovators—is, by contrast, well documented.[18] Empowering implementers to coordinate their negotiating posture could exacerbate that risk. Even commentators sympathetic to LNGs have acknowledged that, where members retain the ability to pursue bilateral deals after joint talks, a group may use the joint negotiation to gather information and then prolong individual negotiations—compounding the risks of delay and collective holdout.[19]

A categorical safe harbour would have to assume away these risks at the threshold. Case-by-case assessment allows the CMA to weigh them on the facts.

B. LNGs Complicate the FRAND Negotiation Framework

LNGs also raise unresolved questions about how collective negotiation interacts with the good-faith negotiation framework governing SEP disputes.[20] The European Court of Justice’s framework in Huawei v. ZTE establishes a structured bilateral process in which an implementer must demonstrate its willingness to take a FRAND licence.[21]

Collective negotiation complicates that framework. If implementers negotiate as a group, it becomes unclear what it means for any individual member to qualify as a ‘willing licensee’. It is likewise unclear whether a member could shelter behind the group’s collective negotiating position while later asserting its own willingness to take a licence.

The operating rules the European Commission examined in the automotive context illustrate the problem. Those rules permit members to reject the negotiated outcome and return to bilateral negotiations. The final EU Guidelines likewise do not require the outcome of LNG negotiations to bind participating members.[22] As a result, LNGs may create opportunities for strategic behaviour that are difficult to reconcile with the bilateral framework established in Huawei v. ZTE.

These are precisely the kinds of structural features whose competitive significance depends on the facts of a particular arrangement. They cannot be resolved in advance through a categorical exemption.

C. Error Costs Favour Case-by-Case Review

The error-cost framework that underpins modern competition analysis reinforces the CMA’s instinct. Where conduct is novel and its effects remain uncertain, the relevant question is which type of error is more costly and harder to reverse.

A categorical safe harbour invites false negatives. It would shield arrangements that, on closer inspection, suppress royalties or facilitate holdout. Once an ex ante exemption normalises such conduct, it becomes difficult to unwind.

Case-by-case assessment, by contrast, preserves the CMA’s ability to distinguish benign arrangements from harmful ones as it gains experience. It also does so without chilling procompetitive arrangements that parties can already defend under the existing effects-based framework.

False positives that burden genuinely procompetitive conduct are costly because efficient arrangements, once deterred, are not easily recreated.[23] But the answer to that concern is careful, fact-specific analysis—not a blunt categorical rule that errs in the opposite direction.[24]

V. The CMA’s Approach Is Preferable to the EU Framework

The CMA has rightly noted that it considered the European Commission’s revised approach and followed it where appropriate. On LNGs specifically, the comparison is instructive.

The Commission’s draft Guidelines proposed a safe harbour for LNGs subject to several safeguards, including open participation, disclosure of operating rules, a narrow scope limited to joint negotiation, restrictions on information exchange, a prohibition on coordinated conduct—including holdout—that would constrain either side’s freedom to negotiate bilaterally, freedom for technology holders to deal with third parties, and a cap limiting jointly negotiated fees to no more than 10 per cent of the price of products incorporating the licensed technology.[25]

Following extensive criticism, the Commission ultimately abandoned the proposed safe harbour. The final Guidelines nonetheless retain a dedicated section addressing LNGs, identifying their potential procompetitive and anticompetitive effects, distinguishing genuine LNGs from buyers’ cartels, and setting out factors relevant to determining whether an LNG is likely to restrict competition.[26]

That retreat from a formal exemption was an improvement. It did not, however, resolve the underlying concern. By according LNGs a bespoke analytical framework, the final EU Guidelines continue to normalise buyer-side coordination in SEP licensing and shift the debate from whether such coordination should be permitted to how it should be structured.[27] Nor do the safeguards identified by the Commission fully address the central concern. An LNG may aggregate implementers’ bargaining power while still allowing members to reject the negotiated outcome, prolong disputes, and exert downward pressure on royalties.[28]

Against that backdrop, the CMA’s decision not to provide a dedicated LNG section—let alone a safe harbour—is the more prudent course. It avoids both the false comfort of a categorical exemption and the subtler problem of a bespoke framework that legitimises the conduct it purports merely to analyse. The CMA’s acknowledgement that it lacks institutional experience with LNGs, that LNGs are a recent development, and that none currently operates in the United Kingdom is not a weakness in its reasoning. It is a principal reason why restraint is warranted.[29]

That restraint also promotes international coherence. U.S. authorities have signalled that LNG-type arrangements would likely be treated as unlawful buyers’ cartels,[30] while continuing to regard properly structured patent pools and SEP platforms as presumptively procompetitive.[31] By declining to enshrine special LNG treatment in its guidance and preserving the ability to assess each arrangement on its facts, the CMA remains aligned with the broad consensus that buyer-side coordination warrants scrutiny rather than categorical endorsement, while retaining flexibility to credit genuinely procompetitive arrangements where the evidence supports them.

VI. Conclusion

ICLE commends the CMA for declining to provide specific guidance on LNGs and for electing instead to assess such arrangements case by case. LNGs are not the mirror image of patent pools. They are a form of buyer-side coordination whose competitive effects depend on fact-specific features that a categorical safe harbour cannot capture.

The case for special LNG treatment remains unproven. The empirical evidence does not show a systemic holdup problem that would justify an antitrust exemption. By contrast, the risks of collective holdout, royalty suppression, strategic delay, and tension with the good-faith FRAND negotiation framework are real and difficult to police in advance. Those risks are especially acute where LNG members remain free to reject a jointly negotiated outcome and resume bilateral negotiations.

The EU’s experience confirms the point. The Commission first proposed a safe harbour, then retreated to a bespoke framework that still normalises the conduct. The safer course is the one the CMA has chosen: preserve the existing effects-based framework and assess the specific facts and economics of each arrangement.

ICLE therefore urges the CMA to retain its proposed approach in the final guidance. Should LNGs become more prevalent, or should enforcement experience accumulate, the CMA will be well placed to revisit the issue on the strength of evidence rather than on the basis of a contested analogy.[32] Until then, case-by-case assessment is fully adequate to the task.[33]

ICLE appreciates the opportunity to comment and would welcome the opportunity to discuss these issues further with the CMA.

 

[1] UK Competition & Markets Auth., Draft Guidance on the Application of the Chapter I Prohibition in the Competition Act 1998 to Technology Transfer Agreements (2026) [hereinafter CMA Draft Guidance]; UK Competition & Markets Auth., Consultation on Draft Guidance on the Application of the Chapter I Prohibition in the Competition Act 1998 to Technology Transfer Agreements (30 Apr. 2026) [hereinafter CMA Consultation].

[2] CMA Consultation, supra note 1, ¶ 5.3 (‘Do you have any comments on the CMA’s proposal not to provide specific guidance on LNGs?’).

[3] Id. ¶¶ 2.19–2.21; CMA Draft Guidance, supra note 1.

[4] Communication from the Commission—Approval of the Content of a Draft for a Commission Regulation on the Application of Article 101(3) of the Treaty on the Functioning of the European Union to Categories of Technology Transfer Agreements and a Draft for Commission Guidelines on the Application of Article 101 of the Treaty to Technology Transfer Agreements, 2025 O.J. (C/2025/5024) § 4.5 (16 Sept. 2025) [hereinafter Draft EU TT Guidelines].

[5] See, e.g., Int’l Ctr. for L. & Econ., Comments on the Draft Revised Technology Transfer Block Exemption Regulation and Technology Transfer Guidelines 4–7 (23 Oct. 2025) [hereinafter ICLE TTBER Comments].

[6] CMA Consultation, supra note 1, ¶ 2.20.

[7] Giuseppe Colangelo, Licensing Negotiation Groups: The New Antitrust Kid on the SEPs Block, 1 Eur. Competition J. 1, 1–19 (2026) [hereinafter Colangelo, LNGs].

[8] See, e.g., Ruud Peters, Igor Nikolic & Bowman Heiden, Designing SEP Licensing Negotiation Groups to Reduce Patent Holdout in 5G/IoT Markets, in 5G and Beyond: Intellectual Property and Competition Policy in the Internet of Things 161 (Jonathan M. Barnett & Sean M. O’Connor eds., Cambridge Univ. Press 2023) (‘Pools and joint purchasing agreements share the same antitrust concerns. The main risk is that the aggregation of substitute products or services would constitute a price-fixing cartel and amount to a “per se” restriction (US) or a restriction of competition “by object” (EU)…. The increased market power of such horizontal cooperation is another concern …’).

[9] Josh Lerner & Jean Tirole, Efficient Patent Pools, 94 Am. Econ. Rev. 691 (2004); see also Carl Shapiro, Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting, 1 Innovation Pol’y & Econ. 119, 134 (2000).

[10] See, e.g., Igor Nikolic, Licensing Negotiation Groups for SEPs: Collusive Technology Buyers Arrangements? Their Pitfalls and Reasonable Alternatives, Les Nouvelles 226 (2021); Colangelo, LNGs, supra note 7.

[11] Statement of Interest of the United States, Global Music Rights, LLC v. Radio Music License Comm., Inc., No. 2:16-cv-09051-TJH-AS (C.D. Cal. 5 Dec. 2019), ECF No. 111.

[12] Khushita Vasant, EU Guidance on Carmakers’ SEP Licensing ‘Unfortunate’, US DOJ’s Kallay Says, MLex (10 Oct. 2025), https://www.mlex.com/mlex/articles/2398760.

[13] Written Submissions of the International Center for Law & Economics as Intervener ¶¶ 4.4–4.5, Tesla, Inc. v. InterDigital Patent Holdings, Inc. & Avanci, LLC, UKSC/2025/0058 (U.K. Sup. Ct. 16 Mar. 2026) [hereinafter ICLE Tesla v. Avanci Submissions]; Robert P. Merges & Michael Mattioli, Measuring the Costs and Benefits of Patent Pools, 78 Ohio St. L.J. 281 (2017).

[14] Colangelo, LNGs, supra note 7 (explaining that coordination among downstream firms remains coordination among competitors, regardless of where it occurs in the supply chain).

[15] See, e.g., Alexander Galetovic, Stephen Haber & Ross Levine, An Empirical Examination of Patent Holdup, 11 J. Competition L. & Econ. 549 (2015).

[16] Justus Baron, Pere Arque-Castells, Amandine Leonard, Tim Pohlmann & Eric Sergheraert, Empirical Assessment of Potential Challenges in SEP Licensing (Eur. Comm’n, 27 Apr. 2023), doi:10.2873/19262 (finding no evidence that FRAND-licensing frictions reduce SEP owners’ incentives to contribute technology to standards or induce implementers to choose alternative standards).

[17] Colangelo, LNGs, supra note 7.

[18] Bowman Heiden & Justus Baron, The Economic Impact of Patent Holdout, 38 Harv. J.L. & Tech. 638 (2024); Kirti Gupta & Urška Petrovcic, Evidence of Systematic “Patent Holdout”, 38 Berkeley Tech. L.J. 575 (2023).

[19] Josef Drexl, Beatriz Conde Gallego & Daria Kim, Position Statement of the Max Planck Institute for Innovation and Competition of 25 April 2025 within the Framework of the Revision of the Technology Transfer Block Exemption Regulation and the Accompanying Guidelines, 74 GRUR Int’l 736 (2025) (‘A greater potential for individual delaying strategies arises if the members of the LNG retain the possibility of continuing bilateral negotiations with the aim of adapting the jointly negotiated outcome to the particular licensee’s circumstances once joint negotiations have concluded.’).

[20] Colangelo, LNGs, supra note 7.

[21] Case C-170/13, Huawei Techs. Co. v. ZTE Corp., ECLI:EU:C:2015:477 (16 July 2015).

[22] Communication from the Commission, Guidelines on the Application of Article 101 of the Treaty on the Functioning of the European Union to Technology Transfer Agreements, C/2025/6189, ¶¶ 321–322 (2025) [hereinafter Final EU TT Guidelines].

[23] Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984).

[24] ICLE Tesla v. Avanci Submissions, supra note 13, ¶ 7.5.

[25] Draft EU TT Guidelines, supra note 4, ¶¶ 300, 326.

[26] Final EU TT Guidelines, supra note 22, ¶¶ 318–322.

[27] Colangelo, LNGs, supra note 7.

[28] Final EU TT Guidelines, supra note 22, ¶¶ 321–322.

[29] CMA Consultation, supra note 1, ¶ 2.20.

[30] Vasant, supra note 12.

[31] U.S. Dep’t of Justice, Business Review Letter Re: Avanci 5G Platform 2–3, 21 (28 July 2020).

[32] CMA Consultation, supra note 1, ¶ 2.21.

[33] CMA Consultation, supra note 1, ¶¶ 2.20–2.21.

Introduction

The International Center for Law & Economics (ICLE) welcomes the opportunity to respond to the Competition Commission’s review of regulatory barriers to competition and to the entry or expansion of firms, particularly small and medium enterprises, launched on 22 April 2026.[1] ICLE is a nonprofit, nonpartisan global research and policy centre founded to build the intellectual foundations for sensible, economically grounded policy. We have engaged extensively with competition agencies and policymakers in the European Union, the United Kingdom, Australia, India, Brazil, and Latin America on digital-market regulation, and we offer these comments in that comparative spirit.

At its core, the review asks the right question: which regulations—including sector policies and licensing frameworks—restrict firm entry or expansion, and are they “necessary to achieve their stated purpose” or “overly restrictive in design or application”?[2] We commend the Commission for asking that question.

The premise of the review is well-founded. International benchmarks indicate that South Africa’s regulatory framework continues to impose meaningful constraints on entry, investment, and economic dynamism. South Africa ranks 60th of 143 jurisdictions on the World Justice Project’s overall Rule of Law Index and 66th on its regulatory-enforcement sub-indicator.[3] It also ranks 84th of 190 economies on ease of doing business.[4]

Other international benchmarks reinforce this diagnosis. The Organisation for Economic Co-operation and Development’s 2023-24 Product Market Regulation indicators rank South Africa last among the 50 jurisdictions covered on the overall economy-wide indicator—that is, as having the most restrictive economy-wide regulatory environment among the countries and economies assessed.[5] The OECD explains that competitive product markets can boost productivity, employment, and living standards, and that its indicators measure how closely a country’s regulatory framework aligns with internationally accepted best practices. The economy-wide indicator captures distortions to competition arising from barriers to firm entry and expansion and from the design of state involvement in markets. On this measure, South Africa performs “rather worse than the OECD average.”[6] The OECD further notes “significant potential” to make South Africa’s regulatory framework more conducive to competition, particularly by removing barriers to entry and competition in energy, transport, and e-communications; improving competition-impact assessments; and strengthening stakeholder-consultation requirements.

Against that background, the policy aims the Commission identifies for this review—supporting inclusive growth, improving the ease of doing business, and strengthening the competitiveness of the economy[7] —are legitimate and pressing. They make serious reform of South Africa’s regulatory environment both timely and necessary.

Our submission makes a single constructive point that follows directly from the Commission’s framing: the most consequential barriers to competition, entry, and investment are not always found in licensing queues, authorisation backlogs, or sector-specific rules. They can also arise from well-intentioned competition interventions that restrict rivalry, deter investment, and make entry more costly than they make markets more contestable.

South Africa’s emerging framework for digital-platform regulation is, we respectfully submit, a candidate for exactly the kind of scrutiny this review invites. We do not suggest that South Africa lacks the institutional capacity to administer complex digital rules. To the contrary, South Africa’s competition authorities are among the most capable and active on the continent. Our concern is that the very sophistication of the regime makes discipline more important: digital-platform remedies may be unnecessary to their stated purposes, overly restrictive in design or application, and costly to the entry, investment, innovation, and dynamic rivalry that the review seeks to protect.

We develop this argument in four steps. Part I acknowledges South Africa’s standing as a regional leader in competition enforcement and explains why that capability raises, rather than lowers, the stakes. Part II shows how digital-platform regulation can itself become a barrier to competition, drawing lessons from Europe’s experience, the opportunity costs of bespoke platform intervention, the administrability problems created by multiple objectives, and the risk that platform remedies restrict the very rivalry they seek to promote. Part III explains why South Africa should prefer evidence-led enforcement under the Competition Act to broad ex ante rules. Part IV offers recommendations.

I. South Africa’s Capability Raises the Stakes

South Africa’s competition authorities are among the most capable and active on the continent. The Competition Commission’s market-inquiry apparatus is well-resourced and technically sophisticated. Its recent digital-platform inquiries—the Online Intermediation Platforms Market Inquiry, concluded in 2023,[8] and the Media and Digital Platforms Market Inquiry, concluded in November 2025[9]—demonstrate that capacity.

This matters because the error-cost profile of a capable, ambitious agency differs from that of an under-resourced one. The danger is not that South Africa lacks the capacity to enforce complex digital rules. The danger is that it has that capacity and may therefore be tempted to expand competition policy to pursue an ever-broader set of objectives, at the expense of the entry, investment, and rivalry that this review seeks to promote.

A sophisticated regulator is, almost by definition, capable of constructing ambitious regulatory frameworks whose costs are difficult to observe and whose benefits are often assumed rather than demonstrated. Regulatory overreach is not limited to weak institutions. It can also arise from strong institutions that possess both the expertise and authority to intervene extensively in market processes.

This review is the appropriate vehicle for that reflection. It asks whether regulations are overly restrictive in their design or application and whether each rule is necessary to achieve its stated purpose. Those questions apply no less forcefully to competition regulation than to the licensing and permitting regimes the review primarily contemplates.

Regulation does not cease to be a potential barrier to competition simply because the competition authority administers it.

II. Digital-Platform Regulation Itself Warrants Scrutiny

Over the past three years, South Africa has created one of the most interventionist digital-platform regimes outside the European Union. The Online Intermediation Platforms Market Inquiry imposed substantive remedies, including the internal organisational separation of Takealot’s retail and marketplace operations, limits on Takealot retail buyers’ access to marketplace-seller data, prohibitions on wide and narrow price-parity provisions, measures to improve the visibility of smaller and historically disadvantaged sellers, and a recommendation that the Commission seek a Tribunal order requiring the EAPPCC estate-agency group to divest its 12.78 per cent minority shareholding in Private Property.[10]

The Media and Digital Platforms Market Inquiry followed in November 2025. It secured a package of negotiated remedies from Google, including a Digital News Transformation Fund of R152 million over five years, the launch of Google News Showcase for mainstream media with R355 million over five years, and a R135 million AI Innovation Fund. It also obtained related commitments from YouTube, Meta Platforms, X Corp., and TikTok; recommended a ministerial block exemption to permit collective bargaining by news media with search, social-media, and AI companies over monetisation tools and joint-selling of content; and proposed extending South Africa’s limited-liability regime to social-media platforms, conditional on industry self-regulation.[11]

Most recently, the Commission published a Guidance Note on Online Intermediation Platforms identifying six practices across three categories of potentially harmful conduct:[12] practices said to harm platform-level competition, including price-parity clauses and interoperability restrictions; practices said to distort competition among business users on vertically integrated platforms, including self-preferencing and misuse of seller data; and practices said to impede the participation of SMEs and historically disadvantaged persons, including differentiated trading terms and unfair treatment of business users.

Taken together, these measures resemble the ex ante digital-competition regulations that have proliferated globally in the wake of the EU’s Digital Markets Act. They also raise the central concern of this section: digital-platform regulation can itself become a barrier to competition. Before extending this model further, South Africa should ask whether Europe’s experience supports imitation, whether scarce enforcement resources are better spent on more direct barriers to entry and growth, whether multiple statutory objectives can be administered predictably in digital markets, and whether the remedies imposed in the name of competition risk restricting the very rivalry, investment, and experimentation that competition law should protect.

A. Europe’s Experience Counsels Caution

South Africa’s digital-platform framework reflects a broader trend in which competition authorities seek to emulate Europe’s most ambitious regulatory interventions without first asking whether those interventions are achieving their stated objectives. The evidence suggests caution.

When the Draghi Report was released in 2024,[13] it gave official recognition to a concern that had been building for years: Europe’s relative economic decline is due, in part, to excessive regulation. Europe’s technology sector has been particularly affected. In 2024, U.S.-based institutions produced 40 large AI foundation models, China produced 15, and the European Union produced just three.[14] While no single metric tells the whole story, the disparity points to a significant innovation gap.

The pattern extends beyond artificial intelligence. Europe’s startup ecosystem is increasingly losing founders to more attractive jurisdictions. A European Investment Bank study of startup and scaleup relocation found widespread dissatisfaction with Europe’s regulatory environment, which many founders viewed as overly restrictive.[15] These frameworks often impose compliance burdens that sit uneasily with the realities of developing and scaling innovative technologies.

Innovation ecosystems depend on speed, experimentation, and flexibility. Europe increasingly offers less of each.

European policymakers themselves appear increasingly aware of these concerns. The Draghi Report is one example. Growing geopolitical tensions have also heightened concerns about Europe’s technological resilience and competitiveness.

More recently, the European Commission’s draft merger guidelines have renewed their emphasis on innovation, investment incentives, and dynamic competition.[16] That shift reflects a broader reassessment of regulatory policies that may have weakened Europe’s capacity to innovate and grow.

South Africa should therefore proceed cautiously before importing European-style digital regulation. It should first assess not only the promised benefits, but also the unintended consequences that Europe is increasingly confronting.

B. Competition Regulation Carries Opportunity Costs

An enforcement agency’s capacity is finite. Every analyst-hour, public hearing, and Tribunal proceeding devoted to designing, imposing, monitoring, and defending bespoke platform remedies is one not spent addressing the administrative and licensing barriers that this review seeks to identify.

The Commission’s digital-platform programme has been exceptionally resource-intensive. The Online Intermediation Platforms Market Inquiry and the Media and Digital Platforms Market Inquiry together consumed much of a decade through evidence gathering, hearings, consultation, and negotiation.[17]

This is a point about prioritisation, not effort. If the Commission’s objective is to promote inclusive growth and SME entry, the marginal enforcement rand is likely better spent addressing the licensing thickets, authorisation backlogs, exclusive-rights regimes, and price and non-price restrictions that the review itself identifies as barriers to competition.

ICLE has advanced similar arguments elsewhere. In Latin America, for example, we have argued that insufficiently competitive digital markets are not among the region’s most pressing public-policy concerns and that scarce institutional resources are better directed toward genuine constraints on growth.[18]

There is also a normative opportunity cost that resource considerations alone do not capture. When remedies seek to equalise outcomes rather than ensure equitable opportunity, they introduce a standard that competition law cannot consistently administer.

Section 2 of the Competition Act refers to “equitable opportunity” for small and medium enterprises, not equal outcomes. Equal opportunity means competitors operate under the same rules. It does not require identical starting positions, nor does it require dominant firms to subsidise less-efficient rivals.

Once remedies aim to engineer distributional outcomes rather than restore competitive conditions, competition policy begins to resemble industrial policy, even where the statutory framework permits such an approach.

C. Multiple Objectives Undermine Administrability

A third concern follows directly from the opportunity costs of South Africa’s competition regime: the Competition Act is unusually broad in its stated purposes.[19]

Section 2 directs enforcement not only toward “competitive prices and product choices” for consumers and “efficiency, adaptability and development of the economy,” but also toward employment, social and economic welfare, equitable opportunity for small and medium enterprises, and a broader spread of ownership, “in particular to increase the ownership stakes of historically disadvantaged persons.” The Preamble situates these objectives within the post-apartheid project of ensuring that “all South Africans” can “participate fairly in the national economy.” Each goal is legitimate and constitutionally weighty. We do not question them.

Our concern is analytical and administrative. When pursued simultaneously through a single body of competition rules, plural objectives confront enforcers with trade-offs they have no objective method to resolve. As Robert Bork put the point:

Antitrust policy cannot be made rational until we are able to give a firm answer to one question: What is the point of the law—what are its goals? . . . Is the antitrust judge to be guided by one value or by several? If by several, how is he to decide cases where a conflict in value arises? Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules.[20]

Recent economic work reinforces this concern. Brian Albrecht and Erik Hovenkamp show that “welfare dashboard” approaches—which seek to weigh competition alongside a long list of additional social values—are not merely controversial, but unworkable. Resolving trade-offs across incommensurable variables requires assigning “welfare weights” that no one knows how to specify. The result, they conclude, “inevitably collapses into subjective speculation.”[21]

The risk is not theoretical. Section 12A of the Act requires the Commission and Tribunal to assess every merger under both a competition test and, after the 2018 amendments, a mandatory freestanding public-interest test. That test includes effects on a “particular industrial sector or region,” employment, small and medium enterprise and historically disadvantaged person participation, the international competitiveness of national industries, and the spread of ownership. Section 18 separately gives the minister a right to participate as a party on public-interest grounds.

In practice, this framework has significantly widened the scope of substantive antitrust analysis and invited contestation by reference to objectives that resist quantification. Public interest, in this institutional setting, functions less as an analytical factor than as a vehicle for political and policy preferences whose weight cannot be specified ex ante. The accompanying risks—discretionary enforcement, reduced predictability for investors, and politicised intervention—are inherent in multi-goal statutes administered without a clear, workable anchor.

Jacques Boshoff, Michael Dingley, and Warren Dingley illustrate the pattern through Wal-Mart/Massmart, Kansai/Freeworld, and Momentum/Metropolitan.[22] In the first two cases, they explain, the relevant minister conducted parallel negotiations with the merging parties outside the statutory process. The resulting conditions—including employment moratoria, Black Economic Empowerment and research-and-development commitments, and local-procurement obligations—rested not on an identified competition concern, but on a broader industrial-policy agenda. Whatever the merits of those objectives, conditions imposed this way blur the line between competition enforcement and industrial policy and weaken the institutional independence of the Commission and Tribunal.

These risks are especially acute in digital markets. Continuous innovation, scale-dependent product design, rapid entry and displacement, and competition for new business models all require a predictable, evidence-based regulatory environment with disciplined objectives. Layering open-ended redistributive and industrial-policy goals onto digital-competition enforcement compresses the space for the experimentation that drives consumer-facing improvements and constrains the dynamic rivalry on which entry and innovation depend.

The current Guidance Note sits on precisely this fault line. It identifies six suspect practices, several framed by reference to “the participation of SMEs and historically disadvantaged persons.”[23]

Rather than expand the regulatory mandate further, the Commission should anchor digital-market interventions in objective technical criteria and demonstrated competitive effects. Distributional and developmental objectives should be left to instruments designed for those purposes and democratically accountable in their use.

D. Digital-Platform Remedies Can Become Regulatory Barriers

The deeper concern is not merely cost, but direction. Several of the measures emerging from South Africa’s digital-platform programme closely resemble the very categories of regulatory barrier that this review seeks to identify.

The review highlights rules that restrict entry, entrench limited supply through exclusive rights or long-term contractual arrangements, limit who may operate in a market, or constrain competition on price and non-price dimensions.[24] Many digital-platform remedies operate in similar ways.

Price-parity prohibitions and mandated contractual terms constrain how platforms compete on both price and non-price dimensions. Mandatory internal separation and forced divestiture intervene directly in firm structure, even absent any finding of prohibited conduct. Under South African law, divestiture may be ordered to remedy an “adverse effect on competition” arising from market features without any contravention of the Act.[25] Such interventions create uncertainty, raise the cost of capital, and discourage investment.

Other measures raise similar concerns. “Fair share”-style transfers, such as the negotiated media-support package, and mandated collective-bargaining exemptions operate, in economic substance, as transfers from successful firms to preferred beneficiaries.[26] By reducing the returns to investment and innovation, they risk discouraging both.

The Google remedies imposed in the Online Intermediation Platforms Market Inquiry illustrate the problem. The Commission concluded that Google Search held a dominant position and that aspects of its conduct harmed competition. Those findings are not unusual in the global competition-policy landscape. The remedies, however, rest on a different rationale.

The OIPMI required Google to provide R180 million in advertising credits and R150 million in training and support for SMEs and historically disadvantaged firms. It also required Google to introduce a new platform-sites unit and other changes intended to increase the visibility of smaller South African platforms.[27]

Yet smaller South African platforms generally struggle for visibility because of structural features of digital markets, including scale advantages, data accumulation, and advertising-auction dynamics. The Commission did not establish that Google’s conduct caused the specific disadvantages these measures sought to remedy. The resulting obligations therefore resemble subsidies directed at broader developmental objectives rather than remedies tailored to a demonstrated competitive harm.

The requirement to introduce an identifier distinguishing South African firms from foreign firms raises similar concerns.[28] It is difficult to identify a competition theory under which a nationality-based visibility mechanism remedies harm to competition. A consumer’s preference for a global platform over a local one because it offers a superior product is not evidence of market failure. It is often evidence of competition working as intended.

Requiring a platform to modify its interface to steer users toward domestic providers is better understood as an industrial-policy intervention than as a competition remedy. It does not answer the central competition question: whether conduct has harmed the competitive process.[29]

The broader economic concern is familiar. Ex ante platform rules that prohibit categories of conduct cannot easily account for the trade-offs inherent in dynamic markets. They often end up protecting less-efficient competitors and redistributing rents rather than protecting competition itself. Many of the practices these regimes target—including self-preferencing, vertical integration, data use, and product integration—are common and often procompetitive forms of business conduct.[30]

Treating such conduct as presumptively suspect increases the risk of false-positive (Type I) error. In innovative markets, those errors are especially costly because they deter not only the conduct at issue, but also the investment, experimentation, and product development that drive competition.

The review expresses concern about the effects of vertical integration on non-integrated firms and about meaningful participation by historically disadvantaged persons. These are legitimate objectives, and we do not question them. The economic literature nevertheless provides little basis for presuming that vertical integration harms competition. More often, it reduces costs, eliminates double marginalisation, and improves the quality and coordination of complementary products.[31]

Where integration or self-preferencing is used to exclude rivals without a valid efficiency justification, existing abuse-of-dominance rules already provide a mechanism for intervention.[32] Broad ex ante restrictions therefore risk sacrificing procompetitive efficiencies while producing only uncertain gains for the intended beneficiaries.

These costs are not hypothetical. The Digital Markets Act—the template for many of these measures—was promoted as a means of increasing contestability without compromising security, raising costs, or degrading services. The emerging evidence points in the opposite direction, with documented costs to security, user experience, fees, and the very European SMEs and innovators the regime was intended to assist.[33] South Africa risks importing those costs alongside the model itself.

There is also a distributional irony. The firms best positioned to benefit from mandated access, data-sharing requirements, and “fair share” transfers are often well-resourced incumbents, not the SMEs these policies are intended to help. Even where smaller firms are the intended beneficiaries, the counterfactual is notoriously difficult to verify. Contestability pursued as an end in itself risks becoming tautological, with every unsuccessful entrant able to point to unrealised opportunities and attribute them to platform conduct.[34]

III. South Africa Should Prefer Evidence-Led Enforcement

South Africa does not regulate in a vacuum. It is part of a broader global trend toward DMA-inspired digital-competition regulation. ICLE has examined these regimes in the European Union,[35] Australia,[36] India,[37] Brazil,[38] and elsewhere. The recurring lesson is that ex ante platform regulation is often justified by assertion rather than evidence and that existing competition law is generally capable of addressing genuine anticompetitive conduct.

That lesson is especially important in emerging markets, where digital markets are often reasonably competitive and where the principal constraints on growth are conventional barriers to entry rather than platform power.[39] The African enforcement landscape illustrates the risks of stretching novel theories of harm to fit digital platforms. The Common Market for Eastern and Southern Africa Competition Commission, for example, recently opened an abuse-of-dominance investigation into Meta’s WhatsApp Business policy, even though the threshold question remains unresolved: what theory of competitive harm, if any, fits the facts?[40]

South Africa’s own framework should be assessed against the same baseline question. Before creating new regulatory obligations, policymakers should ask whether existing competition law, applied on a case-by-case basis, could address the conduct at lower cost and with fewer unintended consequences.

None of this is to deny that digital platforms can engage in anticompetitive conduct or that South Africa may confront genuine competition problems in these markets. It is to recognise that the appropriate response is targeted, evidence-led enforcement under the Competition Act, rather than a standing ex ante regime whose costs this review is expressly designed to identify.

South Africa is also unusually well positioned to learn from international experience. As a late mover, it can draw on a growing body of evidence about how DMA-style frameworks operate in practice. Although the Online Intermediation Platforms Guidance Note reviews the steps some jurisdictions have taken with respect to the six identified practices, it does not assess the competitive effects of those interventions.

The DMA itself illustrates the value of such an assessment. It was promoted as a means of increasing contestability without compromising security, raising costs, or degrading services. The emerging evidence points in the opposite direction, with documented costs to security, user experience, and fees charged to both developers and consumers.[41]

A late mover can learn from those outcomes. Rather than replicate broad regulatory models developed elsewhere, South Africa can adopt a more targeted approach—one grounded in evidence, attentive to investment and innovation incentives, and focused on demonstrable harms rather than speculative concerns. The Commission is well positioned to undertake that task.

IV. Conclusion and Recommendations

The Commission’s review is welcome and timely. Its central insight—that regulation itself can be a barrier to competition—is exactly right. We respectfully urge the Commission to apply that insight even-handedly.

South Africa’s institutional sophistication is real, but it cuts both ways. A capable agency can identify and remedy genuine restraints on entry and growth. It can also extend competition policy beyond administrable limits, increasing uncertainty, raising the cost of investment, and weakening the dynamic rivalry that benefits consumers and SMEs alike.

The documents launching this review identify many genuine barriers to competition in South Africa. We agree. Administrative burdens, licensing restrictions, exclusive-rights regimes, and price and non-price restrictions are precisely the kinds of obstacles that directly impede SME entry, expansion, and inclusive growth. They should remain the Commission’s priority.

In the constructive spirit of the consultation, we respectfully recommend that the Commission:

1. Apply the review’s own test to competition regulation itself. In assessing rules that are “overly restrictive in design or application,” the Commission should bring digital-platform measures—including the OIPMI and MDPMI remedies and any successor ex ante framework—within scope. For each, it should ask whether the measure is necessary to its stated purpose or whether the same objective could be achieved through case-by-case enforcement under the existing Competition Act.
2. Prioritise conventional barriers to entry and growth. The Commission should direct scarce enforcement and institutional resources toward the administrative, licensing, exclusive-rights, and price and non-price barriers that the review identifies and that bear most directly on SME entry and expansion.
3. Subject standing platform remedies to counterfactual and proportionality review. Any such remedy should be assessed against its likely effects on investment, innovation, and dynamic competition; the distribution of its benefits between SMEs and larger incumbents; and the availability of less-restrictive enforcement alternatives.
4. Favour evidence over assertion. Where intervention is warranted, the Commission should ground it in demonstrated harm to the competitive process, not in contestability as an end in itself. The experience of DMA-style regimes elsewhere shows how easily broad ex ante obligations can protect less-efficient rivals, redistribute rents, and chill the experimentation on which digital competition depends.

These principles would not prevent the Commission from acting where digital platforms genuinely harm competition. They would ensure that intervention remains targeted, evidence-led, proportionate, and consistent with the review’s core objective: removing barriers to competition rather than creating new ones.

[1] Competition Comm’n of S. Afr., Press Release, Commission Launches Review of Regulatory Barriers to Competition and SME Participation (22 Apr. 2026), https://www.compcom.co.za/wp-content/uploads/2026/04/Media-Statement-Commission-launches-review-of-regulatory-barriers-to-competition-and-SME-participation-22-April-2026.pdf [hereinafter Review Media Statement] (noting President Cyril Ramaphosa’s call in the 2026 State of the Nation Address to reduce red tape and improve the ease of doing business, and inviting submissions by close of business on 5 June 2026).

[2] Review Media Statement, supra note 1 (inviting submissions assessing whether regulations are necessary to achieve their stated objectives or are unduly restrictive in their design or application).

[3] See WJP Rule of Law Index 2025: South Africa, World Just. Project, https://worldjusticeproject.org/rule-of-law-index/country/2025/South%20Africa (last visited 3 June 2026).

[4] See World Bank, Doing Business 2020: Comparing Business Regulation in 190 Economies (2020), https://openknowledge.worldbank.org/server/api/core/bitstreams/75ea67f9-4bcb-5766-ada6-6963a992d64c/content. South Africa ranked 84th out of 190 economies. The World Bank discontinued the Doing Business project in 2020 following a methodological review and replaced it with the Business Ready (B-READY) initiative. South Africa has not been assessed in any B-READY edition to date. See also World Bank, Business Ready 2025 (2025), https://openknowledge.worldbank.org/entities/publication/a35eb0e7-328a-46a3-8713-ce8ef8a7c9e3.

[5] Org. for Econ. Co-operation & Dev. (OECD), Key Takeaways from the 2023–2024 Update of the OECD Product Market Regulation Indicators, https://www.oecd.org/en/topics/product-market-regulation.html (last visited 3 June 2026).

[6] See Org. for Econ. Co-operation & Dev. (OECD), OECD Product Market Regulation (PMR) Indicators: How Does South Africa Compare? (2024), https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/product-market-regulation/South%20Africa_PMR%20country%20note.pdf.

[7] See Review Media Statement, supra note 1.

[8] Competition Comm’n of S. Afr., Online Intermediation Platforms Market Inquiry: Final Report and Recommendations (31 July 2023), https://www.compcom.co.za/wp-content/uploads/2023/07/CC_OIPMI-Final-Report.pdf [hereinafter OIPMI Final Report].

[9] Competition Comm’n of S. Afr., Media and Digital Platforms Market Inquiry: Final Report (13 Nov. 2025), https://www.compcom.co.za/wp-content/uploads/2025/11/CC_MDPMI-Final-Report_Non-Confidential-1.pdf [hereinafter MDPMI Final Report].

[10] See OIPMI Final Report, supra note 8.

[11] See MDPMI Final Report, supra note 9.

[12] Competition Comm’n of S. Afr., Online Intermediation Platforms Guidance Note (2025), https://www.compcom.co.za/wp-content/uploads/2026/02/Online-Intermediation-Platforms-Guidance-Note.pdf.

[13] Mario Draghi, The Future of European Competitiveness: Part A: A Competitiveness Strategy for Europe, Eur. Comm’n (Sept. 2024), https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en.

[14] Nestor Maslej et al., The AI Index Annual Report (Inst. for Hum.-Centered AI, Stanford Univ. 2025), https://hai.stanford.edu/assets/files/hai_ai_index_report_2025.pdf.

[15] Eur. Inv. Bank, Drivers of Relocation by Innovative EU Startups and Scaleups (2025), https://www.eib.org/files/publications/20250217-120126-drivers-of-relocation-by-innovative-eu-startups-and-scaleups-en.pdf.

[16] Eur. Comm’n, Draft Communication of the European Commission: Guidelines on the Assessment of Mergers Under Council Regulation (EC) No. 139/2004 on the Control of Concentrations Between Undertakings (30 Apr. 2026), https://competition-policy.ec.europa.eu/document/download/46dde10f-85c1-4590-a3f4-2b71f85685ef_en?filename=Merger%20Guidelines%20-%20final%20for%20public%20consultation.pdf.

[17] See OIPMI Final Report, supra note 8; MDPMI Final Report, supra note 9 (both inquiries spanned several years of evidence gathering, public hearings, and stakeholder engagement).

[18] See Mario A. Zúñiga, Regulatory Reconquista: Ex-Ante Regulation of Digital Platforms in Latin America (Int’l Ctr. for L. & Econ. Working Paper, 2025), https://ssrn.com/abstract=5011229 (concluding that insufficiently competitive digital markets are not among Latin America’s most pressing public-policy priorities).

[19] See Competition Act 89 of 1998 §§ 43A–43D, 60(2)(c) (S. Afr.) (as amended by Competition Amendment Act 18 of 2018), https://www.compcom.co.za/wp-content/uploads/2021/03/Competition-Act-A6.pdf.

[20] See Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself 47 (2021 ed.).

[21] See Brian C. Albrecht & Erik Hovenkamp, Should Antitrust Pursue Multiple Policy Goals?, Geo. Mason L. Rev. (forthcoming 2026), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6556681.

[22] See Willen Boshoff, Daryl Dingley & Janine Dingley, The Economics of Public Interest Provisions in South African Competition Policy (paper presented at the 6th Annual Conference on Competition Law, Economics and Policy, Johannesburg, S. Afr. Sept. 2012), https://www.compcom.co.za/wp-content/uploads/2014/09/The-economics-of-public-interest-provisions-in-South-African-competition-policy.pdf.

[23] Online Intermediation Platforms Guidance Note, supra note 12.

[24] See Review Media Statement, supra note 1.

[25] See OIPMI Final Report, supra note 8; see also Competition Act 89 of 1998 §§ 43A–43D, 60(2)(c) (S. Afr.), supra note 19 (authorising the Competition Tribunal, on the Commission’s recommendation following a Chapter 4A market inquiry, to order divestiture to remedy an adverse effect on competition arising from market features without any finding of prohibited conduct).

[26] See MDPMI Final Report, supra note 9.

[27] OIPMI Final Report, supra note 8.

[28] Id.

[29] See Geoffrey Manne, Lazar Radic & Dirk Auer, Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulations, 22 Berkeley Bus. L.J. 201 (2025), https://lawcat.berkeley.edu/record/1312409?v=pdf (arguing that digital competition regulations often protect less-efficient competitors and redistribute rents rather than protect the competitive process).

[30] Geoffrey A. Manne, Error Costs in Digital Markets (Int’l Ctr. for L. & Econ. Working Paper, 2020), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3733662 (explaining that innovative markets amplify both the likelihood and social costs of false positives). See also Darcy Allen et al., Comments of RMIT and ICLE Scholars to the Australian Treasury Consultation on a New Digital Competition Regime (Int’l Ctr. for L. & Econ., 13 Feb. 2025), https://laweconcenter.org/comments-of-rmit-and-icle-scholars-to-the-australian-treasury-consultation-on-a-new-digital-competition-regime (observing that self-preferencing is a common and often procompetitive business practice).

[31] See Joseph J. Spengler, Vertical Integration and Antitrust Policy, 58 J. Pol. Econ. 281 (1950).

[32] Geoffrey A. Manne, Dirk Auer, Eric Crampton & Oliver Hartwich, ICLE Comments to the Australian Government’s Consultation on the Proposed Digital Competition Regime, Int’l Ctr. for L. & Econ. (13 Feb. 2025), https://laweconcenter.org/resources/icle-comments-to-the-australian-governments-consultation-on-the-proposed-digital-competition-regime (addressing the costs of restricting product integration); Allen et al., supra note 30 (explaining that vertical integration and self-preferencing are common and often procompetitive).

[33] Manne et al., supra note 32; Dirk Auer, The Broken Promises of Europe’s Digital Regulation, Truth on the Mkt. (12 Mar. 2024), https://truthonthemarket.com/2024/03/12/the-broken-promises-of-europes-digital-regulation.

[34] Geoffrey A. Manne, Dirk Auer, Lazar Radic, Selçukhan Ünekbaş & Mario A. Zúñiga, ICLE Response to the First Review of the Digital Markets Act, Int’l Ctr. for L. & Econ. (24 Sept. 2025), https://laweconcenter.org/resources/icle-response-to-first-review-of-the-digital-markets-act (noting that treating contestability as an end in itself risks tautology, as every unsuccessful entrant can point to opportunities it failed to realise).

[35] See, e.g., Dirk Auer, The Commission’s Seven Claims, Tested, LawEconCenter.org (27 May 2026), https://laweconcenter.org/resources/the-commissions-seven-claims-tested.

[36] See, e.g., Geoffrey A. Manne, Dirk Auer, Eric Crampton, Oliver Hartwich, R. Ian McEwin & Lazar Radic, ICLE Comments to the Australian Government’s Consultation on the Proposed Digital Competition Regime, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-to-the-australian-governments-consultation-on-the-proposed-digital-competition-regime.

[37] See, e.g., Dirk Auer, Geoffrey A. Manne, Viswanath Pingali, Lazar Radic & Mario A. Zúñiga, ICLE Comments on India’s Draft Digital Competition Act, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-on-indias-draft-digital-competition-act.

[38] See, e.g., Geoffrey A. Manne, Dario Oliveira Neto & Dirk Auer, Digital Overreach: A Premature Turn to Ex Ante Regulation in Brazil (Int’l Ctr. for L. & Econ. Working Paper, 2026), https://laweconcenter.org/resources/digital-overreach-a-premature-turn-to-ex-ante-regulation-in-brazil.

[39] Zúñiga, supra note 18.

[40] See Onyeka Aralu, COMESA, WhatsApp Business, and Antitrust in Search of a Theory, Truth on the Mkt. (9 Mar. 2026), https://laweconcenter.org/resources/comesa-whatsapp-business-and-antitrust-in-search-of-a-theory.

[41] Selçukhan Ünekbas & Lazar Radic, Implementing the EU’s Digital Markets Act: The Seen and the Unseen, Truth on the Mkt. (25 June 2025), https://laweconcenter.org/resources/implementing-the-eus-digital-markets-act-the-seen-and-the-unseen; see also Auer, supra note 35.

I.         Introduction

The International Center for Law & Economics (ICLE) submits these comments in response to two actions by the Office of the Comptroller of the Currency (OCC). The first is the OCC’s interim final rule (Rule), which clarifies that national banks’ authority to charge noninterest fees includes the power to obtain interchange fees from credit- and debit-card operations, including fees set by or in consultation with third parties.[1] The second is the OCC’s interim final order (Order), which concludes that federal law preempts the Illinois Interchange Fee Prohibition Act (IFPA), which restricts interchange fees on the tax and gratuity portions of payment-card transactions and limits the use of payment-card transaction data.[2]

ICLE is a nonprofit, nonpartisan research center that applies law & economics to public-policy questions. Its work promotes sound economic analysis and consumer welfare. ICLE scholars have written extensively on payment-card markets, interchange fees, and related regulation. These comments draw substantially from ICLE’s white paper, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA,[3] and related research.[4]

The IFPA is a novel state law that, absent preemption or a stay, would prohibit payment-card issuers, networks, and processors from charging interchange fees on transaction amounts attributable to gratuities or state and local sales taxes. Although framed as a measure to reduce merchant costs, the IFPA would create economic and legal problems that far outweigh its asserted benefits.

The law would impose a cumbersome two-track compliance regime. One pathway would require merchants to transmit tax and gratuity data in real time during payment authorization. The other would allow merchants to seek rebates for interchange fees collected on exempted amounts. Both approaches would impose substantial technological, operational, and compliance burdens on payment networks, processors, merchants, and financial institutions, while adding inefficiency to the payments system.

Interchange fees are not merely transaction costs. They help payment-card networks balance the two-sided market connecting merchants and consumers. Interchange revenue funds fraud prevention, payment security, rewards programs, insurance benefits, and payment-system innovation. Prohibiting interchange fees on taxes and gratuities would disrupt that balance and reduce issuer revenue. Financial institutions would likely respond by reducing rewards, raising account or card fees, increasing borrowing costs, or some combination of the three. Experience with interchange-fee regulation in the United States under the Durbin amendment, as well as in the European Union and Australia, suggests such interventions often reduce consumer benefits without producing corresponding consumer price reductions. The IFPA also would shift a substantial share of its costs to consumers outside Illinois, giving the law significant extraterritorial effects.

Those effects would grow if other states adopted similar laws. The IFPA effectively requires national payment systems to accommodate Illinois-specific rules, forcing costly and inefficient nationwide adjustments. Colorado has passed similar legislation, pending the governor’s signature.[5] Four other states—Delaware, Oklahoma, Pennsylvania, and Rhode Island—have advanced comparable bills, while 11 additional jurisdictions have active proposals.[6]  This patchwork would fragment the national payments system, increase transaction costs, reduce innovation, and diminish efficiency. The problem is especially acute because states have proposed materially different exemptions and compliance mechanisms. As the OCC recognized in the Order, these laws also raise substantial constitutional and federal-preemption concerns. National banks and federal savings associations have challenged the IFPA as preempted by the National Bank Act (NBA) and the Home Owners’ Loan Act (HOLA).

The federal district court initially granted a preliminary injunction barring enforcement of the IFPA against national banks and federal savings associations after concluding the law was likely preempted by the NBA and HOLA.[7] The same court later held at summary judgment that those statutes did not preempt the IFPA’s interchange-fee provisions, although it found the law’s data-use restrictions preempted.[8] After the OCC issued the Rule and Order, the 7th U.S. Circuit Court of Appeals vacated the district court’s judgment and remanded the case for further proceedings.[9]

Ultimately, the IFPA’s narrow benefits for some merchants would come at the expense of broader harms to consumers, financial institutions, and the payments ecosystem. If replicated nationally, such laws could undermine the efficiency and uniformity of the integrated national payments system on which modern commerce depends. The OCC correctly concluded that national banks may charge interchange fees and other noninterest charges necessary to operate in modern payment markets. The OCC also correctly recognized that payment networks may establish such fees because they perform an essential coordinating function within the payment-card ecosystem. The OCC likewise properly concluded that federal law preempts the IFPA as applied to national banks and federal savings associations. Sound law & economics principles further support extending that preemption to all participants involved in the interchange-fee process.

II.       Electronic Payments, Interchange Fees, and Two-Sided Markets

Electronic payments are indispensable to modern commerce. During the COVID-19 pandemic, they helped sustain the U.S. and global economies as cash use and face-to-face transactions fell sharply.[10] Studies show that payment cards—whether physical cards or mobile-wallet applications—offer substantial advantages over cash for most transactions.[11] Consumers benefit from greater convenience, stronger fraud protection, short-term liquidity through interest-free grace periods, and, in most cases, zero liability for fraud. Many cards also offer purchase protection, travel insurance, cashback rewards, airline miles, hotel points, and other benefits. These advantages help explain why most consumers prefer cards over cash or checks (Figure 1).

FIGURE 1: Payment-Instrument Share as Proportion of Number of Payments

SOURCE: Federal Reserve Board [12]

Merchants also benefit from electronic payments. Payment cards generally speed checkout, increase sales, and reduce theft and fraud risks associated with cash.[13] When Chicago-based quick-service chain Epic Burger went cashless in 2017, founder David Friedman cited improved speed, safety, and fewer counting errors.[14] Mercedes-Benz Stadium in Atlanta likewise reported faster transaction times, higher per-capita spending, and lower operating costs after going cashless in 2018.[15] Restaurants and sports venues in Illinois and nationwide have followed suit.[16]

Payment systems work only when both consumers and merchants participate. That participation depends on trust. Payment networks, issuing banks, acquiring banks, and payment processors invest billions of dollars in fraud prevention, cybersecurity, infrastructure, and maintenance to sustain that trust.[17] Consumers, meanwhile, use payment cards only when they see enough value from security, convenience, insurance, rewards, and related benefits. Issuing banks recover much of the cost of providing those benefits through interchange fees.[18]

Interchange fees remain widely misunderstood. Commentators often describe them simply as “transaction costs.”[19] That characterization is incomplete. Interchange fees do cover operating costs, including fraud prevention and network maintenance. But they also transfer value from merchants to consumers by funding cardholder benefits, such as rewards, purchase protection, and short-term credit.

All payment systems impose costs.[20] Cash is expensive to print, transport, secure, and process, though many of those costs remain hidden because governments subsidize currency production and distribution.[21] Checks impose costs and risks as well, including fraud, processing delays, and nonpayment. Merchants also benefit from legal rules requiring checks to clear at par, which shifts some costs to consumers and financial institutions.[22] More broadly, no payment system survives unless both merchants and consumers perceive net benefits from using it.[23] More broadly, no payment system survives unless both merchants and consumers see net benefits from using it. Cost allocation may differ across payment systems, but continued market adoption shows that both sides of the transaction generally benefit.

Electronic payments differ from cash and checks mainly because the costs of those older systems are often obscured by subsidies or legal rules that shift costs away from merchants. There is therefore no economic basis for exempting taxes or gratuities from interchange fees, just as there would be no basis for exempting portions of cash or check transactions from the costs of those payment systems. The visibility of interchange fees does not justify selectively shifting payment-system costs away from merchants.

Economists call these transfers “cross-side subsidies” because one side of a two-sided market subsidizes participation on the other.[24] Such arrangements are common. Advertisers subsidize newspapers, search engines, smartphone applications, and large language models. The economics literature has long recognized the importance of cross-side subsidies, and the U.S. Supreme Court has recognized their central role in payment-card markets:

Sometimes indirect network effects require two-sided platforms to charge one side much more than the other. For two-sided platforms, “’the [relative] price structure matters, and platforms must design it so as to bring both sides on board.’” The optimal price might require charging the side with more elastic demand a below-cost (or even negative) price. With credit cards, for example, networks often charge cardholders a lower fee than merchants because cardholders are more price sensitive. In fact, the network might well lose money on the cardholder side by offering rewards such as cash back, airline miles, or gift cards. The network can do this because increasing the number of cardholders increases the value of accepting the card to merchants and, thus, increases the number of merchants who accept it. Networks can then charge those merchants a fee for every transaction (typically a percentage of the purchase price). Striking the optimal balance of the prices charged on each side of the platform is essential for two-sided platforms to maximize the value of their services and to compete with their rivals.[25]

The Supreme Court’s discussion concerned American Express, a “3-party” payment-card network that combines network operations, card issuance, and acquiring functions in one firm. By contrast, the IFPA arbitrarily targets “4-party” networks, in which network operations, issuing and acquiring are each undertaken by distinct entities. Only 4-party systems use interchange fees because the issuing and acquiring institutions in those systems are distinct.

III.    The Economic Effects of the IFPA

Although the Illinois Interchange Fee Prohibition Act (IFPA) is unusual in exempting only portions of interchange fees, many jurisdictions have imposed interchange-fee caps and related regulations. Those experiences offer useful lessons about the IFPA’s likely effects. The Durbin amendment to the Dodd-Frank Act is especially instructive.

Before the Durbin amendment, debit-card interchange fees helped issuing banks fund consumer benefits such as debit-card rewards and free checking accounts with low minimum-balance requirements. After the Federal Reserve implemented Regulation II, many banks reduced or eliminated those benefits.

Empirical studies by Federal Reserve economists found that Regulation II’s interchange-fee caps led covered banks to raise account fees, increase minimum-balance requirements, reduce access to free checking, and eliminate debit-card rewards.[26] Those changes disproportionately harmed lower-income households and increased the number of unbanked and underbanked consumers.[27] At the same time, there is little evidence that merchants passed their interchange-fee savings through to consumers in the form of lower retail prices.[28]

The same economic logic applies to the IFPA. The law restricts interchange fees not only on sales taxes, but also on gratuities. It applies to credit cards, debit cards, and general-use prepaid cards. It also reaches broadly across the payments ecosystem, covering issuers, payment-card networks, acquiring banks, and processors. In effect, every participant in the payment chain is prohibited from “charging or receiving” interchange fees on sales taxes and gratuities.

Compliance would require substantial technological and operational changes. Issuers and payment networks would need to upgrade information-technology systems and transaction-processing software to identify taxes and gratuities, modify authorization systems, and implement tracking or rebate mechanisms for post-transaction adjustments.[29] At the same time, the IFPA appears not to apply to 3-party networks such as American Express and Discover because those systems do not rely on interchange fees. As such, the IFPA is economically arbitrary and effectively preferences 3-party networks over 4-party networks for no good reason.

Implementing the IFPA would require far more than simply “turning off” interchange fees on taxes and tips. It would require systemwide changes to the nation’s electronic-payments infrastructure. Payment-card networks and processors would need to revise transaction-message formats and alter the algorithms used to calculate interchange fees for Illinois transactions. At minimum, compliance would require:

• Reliably identifying Illinois sales taxes and gratuities, including precise amounts that vary by product type and locality;
• Modifying authorization and settlement-message formats to transmit that information;
• Altering clearing and settlement systems to ensure interchange fees apply only to permitted transaction amounts; and
• Maintaining records and dispute-resolution systems for merchants seeking retroactive reimbursement of interchange fees on taxes and gratuities.

Even while holding at summary judgment that the IFPA’s interchange-fee provisions were not preempted, the district court recognized the law’s substantial operational complexity. The court noted that compliance would likely require technical capabilities that do “not currently exist, but could possibly exist through additional investment.”[30] It likewise described the resulting compliance costs as “undeniable” and even “staggering.”[31] The OCC estimates those costs could exceed $300 million annually.[32]

Those compliance costs alone would be substantial. More significant still would be the reduction in interchange-fee revenue used to fund consumer rewards and support card issuance. Eliminating interchange fees on taxes and gratuities could reduce issuer revenue by roughly 0.1% on transactions involving Illinois merchants.[33] For large issuers, that could amount to tens of millions of dollars annually.[34] Issuers—both inside and outside Illinois—would likely respond in one or more of several ways.

A.   Reduced Cardholder Rewards and Benefits

Banks would likely respond first by scaling back cardholder rewards and benefits. Credit-card issuers fund rewards programs primarily through interchange fees. If interchange-fee revenue from Illinois transactions declines by 10% or more, issuers will have less revenue to support existing rewards commitments.

Experience elsewhere strongly suggests this outcome is likely. Following interchange-fee price controls in the United States under the Durbin amendment, in Australia under regulations adopted by the Reserve Bank of Australia, and in the European Union under the Interchange Fee Regulation, issuers reduced the generosity of rewards programs.[35] In many cases, those reductions were widespread.

Issuers could also reduce other benefits funded through interchange fees, including travel insurance, purchase protections, and related cardholder services. Australian and European issuers adopted similar measures after interchange-fee regulation in those jurisdictions.[36] If Illinois remains the only state to impose this restriction, national issuers may be less likely to reduce benefits nationwide. Local Illinois banks and credit unions, by contrast, may have fewer alternatives because their customer bases are concentrated in the state. In practice, any nationwide reduction in benefits would force out-of-state cardholders to subsidize the Illinois operations of large merchants.

Issuers could instead create Illinois-specific rewards programs to offset the revenue loss. But doing so would require amendments to nearly all cardholder agreements, as well as agreements with rewards partners such as airlines and hotels. State-specific programs would also complicate customer communications and increase operational complexity.

A more likely response would be modest nationwide reductions in rewards. For example, a bank offering 2% cashback might reduce rewards to 1.95%, or slightly devalue points across its portfolio. Economically, reducing rewards functions as a price increase for consumers. Research consistently shows that consumers bear most of the costs of interchange-fee restrictions, while merchants pass through little, if any, savings through lower retail prices. Once compliance costs are included—including the costs of adapting to Illinois’ law and potentially inconsistent copycat laws in other states or municipalities—it is not clear merchants would realize net savings at all.[37]

Nationwide adjustments would still require amendments to cardholder and partner agreements, but they would be easier to administer than state-specific programs. They would also spread costs across cardholders nationwide. In effect, Illinois policy would impose costs on consumers outside Illinois, forcing out-of-state cardholders to subsidize the Illinois operations of large merchants.

The likelihood of reduced rewards and benefits would rise substantially if additional states adopted similar legislation. Even if Illinois remains unique, issuers may still reduce benefits for Illinois-based customers or for transaction categories with large tax components, such as gasoline purchases that include substantial fuel taxes.

B.    Higher Card and Account Fees

Issuers have often responded to interchange-fee price controls by introducing or increasing cardholder fees. In Australia, for example, banks increased average annual credit-card fees by roughly 50% after interchange-fee regulation.[38] Illinois consumers could face similar outcomes. Cards that currently carry no annual fee could begin charging one, while cards with more generous rewards programs could become more expensive.

Debit cards and associated checking accounts could also become more costly. That is precisely what happened after the Durbin amendment. Some covered banks initially proposed monthly debit-card usage fees to offset lost interchange revenue. After public backlash, many instead increased monthly account fees and raised minimum-balance requirements for free checking accounts.[39]

Those changes disproportionately burden lower-income consumers, who are less likely to maintain large balances and more likely to rely on low-cost banking products. Prior experience with interchange-fee regulation shows that reduced interchange revenue can reduce access to affordable banking services and increase the number of unbanked or underbanked households.

Because nationally chartered banks and out-of-state financial institutions issue a large share of debit and credit cards used in Illinois, the IFPA’s effects would likely extend well beyond Illinois residents. If banks increase fees across broader customer bases, consumers nationwide would bear part of the cost of Illinois’ interchange-fee restrictions. The IFPA would therefore create substantial extraterritorial effects, particularly if issuers adopt nationwide pricing changes to simplify administration and compliance.

C.   Higher Borrowing Costs

Issuers could also respond by increasing borrowing costs, including annual percentage rates (APRs). After the European Union adopted the Interchange Fee Regulation—which capped interchange fees at 0.2% for debit transactions and 0.3% for credit transactions—the spread between the European Central Bank’s base rate and credit-card APRs widened.[40]

The IFPA alone might not produce a measurable increase in APRs. Even so, reduced interchange revenue could place upward pressure on interest rates, particularly for higher-risk borrowers. Consumers would ultimately bear those higher borrowing costs.

If issuers apply those pricing changes across broader customer portfolios rather than limiting them to Illinois accounts, the effects would extend beyond Illinois. As with reduced rewards and higher account fees, the IFPA’s costs would likely fall in part on out-of-state consumers.

D.   Fragmentation of the National Payments System

Payment-card networks currently operate under largely uniform nationwide interchange-fee schedules. The IFPA would undermine that system. If other states adopt similar laws exempting sales taxes, gratuities, or other transaction components from interchange fees, payment networks would likely need to create multiple state-specific interchange regimes.

That fragmentation would increase operational complexity, compliance costs, and administrative burdens. Networks and processors would need to track varying state requirements, identify covered transactions in real time, and apply different interchange calculations depending on jurisdiction and transaction type.

As more states adopt divergent rules, the interchange system would become harder to administer. The resulting patchwork could undermine the efficiency and uniformity of the national payments system and, at sufficient scale, render the existing nationwide interchange framework effectively unworkable.

E.    Nationwide Increases in Interchange Fees

Card networks might also respond by increasing default multilateral interchange-fee schedules nationwide to offset revenue losses from Illinois transactions. In practice, that would likely mean modest across-the-board increases in interchange fees throughout the country.

Such an approach would shift costs from Illinois merchants to merchants and consumers in other states. Out-of-state merchants would face higher interchange fees, while consumers outside Illinois could bear corresponding costs through higher retail prices, reduced rewards, or other pricing adjustments. The IFPA would therefore create another form of extraterritorial cost shifting, spreading costs nationwide to subsidize Illinois-based merchants.

IV.    The IFPA Interferes with Federally Authorized Banking Powers

At the preliminary-injunction stage, the district court applied the Barnett Bank standard and found that the IFPA’s Interchange Fee Provision “significantly interferes” with national banks’ and federal savings associations’ federally authorized power to set interchange fees.[41] At summary judgment, however, the court reversed course for one principal reason: payment-card networks, rather than banks themselves, formally set the fees.[42]

That distinction collapses once the underlying economics are understood. As the court acknowledged, payment-card networks set interchange fees on behalf of issuing banks.[43] Those fees allow issuers to recover transaction-processing costs and fund consumer benefits such as rewards programs and checking-account services.

By limiting which portions of a transaction may carry interchange fees, the IFPA effectively imposes a price control on a fee structure that networks continuously calibrate to balance merchants and consumers. Disrupting that balance reduces the value of payment cards to consumers, which reduces usage and, in turn, diminishes value to merchants. The result harms both sides of the platform and materially interferes with national banks’ and federal savings associations’ exercise of their federally authorized powers.

The OCC is therefore correct that the IFPA’s Interchange Fee Provision is preempted as applied to national banks and federal savings associations.[44] The OCC is likewise correct to follow the district court’s conclusion that the IFPA’s Data Use Provision is preempted.

The same logic extends further. As the district court initially recognized, the IFPA should also be preempted as applied to out-of-state state banks because federal law grants them the same operational powers as national banks.[45] The same reasoning applies to the broader set of participants whose activities are inseparable from those banking powers, including payment networks and other payment processors.

As the district court explained in addressing the Data Use Provision:

Both parties admit that under the current system, if the Issuer associated with a transaction is exempt from the IFPA with respect to a transaction, then—to give effect to the Issuer’s exemption—other participants in the payment card ecosystem would need relief from the requirements of the IFPA for purposes of that transaction, though the Attorney General notes that said result may not be necessary were the global payment card ecosystem structured a different way.[46]

Applying “longstanding principles of equity,” the court concluded that the “Data Usage Limitation is so tied up in the federal entities’ powers that the preemptive effect must run to the Payment Card Networks and others involved in the payment process.”[47]

That reasoning accords with multisided-platform economics and applies equally to the IFPA’s Interchange Fee Provision. Payment-card networks operate integrated systems that establish interchange fees, participation requirements, authorization protocols, clearing and settlement rules, and liability standards. Networks connect merchants and cardholders through issuing banks, acquiring banks, and processors, while transmitting the information needed to complete transactions. Issuing banks, in turn, use interchange-fee revenue to process payments and fund services for cardholders and deposit customers.

Payment-card networks are therefore integrated platforms, not isolated contracts among merchants, banks, and processors. The OCC’s Rule clarifies this point. Interchange fees are the pricing mechanism that holds the system together. Exempting taxes and gratuities from interchange fees would alter the balance between merchants and consumers, shift costs to consumers, and force operational changes across a nationwide—and indeed global—payments network.

That reality bears directly on preemption. A law that materially alters how issuing banks recover costs and fund cardholder services substantially interferes with federally authorized banking powers, even if the law formally targets payment networks or transaction components rather than banks directly. For the same reason, equitable relief cannot stop with issuing banks alone. Because the payment-card system operates as a coordinated platform, compliance obligations imposed on one participant necessarily spill over to networks, processors, and other participants. Partial injunctions therefore cannot fully remedy the interference.

The IFPA’s Interchange Fee Provision should therefore be preempted and enjoined as applied to all participants in the interchange-fee process who are connected to federally regulated banks, including not only the banks themselves but also the networks and payment processors.

V.      Preemption Would Avoid a Fragmented Regulatory Patchwork

The OCC correctly recognized that, absent preemption, the IFPA and similar state laws would create a fragmented and increasingly unworkable regulatory patchwork.[48] Multiple states have already followed Illinois by proposing or adopting nonuniform interchange-fee restrictions that apply to different institutions, transaction components, and fee categories.

Colorado’s law illustrates the problem. Unlike the IFPA, it applies only to issuers with more than $60 billion in assets, exempts sales taxes but not gratuities, applies to payment-card networks rather than issuers directly, and caps fees associated with charitable donations.[49] Other states have proposed exemptions for local tourism taxes, hotel-occupancy taxes, resort fees, and similar charges.

As Table 1 shows, the resulting patchwork is already substantial:

TABLE 1: Active or Pending Bills/Current-Session Proposals[50]

The IFPA’s inclusion of gratuities underscores the absence of any limiting principle. Taxes at least involve government levies that merchants collect and remit. Tips do not. Gratuities are voluntary payments from customers to service workers and function economically as wages. There is no meaningful economic distinction between interchange fees applied to wages embedded in the listed price of a meal or hotel room and interchange fees applied to tips paid through the same card transaction.

Illinois law still allows merchants to retain a limited sales-tax collection allowance for remitting taxes. There is no comparable state allowance or subsidy for processing gratuities. Including tips therefore suggests the IFPA’s objective is not merely to align interchange fees with government functions, but to impose broader price controls on payment-card processing fees. In practice, exempting gratuities transfers costs from merchants to issuing banks and consumers.

Once states begin carving selected transaction components out of interchange fees, there is little reason the process would stop with taxes and tips. Colorado already imposes restrictions tied to charitable contributions. Other politically influential industries could seek exemptions for food, gasoline, medical care, public transportation, childcare, vehicle repairs, or electric-vehicle charging. Legislatures could face constant pressure to create narrow and inconsistent exemptions based on political influence and public sentiment.

That logic quickly spirals in on itself. If merchants selling goods on consignment do not retain the full purchase price, should interchange fees apply only to their markup? If a merchant collects government-imposed licensing or registration fees, should those amounts also be exempt? As carveouts multiply, the operational complexity of calculating interchange fees would increase dramatically.

The rapid proliferation of nonuniform state proposals demonstrates why federal preemption is necessary. The National Bank Act and Home Owners’ Loan Act were designed to prevent states from imposing inconsistent regulatory obligations on nationally integrated banking and payments systems. Without preemption, interchange-fee regulation would become increasingly fragmented, politically driven, and economically disruptive.

VI.    Conclusion

The OCC correctly concluded that the IFPA is preempted as applied to entities subject to OCC supervision. It also correctly clarified that, when payment-card networks set interchange fees on behalf of banks, state efforts to regulate those fees are preempted as applied to national banks and federal savings associations.

The same logic extends to payment-card networks and other participants that operate the payments system. As the IFPA litigation returns to the district court, the reasoning that supports preemption for national banks and federal savings associations also supports equitable relief for the broader payment-card ecosystem. Payment-card networks should therefore receive relief from both the IFPA’s Interchange Fee Provision and its Data Use Provision.

If the court enjoins enforcement against those participants, it should also enjoin enforcement against other federally regulated financial institutions, including credit unions. Otherwise, the IFPA would create an uneven regulatory landscape and distort competition in favor of exempted institutions.

More broadly, the IFPA shows why federal preemption remains necessary in nationally integrated banking and payments markets. Allowing states to impose inconsistent interchange-fee restrictions would fragment the payments system, increase operational complexity, shift costs to consumers, and undermine the uniform national framework established by federal banking law.

[1] National Bank Non-Interest Charges and Fees Interim Final Rule, 91 Fed. Reg. 22,989 (Apr. 29, 2026), https://www.govinfo.gov/content/pkg/FR-2026-04-29/pdf/2026-08328.pdf [hereinafter Interim Final Rule].

[2] Order Preempting the Illinois Interchange Fee Prohibition Act, 91 Fed. Reg. 23,150 (Apr. 29, 2026), https://www.govinfo.gov/content/pkg/FR-2026-04-29/pdf/2026-08341.pdf [hereinafter Interim Final Order].

[3] Julian Morris & Ben Sperry, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA, Int’l Ctr. L. & Econ. (July 7, 2025), https://laweconcenter.org/wp-content/uploads/2025/07/IFPA-Paper-2025.pdf.

[4] See, e.g., Ben Sperry & Julian Morris, Half a Swipe, Whole Lot of Mess: Platform Economics and the Interchange Fee Cases, Truth on the Mkt. (Feb. 26, 2026), https://truthonthemarket.com/2026/02/26/half-a-swipe-whole-lot-of-mess-platform-economics-and-the-interchange-fee-cases; Julian Morris, State Regulation of Interchange Fees, Int’l Ctr. L. & Econ. (Nov. 15, 2024), https://laweconcenter.org/resources/state-regulation-of-interchange-fees.

[5] S.B. 26-134, 75th Gen. Assemb., 2d Reg. Sess. (Colo. 2026); Bill to Restrict Interchange Fees Clears Colorado Senate, ABA Banking J. (May 1, 2026), https://bankingjournal.aba.com/2026/05/bill-to-restrict-interchange-fees-clears-colorado-senate.

[6] See, e.g., Emma Kinery, States Advance Bills to Regulate Credit Card Fees on Taxes and Tips, State Affairs (Apr. 28, 2026), https://pro.stateaffairs.com/co/finance/interchange-fee-bills-2026.

[7] Illinois Bankers Ass’n v. Raoul, 760 F. Supp. 3d 636 (N.D. Ill. 2024).

[8] See Illinois Bankers Ass’n v. Raoul, No. 24-cv-07307, 2026 WL 371196 (N.D. Ill. Feb. 10, 2026).

[9] See Illinois Bankers Ass’n v. Raoul, No. 24-2844, 2026 WL 1291987 (7th Cir. 2026).

[10] See, e.g., Julian Morris, Todd J. Zywicki & Geoffrey A. Manne, The Effects of Price Controls on Payment-Card Interchange Fees: A Review and Update, Int’l Ctr. for L. & Econ. (Mar. 4, 2022), https://laweconcenter.org/wp-content/uploads/2022/03/Payments-2021-Lit-Review.pdf.

[11] See Julian Morris & Ben Sperry, The Cost of Payments: A Review, Int’l Ctr. for L. & Econ. (Aug. 28, 2024), https://laweconcenter.org/resources/the-cost-of-payments-a-review.

[12] Berhan Bayeh et al., 2026 Diary of Consumer Payment Choice, Fed. Rsrv. (2026), https://www.frbservices.org/news/research/2026-findings-diary-consumer-payment-choice.

[13] Morris & Sperry, The Cost of Payments, supra note 11; Claire Wang, Cash Me If You Can: The Impacts of Cashless Businesses on Retailers, Consumers, and Cash Use, Cash Prod. Off. Fed. Rsrv. Sys. (2019), https://www.frbsf.org/wp-content/uploads/sites/7/Cash-Me-If-You-Can-August2019.pdf.

[14] Daniel Gerzina, Epic Burger Is Now Cashless, Tamale Spaceship Closes Wicker Park Restaurant, More Intel, Eater Chi. (June 21, 2017), https://chicago.eater.com/2017/6/21/15846364/epic-burger-cashless-tamale-spaceship-closed-wicker-park-restaurant-am-intel.

[15] Id.

[16] See Morris & Sperry, Cost of Payments, supra note 11.

[17] See Julian Morris, The Hidden Wealth of Payment Cards: How Innovations in Payments Transform Society, Int’l Ctr. L. & Econ. (Dec. 19, 2024), https://laweconcenter.org/resources/the-hidden-wealth-of-payment-cards-how-innovations-in-payments-transform-society.

[18] See Todd J. Zywicki, The Economics of Payment Card Interchange Fees and the Limits of Regulation, Int’l Ctr. L. & Econ. (June 2, 2010), https://laweconcenter.org/images/articles/zywicki_interchange.pdf.

[19] See Aaron Klein et al., How Better Payment Systems Can Improve Public Transportation, Brookings Ctr. Regul. Mkt. (2023), www.brookings.edu/wp-content/uploads/2023/01/20230109_CRM_Klein_TransitPayments_final1.pdf.

[20] See Consumer Fin. Prot. Bureau, 1 Taskforce on Consumer Financial Law 586–88 (2021).

[21] One frequently cited 2019 estimate found that moving to a cashless economy could increase annual GDP by roughly 1% in advanced economies and as much as 3% in developing economies. See Marks Massi, Godfrey Sullivan, Michael Strauß & Mohammad Khan, How Cashless Payments Help Economies Grow, Bos. Consulting Grp. (May 28, 2019), https://www.bcg.com/publications/2019/cashless-payments-help-economies-grow.

[22] The shift from checks to electronic payments funded through interchange fees helped drive the rapid growth of free checking accounts and the decline in monthly maintenance fees following the rise of debit cards.

[23] For example, a consumer may wish to pay in Bitcoin, which imposes some costs on the consumer. But if a merchant declines to accept Bitcoin, the merchant incurs no corresponding costs.

[24] See Morris, Hidden Wealth, supra note 17.

[25] Ohio v. American Express Co., 585 U.S. 529, 536–37 (2018) (internal citations omitted).

[26] See, e.g., Morris, Zywicki & Manne, Effects of Price Controls, supra note 10; Mark D. Manuszak & Krzysztof Wozniak, The Impact of Price Controls in Two-Sided Markets: Evidence from US Debit Card Interchange Fee Regulation (Fin. & Econ. Discussion Series No. 2017-074, Fed. Rsrv., July 2017), https://www.federalreserve.gov/econres/feds/the-impact-of-price-controls-in-two-sided-markets-evidence-from-us-debit-cardinterchange-fee-regulation.htm; Benjamin S. Kay, Mark D. Manuszak & Cindy M. Vojtech, Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment (Fin. & Econ. Discussion Series No. 2014-77, Fed. Rsrv., Sept. 2014), https://www.federalreserve.gov/econres/feds/bank-profitability-and-debit-card-interchange-regulation-bank-responses-to-thedurbin-amendment.htm.

[27] See Geoffrey A. Manne, Julian Morris & Todd J. Zywicki, Unreasonable and Disproportionate: How the Durbin Amendment Harms Poorer Americans and Small Businesses, Int’l Ctr. L. & Econ. (Apr. 25, 2017), https://laweconcenter.org/wp-content/uploads/2017/08/icledurbin_update_2017_final-1.pdf; Vladimir Mukharlyamov & Natasha Sarin, Price Regulation in Two-Sided Markets: Empirical Evidence From Debit Cards, 172 J. Fin. Econ. 1040904 (2025), https://www.sciencedirect.com/science/article/pii/S0304405X25001023.

[28] See, e.g., Zhu Wang, Scarlett Schwartz & Neil Mitchell, The Impact of the Durbin Amendment on Merchants: A Survey Study, 100 Econ. Q. 183 (2014); Mukharlyamov & Sarin, supra note 27, at 10 (“Durbin-induced interchange fee savings for gas merchants were too small for their pass-through—even if full—to be discerned with statistical significance.”).

[29] Morris, Hidden Wealth, supra note 17, at 19.

[30] See Illinois Bankers, 2026 WL 371196, at *13.

[31] Id.; see also id. at *6 (noting evidence that complying with the IFPA would be “extraordinarily expensive and will drive institutions out of the market.”).

[32] Interim Final Order, supra note 2, at 23,156.

[33] See Taxes in Illinois, Tax Found., https://taxfoundation.org/location/illinois (last visited Apr. 20, 2025) (estimating Illinois’s average sales tax rate at 8.86%. Assuming gratuities equal roughly 7% of sales at a 15% rate, taxes and tips together amount to approximately 10% of the average sale. At a 1% interchange fee, exempting taxes and tips would reduce interchange revenue by about 0.1% of the sale amount).

[34] According to the U.S. Census Bureau, Illinois retail sales totaled roughly $244 billion in 2022. See QuickFacts: Illinois, U.S. Census Bur., https://www.census.gov/quickfacts/fact/table/IL/PST045223 (last visited May 22, 2026). Assuming modest growth, retail sales likely exceed $250 billion in 2026. Interchange-fee revenue derived from sales taxes and gratuities could therefore total roughly $250 million annually. For issuers with market shares of 4% or more, that implies losses of at least $10 million.

[35] See Morris, Zywicki & Manne, Effects of Price Controls, supra note 10.

[36] Id.; Iris Chan et al., The Personal Credit Card Market in Australia: Pricing Over the Past Decade, Rsrv. Bank of Austl. (2012), https://www.rba.gov.au/publications/bulletin/2012/mar/pdf/bu-0312-7.pdf.

[37] For example, after enactment of the Durbin Amendment, many smaller merchants saw no price reductions because networks eliminated special discounts for small merchants and low-dollar transactions while acquirer fees increased. See Manne, Morris & Zywicki, Unreasonable and Disproportionate, supra note 27; see also Robert Shapiro & Jerome Davis, The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees 4, Progressive Pol’y Inst. (2025), https://www.progressivepolicy.org/wp-content/uploads/2025/12/PPI_The-Unanticipated-Costs-and-Consequences-of-Federal-Reserve-Regulation-of-Debit-Card-Interchange-Fees_V3.pdf.

[38] Todd J. Zywicki et al., Price Controls on Payment Card Interchange Fees: The U.S. Experience (Geo. Mason L. & Econ. Rsch. Paper No. 14-18, 2014), https://www.law.gmu.edu/pubs/papers/14_18.

[39] Id.; see also Manne, Morris & Zywicki, Unreasonable and Disproportionate, supra note 27.

[40] See Julian Morris, The Credit Card Competition Act’s Potential Effects on Airline Co-Branded Cards, Airlines, and Consumers, Int’l Ctr. L. & Econ. (Nov. 17, 2023), https://laweconcenter.org/resources/the-credit-card-competition-acts-potential-effects-on-airline-co-branded-cards-airlines-and-consumers.

[41] Illinois Bankers Ass’n v. Raoul, 760 F. Supp. 3d 636, 657 (N.D. Ill. 2024) (“Illinois Bankers have shown that they are likely to prevail on the merits of their claim that the IFPA’s Interchange Fee Prohibition violates the federal rights of national banks and is preempted by the NBA under the Barnett Bank standard.”).

[42] See Illinois Bankers, 2026 WL 371196, at *13 (“[T]he core snag in Plaintiffs’ case—third parties set the fees . . . . The Payment Card Networks built this ecosystem, and the Payment Card Networks set these fees.”).

[43] Id. at *2 (“Though the Payment Card Networks set the default interchange fees, they do so on behalf of the other entities . . . .”).

[44] See Interim Final Order, supra note 2, at 23,154.

[45] Illinois Bankers Ass’n v. Raoul, No. 24-cv-07307, 2025 WL 409060, at *4 (N.D. Ill. Feb. 6, 2025) (“Because the Court found that the NBA likely preempts the IFPA with respect to federal banks, applying § 1831a(j)(1), the IFPA is likely preempted with respect to out-of-state state banks.”).

[46] Illinois Bankers, 2026 WL 371196, at *3.

[47] Id. at *21.

[48] See Interim Final Order, supra note 2, at 23,154.

[49] See S.B. 26-134, supra note 5. Colorado’s apparent purpose in adopting a $60 billion issuer threshold is to exempt in-state community banks and credit unions while imposing compliance costs on out-of-state issuers. Likewise, the statute’s application to payment networks rather than issuers appears designed to evade the Comptroller’s preemption authority.

[50] These bills are current as of May, 28, 2026.

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 (NPRM) on reforming legacy rules for an all-Internet Protocol (IP) future and accelerating network modernization.[1] ICLE is a nonprofit, nonpartisan research center that applies law & economics methodologies to public policy. Its work promotes sound economic analysis and consumer welfare, particularly in dynamic, technology-driven markets such as telecommunications.

The voice-services market of 2026 bears little resemblance to the market that produced the intercarrier compensation (ICC) framework this proceeding seeks to modernize. Mobile wireless, Voice over Internet Protocol (VoIP), and satellite services now discipline legacy providers and give consumers alternatives that did not exist when the Commission first adopted many of these rules.[2] The regulatory framework, however, has not kept pace.[3] Remaining ICC charges continue to reward carriers for maintaining legacy copper and time-division multiplexing (TDM) infrastructure. Connect America Fund Intercarrier Compensation (CAF ICC) support continues to subsidize delayed modernization. And the Universal Service Fund (USF) contribution factor continues to rise as the assessed revenue base shrinks.[4] These interrelated problems all stem from the same source: the Commission has not yet completed the transition it began more than a decade ago.

ICLE urges the Commission to move forward decisively with the reforms proposed in this NPRM. These comments make two principal points. First, retiring copper networks and completing the transition to all-IP infrastructure would generate substantial consumer and economic benefits, but the current regulatory framework impedes that transition by rewarding delay and preserving obsolete technology. Second, timely phasing out CAF ICC would correct distorted investment incentives, reduce the overall cost of the USF, relieve the burden on consumers who fund it, and reduce pressure for contribution reforms that could impose new regulatory costs on broadband networks and services.

II.             Completing the Transition to Bill-and-Keep

The FCC’s efforts to facilitate copper retirement and accelerate the transition to IP-based networks will produce substantial consumer and economic benefits. Yet additional reforms remain necessary. As ICLE has previously explained, the remaining ICC regime continues to distort investment incentives by rewarding carriers that maintain outdated TDM infrastructure.[5] Those distortions slow network modernization, preserve inefficient legacy systems, and divert investment away from next-generation infrastructure.

Completing the transition to a bill-and-keep framework would eliminate those incentives and better align regulatory policy with today’s communications marketplace. Under bill-and-keep, providers recover network costs directly from their own customers rather than through intercarrier access charges tied to legacy networks. That approach would accelerate the transition to all-IP infrastructure, reduce the costs associated with maintaining parallel TDM and IP systems, improve service quality and robocall mitigation, and encourage providers to compete through better and more efficient services rather than through outdated regulatory subsidies.

A.      Network Modernization Delivers Substantial Benefits

The FCC has rightly made network modernization a key priority, and many of its recent actions will help accelerate copper retirement.[6] Retiring legacy copper networks and transitioning remaining infrastructure to all-IP systems will produce substantial consumer and economic benefits. Those benefits strongly support eliminating any remaining ICC charges tied to legacy networks.

Maintaining copper infrastructure imposes enormous and growing costs on carriers that have already transitioned—or begun transitioning—to IP-based networks.[7] Providers must maintain aging wire centers, source hardware that manufacturers no longer produce, and rely on a shrinking pool of technicians trained to repair copper facilities.[8] A single outage on a copper line can take days to resolve, while fiber disruptions are often restored within hours.[9] These inefficiencies create substantial deadweight loss by diverting capital away from next-generation infrastructure that could better serve consumers.[10]

The transition to fiber-based IP networks also generates significant operational and consumer benefits. Unlike copper, which degrades over distance and depends on energy-intensive repeaters and TDM switches distributed throughout neighborhoods, fiber transmits data as pulses of light over largely passive infrastructure.[11] That architecture lowers operating costs, improves energy efficiency, and reduces reliance on centralized switching facilities and related real-estate costs.[12] Providers that complete the transition can consolidate infrastructure and reinvest savings into broader deployment and higher-quality service.

IP networks also provide materially better functionality than legacy copper systems.[13] Wideband audio produces clearer calls than the narrowband channels supported by traditional copper networks, improving communications quality for consumers who are hard of hearing or communicating across language barriers.[14] IP infrastructure also enables more effective robocall mitigation, which remains one of Americans’ most persistent communications complaints. The STIR/SHAKEN caller-authentication framework relies on encrypted digital signatures to verify caller identity. That framework cannot operate end-to-end when legacy TDM networks remain in the call path.[15] Even a single TDM hop strips authentication data, creating opportunities for bad actors to evade detection and enforcement.

The Commission’s regulatory framework should reflect where the communications marketplace has already moved. Mobile and VoIP services have largely displaced traditional switched-access lines. As of late 2023, roughly 79% of home phone connections relied on VoIP,[16]  while 78% of households were wireless-only.[17] Continuing to incentivize carriers to maintain legacy copper infrastructure in order to preserve ICC revenue streams offers little consumer benefit and instead slows the full transition to modern IP-based communications networks.

B.       The ICC Framework Distorts Investment Incentives

The remaining ICC framework creates perverse incentives that encourage carriers to maintain legacy TDM infrastructure instead of transitioning to more efficient IP-based networks.[18] Under current rules, local exchange carriers may continue collecting per-minute access charges for certain TDM-based switched voice services,[19] but risk losing those revenue streams if they fully transition to IP infrastructure. As the NPRM recognizes, this disparity effectively shields TDM technology from normal market forces and weakens incentives to invest in modern IP networks and services.[20] So long as carriers can continue generating access-charge revenue from legacy infrastructure, the business case for upgrading remains weaker than it otherwise would be.

Finalizing the transition to bill-and-keep would eliminate those distorted incentives. Under a bill-and-keep framework, carriers recover costs directly from their own customers, rather than through per-minute termination charges imposed on interconnecting providers.[21] In the 2011 USF/ICC Transformation Order, the FCC concluded that bill-and-keep better aligns incentives toward efficiency, investment, and consumer welfare, and identified it as the intended end state for all ICC regulation.[22] Yet the transition remains incomplete nearly 15 years later. Partial implementation has arguably worsened the problem by allowing carriers that retain legacy networks to continue funding reinvestment in aging infrastructure through access-charge revenues, rather than directing capital toward IP deployment.

The Commission should complete the transition to bill-and-keep. Requiring carriers to recover network costs from their own end users would create stronger incentives to compete on price, quality, and efficiency, rather than preserving outdated regulatory arbitrage opportunities. Eliminating ICC subsidies for legacy technology would accelerate the transition to IP networks, reduce the deadweight loss associated with maintaining parallel TDM and IP systems, and ultimately benefit consumers through lower costs and higher-quality service.

III.           The FCC Should Phase Out CAF ICC

The NPRM proposes gradually phasing out CAF ICC support over two years following completion of the transition to bill-and-keep.[23] The FCC should adopt that proposal and prioritize winding down the program as quickly as practicable. CAF ICC was originally designed as a temporary transition mechanism, but it has persisted long after the conditions that justified it began to disappear.

Continuing CAF ICC support distorts investment incentives by subsidizing legacy TDM infrastructure and delaying the transition to modern IP-based networks. The program also imposes growing costs on the broader USF system and, ultimately, on consumers who finance it through rising contribution factors. At the same time, developments in wireless, VoIP, and satellite competition have substantially reduced the risk that consumers will lose access to communications services if legacy copper providers exit the market.

Phasing out CAF ICC alongside completion of the bill-and-keep transition would better align regulatory policy with current market realities, reduce unnecessary USF expenditures, and encourage investment in modern communications infrastructure, rather than continued reliance on outdated subsidy mechanisms.

A.   CAF ICC Was Intended as a Temporary Transition Mechanism

When the FCC created the CAF ICC support mechanism, it intended the program to serve as a temporary bridge during the transition to bill-and-keep.[24] In the 2011 USF/ICC Transformation Order, the Commission recognized that reducing terminating switched-access charges would reduce ICC revenues for incumbent local exchange carriers, particularly rate-of-return carriers serving rural and high-cost areas.[25] CAF ICC provided those carriers with temporary support to help them adapt their networks and business models during the transition. From the outset, moreover, the Commission made clear that carriers had been “on notice since at least 2011 that the FCC plans to move all intercarrier compensation to bill-and-keep.”[26]

Because the transition to bill-and-keep remains incomplete, CAF ICC has likewise persisted far longer than originally intended. By focusing primarily on terminating access charges in 2011 and failing to establish a firm sunset date for CAF ICC support, the Commission inadvertently transformed a temporary stopgap into something closer to a permanent subsidy. Continued ICC support payments have insulated legacy TDM infrastructure from normal market pressures and may have encouraged some carriers to retain aging copper networks, rather than invest in modern IP-based systems.[27] A mechanism designed to facilitate transition has instead slowed it.

CAF ICC, like the broader ICC regime, also imposes costs on the communications ecosystem more broadly. Phasing out CAF ICC alongside completion of the bill-and-keep transition would restore efficient investment incentives and redirect scarce capital toward the IP infrastructure consumers increasingly demand.

B.       Competition Has Undermined the Justification for CAF ICC

The principal concern surrounding elimination of ICC and CAF ICC support is not that some providers may exit the market, but that consumers in high-cost areas could lose service if those providers are the only available option. That concern made sense when incumbent local exchange carriers (LECs) often served as the sole practical provider of voice service. The communications marketplace has changed dramatically since then.

Mobile wireless, fixed VoIP, and low-earth-orbit satellite broadband services now provide consumers with multiple alternatives to legacy copper networks. Broadband Data Collection (BDC) data as of Dec. 31, 2024, indicate that only 0.8% of census tracts lack a competing non-incumbent LEC with at least one facilities-based residential fixed-voice subscriber.[28] Even where wired alternatives remain limited, mobile wireless coverage has become widely available, while satellite services such as Starlink can support over-the-top voice applications.[29] The Commission’s own data likewise show that, as of December 2024, nearly 79% of American adults lived in wireless-only households, while only 0.9% of households remained landline-only.[30] The competitive conditions that originally justified transitional ICC support no longer exist in most markets.

Competition also addresses concerns about affordability in rural and high-cost areas. In competitive markets, providers that raise prices risk losing customers to mobile, VoIP, satellite, or other competing services. Market competition therefore imposes a more effective and dynamic constraint on prices than a continuing subsidy regime tied to legacy infrastructure. As ICLE has previously explained, phasing out CAF ICC alongside completion of the bill-and-keep transition would restore efficient investment incentives and redirect capital toward modern IP infrastructure, rather than preserving a subsidy framework whose original rationale market developments have largely overtaken.[31]

C.      Eliminating CAF ICC Would Reduce USF Costs

Eliminating CAF ICC support would not only encourage the transition to all-IP networks, but also reduce the overall cost of the USF by roughly $300 million annually.[32] That reduction would ease the burden on consumers who ultimately finance the program. As the pool of interstate voice revenues subject to USF assessments continues to shrink, the contribution factor must rise to sustain fixed or growing disbursement obligations. The proposed contribution factor for the second quarter of 2026 is 37.0%.[33] Much of the debate surrounding USF reform has focused on changing the contribution mechanism, but reducing the overall size of the fund would likewise relieve pressure on consumers and ratepayers.

CAF ICC meaningfully contributes to this problem. As part of the high-cost program, CAF ICC provides subsidies to legacy carriers to offset declining ICC revenues as access charges phase down. Continuing those payments not only subsidizes delayed network modernization, as discussed above, but also increases the total disbursements the USF contribution system must support.[34] Phasing out CAF ICC would reduce overall USF spending, easing pressure on the shrinking contribution base and, in turn, reducing upward pressure on the rates consumers pay.

The costs of inaction extend beyond the immediate burden on consumers. The steady rise in the contribution factor has intensified calls for comprehensive reform, including bipartisan congressional proposals to expand the contribution base to broadband providers and large edge providers.[35] Those proposals reflect a growing recognition that relying almost entirely on traditional voice revenues to finance the USF is no longer sustainable. Expanding contribution obligations to broadband services, however, would undermine the broader policy goal of promoting access to advanced communications services. A more straightforward and less distortionary solution is to reduce the size of the fund itself, rather than expanding the range of services and providers subject to USF assessments.

Phasing out CAF ICC—and thereby eliminating a legacy subsidy whose original rationale competition has largely eroded—would reduce USF disbursement obligations and ease pressure for broader contribution reform, without imposing new burdens on the broadband networks and services that consumers and the broader economy increasingly rely upon.

IV.          Conclusion

The reforms proposed in this NPRM are the necessary completion of a transition the FCC began 15 years ago. The 2011 USF/ICC Transformation Order correctly identified bill-and-keep as the appropriate end state for ICC and treated CAF ICC support as a temporary bridge to ensure consumers did not lose service during that transition. But what was meant to be a bridge has become a barrier.

The remaining ICC framework now distorts investment incentives, encourages continued reliance on legacy TDM and copper infrastructure, and delays the transition to more efficient IP networks. It also imposes unnecessary costs on the USF and on consumers who support it, even as mobile wireless, VoIP, and satellite alternatives have undermined the market conditions that once justified transitional support.

The Commission should adopt the proposed two-year phaseout of CAF ICC support on an expedited basis and complete the transition of remaining access charges to bill-and-keep. Doing so would align regulation with current market realities, reduce unnecessary subsidy costs, and accelerate investment in the modern communications networks consumers increasingly use and demand.

[1] Reforming Legacy Rules for an All-IP Future; Accelerating Network Modernization, 91 Fed. Reg. 14,408 (proposed Mar. 24, 2026), https://www.federalregister.gov/documents/2026/03/24/2026-05727/reforming-legacy-rules-for-an-all-ip-future-accelerating-network-modernization [hereinafter NPRM].

[2] See generally Geoffrey A. Manne, Kristian Stout & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture, Int’l Ctr. for L. & Econ. (June 2021), https://laweconcenter.org/wp-content/uploads/2021/06/A-Dynamic-Analysis-of-Broadband-Competition.pdf; Eric Fruits, Geoffrey A. Manne, Ben Sperry & Kristian Stout, Dynamic Competition in Broadband Markets: A 2024 Update, Int’l Ctr. for L. & Econ. (June 4, 2024), https://laweconcenter.org/wp-content/uploads/2024/06/Broadband-Competition-2024-Update.pdf; Comments of the International Center for Law & Economics, The State of Competition in the Communications Marketplace, GN Docket No. 26-78 (May 21, 2026), https://laweconcenter.org/wp-content/uploads/2026/05/Comp-comments.pdf.

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

[4] Comments of the International Center for Law & Economics, Advancing IP Interconnection, Accelerating Network Modernization, and Call Authentication Trust Anchor, WC Docket Nos. 25-304, 25-208 & 17-97, at 6-7 (Jan. 20, 2026), https://laweconcenter.org/wp-content/uploads/2026/01/ICLE-Comments-on-Advancing-IP-Interconnection.pdf [hereinafter ICLE IP Interconnection Comments].

[5] Id.

[6] Reducing Barriers to Network Improvements and Service Changes; Accelerating Network Modernization, Report and Order, WC Docket Nos. 25-209 & 25-208, FCC 26-19 (Mar. 27, 2026), https://docs.fcc.gov/public/attachments/FCC-26-19A1.pdf [hereinafter FCC Network Modernization Order].

[7] Eric Fruits & Brian Albrecht, Paying to Stand Still: Legacy Copper Mandates in a Fiber World, Int’l Ctr. for L. & Econ. (Feb. 27, 2026), https://laweconcenter.org/wp-content/uploads/2026/02/Copper-Retirement-Economics-v2-2026.pdf; Comments of the International Center for Law & Economics, Reducing Barriers to Network Improvements and Service Changes; Accelerating Network Modernization, WC Docket Nos. 25-209 & 25-208 (Aug. 22, 2025), https://laweconcenter.org/wp-content/uploads/2025/08/Comments-on-Copper-Retirement.pdf [hereinafter ICLE Copper Discontinuation Comments].

[8] Id. at 5.

[9] Id.

[10] ICLE IP Interconnection Comments, supra note 4, at 3-5.

[11] Id. at 4.

[12] ICLE Copper Discontinuation Comments, supra note 7, at 5.

[13] ICLE IP Interconnection Comments, supra note 4, at 5-6.

[14] Id. at 5.

[15] Id. at 5-6.

[16] Technology Transitions, Fed. Commc’ns Comm’n, https://www.fcc.gov/tech-transitions (last visited May 21, 2026).

[17] Stephen J. Blumberg & Julian V. Luke, Wireless Substitution: Early Release of Estimates from the National Health Interview Survey, July-December 2024, Nat’l Ctr. for Health Stats., Nat’l Health Interview Survey Early Release Program (June 2025), https://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless202506.pdf.

[18] ICLE IP Interconnection Comments, supra note 4, at 6-7.

[19] NPRM, supra note 1, ¶ 26.

[20] Id. ¶ 19.

[21] Id. ¶ 22.

[22] Connect America Fund et al., Report and Order & Further Notice of Proposed Rulemaking, WC Docket No. 10-90 et al., FCC 11-161, 26 FCC Rcd. 17,663, ¶¶ 742-43 (Nov. 18, 2011), https://docs.fcc.gov/public/attachments/FCC-11-161A1.pdf.

[23] NPRM, supra note 1, ¶ 111.

[24] Id. ¶ 112.

[25] Id.

[26] Access Charge Reform, Report and Order, WC Docket No. 18-155, FCC 20-143, 35 FCC Rcd. 14,099, 14,116 ¶ 50 (Oct. 28, 2020), https://docs.fcc.gov/public/attachments/FCC-20-143A1_Rcd.pdf.

[27] ICLE IP Interconnection Comments, supra note 4, at 6-7.

[28] NPRM, supra note 1, ¶ 12.

[29] See Fruits & Albrecht, supra note 7.

[30] Id.

[31] ICLE IP Interconnection Comments, supra note 4, at 6-7.

[32] NPRM, supra note 1, ¶ 116.

[33] Proposed Second Quarter 2026 Universal Service Contribution Factor, Public Notice, CC Docket No. 96-45, DA 26-218 (Mar. 16, 2026), https://docs.fcc.gov/public/attachments/DA-26-218A1.pdf.

[34] Westling, supra note 3.

[35] Sen. Ben Ray Luján, Press Release, Luján, Fischer Announce Bipartisan, Bicameral Universal Service Fund Working Group (June 12, 2025), https://www.lujan.senate.gov/newsroom/press-releases/lujan-fischer-announce-bipartisan-bicameral-universal-service-fund-working-group.

I.         Introduction and Legal Baseline

The International Center for Law & Economics (ICLE) is a nonprofit research center based in Portland, Oregon, that applies economic analysis to legal and regulatory policy. ICLE submits these comments in response to the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) Antitrust Division’s Request for Information (RFI) regarding improvements to the Hart-Scott-Rodino (HSR) premerger notification form.[1]

ICLE has engaged with HSR policy on several prior occasions. In September 2023, ICLE submitted comments on the agencies’ proposed HSR rule changes.[2] ICLE offered several recommendations relevant to this RFI:

• Scale Back the Proposed Rules: ICLE argued that many of the new requirements lacked a strong evidentiary basis, would impose excessive compliance costs—functioning as a regressive tax on mergers—and may exceed the agencies’ statutory authority.
• Proceed with Statutory and Streamlining Updates: ICLE urged the agencies to move forward with reasonable, legally required changes, particularly implementing the 2022 Merger Filing Fee Modernization Act provisions requiring disclosure of subsidies from foreign entities of concern and adopting mandatory electronic filing.
• Abandon the “Supply Relationships” Narrative: ICLE urged the agencies to drop the requirement that merging parties draft new narratives explaining their strategic rationales and non-horizontal or supply relationships. This information is burdensome to create and had previously been deemed insufficient to justify its inclusion.
• Conduct Research Before Imposing New Regulations: Rather than imposing broad new reporting mandates on all filers, ICLE recommended that the agencies use targeted tools—such as the FTC’s Section 6(b) study authority or the ordinary “second request” process—and develop more enforcement experience before adopting costly, unproven regulatory requirements.

In March 2024, ICLE submitted a letter to then-FTC Chair Lina Khan addressing deficiencies in the Regulatory Flexibility Act analysis accompanying the 2024 rulemaking.[3] ICLE also submitted comments on the agencies’ draft merger guidelines.[4]

The Updated HSR Form took effect Feb. 10, 2025.[5] On Feb. 12, 2026, the U.S. District Court for the Eastern District of Texas vacated the Updated Form.[6] The court found that the agencies had not shown that the Updated Form’s benefits outweighed its costs, as the statute requires. On March 19, 2026, the 5th U.S. Circuit Court of Appeals denied the Commission’s motion for a stay pending appeal.[7] The agencies have reverted to the pre-2025 form and have stated their intent to pursue new rulemaking.

The vacatur order sets the controlling legal baseline for this proceeding. Any new rule that reinstates the Updated Form’s requirements without additional empirical support would face the same legal vulnerability. Repeating factual assertions that a federal court already found insufficient will not satisfy the statutory standard for disclosure requirements.

The HSR Act authorizes the agencies to require disclosure of information “necessary and appropriate” for premerger review.[8] That information must relate to whether a proposed transaction “may, if consummated, violate the antitrust laws.”[9] The standard has two components: Information is necessary when antitrust analysis cannot proceed without it, and appropriate when the burden of producing it is proportionate to the antitrust interest it serves.

The vast majority of reported mergers are consummated without challenge or any allegation of likely anticompetitive effects. For example, the agencies reported challenging only 34 of the 2,031 transactions reported in fiscal 2024, or 1.7%.[10] Across the 21-year period from fiscal years 2004 through 2024, neither agency issued a second request in the overwhelming majority of cases. During that period, an average of just 2.7% of transactions received a second request from either agency (Table 1).[11]

That sub-3% second-request rate is central to applying the “necessary and appropriate” standard, as is the even smaller share of filings that lead to a complaint. Fewer than three out of every 100 HSR filings result in a second request. Universal disclosure requirements therefore impose costs on roughly 97 filers for every three whose transactions the agencies deem worthy of closer review. A requirement whose value materializes in less than 3% of cases must justify costs imposed on 100% of filers—and on agency staff. Where anticipated benefits are uncertain or unlikely, targeted tools—such as Voluntary Access Letters issued to the relevant subset of filers—are more proportionate than universal disclosure obligations.

TABLE 1: Summary of Transactions by Fiscal Year

ICLE appreciates that the agencies issued this RFI rather than rushing to publish a new Notice of Proposed Rulemaking (NPRM). We also appreciate that the RFI sensibly asks about the time, labor, and financial costs associated with various notification requirements. Gathering better information on compliance costs is a useful start, even if an open RFI has limits as a data-collection tool.

The agencies could further aid the inquiry by publishing their own analyses of information, including data, relevant to the other side of the cost-benefit analysis: What new information is likely to be most useful to the screening process, rather than merely of some possible utility?

II.      The Updated Form’s Benefits and Costs (Questions 1, 3, 19)

The Updated Form introduced both useful and burdensome changes. This section identifies the requirements worth preserving, the requirements whose costs lack demonstrated screening benefits, and the role Voluntary Access Letters can play as a more proportionate alternative to universal disclosure mandates.

A.      Elements of the Updated Form Worth Preserving (Question 1)

Three categories of the Updated Form’s requirements have a genuine antitrust justification and should be retained.

Statutory mandates. The Merger Filing Fee Modernization Act of 2022 created two new disclosure requirements.[12] Filers must report foreign subsidies received by the acquiring entity and transactions involving foreign entities of concern. These obligations come from Congress, not agency policy preferences. The agencies must retain them in any new form.

Electronic filing. The Updated Form moved HSR submissions to an electronic platform.[13] Electronic filing reduces administrative costs for filers and agency staff alike. If implemented effectively and efficiently, electronic filing has no connection to the substantive disclosure controversies that led to the vacatur. Any new form should retain electronic filing, subject to continued system improvements.

Officers and directors with competitor affiliations. The Updated Form required disclosure of officers and directors who hold positions at competing firms.[14] This requirement addresses a real information gap. When an individual serves simultaneously on the boards of competing companies, that relationship bears directly on competition analysis. The obligation applies only when the relevant relationship exists, and the information ordinarily should be available to filers without substantial additional research. ICLE supports retaining this requirement.

B.       Requirements That Impose Unjustified Costs (Question 3)

The Updated Form’s most burdensome requirements shared a common defect: They imposed costs on all filers for information whose connection to competitive-harm analysis was speculative or weak.

Strategic-rationale narratives. The requirement that merging parties draft a narrative to “identify and explain each strategic rationale for the transaction” forces filers to create documents that do not exist in the ordinary course of business.[15] ICLE noted that these narratives amount to a requirement to pre-write a reply brief to a hypothetical antitrust challenge, rather than to produce existing evidence.[16]

Supply-relationships narrative. The Updated Form required a narrative description of supply relationships between the merging parties.[17] For many filers, this meant creating documents that did not already exist. Firms do not ordinarily prepare written supply-relationship analyses when evaluating a transaction. The requirement therefore imposed real costs with limited screening value.[18] Before reinstating it, the agencies must identify specific transactions in which supply-relationship narratives revealed competitive problems. They must also explain why those problems would not otherwise have been detected.

The district court found that the agencies had not shown that the Updated Form’s benefits outweighed its costs.[19] A new rule reinstating these requirements without stronger empirical support would face the same legal vulnerability. The cost-benefit requirement is a substantive constraint on agency rulemaking. The agencies must produce affirmative evidence of screening benefits before they can justify reinstating the burdens the Updated Form imposed.

C.      Voluntary Access Letters as a Baseline (Question 19)

Before the Updated Form, the agencies used Voluntary Access Letters (VALs) to request supplemental information from specific filers when an initial filing raised questions. A VAL is a targeted request. It focuses information demands on transactions that actually warrant closer scrutiny. It does not impose a universal disclosure burden.

The VAL mechanism is the proper comparison point for any proposed expansion of initial filing requirements. A universal requirement covering information the agencies could obtain through targeted VALs in the relevant subset of cases does not satisfy the “necessary and appropriate” standard under 15 U.S.C. § 18a(d)(1).[20] The agencies should publish data on VAL compliance costs—including issuance frequency, the scope of information typically requested, and filer burden—before adopting any universal requirement covering the same categories of information.

III.    Anticompetitive Transaction Detection and Safe Harbors (Questions 4, 5, 7)

Any expansion of the HSR Form’s informational demands must rest on evidence that the prior form failed to detect anticompetitive transactions. This section examines whether such evidence exists, identifies categories of transactions that warrant reduced disclosure, and proposes safe harbors and materiality thresholds to focus screening resources where competitive concerns are plausible.

A.      Evidence of Screening Failures Is Required (Question 4)

The RFI asks for evidence of anticompetitive transactions that escaped detection before the Updated Form. ICLE takes this question seriously. To date, the agencies have not identified any specific transaction wrongly cleared under the prior form that the Updated Form’s additional requirements would have flagged.

ICLE previously analyzed the FTC’s Section 6(b) study of nonreported technology acquisitions by Alphabet, Amazon, Apple, Facebook, and Microsoft.[21] That study did not find that the analyzed transactions were anticompetitive. Nor did it find that expanded HSR disclosures would have identified any of them as problematic.

Ginger Zhe Jin, Mario Leccese, and Liad Wagman conducted a broader study of acquisitions by “GAFAM” firms and other top acquirers from 2010 through 2020.[22] They concluded that, “[o]verall, we find that technology acquisitions do not shield GAFAM from potential competition that may arise from other GAFAM members or other firms that acquire in the same categories.”

The absence of identified screening failures matters directly. Requirements that address no demonstrated gap in screening capability cannot produce benefits that outweigh their costs.

Expanded compliance costs also deter procompetitive mergers. When expected compliance costs exceed the expected gains from a transaction, firms may forgo deals that would benefit consumers. Two features of this deterrence make it particularly troubling.

First, the agencies cannot observe deals that parties never propose. The false negatives induced by compliance burdens are therefore invisible to the cost-benefit analysis the statute requires. Second, fixed compliance costs filter most aggressively against small deals and infrequent filers—the segment systematically least likely to raise antitrust concerns. The Updated Form’s burden thus falls heaviest on transactions the screening apparatus is least likely to flag, while the largest and most concentrating deals can absorb the cost with little marginal effect on deal flow.[23]

B.       Categories of Transactions Less Likely to Raise Concerns (Question 5)

Three categories of transactions are systematically less likely to raise competitive concerns and should face reduced disclosure obligations.

Vertical acquisitions with no horizontal overlap. When buyer and seller do not compete in any product or geographic market, the transaction cannot reduce horizontal competition. While vertical acquisitions can, in theory, be anticompetitive, empirical evidence suggests they more often produce efficiencies than harm. As Francine Lafontaine and Margaret Slade found, “under most circumstances, profit-maximizing vertical integration decisions are efficient, not just from the firms’ but also from the consumers’ points of view.”[24]

The economic intuition is straightforward. A firm with market power to harm rivals through input foreclosure post-merger generally has that same power pre-merger and can exercise it through ordinary commercial dealing without integrating. Vertical mergers therefore rarely create new exclusionary capacity. In most cases, they capture internal efficiencies that would otherwise be lost to transaction and contracting costs, including the elimination of double marginalization. Vertical acquisitions with no horizontal overlap should face minimal disclosure requirements.

Acquisitions in unconcentrated markets. Acquisitions resulting in post-merger markets with a Herfindahl-Hirschman Index (HHI) below 1,000 are unlikely to raise competitive concerns. HHI measures market concentration by summing the squares of each competitor’s market-share percentage. Although the 2010 Horizontal Merger Guidelines characterize markets as unconcentrated at any HHI below 1,500, a safe-harbor floor warrants a stricter threshold.[25] Transactions below that threshold should face streamlined disclosure.

Small-revenue-share acquisitions. Acquisitions in which the acquired firm’s revenue in any overlapping market falls below a defined materiality threshold warrant similar treatment. A firm with minimal revenue in a market cannot meaningfully reduce competition there. A revenue-share threshold—for example, 5% in any overlapping market—would concentrate enhanced disclosure on transactions where competitive effects are plausible.

C.      Safe Harbors and Materiality Thresholds (Question 7)

The most analytically grounded safe harbor would use the Gross Upward Pricing Pressure Index (GUPPI) as its primary screen. GUPPI measures the merged firm’s incentive to raise prices by combining the diversion ratio between the merging parties’ products with the margin on the gaining product. Because GUPPI captures the merger’s pricing incentive at its source, it bypasses the structural proxies that drive much of the contested ground in merger litigation.

A low GUPPI indicates either that diversion between the parties is small or that the relevant margin is low. In either condition, the merged firm has little incentive to raise price, even absent further constraint. Transactions with a GUPPI below a defined threshold are unlikely to produce significant price effects. Four FTC commissioners concluded that GUPPI analysis can serve as a “starting point” and an “important screen.”[26] ICLE scholars have argued that the DOJ and FTC should establish a clear 5% safe harbor for low-GUPPI mergers.[27]

A GUPPI-based safe harbor would concentrate the Updated Form’s most demanding disclosures on transactions where pricing-pressure concerns are most plausible. Transactions below the threshold would require only the basic disclosures of the pre-2025 form. Transactions above the threshold would require enhanced disclosure targeted to the specific competitive concern identified. Disclosure requirements should scale with competitive risk.

IV.    Solely-for-Investment Exemption and Nontraditional Structures (Questions 12–13)

The RFI raises the possibility of narrowing the solely-for-investment exemption and extending HSR coverage to nontraditional transaction structures. This section explains why the investment exemption should not be narrowed based on contested common-ownership theories. It also evaluates acquihires and nonexclusive intellectual-property licenses on their own terms.

A.      The Investment Exemption Should Not Be Narrowed by Presumption (Question 12)

The HSR Act exempts acquisitions of voting securities made “solely for the purpose of investment.” The RFI suggests the agencies may clarify that this exemption does not cover investors who use ownership to influence a corporation’s competitive decision-making. The cited occasion for this consideration is Texas v. BlackRock, Inc.[28] ICLE urges caution.

The Texas v. BlackRock litigation rests on contested theories about common ownership. Common ownership refers to institutional investors holding minority stakes in multiple competing firms. José Azar, Martin Schmalz, and Isabel Tecu published research in 2018 finding that airline ticket prices were higher in markets where competing airlines shared common institutional shareholders.[29] Subsequent economic research has identified significant methodological problems in that analysis, and the empirical findings remain disputed.[30] Thomas Lambert and Michael Sykuta have argued that standard antitrust doctrine does not support common-ownership liability theories as a matter of law.[31]

Against this contested backdrop, narrowing the investment exemption would impose real costs. The proposed formulation—excluding investors who use ownership to “influence a corporation’s competitive decision-making”—is too vague to provide meaningful compliance guidance. Proxy voting, board-governance engagement, and shareholder resolutions on environmental and social matters are standard practices for institutional investors. None of these activities connects to the anticompetitive mechanism hypothesized in the common-ownership literature. That mechanism requires investors to coordinate competitive decisions across portfolio companies. A rule sweeping in routine shareholder engagement would impose HSR filing requirements on transactions that pose no antitrust risk.

Efficient capital allocation depends on a workable passive-investment exemption. Investors who cannot take minority stakes without triggering HSR reporting will adjust their portfolio strategies. Capital will flow to structures where HSR requirements do not apply. That adjustment may reduce allocative efficiency without producing any antitrust benefit.

ICLE supports guidance clarifying the existing boundaries of the investment exemption. Such guidance should address specific conduct—such as direct communications with management about pricing or output decisions in overlapping markets—that plausibly raises competitive concerns. It should not sweep in routine investor engagement. Formal rule changes are unwarranted given the unresolved empirical and legal questions.

B.       Nontraditional Transaction Structures (Question 13)

The RFI identifies three categories of concern: acquihires, license-and-hire transactions, and nonexclusive intellectual-property licenses.

Acquihires. Acquihires are acquisitions structured primarily to obtain a company’s workforce. For an acquihire to raise antitrust concerns, the target firm must have been a significant competitive constraint and the transaction must eliminate that constraint. Neither condition follows from the acquihire structure itself. A firm can be acquired for its talent without having competed meaningfully in any product market.

Where both conditions are met, existing doctrine is adequate to the task. Where they are not met, HSR coverage is not warranted absent evidence that specific transactions have caused competitive harm. A structural presumption that talent acquisitions eliminate competitive constraints is not enough to justify premerger-notification obligations.

License-and-hire transactions. A related category has drawn recent regulatory attention: so-called “license-and-hire” or “reverse-acquihire” arrangements, in which a firm licenses a target’s technology on a nonexclusive basis while also hiring key personnel. These transactions raise two issues: one jurisdictional and one substantive.

On jurisdiction, these transactions do not involve the acquisition of voting securities, assets, or noncorporate interests that confer control. They therefore fall outside the HSR Act’s jurisdictional reach under 15 U.S.C. § 18a(a). The FTC’s Premerger Notification Office, which administers the HSR rules, has consistently maintained that a nonexclusive license is not an asset for HSR purposes. A nonexclusive licensing transaction therefore falls outside the Act’s filing requirements and is not subject to preconsummation review, regardless of the consideration involved.

Sens. Elizabeth Warren and Richard Blumenthal have suggested that such arrangements may constitute avoidance devices under Rule 801.90.[32] That rule provides that transactions structured to avoid the Act’s requirements should be disregarded in favor of the transaction’s substance. But analysis of the relevant case-based factors under Rule 801.90 confirms that a typical license-and-hire arrangement lacks the established indicia of avoidance—veiled agency, structural shifts, step transactions, risk shifting, or accelerated consideration.[33]

The deeper reason lies in the nature of employment itself. The HSR Act applies to acquisitions; employment decisions are not acquisitions. Section 6 of the Clayton Act provides that “the labor of a human being is not a commodity or article of commerce,” and employment contracts are unassignable without the employee’s consent. An employer does not “acquire” workers; it offers terms that individuals remain free to accept or reject.

As ICLE scholars have observed, talent acquisitions do not actually “acquire” talent in any sense recognized by the statute. Expanding merger-notification rules to capture license-and-hire structures would require treating voluntary employment decisions as reportable transactions—a step the statute does not contemplate and the inalienability principle resists.[34]

On substance, the jurisdictional conclusion does not foreclose scrutiny where competitive harm materializes. The critical distinction is between a genuine license-and-hire—where the licensor retains the absolute right to grant equivalent access to rivals on commercially meaningful terms—and a transaction that is an acquisition in substance, where formal nonexclusivity conceals de facto exclusivity.[35] Where a technology license eliminates a firm’s competitive significance, rather than merely hiring its team, the agencies retain full authority to investigate and challenge the transaction under Section 7 of the Clayton Act, regardless of whether HSR notification was required.

Extending the HSR Act’s filing requirements to cover license-and-hire arrangements categorically would impose premerger-notification costs on a broad class of commercial licensing and employment decisions without demonstrated screening benefits.

Nonexclusive intellectual-property licenses. Nonexclusive intellectual-property (IP) licenses do not ordinarily constitute acquisitions of competitive assets. A nonexclusive license leaves the licensor free to grant the same technology rights to others, including competitors of the licensee. No competitive position is transferred; the licensee merely gains access.

As noted above, formal nonexclusivity can mask de facto exclusivity. In such cases, the nonexclusive label does not determine the competitive analysis, and existing doctrine is adequate to prevent or remedy competitive harm. But extending HSR reporting to nonexclusive IP licenses without evidence that specific licenses caused competitive harm would require filings for transactions that do not resemble acquisitions in any meaningful sense.

V.      Structural Transaction Modifications and Late-Proposed Remedies (Questions 14–15)

Questions 14 and 15 address whether the agencies need additional tools to evaluate transactions restructured after the initial filing. ICLE agrees that late-proposed divestitures can create genuine informational gaps, but any new filing obligation must be narrow enough to avoid deterring parties from proposing remedies early.

Informational gaps in the current framework (Question 14). ICLE acknowledges the problem the agencies have identified. When merging parties propose divestitures after a second request or after enforcement litigation begins, the agencies face a real informational gap. The second-request process produces documents and analysis focused on the original transaction. A divestiture that removes assets from the deal or adds remedial supply agreements can substantially change the competitive analysis. The existing record may not address the modified transaction.

The problem is real, but narrow. It arises only in cases that receive a second request, present genuine competitive concerns, and are restructured after substantial review. These cases represent a small fraction of all HSR filings. Solutions that expand filing requirements broadly would not be proportionate to the problem.

Conditions for supplemental filings (Question 15). ICLE supports a narrow, well-defined supplemental-filing requirement. A supplemental filing should be triggered when parties propose a divestiture or structural modification after certifying substantial compliance with a second request. The modification must also materially alter the assets or operations to be acquired or retained.

Both conditions are necessary. The “after substantial compliance” trigger limits supplemental filings to cases that have already warranted full second-request review. The “material alteration” trigger excludes minor adjustments—such as technical corrections or clarifications of contract terms—that do not change the competitive analysis.

A broad supplemental-filing requirement—one triggered by any divestiture proposal at any stage—would deter parties from proposing remedies early. Early remedies benefit all parties. They reduce litigation costs and are often better designed than remedies produced through contentious consent-order negotiations.[36] A filing requirement that makes early remedy proposals costly would shift proposal timing toward later stages. That shift would increase total litigation costs and may reduce remedy quality.

Timing agreements are a lower-cost alternative. Under a timing agreement, parties provide documents on a proposed divestiture in exchange for a defined extension of the review period. This gives the agencies the information they need without creating a formal filing obligation that deters remedy proposals.

Any new requirement should be implemented through notice-and-comment rulemaking. Parties need clear, binding rules to plan their transactions and remedy proposals. Guidance that can shift without notice creates uncertainty and discourages efficient settlements.

VI.    Artificial Intelligence Tools in HSR Preparation (Questions 18–21)

The RFI raises several questions about the role of artificial intelligence in HSR compliance. ICLE opposes a mandatory disclosure requirement for artificial-intelligence (AI) tool use, which lacks antitrust relevance, but recognizes that AI-driven efficiencies in document review are changing the cost landscape for HSR compliance.

A.      Disclosure of AI Tool Use (Question 18)

The RFI asks whether filers should be required to disclose their use of AI tools in preparing HSR submissions, including whether they used AI to identify and select submitted documents. ICLE does not support this requirement.

The purpose of HSR disclosure is to provide information relevant to a proposed transaction’s competitive effects. Whether a filer used AI tools to organize or review documents does not inform the agencies’ competitive analysis. A disclosure requirement without antitrust relevance cannot satisfy the “necessary and appropriate” standard under 15 U.S.C. § 18a(d)(1).

If the agencies’ concern is document-collection reliability, the appropriate response is guidance on document-collection standards. Such guidance can specify what review processes are adequate and what documents must be included in a production. A disclosure mandate does not address document-collection reliability directly.

The competitive conduct of AI tool providers is a legitimate subject of antitrust scrutiny. But that scrutiny belongs in investigations of AI market participants. It has no role in the HSR disclosure process for unrelated merger transactions.

B.       AI-Enabled Cost Savings and Calibration of Compliance Burdens (Questions 20–21)

AI tools can reduce the cost of document review for HSR submissions and second requests. Document review has historically been one of the most labor-intensive components of HSR compliance. It requires identifying, collecting, and reviewing documents responsive to a filing or information request. AI-assisted review can reduce the attorney hours required for that work.[37]

The agencies should account for AI-driven cost reductions when calibrating compliance-cost estimates in any new rulemaking. If the incremental cost of the Updated Form’s requirements is now lower than it was in 2024, that change is relevant to the cost-benefit analysis.

But AI-enabled cost reductions should not justify expanding informational demands. The relevant question is whether the information has antitrust value proportionate to its cost. If a requirement lacks antitrust value, lower compliance costs do not cure that defect. The agencies should not conclude that, because AI makes a disclosure cheaper to prepare, the disclosure is now justified.

VII.  Administrative Burden, Small-Business Impacts, and Additional Improvements (Questions 22–24)

The final set of RFI questions concerns the Form’s usability and the empirical record that should underlie any new rulemaking. ICLE highlights the disproportionate compliance burden on first-time and small-business filers, endorses a straightforward formatting improvement, and urges the agencies to publish a performance assessment of the Updated Form before reinstating comparable requirements.

Disproportionate burden on small businesses (Question 23). The Updated Form’s compliance costs fell most heavily on first-time and infrequent filers. Large corporations with dedicated antitrust compliance teams can build filing infrastructure across multiple transactions. A company filing for the first time must build that infrastructure from scratch. The Updated Form’s new requirements imposed fixed costs that experienced filers could spread across many filings, but that first-time filers could not.

The FTC’s Regulatory Flexibility Act (RFA) analysis in the 2024 rulemaking significantly underestimated these impacts. The RFA requires agencies to analyze proposed rules’ impact on small entities and consider alternatives that would minimize those impacts. The FTC’s analysis did not adequately account for the fixed costs that first-time and infrequent filers must incur to comply with new disclosure requirements.

Any new rulemaking must include a thorough RFA analysis that accounts for the full burden on small and infrequent filers. The agencies should consider small-business-specific exemptions or phased compliance schedules for first-time filers. A first-time filer acquiring a small business in an unconcentrated market poses a different antitrust risk than a repeat acquirer with established compliance infrastructure. Different treatment is warranted.

Section numbers (Question 22). The Form should include section numbers. Numbered sections reduce ambiguity for filers and allow agency staff to reference specific requirements precisely. This change imposes no meaningful compliance cost.

An empirical assessment of the Updated Form’s screening performance (Question 24). The agencies should publish an empirical assessment of the Updated Form’s screening performance during its implementation period. The assessment should address three questions:

1. Did second-request rates change after the Updated Form took effect?
2. Were any transactions identified as warranting closer review that would not have been identified under the prior form?
3. What were actual per-filing compliance costs, as reported by filers during the implementation period?

This assessment is the minimum empirical predicate for any new rulemaking. The court vacated the Updated Form because the agencies failed to demonstrate that benefits outweighed costs. A new rule reinstating similar requirements without empirical evidence of screening performance will face the same legal vulnerability. The agencies had more than a year of implementation experience and more than 3,000 filings to analyze. They should use that data to build the factual record the 2024 rulemaking lacked.

[1] Fed. Trade Comm’n & Dep’t of Just., Request for Public Comment Regarding Making Improvements to the Premerger Notification and Report Form (Mar. 25, 2026), https://www.ftc.gov/system/files/ftc_gov/pdf/2026.03.25-HSR-RFI.pdf [hereinafter RFI].

[2] Int’l Ctr. for L. & Econ., Comments on Proposed Amendments to the HSR Form and Instructions, FTC Docket No. FTC-2023-0040 (Sept. 27, 2023), https://laweconcenter.org/wp-content/uploads/2023/09/HSR-form-comments.pdf [hereinafter ICLE 2023 HSR Comments].

[3] Int’l Ctr. for L. & Econ., Letter to FTC Chair Khan on Regulatory Flexibility Act Analysis (Mar. 2024), https://laweconcenter.org/wp-content/uploads/2024/03/ICLE-FTC-letter-re-HSR-Amendments-RFA-2024-03-05.pdf [hereinafter ICLE 2024 RFA Letter].

[4] Int’l Ctr. for L. & Econ., Comments on Draft Merger Guidelines (Sept. 2023), https://laweconcenter.org/wp-content/uploads/2023/09/ICLE-Draft-Merger-Guidelines-Comments-1.pdf [hereinafter ICLE Merger Guidelines Comments].

[5] Premerger Notification; Reporting and Waiting Period Requirements, 89 Fed. Reg. 89,216 (Nov. 12, 2024) (to be codified at 16 C.F.R. pts. 801, 803) [hereinafter Updated Form].

[6] Chamber of Commerce v. FTC, No. 6:25-cv-9 (E.D. Tex. Feb. 12, 2026).

[7] Chamber of Commerce v. FTC, No. 26-40094 (5th Cir. Mar. 19, 2026).

[8] 15 U.S.C. § 18a(d)(1).

[9] Id.

[10] Fed. Trade Comm’n, Hart-Scott-Rodino Annual Report: Fiscal Year 2024 app. B (2026), https://www.ftc.gov/system/files/ftc_gov/pdf/FY24-HSR-ANNUAL-REPORT-FOR-TRANSMITTAL-TO-CONGRESS.pdf.

[11] Id. app. A; Fed. Trade Comm’n & Dep’t of Just., Hart-Scott-Rodino Annual Report: Fiscal Year 2012 app. A (2013), https://www.ftc.gov/sites/default/files/documents/reports_annual/35th-report-fy2012/130430hsrreport_0.pdf; Fed. Trade Comm’n & Dep’t of Just., Hart-Scott-Rodino Annual Report: Fiscal Year 2022 app. A (2024), https://www.ftc.gov/system/files/ftc_gov/pdf/fy2022hsrreportcorrected.pdf.

[12] Pub. L. No. 117-328, § 3701, 136 Stat. 4459 (2022).

[13] Updated Form, 89 Fed. Reg. at 89,270.

[14] Id. at 89,373.

[15] Id. at 89,370; ICLE 2023 HSR Comments, supra note 2, at 11.

[16] ICLE 2023 HSR Comments, supra note 2, at 11.

[17] Updated Form, 89 Fed. Reg. at 89,372.

[18] ICLE 2023 HSR Comments, supra note 2, at 11-12.

[19] Chamber of Commerce, No. 6:25-cv-9.

[20] See Daniel J. Gilman, The FTC World Keeps on Turning, Truth on the Mkt. (Nov. 8, 2024), https://truthonthemarket.com/2024/11/08/the-ftc-world-keeps-on-turning.

[21] ICLE 2023 HSR Comments, supra note 2, at 13-14 (discussing Fed. Trade Comm’n, Non-HSR-Reported Transactions by Select Technology Platforms, 2010-2019: An FTC Study (2021), https://www.ftc.gov/system/files/documents/reports/non-hsr-reported-acquisitions-select-technology-platforms-2010-2019-ftc-study/p201201technologyplatformstudy2021.pdf).

[22] Ginger Zhe Jin, Mario Leccese & Liad Wagman, How Do Top Acquirers Compare in Technology Mergers? New Evidence from an S&P Taxonomy, 89 Int’l J. Indus. Org. 102973 (2023), https://www.sciencedirect.com/science/article/abs/pii/S0167718722000662.

[23] ICLE 2023 HSR Comments, supra note 2, at 7, 11 (“Some have even suggested this may be the purpose of the changes: ‘killing deals softly’ by making mergers more costly to deter at least some transactions, including some that agencies and courts ultimately would clear.”) (citing David C. Kully, Beth Evans Vessel & John R. Dierking, Killing Deals Softly: FTC Proposes 107-Hour Increase in Hart-Scott-Rodino Burden, Holland & Knight: Insights (June 28, 2023), https://www.hklaw.com/en/insights/publications/2023/06/killing-deals-softly-ftc-proposes-107-hour-increase).

[24] Francine Lafontaine & Margaret Slade, Vertical Integration and Firm Boundaries: The Evidence, 45 J. Econ. Literature 629, 677 (2007); see also James C. Cooper et al., Vertical Antitrust Policy as a Problem of Inference, 23 Int’l J. Indus. Org. 639 (2005).

[25] U.S. Dep’t of Just. & Fed. Trade Comm’n, Horizontal Merger Guidelines § 5.3, at 19 (Aug. 19, 2010), https://www.justice.gov/atr/file/810276/dl?inline (describing markets with an HHI below 1,500 as “unconcentrated”).

[26] Statement of the Federal Trade Commission, In the Matter of Dollar Tree, Inc. and Family Dollar Stores, Inc., FTC File No. 141-0207 (July 13, 2015), https://www.ftc.gov/system/files/documents/public_statements/681901/150714dollarstoresstatement.pdf.

[27] Thomas A. Lambert, Leave a Little GUPPI Alone: Why Commissioner Wright Is Right to Call for a Low-GUPPI Safe Harbor, Truth on the Mkt. (July 14, 2015), https://laweconcenter.org/resources/leave-a-little-guppi-alone-why-commissioner-wright-is-right-to-call-for-a-low-guppi-safe-harbor.

[28] Texas v. BlackRock, Inc., No. 6:24-cv-437, 2025 WL 2201071 (E.D. Tex. Aug. 1, 2025).

[29] José Azar, Martin C. Schmalz & Isabel Tecu, Anticompetitive Effects of Common Ownership, 73 J. Fin. 1513 (2018).

[30] See Kristopher Gerardi, Michelle Lowry & Carola Schenone, A Critical Review of the Common Ownership Literature, 16 Ann. Rev. Fin. Econ. 89 (2024).

[31] Thomas A. Lambert & Michael E. Sykuta, The Case for Doing Nothing about Institutional Investors’ Common Ownership of Small Stakes in Competing Firms, 13 Va. L. & Bus. Rev. 213 (2019).

[32] Letter from Elizabeth Warren & Richard Blumenthal, U.S. Senators, to Jensen Huang, President & Chief Exec. Officer, NVIDIA Corp. (Mar. 19, 2026), https://www.warren.senate.gov/imo/media/doc/letter_from_senators_warren_blumenthal_to_nvidia_on_groq_deal.pdf.

[33] Herbert Smith Freehills Kramer, When Is a Transaction That Avoids HSR a Transaction for Avoidance? (May 2026), https://www.hsfkramer.com/en_US/insights/2026-05/when-is-a-transaction-that-avoids-hsr-a-transaction-for-avoidance.

[34] Onyeka Aralu & Dirk Auer, Acquihires and Antitrust: When Buying the Team Isn’t Buying the Company, Truth on the Mkt. (Apr. 9, 2026), https://truthonthemarket.com/2026/04/09/acquihires-and-antitrust-when-buying-the-team-isnt-buying-the-company.

[35] Id.

[36] See, e.g., Brian C. Albrecht, Merger Divestitures: A Valuable Remedy for Competition Concerns, Int’l Ctr. for L. & Econ. (Oct. 2023), https://laweconcenter.org/wp-content/uploads/2023/10/tldr-Divestitures.pdf.

[37] See Eric Fruits & Kristian Stout, AI, Productivity, and Labor Markets: A Review of the Empirical Evidence, Int’l Ctr. for L. & Econ. (2026), https://laweconcenter.org/wp-content/uploads/2026/02/AI-Productivity-and-Labor.pdf.

I.         Introduction and Overview

The International Center for Law & Economics (ICLE) submits these comments in response to the Federal Communications Commission’s (FCC) Public Notice seeking comment on the state of competition in the communications marketplace.[1] ICLE is a nonprofit, nonpartisan research center that applies law & economics methodologies to public policy. Its work promotes sound economic analysis and consumer welfare, particularly in dynamic, technology-driven markets such as telecommunications.

Competition in communications markets has never been more dynamic. The traditional service categories reflected in the Communications Act no longer map neatly onto distinct technologies or consumer use cases. As the boundaries among fixed broadband, mobile broadband, satellite, and video services continue to erode, consumers have more options than ever. A household dissatisfied with cable broadband may switch to fiber, fixed wireless, mobile service, or Low Earth orbit (LEO) satellite.[2] That substitutability constrains firms’ ability to raise prices, reduce quality, or otherwise exercise market power without competitive consequences.[3]

But convergence does not eliminate the basic economics of broadband deployment. Broadband networks require substantial upfront investments, much of which are sunk once infrastructure is deployed.[4] Providers must therefore capture enough revenue over time to justify network expansion and upgrades.[5] Competition policy that focuses only on maximizing the number of firms in a market risks undermining the investment needed to support next-generation applications such as artificial intelligence (AI), augmented reality (AR), and virtual reality (VR). The FCC should instead promote sustainable competition by lowering deployment costs, streamlining permitting, and applying merger policy that weighs investment benefits alongside potential competitive harms, while avoiding conditions unrelated to genuine transaction-specific concerns.

The FCC should bring the same holistic approach to video markets.[6] Technological change has disrupted the assumptions underlying broadcast ownership rules, retransmission consent, content regulation, and sports-distribution policy.[7] Traditional broadcasters increasingly compete with streaming platforms, social media companies, and digital-video providers that face different and often lighter regulatory burdens. ICLE has long supported reforms to media-ownership and broadcast-content rules,[8] but those reforms should not proceed in isolation.[9] Legacy retransmission-consent rules can distort bargaining, raise costs for multichannel video programming distributors (MVPDs), and amplify broadcaster leverage in ways that may not benefit consumers. At the same time, the FCC should recognize the limits of its authority over non-broadcast streaming platforms and private sports-distribution agreements.[10]

As traditionally distinct services converge into a broader communications marketplace, the FCC should avoid regulatory frameworks that treat functionally competing technologies differently. The agency’s guiding principle should be to reduce regulatory distortions, preserve investment incentives, and allow competition—not legacy silos—to discipline communications markets.

II.      Convergence and Competition in Communications Markets

At the outset, the FCC should evaluate competition in a holistic manner. The Public Notice seeks comment on competition across a variety of communications markets, but framing those markets as distinct silos—such as fixed, mobile, and satellite broadband—fails to account for the increasingly dynamic and converged nature of communications technologies.[11] As substitutability across technologies grows, traditional market boundaries become less economically meaningful.

The FCC should instead focus on the capabilities consumers seek and the range of technologies capable of providing them. That approach would better capture the competitive constraints firms actually face, allow the agency to assess market power more accurately, and improve its evaluation of how competition affects consumers, pricing, innovation, and network investment.

A.   Substitutability Defines Communications Markets

Communications technologies are increasingly substitutable, and that substitutability defines the markets in which firms actually compete.[12] Products are substitutes when consumers can switch between them in response to changes in price or quality. The easier that switch becomes, the greater the competitive pressure firms exert on one another.[13] Near-perfect substitutes create intense price competition because consumers will quickly defect if one provider raises prices or degrades service. Weaker substitutes impose less competitive discipline.

Substitutability is therefore central to market definition and the assessment of market power.[14] Regulators commonly use tools such as the SSNIP (small but significant non-transitory increase in price) test to determine whether enough consumers would switch to alternatives to render a price increase unprofitable.[15] Where consumers lack meaningful substitutes, a firm may be able to raise prices or reduce quality without losing substantial market share.

Substitutability analysis also helps identify the most likely sources of competitive disruption.[16] Incumbent firms are often displaced not by traditional rivals within the same market, but by substitute products emerging from adjacent technologies or industries.[17]

B.    Technological Convergence Is Reshaping Communications Markets

The Communications Act treats communications technologies as distinct silos, each with its own infrastructure, customer base, and competitive logic.[18] That framework made sense when technologies such as cable broadband, mobile service, home telephony, and dial-up internet served clearly differentiated functions. In 2005, for example, consumers did not meaningfully view a cellular data plan as a substitute for a home coaxial broadband connection. The products differed substantially in price, performance, and use case, and households often purchased them for entirely separate purposes.

Technological convergence has eroded those distinctions. As network capabilities increasingly overlap, consumers can now substitute among communications technologies in ways that were previously impractical. Consumers increasingly expect ubiquitous, high-quality connectivity, regardless of the underlying technology. As a result, the traditional boundaries between fixed and mobile broadband—and among fixed broadband technologies themselves—are breaking down and reshaping competition across communications markets.[19]

The most significant example is the collapse of the traditional distinction between fixed and mobile broadband. For years, mobile service complemented fixed home broadband by providing connectivity outside the home, while consumers relied on home Wi-Fi for bandwidth-intensive applications.[20] That relationship reflected the technical limitations of earlier mobile networks, including higher latency, data caps, and lower throughput, which made them poor substitutes for cable or fiber connections.

That is no longer true. Fifth-generation (5G) wireless networks increasingly provide functionally comparable services both inside and outside the home.[21] Fixed wireless access (FWA) delivers home broadband using cellular spectrum rather than a traditional last-mile wireline connection, and its performance increasingly competes directly with cable and fiber offerings. At the same time, wireline broadband providers have entered mobile markets through mobile virtual network operator (MVNO) agreements and direct wireless investment, allowing cable companies and other fixed providers to compete for customers who historically purchased mobile service only from traditional wireless carriers.[22] The once-clear fixed/mobile distinction now resembles a continuum rather than a binary divide.

Convergence is also reshaping competition within fixed broadband markets themselves. Cable operators historically operated in geographically franchised territories with limited overlap and relatively little competition from alternative technologies.[23] Fiber providers increasingly compete directly within those territories by deploying networks into areas previously served by cable monopolies or duopolies.[24] Low Earth orbit (LEO) satellite broadband has likewise emerged as a credible high-speed option in many rural and remote areas that previously lacked meaningful alternatives. Together, these developments have weakened traditional geography- and technology-based market boundaries.[25]

Market evidence reflects these changes. T-Mobile’s Home Internet service, launched at scale around 2021, now serves approximately 8.5 million fixed wireless customers.[26] Investor reports indicate that many of those customers view FWA as a direct replacement for traditional coaxial broadband service.[27] Cable providers correspondingly began reporting elevated subscriber churn as FWA adoption accelerated.[28] In response, cable operators expanded into wireless markets through MVNO offerings. Collectively, cable providers now account for roughly 45% of industry postpaid-phone net additions, while Charter and Comcast alone serve well more than 20 million mobile lines.[29] By bundling broadband and wireless service at aggressive prices, cable providers increasingly compete for revenue streams that historically belonged to wireless carriers.

These developments make silo-based market definitions increasingly difficult to sustain.[30] If a cable customer facing a price increase can credibly switch to FWA, fiber, or LEO satellite broadband, those technologies all belong within the same competitive framework. Increasing substitutability across communications technologies constrains providers’ pricing power more than traditional market definitions often recognize. As convergence accelerates, firms increasingly compete through integrated, multi-product offerings that combine broadband, wireless, and related services to retain customers and preserve margins in a more competitive environment.

C.   Substitutability Is Constraining Market Power

The FCC’s competition framework seeks to “foster innovation and offer consumers reliable, meaningful selections in affordable services” by removing regulatory, economic, and operational barriers to entry and deployment.[31] In the past, however, the FCC has sometimes relied on flawed competitive analysis to justify broad regulatory interventions ostensibly designed to promote competition, most notably network-neutrality regulations.[32]

The traditional concern underlying those interventions is familiar: consumers in many broadband markets historically faced limited provider choice, allowing incumbents to extract monopoly or near-monopoly rents.[33] That concern retains some force in the most concentrated markets, particularly in certain rural and tribal areas. But the competitive dynamics discussed above increasingly constrain even dominant local providers. When cable operators know consumers can credibly switch to FWA, fiber, or other alternatives, their ability to raise prices or degrade quality without consequence narrows considerably.

Importantly, this competitive discipline operates through the threat of switching as much as through actual switching.[34] A cable provider need not lose millions of subscribers before adjusting its behavior. The credible possibility of subscriber loss can itself constrain pricing and service-quality decisions.[35] Even a relatively small group of price-sensitive consumers can discipline firm behavior across the broader customer base because providers generally cannot distinguish perfectly between consumers who would switch and those who would not.[36]

These competitive pressures increasingly shape market outcomes. Broadband providers operating in markets with meaningful cross-technology competition tend to raise prices more slowly, offer more aggressive promotional discounts, and invest more heavily in network quality than providers facing weaker competitive constraints.[37] Cable operators, for example, have moderated broadband price increases and accelerated network upgrades in response to growing competition from FWA and fiber providers.[38] Potential LEO satellite competition in rural markets has similarly pressured incumbent providers to improve service quality and pricing in areas where they previously faced limited competitive discipline.[39]

The rapid pace of broadband-network improvement reflects these competitive realities. Cable providers have accelerated Data Over Cable Service Interface Specification (DOCSIS) upgrades, fiber deployment has expanded beyond the most densely populated markets, and FWA performance has improved dramatically in speed and capacity. These developments are at least partly attributable to the growing availability of credible substitutes across technologies. Providers increasingly cannot afford to allow their networks to stagnate.[40] As a result, inflation-adjusted broadband prices have declined over time even as service quality and network performance have improved.[41]

III.    Broadband Competition Depends on Sustainable Investment

The FCC should avoid policies aimed primarily at maximizing the number of firms in broadband markets. Competition is critical to improving service quality, expanding consumer choice, and constraining prices. But broadband markets are shaped by high fixed and sunk deployment costs, substantial economies of scale, and strong investment incentives that may support only a limited number of sustainable competitors.

These structural realities persist even as technological convergence expands consumer choice and intensifies competition among cable, fiber, fixed wireless, and satellite providers. The FCC should therefore focus less on firm counts and more on policies that promote sustainable competition, encourage long-term investment, reduce deployment costs, and support widespread, high-quality broadband deployment.

A.   Broadband Markets Are Defined by High Fixed and Sunk Costs

Broadband deployment requires extraordinarily high fixed and sunk costs[42] Building the physical infrastructure needed to deliver high-speed internet demands substantial upfront investment in trenching, conduit, equipment, and rights-of-way—all before a provider connects a single subscriber or earns any revenue. Most of these costs are sunk: once infrastructure is deployed, providers generally cannot recover those investments by redeploying assets elsewhere.[43] Industries with high sunk costs therefore tend toward greater concentration, because the scale of investment required for entry limits the number of firms that can profitably operate in a market.[44] Broadband infrastructure fits squarely within this framework. Estimates of per-home fiber-deployment costs range from roughly $700 to $2,700, depending on population density and geography.[45]

These cost structures also generate substantial economies of scale. Because fixed costs do not vary with the number of subscribers served, a provider’s average cost declines sharply as it adds customers. Where scale economies are significant, social welfare is often maximized by a finite—and sometimes small—number of firms. Entry beyond that level may not merely prove unprofitable; it can reduce welfare by duplicating infrastructure and dissipating the revenues needed to sustain efficient networks.[46] In industries with declining average costs, market equilibrium may therefore produce either too few or too many entrants relative to the socially optimal number, depending on the balance between productive efficiencies and the “business-stealing” effect.[47]

Providers must also price broadband services to recover these substantial upfront investments over time. That cost recovery is essential to continued investment, maintenance, and network upgrades. Decisions about additional entry and service quality similarly depend on whether providers can earn sufficient returns across census blocks to justify deployment costs. As a result, the profitability of incremental deployment is highly sensitive to local demand density and competitive conditions. Where revenues are divided among multiple providers, the return on infrastructure investment may fall below the threshold necessary to justify deployment at all. These economic realities historically left many parts of the country—particularly lower-density areas—with only one or two wireline broadband providers, because the available subscriber base could not support cost recovery for additional networks.[48]

B.    Convergence Reshapes Broadband Concentration

Technological convergence can expand consumer choice by allowing consumers to substitute among previously distinct products and services. But convergence does not eliminate the underlying economic constraints that shape broadband markets. Providers that invested on the assumption of a particular market share may suddenly find that new forms of competition undermine the returns needed to justify those investments. Counterintuitively, this temporary increase in competitive pressure does not necessarily increase the number of firms that can sustainably operate in the market.

The reason is straightforward: the cost structure of broadband deployment remains largely unchanged. The high fixed and sunk costs associated with building and maintaining networks do not disappear when new technologies emerge. In many cases, those costs reappear in each successive generation of infrastructure. As a result, the concentration floor imposed by sunk costs tends to persist even as technologies evolve. Convergence therefore reshuffles which firms compete more often than it changes how many firms can compete sustainably.[49]

Empirical evidence supports this conclusion. Studies of broadband entry find that the incremental competitive benefit of a fourth provider is modest at best, suggesting that broadband markets often reach competitive equilibrium well before they resemble atomistic competition.[50] Too little competition can weaken incentives to improve service and invest in network upgrades, although dominant firms may sometimes invest above competitive levels.[51] At the same time, too much fragmentation can reduce per-firm revenues below the level necessary to sustain the substantial capital expenditures required to maintain and upgrade broadband infrastructure.

These dynamics are especially important for next-generation deployment. A provider considering investment in fiber-to-the-home (FTTH), 6G wireless infrastructure, or other advanced technologies must weigh the expected return against the substantial upfront cost. In markets with intense competition and thin margins, the expected return may not justify deployment, particularly in lower-density or uncertain markets. The profitability of incremental broadband deployment is therefore highly sensitive to competitive conditions. In industries with declining average costs, unrestricted entry can deter socially valuable investment because no individual firm can capture enough of the resulting gains to justify undertaking the investment in the first place.[52]

C.   Broadband Policy Should Promote Investment and Deployment

The FCC’s objective should not be to maximize the number of competitors in broadband markets. Rather, it should pursue policies that ensure competition disciplines providers, while preserving the returns necessary to sustain long-term investment in broadband infrastructure.

Broadband connectivity creates enormous social value that extends far beyond what providers recover through monthly subscription fees.[53] High-speed internet access enables remote work, telemedicine, online education, civic participation, and e-commerce.[54] These services generate substantial spillover benefits for employers, healthcare systems, schools, local economies, and consumers that broadband providers cannot fully monetize. As a result, the social value of broadband deployment systematically exceeds the private return available to network operators.[55]

That gap between social value and private return becomes even more important as technological convergence intensifies competition. Cable, fiber, fixed wireless, and satellite providers increasingly offer functionally comparable services, placing greater pressure on providers’ margins and reducing the per-subscriber revenues that ultimately fund network investment. In moderately concentrated markets, new entry can spur firms to invest and improve service quality. At some point, however, additional fragmentation can undermine investment incentives by reducing expected returns below sustainable levels. In markets where consumers can choose among multiple broadband technologies, each additional provider faces a smaller and less predictable share of the available revenue pool.

One way to mitigate this problem is to reduce deployment costs.[56] Lower costs reduce the subscriber base necessary to earn an adequate return, allowing more firms to compete sustainably. Permitting reform offers one of the clearest avenues for doing so.[57] Broadband deployment requires providers to navigate a fragmented and often unpredictable web of federal, state, and local approvals. Rights-of-way negotiations, pole-attachment disputes, zoning approvals, environmental review, and historic-preservation requirements can each add substantial delays and costs to deployment projects.[58] These delays compound the burden of sunk-cost investment by extending the period between capital outlay and revenue generation, effectively increasing deployment risk. In lower-density or economically marginal areas, those added costs can determine whether deployment proceeds at all. Streamlining approval processes would not eliminate the underlying economics of broadband deployment, but it would lower the threshold necessary to justify investment.

The FCC has already adopted reforms intended to streamline deployment. Most notably, the agency limited local governments’ ability to impose excessive rights-of-way fees and accelerated review timelines for small-cell deployment under Section 332 of the Communications Act.[59] More remains to be done, particularly through congressional action, to ensure that permitting and zoning requirements do not impose costs that lack offsetting public benefits.[60] If the FCC seeks to encourage additional broadband competition while preserving the relatively low prices consumers currently enjoy, it should continue pursuing policies that make deployment faster, less costly, and more predictable.

The FCC should likewise account for deployment incentives in merger policy. Regulators understandably focus on potential harms when broadband or wireless providers propose to merge, including the risks of higher prices, reduced output, or diminished competitive pressure. Those concerns are legitimate and warrant careful scrutiny. But merger review in communications markets should also account for the substantial procompetitive benefits that consolidation can generate in capital-intensive network industries.

Mergers can improve investment incentives by increasing scale, stabilizing revenues, and strengthening firms’ financial capacity.[61] Greater scale can reduce per-unit costs by eliminating duplicative infrastructure, administrative overhead, and network operations.[62] In industries where high fixed costs and uncertain revenues constrain deployment, these efficiencies can materially improve firms’ willingness and ability to invest in network expansion and upgrades.[63] Improved networks, in turn, place competitive pressure on rivals to invest as well, or risk losing subscribers and revenue.

Those investment effects can extend beyond broadband markets themselves. More ubiquitous high-speed connectivity supports downstream innovation by enabling new applications, services, and business models that depend on robust broadband infrastructure. Improved deployment and network quality therefore generate dynamic competitive benefits that static market-concentration metrics often fail to capture.

These realities should shape how the FCC and the Department of Justice (DOJ) evaluate mergers in broadband and wireless markets. Merger review should account not only for potential anticompetitive harms, but also for how transactions affect investment incentives within the economic structure of communications markets. Conditions imposed on transactions should remain narrowly tailored to address demonstrated, transaction-specific harms, rather than serving as vehicles for unrelated policy objectives.[64] Overbroad conditions impose real costs on merged firms, dilute the efficiencies that motivate consolidation, and may deter transactions that would otherwise generate substantial consumer benefits and expand high-quality broadband deployment.

IV.    Competition and Regulatory Reform in Video Markets

Technological change is transforming not only broadband markets, but video markets as well. Broadcasters, cable providers, streaming platforms, social media companies, and other digital distributors increasingly compete for the same audiences, advertising revenues, and programming rights. Yet many legacy regulations continue to impose asymmetric burdens on certain technologies while leaving newer competitors largely unregulated.

As the FCC considers reforms to broadcast ownership rules, retransmission consent, content regulation, and sports-distribution policy, it should focus on reducing regulatory distortions that prevent firms from competing on equal terms. The FCC should seek to modernize outdated rules, narrow unnecessary content-based regulation, and avoid expanding agency authority into markets where Congress has not clearly authorized federal oversight.

A.   Broadcast Ownership Rules No Longer Reflect Market Realities

The video marketplace that broadcast-ownership rules were designed to govern no longer exists. Local television stations, once presumed dominant within geographically defined markets, now compete against streaming platforms, social media companies, and digital news outlets that face no comparable restrictions on scale or reach.[65] The FCC’s national ownership cap rests on assumptions about spectrum scarcity and broadcaster market power that technological change has largely overtaken.[66]

Streaming platforms can effectively reach the entire national market, while broadcast ownership rules still limit a parent company’s reach to 39% of U.S. households. Yet broadcasters increasingly compete with those national platforms for the same audiences and advertising revenues. Modern broadcasters therefore face competitors whose scale far exceeds anything broadcasters may legally achieve under existing ownership restrictions. In many markets, broadcasters no longer possess the degree of market power the rules originally assumed.

These competitive pressures are reshaping the economics of local broadcasting in ways that undermine the traditional rationale for ownership restrictions. The decline of syndicated daytime programming has eroded the cross-subsidies that historically funded local-news operations, forcing stations into divergent strategies for survival.[67] Larger or better-capitalized stations increasingly emphasize local content as a competitive differentiator. Smaller or financially weaker stations, by contrast, often reduce or eliminate local production entirely, replacing locally produced programming with lower-cost centralized content.[68]

Under these conditions, the greatest threat to localism is not consolidation itself, but the financial deterioration of stations constrained by outdated ownership rules. Consolidation may instead preserve local journalism by generating economies of scale that make local-news production financially sustainable through shared investigative teams, weather infrastructure, production facilities, and administrative operations.

At the same time, any ownership reform must account for the retransmission-consent framework established by the Cable Television Consumer Protection and Competition Act of 1992.[69] Under that regime, broadcasters choose every three years between must-carry status and retransmission consent, which requires MVPDs to negotiate carriage rights—typically in exchange for substantial fees.[70] Retransmission revenues now approach the scale of advertising revenues and play a central role in funding broadcast operations and local news production.

But retransmission consent was designed to address a cable-distribution bottleneck that has weakened substantially in an era where broadcasters can distribute programming directly through websites, applications, and streaming platforms.[71] The result is a regulatory asymmetry: broadcasters retain regulatory negotiating advantages unavailable to most other content creators. Consolidation can magnify that leverage, potentially increasing carriage fees and encouraging distributors to drop smaller independent networks to control programming costs.[72]

This interaction between ownership restrictions and retransmission consent makes piecemeal reform problematic. Relaxing ownership caps without reforming retransmission consent could strengthen broadcasters’ bargaining leverage over MVPDs without necessarily producing offsetting consumer benefits such as lower prices, improved programming, or more reliable service. Reforming ownership rules alone would therefore risk amplifying distortions already embedded in the retransmission framework while leaving broadcasters’ regulatory advantages over streaming competitors largely intact.

The FCC should instead pursue comprehensive reform that addresses ownership restrictions and retransmission consent together.[73] The most coherent long-term solution would phase out retransmission consent entirely and treat broadcasters like other content creators, relying on copyright law and voluntary commercial agreements to govern distribution relationships.[74] Doing so would reduce the regulatory asymmetries that currently advantage broadcasters relative to streaming competitors and independent networks.

If full repeal proves politically infeasible, the FCC should at minimum pair ownership deregulation with meaningful retransmission reform. Potential reforms could include stronger good-faith bargaining requirements, limits on automatic fee-escalation clauses tied to acquisitions, and arbitration mechanisms designed to reduce consumer harm during blackout disputes involving high-value programming.[75] The FCC should seek reforms that reduce multiple distortions simultaneously, rather than replacing one set of market imbalances with another.

B.    Spectrum Scarcity No Longer Justifies Broad Content Regulation

The FCC occupies a uniquely powerful position in the media landscape because its authority over broadcast licensees extends well beyond technical and engineering matters into the content broadcasters air. Unlike regulators overseeing cable networks, streaming platforms, newspapers, or social media companies, the FCC may fine broadcasters, condition license renewals, or revoke licenses under the Communications Act’s broad “public interest, convenience, and necessity” standard.[76] That authority gives the FCC leverage over broadcasters that has few parallels elsewhere in media regulation.[77]

As a result, even informal regulatory pressure can significantly influence broadcasters’ editorial decisions. When FCC officials publicly suggest that particular programming choices may create regulatory risk, broadcasters face strong incentives to alter their conduct regardless of whether any formal enforcement action is ever initiated—or would survive judicial review.[78] This practice, commonly known as jawboning, allows government officials to shape private editorial decisions through implicit or explicit threats, while avoiding the procedural and constitutional scrutiny associated with formal enforcement or rulemaking.

The constitutional justification for this content-based regulatory authority rests largely on the Supreme Court’s decisions in Red Lion Broadcasting Co. v. FCC and FCC v. Pacifica Foundation, which relied heavily on the theory of spectrum scarcity.[79] But technological developments have substantially undermined the factual assumptions underlying those decisions.[80] Broadcasters now compete in an intensely crowded media environment alongside cable networks, streaming platforms, podcasts, social media companies, and countless online-content providers. Yet broadcasters alone remain uniquely vulnerable to government pressure over lawful programming decisions because they transmit content over spectrum licensed by the FCC.

That asymmetry carries significant competitive consequences. Broadcast stations and affiliate groups must weigh editorial decisions not only against audience preferences, advertiser relationships, and market competition, but also against the potential reaction of an agency empowered to deny license renewals or initiate costly proceedings.[81] This additional layer of regulatory risk distorts editorial incentives in ways unrelated to consumer demand or effective competition in modern media markets. So long as the FCC retains broad discretionary authority over broadcast licensees under the public-interest standard, officials in any administration may face incentives to reward favored speech or pressure disfavored viewpoints.

The FCC cannot eliminate its statutory obligation to regulate broadcasters in the public interest, and its authority will likely persist so long as Red Lion and Pacifica remain binding precedent.[82] But the agency can narrow the scope of its content-based authority by repealing unnecessary speech-related regulations and constraining the use of those that Congress expressly requires. Policies such as the FCC’s news-distortion doctrine risk extending agency authority into areas involving lawful editorial judgment and protected speech. Future administrations could use such policies more aggressively or selectively.

The FCC should therefore reduce or eliminate content-based broadcast regulations wherever possible. Doing so would better align broadcast regulation with modern constitutional and technological realities while allowing broadcasters to compete more effectively on the merits against streaming, cable, and other digital-video platforms.

C.   The FCC Lacks Authority to Regulate Sports Streaming

Recently, consumers and advocates have raised concerns that an increasing number of live sporting events are moving behind paywalls.[83] Much of the legal debate centers on the National Football League’s (NFL) antitrust exemption under the Sports Broadcasting Act of 1961, which allows the league to negotiate national broadcast agreements collectively.[84] Because the exemption applies only to broadcast television rights, some have questioned whether league-wide streaming agreements fall outside its protection. But the core policy concern is not fundamentally about antitrust law. Rather, it is whether consumers are losing reasonable access to live sports as distribution shifts toward subscription-based platforms. As Chairman Brendan Carr observed, “there is a point at which you sort of tip the scale, and they’ve put too many games behind aa paywall, and then that whole exemption collapses.”[85]

The marketplace underlying this debate has changed dramatically since the relevant legal frameworks were enacted. Consumers once depended on a relatively small number of local broadcast stations to access entertainment and live sports programming. Technological innovation has since transformed the distribution landscape. Cable, satellite, fiber, and streaming platforms now provide leagues and content producers with numerous pathways to reach viewers, while consumers increasingly prefer on-demand, device-agnostic viewing experiences.

Live sports remain uniquely valuable because audiences strongly prefer real-time viewing and the shared experience surrounding live events.[86] Even there, however, the distribution ecosystem has diversified substantially. Streaming platforms now compete directly with broadcasters and cable networks for sports rights in order to attract and retain subscribers.[87] Netflix and Amazon have carried NFL games on Christmas Day, Amazon holds exclusive rights to Thursday Night Football, NBCUniversal streams Premier League matches on Peacock, and Apple TV distributes Major League Soccer.[88] The market for sports distribution has therefore expanded rather than contracted.

That competition has generated substantial consumer benefits. Many consumers actively prefer streaming services because they offer greater flexibility, portability, and device compatibility.[89] Consumers can watch games from virtually any location without relying on a traditional television set or cable subscription. Streaming services also often provide lower-cost or more targeted viewing options. Consumers interested primarily in one league or sport may purchase a single subscription rather than a large cable bundle containing unwanted channels.

At the same time, MVPDs have adapted to this competitive pressure by integrating streaming services such as Disney+, Peacock, and ESPN into broader distribution packages. Those bundles often provide lower-latency video quality and simpler access than standalone streaming subscriptions.[90] Competition from streaming services has therefore forced traditional distributors to innovate, improve pricing, and enhance service quality, benefiting consumers regardless of which platform they ultimately choose.

Critics nevertheless argue that consumers are losing access to games they previously watched for free.[91] That concern is often overstated. Much of the content now distributed through streaming platforms was never previously available through free over-the-air television. The NFL’s expansion into Thursday-night games, Christmas Day programming, and international broadcasts created new inventory that historically would not have aired on local broadcast television at all.[92] Before streaming platforms acquired rights to those games, most consumers simply could not watch them.

Other leagues have followed similar models. The National Basketball Association’s (NBA) League Pass service, for example, gives fans access to out-of-market games that were historically unavailable outside a team’s local market.[93] Many streaming agreements also preserve local broadcast access for in-market consumers. The NFL, for example, continues to air 100% of games on broadcast television within participating teams’ local markets.[94] In practice, many streaming arrangements expand consumer access by making additional games available that otherwise would not have been distributed broadly.

Whatever the merits of broader policy concerns surrounding sports-fragmentation and paywalls, the FCC’s legal authority to regulate these arrangements is extremely limited.[95] The Communications Act grants the FCC authority over broadcast licensees operating under the public-interest standard, but that authority does not extend generally to streaming platforms, which operate outside the FCC’s licensing framework. Efforts to use the public-interest standard to dictate how leagues or networks allocate content between broadcast and streaming platforms would represent a substantial expansion of agency authority and would likely trigger major-questions concerns.[96]

The FCC might alternatively attempt to rely on ancillary jurisdiction under Title I of the Communications Act.[97] Courts have previously allowed the FCC to regulate certain communications technologies where doing so was ancillary to specifically delegated statutory authority.[98] In United States v. Southwestern Cable Co., for example, the Supreme Court upheld FCC regulation of cable systems because those systems directly retransmitted broadcast television signals already subject to FCC oversight.[99]

But ancillary authority remains limited and closely tied to express statutory powers.[100] In Comcast Corp. v. FCC, the D.C. Circuit rejected the FCC’s attempt to regulate broadband-network-management practices through broad assertions of ancillary jurisdiction.[101] The court emphasized that ancillary authority must remain tethered to specifically delegated statutory responsibilities and that general policy statements alone cannot create regulatory authority.[102] Without such limits, the court warned, the FCC’s jurisdiction could become effectively unbounded.[103]

That reasoning strongly constrains any effort to regulate streaming platforms’ sports-distribution agreements. Streaming services are not broadcast licensees, nor are they merely retransmitting local broadcast signals in the manner contemplated in Southwestern Cable.[104] Instead, they distribute programming through private contractual arrangements that the Communications Act nowhere authorizes the FCC to supervise, condition, or override.

Recent Supreme Court decisions further narrow the FCC’s ability to rely on expansive ancillary-authority theories. In Loper Bright Enterprises v. Raimondo,[105] the Court overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.,[106] ending the longstanding practice of deferring to agencies’ reasonable interpretations of ambiguous statutes. Courts will now independently evaluate whether the Communications Act actually authorizes the FCC’s asserted authority.

Similarly, West Virginia v. EPA reinforced the major questions doctrine, which requires clear congressional authorization before agencies may regulate issues of major economic or political significance.[107] Nothing in the Communications Act clearly authorizes the FCC to regulate how streaming platforms, sports leagues, or other non-broadcast entities structure programming or distribution agreements.

Taken together, Loper Bright and West Virginia v. EPA make any attempt to regulate sports-streaming arrangements through ancillary jurisdiction highly vulnerable to judicial challenge. Courts are unlikely to permit the FCC to infer sweeping authority over streaming platforms and private-content agreements from broad statutory language enacted long before modern digital-video markets existed.

V.      Conclusion

As the FCC evaluates the state of communications markets, it should ground any regulatory intervention in today’s economic and technological realities, not in frameworks inherited from an earlier era. Communications markets are increasingly dynamic, competitive across technological boundaries, and capable of generating substantial consumer benefits through market forces. Fixed and mobile broadband services are increasingly substitutable. Satellite, fiber, fixed wireless, and cable providers increasingly compete for the same subscribers. Streaming and broadcast video compete for the same audiences, advertising dollars, and programming rights.

These developments make outdated analytical frameworks increasingly unreliable. Market definitions built around discrete service silos, assumptions of persistent incumbent dominance, and static measures of competition often fail to capture the constraints firms actually face. Regulatory interventions based on those assumptions risk distorting markets that are already delivering lower prices, improved quality, expanded access, and greater consumer choice.

For broadband, the FCC should account for how market structure affects investment. Policies that seek to maximize the number of competitors without considering deployment economics may sacrifice the long-run network quality and coverage consumers need in pursuit of a static competition metric. The FCC’s goal should be to encourage market conditions that promote private investment while narrowing the gap between what firms can profitably deploy and what society values. That means reducing deployment costs through permitting reform, weighing investment benefits in merger review, and avoiding mandates or conditions that compress the margins needed to justify next-generation network investment.

The FCC should bring the same discipline to video markets. Broadcast ownership rules designed for an earlier media environment, retransmission-consent rules that create regulatory bargaining advantages, and broadcast-content regulations with no analog in cable, streaming, or digital media impose real costs on competition and investment. Reform should be comprehensive and evidence-based, reducing regulatory distortions across the system rather than fixing one problem while preserving adjacent distortions. Where the FCC lacks legal authority—particularly over non-broadcast streaming platforms and private content-distribution agreements—it should say so clearly and leave those policy choices to Congress, rather than stretching the Communications Act beyond what the major questions doctrine and Loper Bright permit.

Ultimately, the FCC’s most important contribution to consumer welfare is not any single intervention, but the quality and consistency of the analytical framework it applies across proceedings. Communications markets work best when policy is predictable, rewards investment, applies equivalent rules to equivalent competitors regardless of technology, and resists using regulatory leverage as a substitute for competitive discipline. ICLE urges the FCC to keep that framework at the center of its work in this proceeding.

[1] The State of Competition in the Communications Marketplace, GN Docket No. 26-78, Public Notice, DA 26-333 (Apr. 6, 2026), https://docs.fcc.gov/public/attachments/DA-26-333A1.pdf [hereinafter Public Notice].

[2] See generally Geoffrey A. Manne, Kristian Stout & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture, Int’l Ctr. for L. & Econ. (June 2021), https://laweconcenter.org/wp-content/uploads/2021/06/A-Dynamic-Analysis-of-Broadband-Competition.pdf; Eric Fruits, Geoffrey A. Manne, Ben Sperry & Kristian Stout, Dynamic Competition in Broadband Markets: A 2024 Update, Int’l Ctr. for L. & Econ. (June 4, 2024), https://laweconcenter.org/wp-content/uploads/2024/06/Broadband-Competition-2024-Update.pdf.

[3] See Comments of the International Center for Law & Economics, Safeguarding and Securing the Open Internet, WC Docket No. 23-320, at 19 (Dec. 14, 2023), https://laweconcenter.org/resources/icle-comments-to-fcc-on-title-ii-nprm [hereinafter ICLE Title II Comments].

[4] Eric Fruits, Kristian Stout & Geoffrey A. Manne, The Economics of Broadband Data Caps and Usage-Based Pricing, Int’l Ctr. for L. & Econ. (Oct. 23, 2024), https://laweconcenter.org/resources/the-economics-of-broadband-data-caps-and-usage-based-pricing (“Indeed, these practices may help internet service providers (ISPs) to better manage network congestion, ensure fair allocation of network resources, and provide a means for ISPs to recover the large, fixed costs associated with building, maintaining, and upgrading broadband infrastructure—in part, to enable deployment of more capacity for increased data usage”).

[5] See Manne et al., supra note 2; Fruits et al., supra note 2.

[6] Eric Fruits, Geoffrey A. Manne & Kristian Stout, Broadcast Ownership, Retransmission, and the Case for Comprehensive Reform, Int’l Ctr. for L. & Econ. (Nov. 18, 2025), https://laweconcenter.org/resources/broadcast-ownership-retransmission-and-the-case-for-comprehensive-reform.

[7] Comments of the International Center for Law & Economics, 2022 Quadrennial Regulatory Review—Review of the FCC’s Broadcast Ownership Rules, MB Docket No. 22-459 (Dec. 17, 2025), https://laweconcenter.org/wp-content/uploads/2025/12/FCC-Broadcast-Ownership-NPRM-2025.pdf [hereinafter ICLE Broadcast Ownership Comments].

[8] Id.

[9] Fruits et al., supra note 6.

[10] Comments of the International Center for Law & Economics, Sports Broadcasting Practices and Marketplace Developments, MB Docket No. 26-45 (Mar. 27, 2026), https://laweconcenter.org/resources/icle-comments-to-the-fcc-on-sports-broadcasting-practices-and-marketplace-developments [hereinafter ICLE Sports Broadcasting Comments].

[11] Public Notice, supra note 1.

[12] United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 393 (1956) (“[W]here there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others.”); Herbert Hovenkamp, Antitrust Market Definition: The Hypothetical Monopolist and Brown Shoe, U. Pa. Inst. L. & Econ. Rsch. Paper No. 24-13 (2024), https://ssrn.com/abstract=4746039.

[13] See Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 Antitrust L.J. 363 (1998), https://gai.gmu.edu/wp-content/uploads/sites/27/2021/05/Session-5_Werden-Demand-Elasticities.pdf.

[14] Hovenkamp, supra note 12.

[15] U.S. Dep’t of Justice & Fed. Trade Comm’n, Merger Guidelines (Dec. 18, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf.

[16] J. Gregory Sidak & David J. Teece, Dynamic Competition in Antitrust Law, 5 J. Competition L. & Econ. 581, 614 (2009), https://academic.oup.com/jcle/article/5/4/581/755200 (“In dynamic contexts, potential competitors can have much greater importance. What today appears merely to be a potential competitor can obliterate incumbents tomorrow in acts of Schumpeterian creative destruction. To exclude such a competitor from the boundaries of the market would clearly be a mistake”).

[17] Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Bus. Sch. Press 1997).

[18] Communications Act of 1934, Pub. L. No. 73-416, 48 Stat. 1064 (codified as amended at 47 U.S.C. §§ 151–621); see also Comments of the International Center for Law & Economics & TechFreedom, Communications Act for the 21st Century, at 2-3 (June 2014), https://laweconcenter.org/images/articles/icletfcommsactcomments.pdf.

[19] Fruits et al., supra note 2.

[20] ICLE Title II Comments, supra note 3.

[21] Fruits et al., supra note 2.

[22] See Eric Fruits, Ben Sperry & Kristian Stout, The Competitive Effects of the Proposed Charter/Cox Transaction, Int’l Ctr. for L. & Econ. (Sept. 17, 2025), https://www.laweconcenter.org/resources/the-competitive-effects-of-the-proposed-charter-cox-transaction.

[23] Eric Fruits & Gus Hurwitz, Title II: The Model T of Broadband Regulation, Int’l Ctr. for L. & Econ. (June 2024), https://laweconcenter.org/resources/title-ii-the-model-t-of-broadband-regulation.

[24] See Fruits et al., supra note 22.

[25] See Fruits et al., supra note 2.

[26] Michelle Donegan, T-Mobile Says FWA Is Here to Stay and Eyes More Fiber M&A, Light Reading (Feb. 11, 2026), https://www.lightreading.com/5g/t-mobile-says-fwa-is-here-to-stay-and-eyes-more-fiber-m-a.

[27] Mike Dano, Here’s What’s Next for T-Mobile’s FWA Business, Light Reading (Sept. 22, 2022), https://www.lightreading.com/fixed-wireless-access/here-s-what-s-next-for-t-mobile-s-fwa.

[28] Jeff Heynen, 5G Fixed Wireless and the Threat to Cable’s US Dominance, Dell’Oro Grp. (July 31, 2023), https://www.delloro.com/5g-fixed-wireless-and-the-threat-to-cables-us-dominance.

[29] XJ Wang, The Great Convergence: The State of U.S. Wireless Competition, Light Reading (Feb. 6, 2026), https://www.lightreading.com/wireless/the-great-convergence-the-state-of-u-s-wireless-competition.

[30] See Manne et al., supra note 2.

[31] Competition, Fed. Commc’ns Comm’n, https://www.fcc.gov/general/competition (last visited May 18, 2026).

[32] See, e.g., Comments of the International Center for Law & Economics, Restoring Internet Freedom, WC Docket No. 17-108 (July 17, 2017), https://laweconcenter.org/wp-content/uploads/2017/09/icle-comments_policy_rif_nprm-final.pdf.

[33] See generally Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, 2024 Section 706 Report, GN Docket No. 22-270, 39 FCC Rcd. 3247 (2024) [hereinafter 2024 Section 706 Report].

[34] Manne et al., supra note 2, at 9.

[35] Id. at 11.

[36] Steven Salop & Joseph E. Stiglitz, Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion, 44 Rev. Econ. Stud. 493, 494 (1977) (“Those agents who become informed give an external economy to the uninformed; the weight of their search keeps prices lower. In fact, if there are enough informed agents, the market price will settle down to the perfectly competitive price”).

[37] See Yongmin Chen & Scott J. Savage, The Effects of Competition on the Price for Cable Modem Internet Access, 93 Rev. Econ. & Stat. 201 (2011) (finding that, in markets with low preference diversity, competition reduces prices).

[38] Sean Buckley, Comcast Maintains Focus on DOCSIS 4.0, Wireless Amidst Q4 Broadband Subscriber Loss, Lightwave Online (Jan. 30, 2024), https://www.lightwaveonline.com/home/article/55026285/comcast-maintains-focus-on-docsis-40-wireless-amidst-q4-broadband-subscriber-loss (quoting Comcast Cable CEO David Watson: “We are focused on what we can control…. That means segmenting our customer base by offering our customers the right price, including value options at different speed tiers and driving ARPU ahead in an environment where broadband subscriber growth remains challenged. And we’re doing this in the context of aggressive network upgrades and expansion”).

[39] See generally Ellis Scherer & Joe Kane, Broadband Convergence Is Creating More Competition, Info. Tech. & Innovation Found. (July 7, 2025), https://itif.org/publications/2025/07/07/broadband-convergence-is-creating-more-competition; see also LEO Policy Working Group, Low Earth Orbit Satellites: Policies to Promote Spectrum Sharing, Foster Competition, and Close Digital Divides (Oct. 2025), https://laweconcenter.org/wp-content/uploads/2025/10/Low_Earth_Orbit_Satellites_FINAL.pdf.

[40] See Fruits et al., supra note 2.

[41] Id. at 11.

[42] See Fruits et al., supra note 2; Int’l Ctr. for L. & Econ., Guiding Principles & Legislative Checklist for Broadband Subsidies (2022), https://laweconcenter.org/wp-content/uploads/2022/06/ICLE-BEAD-Checklist.pdf.

[43] Jerry A. Hausman, The Effect of Sunk Costs in Telecommunications Regulation, in Economic Policy in the Information Economy 2 (2002) (“the essence of most [telecommunications] investments is an extremely high proportion of sunk costs”); see also Eric Fruits & Geoffrey A. Manne, Quack Attack: De Facto Rate Regulation in Telecommunications, Int’l Ctr. for L. & Econ. (Mar. 30, 2023), https://laweconcenter.org/wp-content/uploads/2023/03/De-Facto-Rate-Reg-Final-1.pdf.

[44] Daniel R. Shiman, The Intuition Behind Sutton’s Theory of Endogenous Sunk Costs (Jan. 15, 2008), https://ssrn.com/abstract=1018804; John Sutton, Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration (MIT Press 1991).

[45] Fiber Broadband Ass’n & Cartesian, Fiber Deployment Annual Report 2023 13 (Jan. 2024), https://fiberbroadband.org/wp-content/uploads/2024/01/Fiber-Deployment-Annual-Report-2023_FBA-and-Cartesian.pdf.

[46] Rabah Amir, Market Structure, Scale Economies and Industry Performance, CORE Discussion Paper No. 2003/65, at 4 (2003), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=995721 (“More precisely, we argue that the slightest amount of scale economies leads to welfare being decreasing at sufficiently high numbers of firms”).

[47] N. Gregory Mankiw & Michael D. Whinston, Free Entry and Social Inefficiency, 17 RAND J. Econ. 48 (1986).

[48] Scott Wallsten & Colleen Mallahan, Residential Broadband Competition in the United States (2013), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1684236; see also Int’l Ctr. for L. & Econ., supra note 42; Fruits et al., supra note 2.

[49] Shiman, supra note 44.

[50] Comments of the International Center for Law and Economics in Opposition to Petitions to Deny, Applications of T-Mobile US, Inc. and Sprint Corporation for Consent to Transfer Control of Licenses and Authorizations, WT Docket No. 18-197 (Sept. 17, 2018), https://laweconcenter.org/wp-content/uploads/2018/09/ICLE-Comments-TMobile-Sprint-Merger.pdf; see also Mo Xiao & Peter F. Orazem, Does the Fourth Entrant Make Any Difference?: Entry and Competition in the Early U.S. Broadband Market, 29 Int’l J. Indus. Org. 547 (2011), https://www.sciencedirect.com/science/article/abs/pii/S0167718710001384.

[51] Andrew Kearns, Does Competition from Cable Providers Spur the Deployment of Fiber? (July 27, 2023) (working paper), https://ssrn.com/abstract=4523529 (finding that “competition reduces providers’ incentive to deploy high-speed service. Specifically, I find that as a monopolist CenturyLink would deploy slightly more fiber (in place of DSL), increasing available broadband quality for approximately 12,000 households, as compared to its deployment under competition”).

[52] Mankiw & Whinston, supra note 47.

[53] Id.

[54] See generally Section 706 Report, supra note 33.

[55] Chad Syverson, Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown, 31 J. Econ. Persp. 165, 174–75 (2017).

[56] Fruits et al., supra note 2.

[57] Reply Comments of the International Center for Law & Economics, Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (Nov. 2022), https://laweconcenter.org/resources/icle-reply-comments-on-wireline-broadband-deployment; see also Reply Comments of the International Center for Law & Economics, Build America: Eliminating Barriers to Wireless Deployments, WT Docket No. 25-276 (Jan. 12, 2026), https://laweconcenter.org/wp-content/uploads/2026/01/Build-America-Wireless-infrastructure-Comments.pdf.

[58] See, e.g., Ben Sperry & Kristian Stout, Issue Brief: Pole Attachments and Broadband Build-out, Int’l Ctr. for L. & Econ. (July 2021), https://laweconcenter.org/wp-content/uploads/2021/07/Pole-Attachment-Issue-Brief.pdf.

[59] See, e.g., Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment et al., Declaratory Ruling and Third Report and Order, WT Docket No. 17-79 et al., 33 FCC Rcd. 9088 (2018).

[60] Sperry & Stout, supra note 58 (“arguing that permitting and zoning barriers remain among the most significant and addressable impediments to broadband deployment, and that congressional action to extend FCC oversight to municipally- and co-op-owned poles would materially reduce deployment costs without offsetting public benefits”); see also Ben Sperry, Geoffrey A. Manne & Kristian Stout, The Role of Antitrust and Pole-Attachment Oversight in TVA Broadband Deployment, 29 J. Tech. L. & Pol’y 73 (2025) (documenting how the Tennessee Valley Authority allows local power companies to abuse the pole-attachment process).

[61] Fruits et al., supra note 22.

[62] See ICLE Comments to CPUC on Charter/Cox Merger, Int’l Ctr. for L. & Econ. (Feb. 24, 2026), https://laweconcenter.org/resources/icle-comments-to-cpuc-on-charter-cox-merger.

[63] Fruits et al., supra note 2, at 18 (“Because of these dynamics, mergers and increased concentration can sometimes be associated with increased investment, in that they may allow firms to achieve greater economies of scale and scope”).

[64] Comments of the International Center for Law & Economics, Delete, Delete, Delete, GN Docket No. 25-133, at 12 (Apr. 11, 2025), https://laweconcenter.org/resources/icle-comments-to-fcc-re-delete-delete-delete (“(1) directly related to mitigating specific, transaction-specific harms; (2) narrowly tailored to address those harms; and (3) limited in duration, with specific sunset provisions”).

[65] Id. at 5-6.

[66] Fruits, Manne & Stout, supra note 6, at 2-3.

[67] Id.

[68] Id. at 3-4.

[69] Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, § 6, 106 Stat. 1460, 1469–71 (1992).

[70] Fruits, Manne & Stout, supra note 6.

[71] Id. at 4-5.

[72] Id.

[73] Id. at 5-6.

[74] Id. at 6-8.

[75] Id.

[76] Nat’l Broad. Co. v. United States, 319 U.S. 190, 215-16 (1943) (holding that the FCC’s powers are “not limited to the engineering and technical aspects of regulation of radio communication” and that the Act “puts upon the Commission the burden of determining the composition of that traffic”).

[77] The Supreme Court has extended limited content authority over broadcasting under theories of ancillary jurisdiction, but that authority remains narrower than the broad public-interest standard applicable to broadcast regulation. United States v. Midwest Video Corp., 406 U.S. 649 (1972) (extending ancillary jurisdiction to cable-access requirements); FCC v. Midwest Video Corp., 440 U.S. 689 (1979) (limiting ancillary jurisdiction where cable regulation conflicted with the Communications Act’s treatment of cable as a non-common carrier).

[78] Ben Sperry, Censorship-by-Proxy: Jawboning in the Marketplace of Ideas, Int’l Ctr. for L. & Econ. (May 8, 2026), https://laweconcenter.org/wp-content/uploads/2026/05/The-New-Jawboning-The-Continued-Threat-to-Free-Speech-from-Government-Coercion-Under-the-Trump-FTC-and-FCC.pdf.

[79] Ben Sperry, First Amendment Jurisprudence Should Reflect Economic Reality: Why Red Lion and Pacifica Must Fall, Truth on the Mkt. (Oct. 14, 2025), https://truthonthemarket.com/2025/10/14/first-amendment-jurisprudence-should-reflect-economic-reality-why-red-lion-and-pacifica-must-fall.

[80] Id.

[81] Sperry, supra note 79, at 27-28.

[82] Id. (noting that courts or Congress would likely need to curb jawboning by agencies such as the FCC).

[83] Sports Broadcasting Practices and Marketplace Developments, Public Notice, MB Docket No. 26-45 (Feb. 2026) [hereinafter Sports Broadcasting Notice].

[84] Sports Broadcasting Act of 1961, Pub. L. No. 87-331, 75 Stat. 732 (1961) (codified at 15 U.S.C. §§ 1291–1295).

[85] Chantz Martin, FCC Chairman Questions NFL’s Antitrust Protection as League Shifts to Streaming Services, Fox News (Mar. 27, 2026), https://www.foxnews.com/sports/fcc-chairman-questions-nfls-antitrust-protection-league-shifts-streaming-services.

[86] ICLE Sports Broadcasting Comments, supra note 10.

[87] Id. at 5.

[88] Id.

[89] Id. at 4.

[90] Id. at 6-7.

[91] Sports Broadcasting Notice, supra note 84.

[92] ICLE Sports Broadcasting Comments, supra note 10, at 5-6.

[93] Id.

[94] Alaina Getzenberg & Kevin Seifert, Sources: DOJ Opens Antitrust Investigation of NFL over TV Deals, ESPN (Apr. 9, 2026), https://www.espn.com/nfl/story/_/id/48440303/sources-doj-opens-antitrust-investigation-nfl-tv-deals (quoting the NFL: “With over 87% of our games on free, broadcast television, including 100% of games in the markets of the competing teams, the NFL has for decades put our fans front and center in how we distribute our content. The 2025 season was our most viewed since 1989 and reflects the strength of the NFL distribution model and its wide availability to all fans.”).

[95] ICLE Sports Broadcasting Comments, supra note 10, at 9-14.

[96] The FCC would be asserting sweeping new regulatory authority under a long-extant statute, relying on a broadly worded ancillary provision, even though Congress has repeatedly declined to address the issue legislatively. Id. at 11.

[97] 47 U.S.C. § 151 (2018).

[98] Christopher J. Wright, The Scope of the FCC’s Ancillary Jurisdiction After the D.C. Circuit’s Net Neutrality Decisions, 67 Fed. Commc’ns L.J. 19 (2015).

[99] United States v. Southwestern Cable Co., 392 U.S. 157 (1968).

[100] Midwest Video, 440 U.S. 689.

[101] Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010).

[102] Id. at 653.

[103] Id. at 655.

[104] Southwestern Cable, 392 U.S. at 175-77.

[105] Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024).

[106] Id.

[107] West Virginia v. EPA, 597 U.S. 697 (2022).

I.         Introduction

The International Center for Law & Economics (ICLE) submits these comments in response to the U.S. Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) Joint Public Inquiry for Consideration of Guidance on Collaborations Among Competitors (Docket No. ATR-2026-0001).[1] Both agencies have acknowledged that new guidelines are needed. These comments therefore focus on what those guidelines should contain.

ICLE recommends that the agencies: (1) restore the general 20% combined-market-share safe harbor from the 2000 Antitrust Guidelines for Collaborations Among Competitors; (2) establish a 25% safe harbor for research-and-development (R&D) collaborations, along with a two-year grace period modeled on the European Union (EU) framework; (3) clarify that algorithmic-pricing liability requires evidence of coordination, not merely parallel use of software tools or platform policies; (4) establish safe harbors for procompetitive data-sharing arrangements, including artificial-intelligence (AI) training-data collaborations and cybersecurity-threat-intelligence sharing; and (5) confirm favorable rule-of-reason treatment for workforce credentialing, safety-standardization, and training collaborations that remain open and nondiscriminatory.

For 24 years, the 2000 Guidelines gave businesses a practical framework for evaluating competitor collaborations.[2] When the agencies withdrew those Guidelines in December 2024, they offered no replacement, transition period, or interim framework.[3] FTC Commissioner Melissa Holyoak warned in dissent that businesses would be left “grasping in the dark.”[4] Then-Commissioner Andrew Ferguson similarly argued that agency guidance must “properly inform[] the public of the Commission’s enforcement position” so businesses can plan with reasonable predictability.[5]

The resulting harm is not most visible in completed collaborations later challenged by enforcers. It appears in collaborations that never occur because firms narrow, delay, or abandon proposed arrangements in response to legal uncertainty. That effect is especially significant in research-intensive and globally competitive industries such as AI, semiconductors, and pharmaceuticals.

Recent developments in AI illustrate the problem. A March 2026 Lawfare analysis argued that antitrust uncertainty may discourage frontier AI firms from pursuing deeper joint safety initiatives, including collaborative model evaluations.[6] The article discussed a 2025 joint safety evaluation by OpenAI and Anthropic that was limited to publicly released models and suggested that collaboration involving unreleased systems may be constrained by antitrust concerns.[7] Anthropic has likewise stated that greater clarity on the antitrust treatment of AI-safety collaborations “would help determine whether and how AI labs can collaborate on safety standards.”[8]

Similarly, Bloomberg reported in April 2026 that OpenAI, Anthropic, and Google had begun sharing information through the Frontier Model Forum—the nonprofit they formed with Microsoft in 2023—to detect “adversarial distillation,” a technique used to replicate outputs from advanced AI systems.[9] According to the report, the companies remained uncertain about what information they could lawfully share under existing antitrust guidance and indicated that greater regulatory clarity would facilitate additional cooperation. The pattern is the same in both examples: firms seek to collaborate on objectives policymakers support, but legal uncertainty narrows the scope of permissible cooperation.

The agencies have themselves recognized the importance of clear guidance. Acting Assistant Attorney General Omeed Assefi stated in February 2026 that “vigorous and effective enforcement can only exist when the rules of the road are clearly outlined.”[10] Chairman Ferguson similarly observed that “businesses need transparency and predictability from enforcers more than ever.”[11] The case for new guidelines follows directly from those principles.

II.      Restore and Expand Safe Harbors for Competitor Collaborations

Section 4.1 of the 2000 Guidelines explained the rationale for safe harbors directly, identifying “situations in which anticompetitive effects are so unlikely that the Agencies presume the arrangements to be lawful without inquiring into particular circumstances.” In 2024, by contrast, the FTC and DOJ argued that the 2000 Guidelines “risk creating safe harbors that have no basis in federal antitrust statutes.” That criticism misconstrued the nature of the safe harbors described in the Guidelines.

The 2000 Guidelines did not confer antitrust immunity or alter the substantive reach of the antitrust laws or Section 5 of the FTC Act. They recognized a basic economic reality: competitor collaborations are often procompetitive,^[12] particularly when they involve firms with limited market power or facilitate productive joint activity such as R&D. The Guidelines identified categories of arrangements unlikely to harm competition and explained that the agencies were correspondingly unlikely to challenge them.^[13] In doing so, they gave useful guidance to businesses seeking to comply with the law and to agency staff allocating limited enforcement resources.

Eliminating safe harbors does not improve enforcement precision. It risks directing agency resources toward collaborations unlikely to harm competition or consumers, while subjecting agreements among small competitors to the same uncertainty and scrutiny as arrangements involving firms with substantial market power. That approach can discourage efficient collaborations, particularly in research-intensive and globally competitive industries.

The agencies should therefore restore and expand clear safe-harbor guidance. As discussed below, that effort should include reinstating the 20% general safe harbor from the 2000 Guidelines, adopting a higher threshold for R&D collaborations that generate substantial knowledge spillovers, and creating a grace period for collaborations whose market shares later exceed the applicable threshold because the venture succeeded.

A.      Restore the 20% General Safe Harbor

Section 4.2 of the 2000 Guidelines created a general safe harbor for collaborations in which the participants and the collaboration together accounted for no more than 20% of each relevant market in which competition could be affected. Even then, the agencies specified that the safe harbor did “not apply to agreements that are per se illegal, or that would be challenged without a detailed market analysis, or to competitor collaborations to which a merger analysis is applied.”^[14]

The economic logic is straightforward. Firms with small combined market shares generally lack the market power needed to raise prices, restrict output, or exclude rivals in a durable way. A firm with a small market share that raises prices will typically lose sales to competitors rather than induce a market-wide price increase. For similar reasons, collaborations among firms with small aggregate market shares are unlikely to facilitate anticompetitive coordination or exclusion.

The Supreme Court’s decision in NCAA v. Alston reinforces the value of such safe harbors.[15] The Court confirmed that most agreements among competitors—including most joint-venture restrictions—are evaluated under the rule of reason, which requires a fact-intensive assessment of market conditions, competitive effects, and business justifications. Rule-of-reason analysis is expensive, time-consuming, and often unpredictable, even for arrangements unlikely to harm competition. Safe harbors reduce those costs by signaling that collaborations below a specified market-share threshold are unlikely to warrant enforcement scrutiny. In that sense, Alston makes safe harbors more valuable, not less.

The Biden administration justified the 2024 withdrawal of the Guidelines on the ground that the safety zones “have no basis in federal antitrust law.”[16] That rationale misunderstands the function of safe harbors. Safe harbors are enforcement-policy statements, not binding legal rules. The antitrust laws neither require nor prohibit them. The relevant policy question is whether the FTC and DOJ should devote enforcement resources to investigating collaborations among firms with low combined market shares. The answer is generally no. A 20% combined-share threshold remains a reasonable proxy for the point below which the structural conditions necessary for consumer harm are unlikely to exist.

ICLE therefore recommends restoring the general 20% safe harbor from Section 4.2 of the 2000 Guidelines. The same carveouts from the 2000 framework should also remain in place. The safe harbor should not apply to: (1) agreements that are per se illegal; (2) agreements the agencies would challenge without detailed market analysis; or (3) collaborations that function as mergers.

B.       Adopt a Higher Safe-Harbor Threshold for R&D Collaborations

R&D collaborations warrant a higher safe-harbor threshold than ordinary competitor collaborations because they generate substantial knowledge spillovers. When one company invests in research, competitors and consumers often benefit indirectly through published findings, reverse engineering, employee mobility, or follow-on innovation. The investing firm therefore cannot capture the full social value of its research. As a result, private firms tend to invest less in R&D than would maximize overall welfare. Joint ventures can help correct that problem by allowing firms to share the costs, risks, and benefits of research projects that neither could efficiently undertake alone.

The economic literature supports this view. Morton Kamien, Eitan Muller, and Israel Zang show that R&D cooperation can increase total welfare relative to independent investment.[17] Empirical studies of European manufacturing firms likewise find that cooperation with other companies is associated with higher R&D spending.[18] In biopharmaceutical development, firms increasingly rely on alliances and joint ventures to share risk and combine complementary scientific and commercial capabilities, particularly when the average cost of bringing a new drug to market exceeds $1.3 billion per approved product.[19]

The EU recognized these dynamics in its revised R&D Block Exemption Regulation, which took effect July 1, 2023.[20] The regulation establishes a 25% combined-market-share safe harbor for joint R&D agreements among competitors. The European Commission explained that, below this threshold, the technical and economic benefits generated by R&D cooperation—including new products, improved technologies, and lower prices—will generally outweigh potential anticompetitive effects.[21] ICLE recommends that the FTC and DOJ adopt a comparable 25% threshold for R&D-specific safe harbors.

The international competitiveness implications are significant. American firms currently operate without a general safe-harbor regime, while EU firms benefit from clear thresholds under the 2023 Horizontal Block Exemption Regulations, including a 25% threshold for R&D agreements and a 20% threshold for specialization agreements.[22] A joint research venture between firms with a combined 22% market share may be lawful in both jurisdictions, but EU firms can confirm that quickly and predictably. American firms, by contrast, must either incur substantial legal-review costs or abandon the collaboration.

That disparity matters most in globally competitive industries such as AI, semiconductors, and pharmaceuticals, where firms make investment and collaboration decisions across jurisdictions. Regulatory clarity can influence where firms invest, conduct research, and form partnerships.

C.      Adopt a Two-Year Grace Period

ICLE also recommends adopting a two-year grace period, consistent with the EU framework,^[23] for collaborations whose participants exceed the applicable combined-market-share threshold after forming the arrangement.

Such a rule would prevent the safe harbor from creating perverse incentives against successful collaborations. Without a grace period, firms could face immediate legal uncertainty or enforcement risk simply because a productive collaboration succeeded in expanding output, improving products, or increasing market share. A grace period would instead allow firms time to adjust their arrangements or seek legal guidance while preserving the benefits of efficient cooperation.

III.    Clarify Antitrust Treatment of Patent Pools and Joint Licensing

The agencies’ request for comment specifically asks whether joint licensing arrangements would benefit from additional guidance.[24] They would. Joint licensing among competitors—including patent pools, standard-essential-patent (SEP) platforms, and cross-licensing arrangements—is a paradigmatic example of a procompetitive horizontal collaboration of the type the 2000 Guidelines were designed to protect.

Properly structured joint-licensing arrangements can reduce transaction costs, mitigate royalty stacking, and accelerate the dissemination of standardized technologies, particularly in industries built around complex technical standards. The agencies should therefore reaffirm that patent pools limited to complementary patents and licensed on fair, reasonable, and nondiscriminatory (FRAND) terms generally warrant rule-of-reason treatment.

At the same time, the agencies should distinguish those arrangements from collective-bargaining groups among implementers. Existing antitrust doctrine already provides the tools necessary to distinguish procompetitive joint licensing from buyers’ cartels without categorical prohibitions or overbroad safe harbors.

A.      Protect Procompetitive Patent Pools

Properly structured patent pools and licensing platforms can reduce transaction costs, mitigate royalty stacking, and accelerate the diffusion of standardized technologies.[25] Standard-setting organizations often develop technical standards that incorporate hundreds—or even thousands—of complementary patented technologies. Licensing those patents individually can require extensive negotiations, evaluation of large global patent portfolios, and specialized technical and legal counsel. Patent pools and licensing platforms offer a more efficient “one-stop-shop” alternative. Empirical research estimates that patent pools can save hundreds of millions of dollars in transaction costs relative to purely bilateral licensing.[26]

Competitive market forces constrain pool royalty rates when bilateral licensing remains available. In most patent pools, members retain the right to license their SEPs independently. An SEP is a patent that must be used to comply with a technical standard, such as a wireless-communications protocol. Because pool licenses and bilateral licenses operate as functional substitutes,[27] a pool operator cannot sustainably charge royalties above the value of available bilateral alternatives, adjusted for the efficiencies the pool creates. If a pool attempts to charge supra-competitive rates, rational licensees can negotiate directly with SEP holders, who remain bound by their FRAND licensing commitments.

The DOJ recognized these dynamics in its July 2020 Business Review Letter regarding the Avanci 5G Platform. DOJ concluded that the platform was “unlikely to harm competition”[28] and identified the preservation of independent bilateral licensing as a key safeguard against anticompetitive effects.[29] In a November 2022 letter signed by 25 legal academics, economists, former federal judges, and other antitrust and intellectual-property experts, ICLE and others urged the agencies to preserve that approach.[30]

New guidelines should confirm that properly structured patent pools are presumptively procompetitive and should be analyzed under the rule of reason. That treatment should apply to pools limited to essential and complementary patents, licensed on FRAND terms, and structured to preserve participants’ ability to license bilaterally outside the pool.

B.       LNGs Are Not Patent Pools

A separate question is whether collective bargaining by implementers—sometimes called licensing-negotiation groups (LNGs)—should receive safe-harbor treatment analogous to patent pools. The European Commission initially proposed such a safe harbor in its draft revised Technology Transfer Guidelines before ultimately retreating from that approach[31] The FTC and DOJ should likewise decline to adopt one.

Proponents of LNG safe harbors often argue that LNGs are simply the mirror image of patent pools. That analogy is flawed. Patent pools involve the collective licensing of complementary patents—separately owned technologies that must be combined to implement a standard. By aggregating those rights, pools can reduce transaction costs and mitigate royalty stacking,[32] which occurs when multiple overlapping royalty demands increase the total cost of implementing a technology standard.

LNGs operate differently. Rather than coordinating the sale of complementary technologies, they coordinate the purchase of licenses among implementers that would otherwise negotiate independently. In practice, LNGs involve buyers collectively setting the price they are willing to pay for technology licenses.[33] That structure more closely resembles a buyers’ cartel than a patent pool. Treating LNGs as equivalent to patent pools collapses the important distinction between coordinating complements and coordinating substitutes, and improperly extends the efficiency rationale for pools to fundamentally different conduct.

Buyers’ cartels can be as harmful as sellers’ cartels. Just as a sellers’ cartel can inflate prices above competitive levels, a buyers’ cartel can suppress prices below competitive levels. In the context of intellectual property, suppressed royalties can reduce returns to innovation and weaken incentives to invest in future technologies.[34] U.S. antitrust authorities have long recognized this principle. In the music-licensing context, for example, the DOJ filed a statement of interest explaining that collective rate-negotiation strategies could constitute per se unlawful buyers’ cartels.[35] More recently, a senior DOJ official criticized the European Commission’s support for an automotive LNG as “unfortunate” and difficult to reconcile with sound competition-law principles, warning that similar arrangements would likely be treated as per se unlawful buyers’ cartels under U.S. law.[36]

ICLE therefore recommends that any revised guidelines make three points clear. First, properly structured patent pools and SEP platforms—including those limited to essential and complementary patents, licensed on FRAND terms, and preserving participants’ rights to license bilaterally—are presumptively procompetitive and should be analyzed under the rule of reason, consistent with the 2020 Avanci Business Review Letter. Second, the agencies should not extend safe-harbor treatment to implementer collective-bargaining arrangements that lack the structural characteristics that make patent pools procompetitive. Third, existing antitrust principles, applied case by case, are sufficient to address potential harms from joint licensing without categorical prohibitions or overbroad safe harbors.

IV.    Distinguish Algorithmic Coordination from Lawful Conduct

The agencies’ request for comment specifically asks whether new technologies and business models—including algorithmic pricing and data sharing—would benefit from additional guidance[37] They would. Clearer guidelines are needed to distinguish lawful parallel conduct from unlawful coordination.

The key question should be whether competitors share nonpublic, competitively sensitive information or otherwise coordinate their conduct. Liability should not turn merely on the use of algorithms, common software tools, or uniform platform policies. Algorithms often automate lawful conduct, such as responding to publicly available prices and changing market conditions, and can generate substantial consumer benefits.

New guidelines should therefore focus on identifying concrete mechanisms of coordination, distinguishing public from nonpublic information, and preserving the distinction between vertical platform policies and horizontal agreements among competitors.

A.      A Framework for Evaluating Algorithmic Pricing

Algorithmic pricing can arise in at least three distinct situations that require different antitrust treatment. First, competitors may agree to use a shared pricing algorithm to coordinate prices. In that scenario, the algorithm itself is legally irrelevant; the unlawful agreement is the antitrust violation, and existing law already addresses it.

Second, competing firms may each share competitively sensitive information with a common third-party platform that generates pricing recommendations for all participants. In that circumstance, the platform can function as a coordinating mechanism because each participant receives recommendations informed by rivals’ nonpublic data, even absent direct communication among competitors.

Third, independent algorithms may arrive at similar pricing outcomes simply because they respond to the same market conditions and economic signals. That form of conscious parallelism is not unlawful under U.S. antitrust law absent an agreement among competitors.

The proposed consent decree in the DOJ’s RealPage case offers a useful framework for distinguishing lawful from unlawful conduct.^[38] The decree targets the use of competitors’ nonpublic, competitively sensitive information in generating pricing recommendations, while preserving firms’ ability to rely on their own internal data and publicly available market information. As the Competitive Impact Statement explains, the decree permits pricing recommendations “solely based on a property owner’s own nonpublic data or data available to the general public,” reflecting “the principle that firms should not make pricing decisions using insight drawn from their competitors’ nonpublic, competitively sensitive data.”^[39]

New guidelines should adopt that distinction as their organizing principle.

B.       Separate Public and Sensitive Data

An algorithm that monitors publicly posted competitor prices and adjusts accordingly merely automates conduct that human pricing analysts have long performed lawfully. As former FTC Acting Chairman Maureen Ohlhausen observed, automated business practices should generally be evaluated by asking whether the same conduct would be lawful if performed manually—her “guy named Bob” test.^[40] The antitrust concern arises when competitors share nonpublic, competitively sensitive information through a common platform. New guidelines should make that distinction explicit.

Precision matters. In the RealPage litigation, the problematic information was not publicly visible asking rents posted on apartment-listing websites. It instead involved nonpublic transactional data, including executed lease prices, concessions and discounts, renewal terms, and forward-looking occupancy projections.^[41] The distinction between public pricing information and confidential transactional data is critical. Not all commercially relevant information is sufficiently sensitive to create antitrust concerns.

The hotel-pricing software at issue in Gibson v. Cendyn illustrates the other side of the line.^[42] There, each hotel’s pricing recommendations were generated using the hotel’s own internal data combined with publicly available competitor rates collected from travel websites. The software did not pool or share one hotel’s proprietary data with competing hotels. The 9th U.S. Circuit Court of Appeals therefore affirmed dismissal of the antitrust claims, holding that independent use of the same pricing algorithm does not itself constitute a restraint of trade, even when competitors know they are using the same tool.

That outcome follows naturally from the distinction between public and nonpublic information. When a pricing system excludes competitors’ confidential data, the factual predicate for hub-and-spoke liability is absent.

C.      Require Proof of Coordination

As former Deputy Assistant Attorney General Roger Alford explained, “in the absence of evidence of concerted action, we cannot presume the simple use of pricing algorithms is an antitrust violation.”^[43] That principle remains correct. The use of common software tools, standing alone, does not establish unlawful coordination.

The Gibson v. Cendyn litigation illustrates the point. As discussed above, the software architecture in that case excluded competitors’ confidential data.^[44] Each hotel’s pricing recommendations were generated from its own internal information and publicly available market data, rather than from competitors’ nonpublic information. When a platform operates this way, the factual predicate for hub-and-spoke liability is absent because the platform is not functioning as a conduit for sharing competitively sensitive information among rivals.

New guidelines should identify the plus factors necessary to transform parallel adoption of a common pricing tool into a hub-and-spoke conspiracy.^[45] Relevant evidence could include: (1) coordinated adoption decisions among competitors; (2) agreements not to deviate from algorithmic recommendations; (3) exchange of competitors’ nonpublic information through the platform to generate pricing recommendations; and (4) software features specifically designed to align prices or penalize deviation from recommended pricing.

The agencies should not challenge algorithmic-pricing conduct without first identifying a concrete mechanism of coordination among competitors.

D.      Preserve the Vertical-Horizontal Distinction

Another area requiring clearer guidance is the treatment of platform pricing policies, including most-favored-nation (MFN) clauses, price-parity provisions, and “fair pricing” policies. Recent litigation increasingly characterizes these arrangements as hub-and-spoke conspiracies facilitating horizontal coordination among sellers.^[46] That framing risks collapsing ordinary vertical contracting into per se unlawful horizontal price-fixing.

A platform that adopts uniform pricing terms across its seller agreements engages in a common form of vertical contracting. Sellers subject to these policies do not gain access to competitors’ costs, pricing strategies, or proprietary information. Nor does widespread use of a common contractual term transform a series of bilateral vertical agreements into a horizontal conspiracy. A franchise system’s uniform quality standards, for example, do not create a conspiracy among franchisees simply because all franchisees operate under similar contractual obligations.

MFN provisions are longstanding commercial tools with recognized procompetitive justifications.[47] Judge Richard Posner described MFNs as “standard devices by which buyers try to bargain for lower prices” and “the sort of conduct that the antitrust laws seek to encourage.”^[48] The economic literature likewise finds ambiguous competitive effects. The strongest empirical studies report either no statistically significant medium-run price effects from eliminating MFNs or effects that are small and temporary.[49]

United States v. Apple illustrates the substantial evidentiary showing required to establish hub-and-spoke liability.^[50] The case involved extensive evidence of horizontal coordination among publishers, direct communications regarding collective strategy, and active orchestration by Apple itself. More broadly, Apple demonstrates that hub-and-spoke liability requires proof of a horizontal agreement among the competing “spokes”—the “rim” of the wheel.^[51] If liability was difficult to establish even where a platform actively coordinated supplier conduct, it should not arise absent evidence of horizontal agreement among a platform’s participants.^[52] Uniform contractual terms alone—even when imposed by a dominant platform—cannot supply the missing rim.

New guidelines should therefore reaffirm three principles. First, hub-and-spoke liability requires proof of a horizontal agreement connecting competing firms.[53] Second, conscious parallelism, even when facilitated by common tools or market conditions, is not itself a conspiracy.[54] Third, vertical contract terms between a platform and its participants are analytically distinct from horizontal agreements among those participants.

E.       Avoid Guidance That Chills Procompetitive Pricing Technologies

Guidelines that treat common algorithmic tools or platform pricing policies as presumptive hub-and-spoke coordination would jeopardize substantial consumer benefits. Dynamic pricing can improve allocative efficiency by matching supply more closely to demand. Empirical research finds that dynamic airline pricing increases output and overall welfare, while rideshare surge pricing increases rider surplus and disproportionately benefits lower-income riders.^[55] Third-party pricing tools can also reduce barriers to entry by giving smaller firms access to sophisticated pricing capabilities previously available only to larger competitors. The Organisation for Economic Co-operation and Development (OECD) has recognized that pricing algorithms can help smaller firms gain market insights and compete more effectively.^[56]

The Mercatus Center’s 2025 review likewise identified several consumer benefits from algorithmic pricing, including reduced shortages, improved product availability for higher-valuation consumers, and greater responsiveness to changing market conditions.^[57] The review concluded that overbroad restrictions on algorithmic pricing would eliminate those benefits without addressing the narrower coordination risks the evidence supports.

Platform pricing policies can likewise serve legitimate procompetitive purposes. The Supreme Court has long recognized that vertical restraints may prevent free riding and protect investment in valuable services and infrastructure.^[58] Online platforms often invest heavily in search functionality, product reviews, fraud prevention, payment processing, and logistics. When platforms cannot prevent sellers from using those services while undercutting prices elsewhere, they may shift toward less transparent alternatives such as algorithmic steering, advertising-based rankings, or delisting practices that may prove more harmful to consumers and more difficult to administer.

The empirical literature further underscores the need for case-specific analysis. The competitive effects of algorithmic pricing vary across markets and business models. The same technology that may soften competition in some settings can intensify it in others, as the German gasoline-market study by Stephanie Assad and coauthors demonstrates.^[59] New guidelines should therefore focus on concrete evidence of coordination rather than broadly condemning algorithmic pricing technologies or platform pricing policies.

V.      Provide Clear Safe Harbors for Procompetitive Data Sharing

Data sharing presents some of the most consequential unresolved questions in modern antitrust law. The agencies’ request for comment specifically identifies AI training data, cybersecurity-threat intelligence, and benchmarking arrangements as priority areas. Each raises distinct competitive considerations and requires a different analytical framework.

The key distinction is not whether firms share data, but what kind of data they share and whether the arrangement facilitates coordination among competitors. Existing antitrust doctrine already distinguishes between exchanges of current competitively sensitive information, which may facilitate collusion, and exchanges of aggregated, historical, anonymized, or technical information, which often generate substantial procompetitive benefits.

New guidelines should build on those distinctions by adopting targeted safe harbors and clear governance safeguards to distinguish legitimate information sharing from unlawful coordination.

A.      Governance Safeguards for AI Training Data

Building competitive AI systems requires large amounts of training data. Research suggests that AI development is often hindered by fragmented or siloed datasets, which increase the time and labor needed to clean, label, and organize training inputs. Standardized or pooled data architectures, by contrast, can improve data availability, governance, and model-development efficiency.[60] A 2025 Mercatus Center working paper likewise found that open-source AI models and commercial data-licensing markets provide smaller firms meaningful access routes to training data, reducing the likelihood that data pooling itself will foreclose competition.[61]

These findings support a data-sharing safe harbor focused on governance safeguards rather than categorical restrictions on pooling. The European Commission’s 2023 Horizontal Guidelines adopt a similar distinction. They treat exchanges of current competitively sensitive information as presumptively problematic because they can facilitate coordination of future conduct, while treating historical or aggregated data managed by an independent intermediary as generally less concerning.[62]

The relevant competition concern is not that firms gain access to larger training datasets. Competition in AI markets generally centers on model architectures, computing resources, training methods, and post-training capabilities—not merely on access to raw inputs. The concern instead is that firms could use a purported “training-data pool” to exchange current pricing, output, capacity, or forward-looking business information that would otherwise be unlawful to share directly. Likewise, a jointly trained and jointly deployed model could become a coordination mechanism during real-world use.

Broad restrictions on data pooling would likely do more harm than good. Effective AI training often requires extremely large datasets, and startups may need collaborative arrangements to achieve the scale necessary to compete with incumbents.

The agencies should therefore adopt a safe harbor for data-sharing arrangements that satisfy four conditions: (1) an independent third party administers the arrangement; (2) shared data is aggregated or anonymized; (3) current pricing, output, or forward-looking business-planning information is excluded; and (4) access is available to market participants on nondiscriminatory terms.

B.       Protect Cybersecurity Information Sharing

In April 2014, the FTC and DOJ issued a joint policy statement explaining that cybersecurity information—such as technical data about hacking methods, attack signatures, and defensive countermeasures—is fundamentally different from competitively sensitive commercial information and therefore “is not likely to raise antitrust concerns.”[63] Congress later reinforced that principle through the Cybersecurity Information Sharing Act of 2015, which established a statutory antitrust exemption for private entities sharing cyber-threat indicators or providing cybersecurity assistance under the act.[64]

The core distinction recognized in the 2014 policy statement remains sound and should be reaffirmed in new guidelines. Technical threat intelligence is categorically different from pricing, output, or other commercial data that could facilitate coordination among competitors. A firm that learns about a new malware signature or network vulnerability through an industry-sharing group gains information relevant to cybersecurity defense, not information that would help coordinate prices or allocate markets.

New guidelines should therefore confirm that cybersecurity-threat-intelligence sharing—limited to technical indicators and expressly excluding current commercial information—does not raise antitrust concerns, regardless of participants’ market shares.

C.      Use Existing Information-Sharing Frameworks as the Model

The governance safeguards proposed above for AI training data and cybersecurity intelligence are not novel. They build on information-sharing frameworks the agencies have previously endorsed. Before withdrawing the health-care antitrust policy statements in 2023, the FTC and DOJ recognized a safe harbor for certain health-care benchmarking and information-sharing arrangements. To qualify, the data had to be collected by an independent third party, be more than three months old, include at least five contributors, ensure that no participant supplied more than 25% of the inputs, and be reported only in aggregated form.[65]

Those conditions reflected a broader antitrust principle: aggregated and historical data exchanges are generally less likely to facilitate coordination than direct exchanges of current competitively sensitive information. New guidelines should codify those principles as the baseline framework for lawful information sharing, with the AI and cybersecurity safe harbors discussed above serving as targeted applications.

For industry benchmarking more broadly, the EU framework for standardization agreements provides a useful model.[66] The key safeguards are transparency, open participation on equal terms, voluntary participation, limits on the exchange of competitively sensitive information, and broad access to the resulting benchmarks. These conditions help ensure that benchmarking arrangements serve legitimate informational purposes rather than becoming vehicles for coordination among competitors.

VI.    Support Procompetitive Workforce Standards

The agencies’ January 2025 Antitrust Guidelines for Business Activities Affecting Workers correctly recognize that collaborations involving professional credentials, safety certifications, and workforce-training standards are generally procompetitive.[67] New guidelines should reaffirm and extend that principle beyond the specific arrangements addressed in the worker guidelines.

The economic rationale is straightforward. Professional credentialing and standardized training reduce information asymmetries between workers and employers by providing independent, verifiable signals of competence. That, in turn, can improve matching efficiency and increase labor mobility by making credentials portable across employers and regions.

Courts have likewise recognized that workforce-related restraints embedded in broader collaborations may warrant rule-of-reason treatment. In Aya Healthcare Services, Inc. v. AMN Healthcare, Inc., for example, the 9th U.S. Circuit Court of Appeals analyzed a non-solicitation provision as an ancillary restraint reasonably related to a broader procompetitive staffing arrangement, rather than as a naked restraint on competition.[68]

The limiting principle is clear. Collaborative standard-setting and credentialing arrangements should be treated as presumptively procompetitive when they are reasonably related to legitimate quality or safety objectives, open to qualified participants on equal terms, and not used to fix wages, allocate employees, or exclude rivals through unjustified restrictions. New guidelines should confirm rule-of-reason treatment for arrangements that satisfy those conditions.

VII.  Clarify Rule-of-Reason Analysis for Joint Ventures

In NCAA v. Alston, the Supreme Court reaffirmed that most agreements among competitors—including most joint-venture restraints—are analyzed under the rule of reason, which requires a fact-specific assessment of market conditions, competitive effects, and asserted business justifications.[69] Rule-of-reason analysis is often expensive, time-consuming, and unpredictable, even for collaborations unlikely to harm competition. Safe harbors reduce those costs by signaling that low-share collaborations are unlikely to raise competitive concerns. As discussed above, Alston makes such guidance more valuable, not less.

The 1st U.S. Circuit Court of Appeals’ decision in United States v. American Airlines Group Inc. further illustrates the importance of focusing on actual competitive effects rather than labels.[70] The court upheld the government’s challenge to the Northeast Alliance joint venture between American Airlines and JetBlue after finding that the arrangement reduced competition on overlapping routes and decreased output in the form of fewer flights available to consumers. The airlines’ asserted efficiencies failed because they lacked reliable evidentiary support and could have been achieved through less restrictive means.

The key lesson for agency guidance is that calling an arrangement a “joint venture” does not entitle it to favorable treatment. The relevant inquiry is whether the collaboration harms competition in practice. Conversely, collaborations among firms with small combined market shares generally lack the ability to reduce output, raise prices, or exclude rivals in a durable way. Any procompetitive presumption for low-share collaborations should therefore rest on market structure and competitive realities, not formal labels.

The American Airlines litigation also highlighted continuing uncertainty surrounding evidentiary burdens in rule-of-reason cases. American Airlines petitioned the Supreme Court for review, arguing that the circuits apply inconsistent standards at the first step of rule-of-reason analysis.[71] Although the Court denied certiorari,[72] the case underscores the need for clearer agency guidance on what evidence of anticompetitive effects is necessary to satisfy the plaintiff’s initial burden in joint-venture cases.

VIII.      Close the U.S.-EU Guidance Gap

American businesses evaluating competitor collaborations currently lack any general safe-harbor regime. By contrast, the European Union’s 2023 Horizontal Block Exemption Regulations provide market-share safe harbors for certain research-and-development (R&D) agreements (25% combined market share) and specialization agreements (20% combined market share).[73] The European Commission’s 2023 Horizontal Guidelines also establish a soft safe harbor for certain sustainability-standardization agreements that satisfy specified conditions.[74] In both the R&D and specialization contexts, the EU further provides a two-year grace period when market shares later exceed the applicable threshold.[75] The United States offers no comparable framework.

That disparity has direct competitive consequences. In industries where collaboration decisions are made globally—including artificial intelligence (AI), semiconductors, pharmaceuticals, and advanced manufacturing—the ex ante legal costs of evaluating a collaboration in the United States are now materially higher than in the EU. This difference does not reflect a substantive divergence in the legality of many arrangements. A joint R&D venture between firms with a combined 22% market share may be lawful in both jurisdictions. The difference is that EU firms can determine that more quickly and predictably, while American firms must either incur substantial legal-review costs or forgo the collaboration.

The EU framework therefore makes the costs of the current U.S. guidance gap concrete. American firms face systematically higher collaboration costs than their European counterparts in precisely the industries where international competition and innovation matter most.

IX.   Recommendations

ICLE recommends that the agencies incorporate the following principles into new guidelines.

General Safe Harbor. The agencies should not challenge a competitor collaboration when the collaboration and its participants collectively account for no more than 20% of any relevant affected market. The carveouts from the 2000 Guidelines should remain in place. The safe harbor should not apply to: (1) per se unlawful conduct; (2) agreements the agencies would challenge without detailed market analysis; or (3) collaborations that function as mergers.

R&D Safe Harbor. The agencies should not challenge an R&D collaboration when participants’ combined market share does not exceed 25% in any relevant affected market. This threshold reflects the distinctive efficiencies associated with R&D cooperation, including the pooling of complementary assets, expertise, and investment.

Grace Period. A collaboration that exceeds the applicable market-share threshold because participants’ shares increased after the arrangement was formed should retain safe-harbor protection for two calendar years after the threshold is exceeded.

Algorithmic Pricing. Algorithmic-pricing practices should be analyzed under the rule of reason. Independent adoption of pricing software, absent an agreement, shared platform, or exchange of current competitively sensitive information among competitors, does not constitute a Sherman Act violation. The agencies should not challenge algorithmic-pricing conduct without identifying a concrete mechanism of coordination.

Data-Sharing Safe Harbor. Data-sharing arrangements should be presumptively lawful regardless of market share when four conditions are satisfied: (1) an independent third party administers the arrangement; (2) only aggregated or anonymized data is shared; (3) current pricing, output, capacity, or business-planning information is excluded; and (4) access is available to market participants on nondiscriminatory terms.

Cybersecurity Threat Intelligence. Sharing technical cyber-threat indicators, attack signatures, and defensive countermeasures should not raise antitrust concerns, regardless of market share, provided the sharing excludes current commercial pricing, output, or other competitively sensitive business information.

Labor-Market Standard-Setting. Collaborative development of professional credentials, training standards, and workplace-safety standards should receive favorable rule-of-reason treatment when: (1) the standards are reasonably related to legitimate quality or safety objectives; (2) participation is open to qualified parties on nondiscriminatory terms; and (3) the arrangements do not fix wages, allocate employees, or restrict labor supply through exclusionary criteria.

[1] Fed. Trade Comm’n, Press Release, Federal Trade Commission and Department of Justice Seek Public Comment for Guidance on Business Collaborations (Feb. 23, 2026), https://www.ftc.gov/news-events/news/press-releases/2026/02/federal-trade-commission-department-justice-seek-public-comment-guidance-business-collaborations [hereinafter Request for Comment].

[2] U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for Collaborations Among Competitors (2000), https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf [hereinafter 2000 Guidelines].

[3] U.S. Dep’t of Justice & Fed. Trade Comm’n, Announcement, Justice Department and Federal Trade Commission Withdraw Guidelines for Collaboration Among Competitors (Dec. 11, 2024), https://www.justice.gov/atr/media/1380001/dl?inline.

[4] Fed. Trade Comm’n, Statement of Comm’r Melissa Holyoak on the Withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Dec. 11, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/holyoak-collaboration-guidelines-withdrawal-statement.pdf.

[5] Fed. Trade Comm’n, Statement of Comm’r Andrew Ferguson on the Withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Dec. 11, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/collaborations-guidance-withdrawal-ferguson_-statement.pdf.

[6] Nicholas Felstead, How Antitrust Can Promote AI Safety Collaborations, Lawfare (Mar. 5, 2026), https://www.lawfaremedia.org/article/how-antitrust-can-promote-ai-safety-collaborations.

[7] OpenAI, Findings from a Pilot Anthropic-OpenAI Alignment Evaluation Exercise (Aug. 26, 2025), https://openai.com/index/openai-anthropic-safety-evaluation.

[8] Anthropic, Comment Letter on AI Accountability Policy (June 6, 2023), https://www-cdn.anthropic.com/257e6352c677beeffcbce24233211887173a41dc/2023.06.06-Anthropic_NTIA_Comment_v2.pdf.

[9] Shirin Ghaffary & Maggie Eastland, OpenAI, Anthropic, Google Unite to Combat Model Copying in China, Bloomberg (Apr. 6, 2026), https://www.bloomberg.com/news/articles/2026-04-06/openai-anthropic-google-unite-to-combat-model-copying-in-china (“The three companies are uncertain about the scope of information they can legally share under existing antitrust guidelines” and have “indicated they would benefit from greater regulatory clarity from the US government.”).

[10] Request for Comment, supra note 1.

[11] Id.

^[12] 2000 Guidelines, supra note 2, at 25.

^[13] In that regard, the 2000 Guidelines resembled other agency guidance documents, such as the 1997 Horizontal Merger Guidelines, cited in the 2000 Guidelines. Id. at 26 n.3. The 2010 Horizontal Merger Guidelines likewise identified two categories of mergers “unlikely to have adverse competitive effects and ordinarily require no further analysis,” even though they did not use the term “safety zone.” U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 5.3 (2010), https://www.justice.gov/atr/file/810276/dl?inline.

^[14] 2000 Guidelines, supra note 2, at 26–27 (internal citations omitted).

[15] NCAA v. Alston, 594 U.S. 69 (2021).

[16] Fed. Trade Comm’n, Statement of Comm’r Alvaro M. Bedoya Regarding the Withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Dec. 11, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/bedoya-statement-regarding-withdrawal-collaboration-guidelines.pdf.

[17] Morton I. Kamien, Eitan Muller & Israel Zang, Research Joint Ventures and R&D Cartels, 82 Am. Econ. Rev. 1293 (1992).

[18] Bojan Lalic, Tanja Todorovic, Nenad Medic, Branislav Bogojevic, Danijela Ciric & Ugljesa Marjanovic, The Impact of Inter-Organizational Cooperation on R&D Expenditure of Manufacturing Companies, 39 Procedia Manufacturing 1401 (2019).

[19] See, e.g., Neil Lesser & Matt Hefner, R&D Partnerships—Partnering for Progress: How Collaborations Are Fueling Biomedical Advances, Drug Dev. & Delivery (Nov.–Dec. 2017), https://drug-dev.com/rd-partnerships-partnering-for-progress-how-collaborations-are-fueling-biomedical-advances; see also Andrew Mulcahy, Stephanie Rennane, Daniel Schwam, Reid Dickerson, Lawrence Baker & Kanaka Shetty, Use of Clinical Trial Characteristics to Estimate Costs of New Drug Development, 8 JAMA Network Open e2453275 (Jan. 6, 2025), https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2828689 (reporting a mean drug-development cost of $1.3 billion and a median cost of $708 million).

[20] Commission Regulation (EU) 2023/1066 of 1 June 2023 on the Application of Article 101(3) of the Treaty on the Functioning of the European Union to Certain Categories of Research and Development Agreements, 2023 O.J. (L 143) 9.

[21] Id. rec. 5 (“Below a certain level of market power, it can in general be presumed, for the application of Article 101(3) of the Treaty, that the positive effects of research and development agreements will outweigh any negative effects on competition.”).

[22] Commission Regulation 2023/1066, supra note 20; Commission Regulation 2023/1067, 2023 O.J. (L 143) 20 (EU) (specialization agreements).

[23] Both the R&D and specialization block exemptions include two-year grace periods after market shares exceed the relevant threshold.

[24] Request for Comment, supra note 1. (“What topics would benefit from additional guidance—for example, joint licensing arrangements?”).

[25] Written Submissions of the International Center for Law & Economics as Intervener at ¶ 2.1.1, Tesla, Inc. v. InterDigital Patent Holdings, Inc. & Avanci, LLC, UKSC/2025/0058 (U.K. Sup. Ct. Mar. 16, 2026) [hereinafter ICLE Tesla v. Avanci Submissions].

[26] Robert P. Merges & Michael Mattioli, Measuring the Costs and Benefits of Patent Pools, 78 Ohio St. L.J. 281 (2017) (presenting the first empirically based estimate of patent-pool transaction-cost savings and finding that pools can save hundreds of millions of dollars relative to bilateral-licensing counterfactuals).

[27] ICLE Tesla v. Avanci Submissions, supra note 25, ¶ 6.3.

[28] U.S. Dep’t of Justice, Business Review Letter Re: Avanci 5G Platform 2–3 (July 28, 2020) [hereinafter DOJ Avanci Business Review Letter] (“After soliciting input from a range of stakeholders in the automotive and telecommunications industries, including potential licensors and licensees, conducting an independent review, and considering our prior guidance and reviews of other patent pools, we conclude that, on balance, Avanci’s proposed 5G Platform is unlikely to harm competition.”).

[29] Id. at 21 (“There is no single correct way to calculate a reasonable royalty in the FRAND context.”).

[30] Letter from Adam Mossoff, Geoffrey A. Manne, Gus Hurwitz et al. to Jonathan Kanter, Assistant Att’y Gen., Re: Support for the Avanci Business Review Letter 1 (Nov. 30, 2022) [hereinafter Mossoff/ICLE Kanter Letter]. The letter was signed by 25 experts, including former Federal Circuit Judges Paul R. Michel and Kathleen M. O’Malley and former D.C. Circuit Judge Douglas H. Ginsburg, and characterized the 2020 Avanci business review letter as “a legally sound and evidence-based approach in applying antitrust law to innovative commercial institutions like the Avanci patent pool that facilitate the efficient commercialization of new standardized technologies in the fast-growing mobile telecommunications sector to the benefit of innovators, implementers, and consumers alike.”

[31] Communication from the Commission—Approval of the Content of a Draft for a Commission Regulation on the Application of Article 101(3) of the Treaty on the Functioning of the European Union to Categories of Technology Transfer Agreements and a Draft for Commission Guidelines on the Application of Article 101 of the Treaty to Technology Transfer Agreements, 2025 O.J. (C/2025/5024), § 4.5 (Sept. 16, 2025); see also Comments of the International Center for Law & Economics on the Draft Revised Technology Transfer Block Exemption Regulation and Technology Transfer Guidelines 4–7 (Oct. 23, 2025) [hereinafter ICLE TTBER Comments].

[32] See Josh Lerner & Jean Tirole, Efficient Patent Pools, 94 Am. Econ. Rev. 691 (2004); Carl Shapiro, Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting, 1 Innovation Pol’y & Econ. 119, 134 (2000) (“In many respects, a patent pool (much like a package license) is the purest solution to the complements problem described above and analyzed in the appendix.”).

[33] See, e.g., Igor Nikolic, Licensing Negotiation Groups for SEPs: Collusive Technology Buyers Arrangements? Their Pitfalls and Reasonable Alternatives, Les Nouvelles 226 (2021).

[34] Id.

[35] Statement of Interest of the United States, Global Music Rights, LLC v. Radio Music License Comm., Inc., No. 2:16-cv-09051-TJH-AS (C.D. Cal. Dec. 5, 2019), ECF No. 111.

[36] Khushita Vasant, EU Guidance on Carmakers’ SEP Licensing “Unfortunate,” US DOJ’s Kallay Says, MLex (Oct. 10, 2025), https://www.mlex.com/mlex/amp/articles/2398760.

[37] Request for Comment, supra note 1.

[38] U.S. Dep’t of Justice, Press Release, Justice Department Requires RealPage to End the Sharing of Competitively Sensitive Information and Alignment of Pricing Among Competitors (Nov. 24, 2025), https://www.justice.gov/opa/pr/justice-department-requires-realpage-end-sharing-competitively-sensitive-information-and.

[39] Competitive Impact Statement at 10–11, United States v. RealPage, Inc., No. 1:24-cv-00710 (M.D.N.C. Nov. 24, 2025), ECF No. 160, https://www.justice.gov/atr/media/1419471/dl.

[40] Maureen K. Ohlhausen, Acting Chairman, Fed. Trade Comm’n, Should We Fear the Things That Go Beep in the Night? Some Initial Thoughts on the Intersection of Antitrust Laws and Algorithmic Pricing 10 (May 23, 2017), https://www.ftc.gov/system/files/documents/public_statements/1220893/ohlhausen_-_concurrences_5-23-17.pdf (“Is it ok for a guy named Bob to collect confidential price strategy information from all the participants in a market, and then tell everybody how they should price? If it isn’t ok for a guy named Bob to do it, then it probably isn’t ok for an algorithm to do it either.”).

[41] Competitive Impact Statement, supra note 39, at 7–8 (identifying the problematic data as “rental applications, executed new leases, renewal offers and acceptances, and occupancy estimates and projections”).

[42] Brief of the International Center for Law & Economics as Amicus Curiae at 6, Gibson v. Cendyn Grp., LLC, No. 23-16463 (9th Cir. Dec. 26, 2024), https://laweconcenter.org/resources/icle-brief-to-the-9th-circuit-in-gibson-v-cendyn (“[T]here is no allegation here that Rainmaker’s pricing recommendations to one subscriber are based on the confidential information of another subscriber.”); see also Gibson v. Cendyn Grp., LLC, No. 23-16463 (9th Cir. 2025) (distinguishing software that shares confidential information among competitors from software that does not).

[43] Roger Alford, Deputy Assistant Att’y Gen., U.S. Dep’t of Justice, The Role of Antitrust in Promoting Innovation 8 (Feb. 23, 2018).

[44] Brief of the International Center for Law & Economics as Amicus Curiae, supra note 42, at 6.

[45] William E. Kovacic et al., Plus Factors and Agreement in Antitrust Law, 110 Mich. L. Rev. 393 (2011); 6 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 1433 (5th ed. 2020).

[46] Recent litigation involving platform-pricing policies includes Gibson v. Cendyn Grp., LLC, No. 23-16463 (9th Cir. 2025); United States v. RealPage, Inc., No. 1:24-cv-00710 (M.D.N.C.); and FTC v. Amazon.com, Inc., No. 2:23-cv-01495 (W.D. Wash.).

[47] The economic literature identifies several concrete procompetitive mechanisms, including free-rider prevention and investment protection. See Benjamin Klein, Competitive Resale Price Maintenance in the Absence of Free Riding, 76 Antitrust L.J. 431 (2009); Chengsi Wang & Julian Wright, Search Platforms: Showrooming and Price Parity Clauses, 51 Rand J. Econ. 32 (2020). For the principal academic argument against MFNs, see Jonathan B. Baker & Fiona Scott Morton, Antitrust Enforcement Against Platform MFNs, 127 Yale L.J. 2176 (2018). The empirical literature, however, has not borne out the harms they predicted. See, e.g., infra note 49.

[48] Blue Cross & Blue Shield of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1415 (7th Cir. 1995) (Posner, J.); see also Kartell v. Blue Shield of Mass., 749 F.2d 922 (1st Cir. 1984) (Breyer, J.).

[49] See, e.g., Andrea Mantovani, Claudio A. Piga & Carlo Reggiani, Online Platform Price Parity Clauses: Evidence from the EU Booking.com Case, 69 J. Indus. Econ. 422 (2021) (finding only an approximately 2.6% short-run price decrease from removing MFNs, with no statistically significant medium-run effects); Jack (Peiyao) Ma et al., The Price Effects of Prohibiting Price Parity Clauses: Evidence from Global Hotel Chains, Econ. J., (forthcoming) (finding no significant price effects on visible online channels after prohibiting all price-parity clauses, with consumer-welfare gains attributable primarily to channel shifting rather than competitive pricing effects).

[50] United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015), cert. denied, 136 S. Ct. 1158 (2016).

[51] Id.

[52] Benjamin Klein, The Apple E-Books Case: When Is a Vertical Contract a Hub in a Hub-and-Spoke Conspiracy?, 13 J. Competition L. & Econ. 423 (2017).

[53] Howard Hess Dental Labs., Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 244 (3d Cir. 2010) (“The rim of the wheel is the connecting agreements among the horizontal competitors … that form the spokes.”).

[54] Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553–54 (2007) (parallel conduct “just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market”).

[55] See Kevin R. Williams, The Welfare Effects of Dynamic Pricing: Evidence from Airline Markets, 90 Econometrica 831 (2022); Juan Camilo Castillo, Who Benefits from Surge Pricing?, 93 Econometrica 1811 (2025).

[56] Org. for Econ. Cooperation & Dev. (OECD), Algorithmic Competition 14 (2023), https://www.oecd.org/daf/competition/algorithmic-competition2023.pdf.

[57] Cody Taylor, The Case for Algorithmic Pricing: Consumer Welfare, Market Efficiency, and Policy Missteps, Mercatus Ctr. Pol’y Brief (May 14, 2025), https://www.mercatus.org/research/policy-briefs/case-algorithmic-pricing-consumer-welfare-market-efficiency-and-policy.

[58] See Cont’l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977); Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007); Lester G. Telser, Why Should Manufacturers Want Fair Trade?, 3 J.L. & Econ. 86 (1960).

[59] Stephanie Assad, Robert Clark, Daniel Ershov & Lei Xu, Algorithmic Pricing and Competition: Empirical Evidence from the German Retail Gasoline Market, CESifo Working Paper No. 8521 (2020).

[60] See, e.g., Husanjot Chahal, Helen Toner & Ilya Rahkovsky, Small Data’s Big AI Potential, Ctr. for Sec. & Emerging Tech. (2021), https://cset.georgetown.edu/wp-content/uploads/CSET-Small-Datas-Big-AI-Potential-1.pdf; Josh Howard & Amit Kara, Data Silos Explained: Problems They Cause and Solutions, Databricks (Nov. 11, 2024), https://www.databricks.com/blog/data-silos-explained-problems-they-cause-and-solutions.

[61] Alden Abbott & Satya Marar, Is Data Really a Barrier to Entry? Rethinking Competition Regulation in Generative AI, Mercatus Ctr. Working Paper (Mar. 31, 2025), https://www.mercatus.org/research/working-papers/data-really-barrier-entry-rethinking-competition-regulation-generative-ai.

[62] European Comm’n, Guidelines on the Applicability of Article 101 of the Treaty on the Functioning of the European Union to Horizontal Co-operation Agreements, 2023 O.J. (C 259) 1, ¶¶ 390–450 [hereinafter 2023 EU Horizontal Guidelines].

[63] U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Policy Statement on Sharing of Cybersecurity Information (2014), https://www.ftc.gov/system/files/documents/public_statements/297681/140410ftcdojcyberthreatstmt.pdf.

[64] Cybersecurity Information Sharing Act of 2015, Pub. L. No. 114-113, div. N, tit. I, 129 Stat. 2935, 2947–59 (2015).

[65] Fed. Trade Comm’n & U.S. Dep’t of Justice, Statements of Antitrust Enforcement Policy in Health Care (Aug. 1996), https://www.ftc.gov/system/files/attachments/competition-policy-guidance/statements_of_antitrust_enforcement_policy_in_health_care_august_1996.pdf; see also Fed. Trade Comm’n, Press Release, Federal Trade Commission Withdraws Health Care Enforcement Policy Statements (July 14, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements.

[66] 2023 EU Horizontal Guidelines, supra note 62, ¶¶ 552–584.

[67] U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for Business Activities Affecting Workers (Jan. 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/p251201antitrustguidelinesbusinessactivitiesaffectingworkers2025.pdf.

[68] Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc., 9 F.4th 1102 (9th Cir. 2021).

[69] NCAA v. Alston, supra note 15.

[70] United States v. Am. Airlines Grp. Inc., 121 F.4th 209 (1st Cir. 2024).

[71] See Petition for Writ of Certiorari, Am. Airlines Grp. Inc. v. United States, No. 24-938 (U.S. Feb. 27, 2025), https://www.supremecourt.gov/DocketPDF/24/24-938/350862/20250227152404466_2027-02-27%20American%20Airlines%20Petition%20For%20Certiorari%20with%20Appendix.pdf.

[72] Am. Airlines Grp. Inc. v. United States, No. 24-938 (U.S. June 30, 2025) (mem.).

[73] Commission Regulation 2023/1066, supra note 20; Commission Regulation 2023/1067, supra note 22.

[74] 2023 EU Horizontal Guidelines, supra note 62.

[75] Id. at 18–19, 24–25 (discussing grace periods).

I.         Introduction and Background

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 Federal Trade Commission’s (FTC) Advance Notice of Proposed Rulemaking (ANPRM) on unfair or deceptive fee practices by online food-delivery platforms, published April 16, 2026. The Commission issued the ANPRM under Section 18 of the FTC Act and seeks written comments, data, and arguments on whether a trade regulation rule is needed to address fee practices in online food delivery.[1]

Hidden mandatory fees and false representations about tip distribution can harm consumers. They also fall within the kinds of practices that may violate Sections 5 and 12 of the FTC Act.^[2] As such, they are subject to enforcement through Section 5(b), Section 13(a), or Section 13(b). As the ANPRM notes, the FTC has already brought several such cases,[3] and the Commission may continue to issue complaints when it has “reason to believe” conduct violates the FTC Act. ICLE supports targeted enforcement against illegal practices.

That enforcement record does not justify a sectorwide rule at this stage. A small set of enforcement matters involving alleged conduct by large national platforms does not establish prevalence across a heterogeneous market that includes merchant-operated first-party delivery services, third-party intermediaries, ghost kitchens, and regional operators. Nor does the current record establish the consumer-expectation evidence, cost-benefit analysis, or small-entity effects that should precede any shift from targeted enforcement to sectorwide regulation.

Existing Section 5 enforcement, formal business guidance clarifying which fee practices the Commission considers deceptive, and coordination with state attorneys general remain more proportionate responses than sectorwide rulemaking on the current record. The comments that follow make six points.

First, hidden mandatory fees and false fee-related representations are already reachable through existing Section 5 enforcement tools. Formal business guidance could extend those standards marketwide without the costs and rigidity of rulemaking. A rule does not follow from the enforcement record alone.

Second, the current record does not yet satisfy the statutory showings Section 18 requires before the Commission proceeds from an ANPRM to an NPRM or final rule, including prevalence, consumer-expectation evidence, and cost-benefit analysis. Indeed, absent a more developed evidentiary record, the ANPRM itself appears premature.

Third, should the Commission later develop a record satisfying those requirements, any rule must distinguish drip pricing—the strategic withholding of known mandatory fees—from the legitimate later disclosure of charges that cannot be calculated until the ordering process reveals customer- and order-specific variables.

Fourth, cost-of-service pricing requirements, as contemplated in Question 43, would constitute price regulation rather than disclosure regulation and would exceed the Commission’s Section 18 authority.

Fifth, any rule must apply with competitive neutrality to both third-party platforms and merchant-operated first-party delivery services, while accounting for disproportionate compliance burdens on small operators through safe harbors or model disclosure templates.

Finally, a sectorwide rule creates supply-side risks that targeted enforcement does not. A disclosure mandate that effectively constrains variable fee structures can function as a de facto price cap, driving service exits from low-density and high-cost delivery zones where consumers have the fewest alternatives. The Commission must analyze those distributional effects before issuing any NPRM.

II.      Existing Law Reaches Fee Deception Without New Rules

The practices described in the ANPRM’s cited enforcement matters fall within familiar Section 5 territory. The complaints allege hidden mandatory fees, misleading free-delivery representations, and false statements about tip distribution.[4] Where proven, hidden mandatory fees and materially misleading representations about fees, “memberships,” or tip distribution fit comfortably within established deception doctrine.[5]

The critical question, therefore, is not whether the FTC Act can reach such practices; it plainly can. The relevant question is whether a small number of enforcement matters—resolved through settlements without merits determinations—justify imposing a uniform Section 18 rule across the entire food-delivery sector.

As discussed below, the current record does not support that conclusion. Existing market dynamics already create strong incentives for fee transparency, while the Commission’s current enforcement tools already permit targeted remedies against deceptive conduct. The cited enforcement matters also demonstrate that behavioral remedies, consent orders, guidance, and state-law enforcement can address identified harms without imposing inflexible, sectorwide mandates. At minimum, the current record counsels further analysis of the prevalence of specific practices, and the effectiveness of existing interventions, before the Commission undertakes Section 18 rulemaking.

A.      Competitive Dynamics Already Promote Fee Transparency

Before assessing what enforcement can accomplish, it is important to establish the market conditions against which any remedy would operate. Food-delivery consumers face near-zero switching costs. A user dissatisfied with the fees on one platform can instantly open a competing app and even compare several side by side. That competitive structure creates strong private incentives for fee transparency. Platforms that bury charges until checkout risk abandoned orders and negative user experiences that quickly surface in ratings, reviews, and churn data.

The ANPRM itself notes that at least one platform advertises the absence of delivery and service fees on orders above $50 as a selling point.[6] That is precisely what competitive markets tend to produce when consumers value fee transparency. Advertising transparent pricing is not evidence of market failure requiring regulation; it is evidence that transparency has already become a competitive dimension.

These market conditions also bear on the proper scope of any agency response. The Commission’s pleadings in FTC v. Grubhub Inc. acknowledge that concealed fees can harm honest competitors that do not engage in similar practices.[7] That theory may support targeted enforcement against deceptive fee presentation. It does not establish that any particular form of deception is prevalent industrywide, much less that the entire industry engages in such conduct. A rule binds compliant firms and violators alike; enforcement reaches only violators.

The cited enforcement matters also suggest that the Commission’s existing enforcement tools already provide the relevant corrective mechanism. At least one complaint alleges that the challenged practice changed after the firm learned it was under FTC investigation.[8] That is the deterrent effect enforcement is designed to produce.

The relevant empirical question for the Commission (Questions 29a-b) is whether drip pricing is self-reinforcing or self-correcting in this market. The evidence cited in the ANPRM—including competitive advertising centered on fee transparency, completed enforcement matters that produced behavioral remedies, and fee-transparency statutes enacted in five states—suggests that market and enforcement dynamics are already addressing the problem.

A rule mandating what competition is already delivering would be, at best, redundant and, at worst, counterproductive. Such a rule would replace disclosure as a competitive differentiator with a uniform compliance floor. At minimum, the current record suggests that the Commission should assess the ongoing prevalence of specific harmful practices, as well as the effectiveness of existing state and federal interventions, before initiating Section 18 rulemaking.

B.       Existing Enforcement Tools Are Sufficient

The Commission’s existing orders demonstrate that targeted relief can address the conduct identified in the ANPRM. One order requires clear and conspicuous disclosure of all fees on any page referencing the cost of a delivery order, including the amount or percentage—or range—of additional fees.[9] Another requires firms advertising free or discounted delivery to disclose that other fees may apply.[10] The driver-pay orders prohibit misrepresentations about tips, earnings, and reductions in stated pay after acceptance.[11] These are targeted behavioral remedies that govern how covered firms present fees and driver-pay information without imposing new obligations across the entire market. They are also backed by the FTC’s existing civil-penalty authority.

If the Commission nevertheless proceeds to rulemaking, these orders identify the outer boundary of what the current record can support. A rule requiring clear disclosure of mandatory fees before a consumer commits to an order could address the timing harms identified in the ANPRM. A broader rule mandating total-price display, restricting fee structures, or requiring cost-reflective pricing would exceed what the current record establishes as necessary.

For firms not covered by existing orders, the Commission has tools short of rulemaking to extend these standards. The Commission’s settlements with the nation’s largest delivery operators received substantial trade coverage and put the broader market on notice. Likewise, the Commission’s December 2025 warning letters to 13 property-management software vendors illustrate how enforcement can reach the technological layer facilitating fee presentation without imposing sectorwide rules.[12] An analogous approach in the food-delivery market—through guidance directed at checkout-flow software vendors and platform engineering teams—could establish clear standards for fee-presentation timing across the market without the costs and rigidity of a rule.

More broadly, formal business guidance could accomplish much of what a trade regulation rule would target without the attendant costs, rigidity, and legal risk. The Commission could issue guidance documents or policy statements explaining which food-delivery fee practices it considers deceptive under Section 5. Such guidance could explain, for example, that mandatory fixed charges should not first appear only after a consumer has invested time building an order; that fee labels should accurately describe the nature and recipient of the charge; and that misrepresenting a fee’s refundability or optionality violates the Act.

This approach would place the entire market—not merely firms subject to consent orders—on notice of enforcement risk. It would also provide platforms with clearer compliance targets, reducing the uncertainty reflected in the ANPRM’s open-ended questions. Unlike a trade regulation rule, guidance can evolve alongside market practices, does not require the Commission to satisfy Section 57a’s prevalence and cost-benefit thresholds, and does not expose the agency to the litigation risks accompanying a final rule.

C.      Existing Statutory Tools Already Provide Extensive Remedies

The Supreme Court’s unanimous decision in AMG Capital Management, LLC v. FTC held that Section 13(b) of the FTC Act does not “authorize the Commission to seek, and a court to award, equitable monetary relief such as restitution or disgorgement.”^[13] At the same time, the Court left untouched the FTC’s authority to use Section 13(b) to obtain injunctions against unlawful conduct, as well as its authority under Sections 5 and 19 to obtain restitution on behalf of consumers.^[14]

In short, the Commission retains several avenues to obtain behavioral remedies, monetary relief, or both for violations of Section 5, subject to congressionally imposed limitations:

• Under Section 5(b), the Commission may bring and adjudicate complaints internally and issue cease-and-desist orders upon finding a violation. Under Section 5(g), such orders generally become final either after judicial review affirms them or after the 60-day period for seeking review expires.
• Under Section 5(l), the Commission may seek civil penalties against respondents that violate final Commission cease-and-desist orders.
• Under Section 13(b), the Commission may proceed directly to federal court to obtain temporary injunctive relief or, “in proper cases,” permanent injunctions, without first conducting an administrative hearing or issuing a cease-and-desist order.
• Under Section 19, the Commission may obtain “such relief as the court finds necessary to redress injury to consumers or other persons,” including “the refund of money or return of property [and] the payment of damages.” 15 U.S.C. § 57b(b).

Cases brought under Sections 5, 13(b), or 19 may also be resolved through consent orders without findings—or allocutions—of liability. Such settlements may prudently allow both the FTC and respondents to manage litigation risk and avoid the costs of full administrative or judicial proceedings. Even so, while we do not question the Commission’s “reason to believe” allegations underlying these complaints, or the investigative work of Commission staff, settlements necessarily limit the extent of agency experience developed through fully litigated matters, not merely the creation of precedent.

The differing theories advanced in FTC v. Grubhub Inc. and FTC v. Maplebear Inc. further underscore this point. The presence of unfairness allegations in Grubhub, and their absence in Instacart, is especially salient given the statutory limitations Congress imposed on the Commission’s unfairness authority through Section 5(n). Those limitations bear directly on any consumer-protection rulemaking the Commission may contemplate under Section 18.

Assessing both the prevalence of allegedly unfair food-delivery fee practices and the Commission’s experience with those practices is complicated further by the controversy surrounding the FTC’s 2022 Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act.^[15] The Commission adopted that policy statement on a party-line vote under former Chair Lina M. Khan.^[16]

State attorney-general co-enforcement actions may also provide alternative paths to monetary relief unavailable to the Commission after AMG Capital. The Colorado/Greystar rental-housing matter illustrates how state-law authority may supply monetary remedies independent of the FTC Act’s limitations.[17]

III.    Section 18 Requires a Stronger Record Before Rulemaking

Section 18 imposes substantive obligations at each stage of a trade regulation rulemaking. These are not procedural formalities. We recognize that the ANPRM stage is preliminary, but an ANPRM is not merely a request for information or a staff economic or policy study. It is the first step in a rulemaking process distinct from the Commission’s general investigative and study authority—and one subject to statutory constraints beyond those governing legislative rulemaking generally.

At the ANPRM stage, the Commission must describe the area of inquiry, regulatory objectives, and possible regulatory alternatives under consideration. Before issuing an NPRM, the Commission must have reason to believe that the targeted unfair or deceptive acts or practices are prevalent, as shown by cease-and-desist orders or other information indicating a widespread pattern of unfair or deceptive conduct. A final rule’s Statement of Basis and Purpose must then address: (1) the prevalence of the acts or practices the rule targets, (2) the manner and context in which those practices are unfair or deceptive, and (3) the rule’s economic effects on small businesses and consumers.[18]

Those requirements matter here. As discussed below, the ANPRM’s current record does not yet establish industrywide prevalence across a highly heterogeneous food-delivery market. Nor does it establish a consumer baseline for food-delivery pricing, explain how consumer expectations vary across first-time and repeat users, or show that laboratory evidence on drip pricing can support a sectorwide rule. The Commission also must account for existing enforcement, state laws, and its own recent decision to exclude food delivery from the final Unfair or Deceptive Fees Rule.

After Loper Bright Enterprises v. Raimondo, courts will independently assess whether the Commission has satisfied each statutory element, without deferring to the agency’s own view of the record’s adequacy.[19] The online food-delivery market processes more than $9 billion in monthly sales and serves more than 138 million Americans.[20] A sectorwide rule covering that market warrants a correspondingly thorough record.

A.      The Record Does Not Establish Industrywide Prevalence

The food-delivery market is highly heterogeneous. It includes large third-party platforms, merchant-operated delivery services, ghost kitchens, restaurant- and grocery-delivery services, and small regional operators. The ANPRM itself defines “online food delivery platforms” broadly, and its questions expressly encompass merchants operating their own online delivery platforms.

The Commission’s current enforcement record does not establish that deceptive fee practices are prevalent across this diverse population. The cited matters involve only a small number of large, national, third-party platforms, and all concluded through non-litigated settlements. That record does not justify extending a uniform rule across the broader food-delivery market.

The mismatch between the enforcement record and the scope of the contemplated rule is especially significant. The Commission’s complaints target practices associated with major multisided intermediaries and their particular fee structures. Yet the proposed rule would apply equally to those firms and to companies operating their own delivery websites, including small businesses. The hidden-fee practices alleged in the ANPRM arise from specific platform conduct, not from the food-delivery market generally.

B.       The ANPRM Does Not Establish a Consumer Baseline

The ANPRM does not establish what baseline expectations consumers hold about food-delivery pricing, how the Commission would measure those expectations, or whether they are consistent across consumer groups. Yet the Commission’s deception theory depends on the premise that consumers hold a “reasonable expectation” about what a displayed price includes, and that platforms violate that expectation by later adding fees.

No settled consumer baseline exists for food-delivery pricing. Unlike hotel-room rates, where decades of convention have established that an advertised price generally reflects the nightly rate before taxes, food-delivery pricing lacks a comparable market convention. The market has evolved rapidly over the past decade, and fee structures vary substantially across platforms. Some platforms charge flat delivery fees; others impose percentage-based service fees; still others bundle some or all costs into menu prices.

Consumer expectations also likely vary with experience. A first-time user’s expectations differ materially from those of a customer placing a hundredth order. The ANPRM’s own statistics indicate a large repeat-user population that has encountered delivery fees across multiple transactions.[21] Yet the ANPRM does not present evidence regarding the share of transactions involving first-time versus repeat users, nor does it address whether repeat users—who already possess information about a platform’s fee structure from prior orders—can reasonably claim deception.

The ANPRM’s own evidence also undercuts the need for a sectorwide disclosure mandate. The Commission’s enforcement record suggests that consumers can identify allegedly deceptive fee practices when they encounter them. One complaint references “hundreds of thousands of consumer complaints” concerning the challenged conduct.[22] Another cites internal research showing that consumers viewed a purported free-delivery offer as misleading when a service fee still applied, and that consumers did not distinguish between delivery fees and service fees in the manner the platform intended.[23]

That evidence suggests the relevant problem is not a marketwide information failure requiring regulatory correction. Consumers appear capable of recognizing and reacting to allegedly deceptive practices. The more plausible issue is deceptive labeling or presentation by specific firms—a problem that targeted enforcement already addresses.

More fundamentally, the behavioral-economics literature cited in the ANPRM cannot substitute for two evidentiary showings the Commission still lacks: first, evidence establishing the baseline pricing expectations that reasonable food-delivery consumers actually hold; and second, evidence explaining how the Commission’s deception theory applies to the repeat-user majority responsible for much of the market’s transaction volume.

The ANPRM asks how and when platforms disclose fee information, but it does not establish how consumers process those disclosures or how prior experience shapes expectations. A rule premised on deception should first establish what consumers actually believe and how they form those beliefs. The Commission cannot simply assume that any fee excluded from the menu price is necessarily unexpected.

Nor does the behavioral-economics literature resolve this problem. As Todd Zywicki, Geoffrey Manne, and Kristian Stout explain, the same asserted behavioral biases can support contradictory predictions about consumer behavior, rendering the theory “non-falsifiable, malleable, self-contradictory, and, often, trotted out only when convenient.”[24]

C.      The Record Remains Underdeveloped

The ANPRM appropriately seeks to develop the record. The Commission should also recognize that the existing evidence cannot yet support a notice of proposed rulemaking.

Significant evidentiary gaps remain. These include systematic data on platform types and sizes (Questions 1-7); fee categories and disclosure timing (Questions 9, 12-17, 23); consumer-perception evidence specific to food delivery; and analysis of whether existing state laws already adequately address the challenged conduct in jurisdictions where those laws apply (Questions 22, 58).

We appreciate that the ANPRM requests data and other systematic evidence concerning fee-disclosure practices in food delivery. FTC staff are also well positioned to survey and synthesize the existing literature and available evidence. That empirical analysis and reporting should precede further rulemaking initiatives.

The behavioral studies cited in the ANPRM—Alexander Rasch et al. (2020) and Shelle Santana et al. (2020)—do not fill these gaps. Both studies involve laboratory experiments conducted in artificial settings without repeat-purchase dynamics, and neither study addresses food delivery specifically.[25] The “uniformly underwhelming track record” of converting “anomalies found in economics lab experiments into real-world realities” in the consumer-finance context should give the Commission serious pause before relying on analogous laboratory findings to justify a sectorwide rule for food delivery.[26]

The Commission’s own recent actions reinforce the need for caution. In January 2025, the Commission excluded food delivery from the final Unfair or Deceptive Fees Rule, explaining that it would “proceed incrementally.”[27] Food-delivery fee concerns were already before the Commission during that rulemaking. The subsequent settlements add enforcement examples, but the ANPRM still must explain why those examples transform targeted deception matters into evidence of sectorwide prevalence.

If incrementalism was justified in 2025, the ANPRM has not yet identified what has changed to justify sector-specific rulemaking now.

IV.    Any Rule Should Target Disclosure Harms, Not Fee Structures

As set forth above, ICLE does not believe the current record supports proceeding to an NPRM under Section 18. The design observations that follow are offered in the alternative: Should the Commission develop a record satisfying Section 57a’s requirements for prevalence, unfairness or deception, and cost-benefit analysis, these principles should guide any rule design.

Before turning to those principles, ICLE acknowledges what the enforcement record does suggest. The checkout flows alleged in the Grubhub and Instacart complaints—where consumers allegedly assembled complete orders, selected delivery windows, and proceeded to payment screens before learning the full fee amount—may strategically exploit order-commitment dynamics to reduce price sensitivity. A consumer who has spent time building an order, selected a delivery window, and reached the payment screen has invested effort. Abandoning the order and switching platforms at that point imposes real costs.

Where specific platforms structure checkout flows to reveal mandatory fees at the moment of maximum sunk-cost leverage, that conduct may harm affected consumers. Depending on the facts and circumstances, such conduct might give the Commission “reason to believe” that enforcement against those specific firms is warranted.

But evidence that particular firms used deceptive checkout flows is not evidence that the practice is prevalent across the heterogeneous food-delivery market. Section 57a(b)(3) requires prevalence, not possibility. To advance to an NPRM, the Commission must establish both the prevalence of the acts or practices the rule targets and the manner and context in which those practices are unfair or deceptive.

If the Commission ultimately develops that record, any rule should address the specific timing and labeling harm that the record supports—not food-delivery pricing more broadly. As discussed below, that means distinguishing fixed mandatory fees from contingent, order-specific charges; preserving useful itemized disclosures; and recognizing that food delivery differs structurally from ticketing, lodging, and other markets where a single total price is knowable at the outset.

The Commission should also evaluate whether the identified conduct is better addressed through targeted Section 5 deception enforcement, Commission-issued business guidance on fee-advertising practices it considers deceptive, or industrywide rulemaking.

A.      Any Rule Should Target Fixed Mandatory Fees

The identifiable drip-pricing harm is the delayed disclosure of mandatory fees until after a consumer has invested time building an order, thereby distorting comparison shopping. One cited complaint described this internally as a “pricing shell game.”[28] The problem is therefore one of timing and labeling, not fee structure.

Xavier Gabaix and David Laibson’s “shrouded attributes” model explains how such conduct can arise even in competitive markets.[29] Firms may have incentives to obscure mandatory add-on charges when some consumers focus primarily on headline prices. The model also suggests that mandatory disclosure of shrouded add-on prices can improve consumer welfare.

That conclusion, however, depends on a critical assumption: the hidden charge must be a fixed, known amount that the firm could disclose but strategically withholds. That assumption may fit the mandatory service fees alleged in the FTC v. Grubhub Inc. complaint. It does not fit the variable, order-specific charges that make up much of food-delivery pricing and that genuinely cannot be calculated at the point of initial advertisement.

Not all late-revealed fees constitute drip pricing. Food delivery involves costs that often cannot be calculated until customer- and order-specific variables become known. Delivery fees may depend on the customer’s address, distance, or real-time traffic conditions. Small-order surcharges depend on the final cart total. Tip prompts necessarily arise later in the transaction flow. These fees are not withheld to exploit sunk-cost leverage; they are unknown until the relevant inputs exist. A rule treating delayed disclosure of such variable fees the same as the strategic concealment of fixed mandatory charges would punish pricing transparency rather than promote it.

If the Commission nevertheless concludes that drip-pricing harms are sufficiently frequent, severe, and durable to justify intervention, any rule should narrowly target the timing problem itself without regulating fee structures. Such a rule should distinguish between two categories:

1. Mandatory fixed fees—charges that apply regardless of order composition, whose amounts are known in advance and whose delayed disclosure may exploit sunk-cost dynamics without producing offsetting procompetitive benefits.
2. Contingent variable fees—charges that vary based on factors such as address, cart size, time of day, or driver availability and cannot be disclosed as dollar amounts before the relevant inputs exist. For those fees, the Commission could require upfront disclosure that additional charges may apply, followed by clear disclosure of the amount once the pricing system can calculate it and, in all events, before purchase.

A blanket mandate to disclose all fees upfront could force platforms to display hypothetical estimates or adopt inefficient pricing structures, to the detriment of some consumers. By contrast, an amorphous timing standard—with some fees disclosed upfront and others disclosed only after the order has been finalized—could produce the very confusion the rule seeks to address.

B.       Itemized Disclosure May Better Serve Consumers

A platform that displays “Subtotal: $22.00 + Delivery fee: $3.99 + Service fee: $2.50 = Estimated total: $28.49” before order placement provides complete and timely pricing information. That is not drip pricing. Indeed, this type of itemized disclosure may convey more useful information than a single blended “total price,” because it allows consumers to identify which charges they may be able to avoid—for example, by ordering from a closer restaurant to reduce the delivery fee or increasing the order size to avoid a small-order surcharge. Itemization also helps consumers understand the nature, purpose, and recipient of each charge. See Questions 42, 44.

That distinction tracks the framework ICLE urged in the rental-fee ANPRM: separate disclosure timing from the number of line items, and distinguish between optional or contingent services and charges every consumer must pay.[30] In the food-delivery context, the same principle suggests that mandatory baseline charges should be disclosed early, while truly optional or contingent charges may remain itemized so long as their triggering conditions are clear.

The FTC’s Bureau of Economics has likewise cautioned that disclosures containing “too much, irrelevant, or unnecessary information can make it difficult, time-consuming, and frustrating for consumers to understand what is being conveyed and sort the important points from the minor detail. Such disclosures may induce consumers to ignore the information completely because it is simply too much trouble.”[31] That concern applies directly here.

A delivery platform that collapses all variable fees into a single figure—including, e.g., delivery charges, percentage-based service fees, potential small-order surcharges, and tip solicitations—must either incorporate worst-case assumptions for each variable or present a broad pricing range. The former approach risks overstating costs for many consumers; the latter risks conveying little useful information at all. Either outcome could train consumers to disregard the disclosed figure as unreliable, producing precisely the disclosure-avoidance dynamic FTC staff warned against.

There may well be an optimal degree of fee-disclosure granularity between a single opaque total and a line-by-line accounting of every cost component. The current record, however, does not identify that point. Until the Commission develops empirical evidence regarding how consumers actually process itemized fee disclosures in the food-delivery context—evidence the ANPRM does not yet provide—any prescriptive disclosure-format rule risks mandating a level of granularity that is either too coarse or too fine to serve consumers effectively.

C.      Food Delivery Requires Different Disclosure Rules

Food delivery differs fundamentally from the sectors covered by the Commission’s existing Unfair or Deceptive Fees Rule, including live-event ticketing, short-term lodging, and rental housing. In those markets, the total price is generally knowable before the consumer invests time comparison shopping. A hotel room carries a fixed nightly rate plus resort fees; a concert ticket has a fixed face value plus service charges. In both cases, the seller can calculate and display a single all-in figure at the point of initial advertisement.

Food delivery pricing operates differently. Many food-delivery charges are inherently variable and depend on order-specific circumstances. For example:

• Delivery fees vary based on distance, traffic conditions, and time of day.
• Service fees may be calculated as a percentage of the order subtotal.
• Small-order fees apply only when the cart total falls below a threshold amount.
• Surge fees fluctuate with real-time driver availability and consumer demand.
• Priority fees apply only if the consumer selects expedited delivery.
• Bag fees and regulatory-response fees vary by jurisdiction and item type.

A mandatory single “total price” is meaningful only if the consumer’s actual circumstances match the assumptions embedded in that figure. In many cases, they will not. A consumer with a $30 budget comparing restaurants cannot meaningfully rely on a “total price” calculated using hypothetical assumptions about order composition, delivery distance, or time of day.

ICLE made a similar point in the rental-fee context: a single all-in figure can distort comparison shopping when it incorporates charges triggered only by individualized circumstances. Food delivery amplifies that problem because the relevant variables may change with each transaction.[32]

The Commission’s existing rule already recognizes analogous administrability concerns. For live-event ticketing and short-term lodging, the Unfair or Deceptive Fees Rule excludes “shipping charges” from the total-price requirement.[33] See 16 C.F.R. pt. 464. The rule defines shipping charges as amounts reasonably reflecting the costs incurred to send physical goods to consumers. Delivery fees present a closely related problem because they often depend on address, distance, timing, and driver availability.

The Commission should therefore treat delivery charges similarly. Delivery fees should be excluded from any total-price requirement, with disclosure required once the consumer provides the information necessary to calculate the charge. See Question 35a.

Several states adopting total-price statutes have already reached comparable conclusions. Virginia’s Fair Food Delivery Act imposes disclosure requirements specific to food-delivery platforms.[34] Minnesota distinguishes between delivery platforms and food-service establishments.[35] California separately regulates third-party food-delivery platforms and treats them differently from restaurants, bars, and grocery stores.[36]

Those distinctions are not arbitrary. They reflect the same structural judgment advanced here: Food-delivery fees often cannot be meaningfully aggregated at the point of first advertisement because their amounts depend on consumer-specific choices and real-time logistical conditions that remain unknown until later in the ordering process. This is one reason why “all-in” pricing concepts used in hotels, ticketing, and broadband cannot readily be applied to food delivery.

A federal rule ignoring those differences and imposing a uniform total-price mandate would create substantial administrability problems. At best, the rule would require strained interpretations to remain workable. At worst, it would harm consumers by suppressing variable pricing signals that help platforms allocate delivery resources and serve higher-cost delivery zones.

V.      Any Rule Must Account for Economic Costs and Tradeoffs

The ANPRM seeks comment on the costs and benefits of potential rule provisions. See Questions 27-31, 59-64. Before issuing any NPRM, the Commission should separately analyze not only the frequency, severity, and durability of the specific consumer harms it seeks to address, but also the economic consequences of any proposed rule design.

Four issues warrant distinct analysis: how compliance costs would flow through to consumers; how platform-based compliance standards could reduce burdens on small businesses; why cost-of-service fee requirements would exceed the Commission’s authority and distort supply; and how any federal rule would interact with state fee-transparency statutes already in effect.

The Commission should also assess the supply-side risks that distinguish sectorwide rulemaking from targeted enforcement. A case-by-case enforcement action can address specific deceptive conduct by specific firms. A rule, by contrast, may alter fee structures, pricing signals, and service availability across the entire food-delivery market, including in thin-margin and underserved areas.

The comments below do not recommend that the Commission proceed to a food-delivery NPRM. Rather, they respond to several of the ANPRM’s enumerated questions on the assumption that the FTC may later develop the relevant experience, evidence, and research findings needed to support a narrowly targeted rule.

A.      Compliance Costs Will Affect Consumers and Small Platforms

Disclosure mandates can redirect behavior into channels the rule does not directly regulate, including pricing structure, service design, and investment in platform quality. Geoffrey Manne’s “hydraulic theory” of disclosure regulation explains how firms adapt along margins outside the rule’s formal scope.[37] Pass-through theory likewise establishes that the economic incidence of compliance costs does not depend on where the law formally places those costs; it depends on market conditions and pass-through rates.[38] The Commission therefore should treat platform compliance costs as potential consumer costs, rather than assume platforms will absorb them.

Those costs may be especially significant for smaller firms. Fixed compliance costs—including legal review, platform redesign, real-time fee-calculation systems, and compliance with differing state disclosure requirements—do not scale proportionally with transaction volume. The Commission’s current enforcement record involves only large national platforms capable of spreading such costs across billions of transactions. Any rule, by contrast, would apply equally to a regional delivery service processing only a small fraction of that volume.

Questions 59-62 therefore should distinguish among platform types and sizes. Average per-transaction compliance-cost estimates are likely to understate burdens on smaller operators while overstating them for larger firms.

B.       Compliance Obligations Should Reflect Platform Structure

If the Commission proceeds with rulemaking, it must address the consequences of imposing compliance obligations primarily on platform operators rather than on each individual restaurant using those platforms. For example, a restaurant operating exclusively through a compliant third-party platform could be deemed compliant without separate disclosure obligations. This approach—similar to the Commission’s focus on software vendors in the rental-housing context—places technical compliance responsibilities on entities that already have the necessary engineering infrastructure, while protecting smaller businesses that lack dedicated compliance staff. See Questions 33, 54, 55.

This allocation, however, carries its own competitive risk. Deeming a restaurant compliant whenever it sells exclusively through a compliant third-party platform could give merchants that currently operate their own ordering and delivery channels a reason to abandon those channels and route sales through a third-party platform instead—not because the platform offers better service, but because routing through it discharges the merchant’s disclosure obligations. Smaller first-party operators, which face the steepest per-transaction compliance costs, would feel that pull most strongly. The Commission should therefore design any platform-level safe harbor so that it does not penalize merchants that choose to serve customers directly.

A rule imposing disclosure obligations only on third-party platforms—or effectively exempting first-party operators—would distort competition in the opposite direction. If compliance burdens fall only on third-party intermediaries, merchants would face artificial incentives to bypass those platforms and route sales through their own first-party channels, including through off-the-shelf ordering and delivery software that replicates platform functionality without the associated disclosure obligations. Channel choices would then reflect regulatory arbitrage rather than the relative quality, reach, or cost of the underlying services.

Any framework must therefore account for the competitive relationship between third-party platforms and merchant-operated first-party delivery services. The consumer-protection rationale for fee transparency does not depend on who operates the delivery service. A consumer encountering a hidden service fee on a restaurant’s own website faces the same potential harm as a consumer encountering one on a third-party app.

At the same time, the compliance-cost asymmetries discussed above are most acute for small first-party operators. A local restaurant or grocery store operating its own delivery website typically lacks the engineering infrastructure, legal staff, and transaction volume that allow national platforms to spread fixed compliance costs across billions of transactions.

If the Commission proceeds, it should therefore estimate not only aggregate compliance costs across the food-delivery sector, but also how those costs vary across different categories of providers. Based on those estimates, the Commission should consider proportionate compliance pathways for smaller first-party operators. Potential approaches could include simplified disclosure safe harbors for merchants below a specified transaction-volume threshold, or model disclosure templates satisfying the rule’s requirements without requiring custom legal or technical implementation.

Such an approach would preserve competitive neutrality between first-party and third-party delivery models while reducing the risk that prescriptive disclosure requirements disproportionately burden the market’s smallest participants. See Questions 33, 54, 55, 59-62.

C.      Cost-Reflective Pricing Would Exceed the FTC’s Authority

Question 43 asks whether a rule should “require fees or charges to accurately reflect the actual cost of the goods or services covered by the fee or charge.” That question presents the most consequential design issue in the ANPRM because it would determine whether the Commission is proposing a disclosure rule or a form of price regulation. Section 18 authorizes the former, not the latter.

Cost-of-service ratemaking—requiring each fee component to correspond to allocated costs—is a traditional form of price regulation historically applied to public utilities under distinct statutory authority. It is not a disclosure requirement. A rule mandating cost-reflective pricing would not merely govern how platforms present fees; it would regulate the level and structure of those fees. That is price regulation under a disclosure label, and it exceeds what Section 5 unfairness or deception authority can support.

Economic theory further underscores the problem. William Baumol and David Bradford demonstrated that efficient pricing for multiproduct services does not require each fee component to equal marginal cost.[39] Efficient recovery of joint and common costs instead may require markups inversely related to demand elasticities, rather than uniform cost-reflective pricing.

That insight applies directly to food-delivery platforms. A platform’s “service fee” often funds a bundle of activities, including customer support, fraud prevention, insurance, and software maintenance. Those costs cannot be meaningfully allocated to individual transactions. Nor is there any principled reason to single out one component of a platform’s pricing structure for mandatory cost-reflective treatment while allowing all other business costs to remain embedded within menu prices.

The analogy to payment-card surcharge regulation is instructive. As Todd Zywicki, Geoffrey Manne, and Kristian Stout observed in that context: “There is no obvious reason why of all of the potential costs of doing business that could be disclosed to consumers, this one—and this one alone—is deemed to be particularly useful.”[40]

The same logic applies here. Menu prices, restaurant commission rates, software licensing fees, and other platform charges all incorporate cost allocations invisible to consumers. There is no principled basis for singling out service fees for mandatory cost-reflective disclosure while leaving other cost components bundled into prices—unless the objective is not transparency, but effective price control.

The Commission therefore should reject any cost-reflective pricing requirement in a final rule. At minimum, any NPRM should make clear that Question 43 does not reflect a proposal supported by the current record.

D.      The Commission Should Account for Existing State Laws

At least five states have enacted fee-transparency statutes containing provisions specific to food-delivery platforms, and several others have introduced similar legislation.[41] A federal rule defining terms such as “mandatory fee,” “total price,” or “clear and conspicuous disclosure” differently from existing state standards would create overlapping compliance obligations whose costs ultimately flow through to consumers.

The Commission has already recognized the relevance of existing state regulation in analogous contexts. In the final Unfair or Deceptive Fees Rule, the Commission excluded long-term residential rentals in part because state and local laws already governed the challenged conduct.[42] That rationale applies with even greater force here, where multiple states have enacted food-delivery-specific fee-transparency provisions within the past 18 months.

Before issuing any NPRM, the Commission should therefore clarify whether a federal rule would preempt conflicting state requirements, establish a federal floor, or operate alongside divergent state standards. See Question 58b. Failing to resolve that issue in advance would predictably generate compliance costs, legal uncertainty, and litigation.

E.       Uniform Disclosure Rules May Reduce Service Availability

There is a critical distinction between case-by-case enforcement and industrywide rulemaking. An enforcement action targets a specific platform’s allegedly deceptive practices. It constrains the bad actor without altering the pricing structures of compliant firms. A rule, by contrast, imposes uniform obligations across the entire sector. If those obligations effectively constrain how platforms structure variable fees—whether through mandatory all-in pricing, fee aggregation, or cost-reflective pricing requirements—the effects will fall most heavily on routes and delivery windows where variable fees are what make service economically viable.

Food-delivery fee structures are not arbitrary. Variable delivery fees reflect real logistical costs, including driver time, travel distance, congestion, weather, and fluctuating demand. Surge pricing during peak-demand periods or severe weather conditions sends signals that induce drivers to serve those routes and time windows. A rule compressing variable fees into flat charges, or discouraging itemized pricing through a mandatory single “total price,” would weaken those signals—not by formally prohibiting them, but by making transparent disclosure legally or operationally more difficult.

Although a disclosure rule is not formally a price cap, it may operate similarly in practice. A total-price mandate requiring platforms to display a single figure at the point of initial advertisement necessarily forces platforms to incorporate assumptions about variable fee components such as delivery distance, surge pricing, and small-order surcharges. In many cases, those assumptions will overstate actual costs for most consumers.

Platforms will then face competitive pressure to reduce the displayed total price. Under a total-price mandate, that pressure effectively translates into pressure to compress the variable-fee components contributing to the displayed figure. Over time, variable fees may migrate toward flat averages, reducing the pricing signals that reflect actual delivery costs. That is the mechanism through which a disclosure mandate can constrain fee structures and fee levels even without imposing a formal price cap.

The supply-side effects of revenue constraints in markets with heterogeneous operating costs are well documented. Rebecca Diamond, Tim McQuade, and Franklin Qian’s study of San Francisco’s rent-control expansion provides a useful empirical benchmark.[43] The study found that when revenue constraints bind in markets with location-specific cost variation, suppliers tend to exit the segments where those constraints are most binding. In the rent-control context, that dynamic contributed to condominium conversion and redevelopment of older units, producing a 15% reduction in rental supply concentrated in the affordable-housing segment the policy sought to protect.

That mechanism is not unique to housing. In any market with substantial cost variation across suppliers or service areas, uniform pricing constraints tend to reduce service in the highest-cost segments. In food delivery, those segments may include low-density markets, rural delivery zones, and late-night service windows—precisely the contexts in which delivery platforms may provide the only practical food-access option for consumers without transportation.

Targeted enforcement does not create this risk because it addresses specific deceptive practices by particular firms, rather than imposing uniform constraints on pricing structures across the market. Rulemaking does create that risk because it applies the same obligations to all operators, including firms serving thin-margin routes where variable pricing structures are necessary to sustain service.

Before issuing any NPRM, the Commission therefore should analyze these supply-side effects, including their geographic and demographic distributional consequences. See Questions 27, 59-64. A cost-benefit analysis that measures transparency gains for average consumers while ignoring potential service losses in underserved areas will overstate the rule’s net benefits and understate its distributional harms.

VI.    Conclusion

ICLE supports targeted enforcement against drip pricing and material fee misrepresentations on food-delivery platforms where the Commission can establish deception or unfairness under Section 5 of the FTC Act. Existing law already reaches those practices.

At this stage, the proportionate response is continued Section 5 enforcement against documented violators, clear business guidance to the broader market, and coordination with state attorneys general where state law provides monetary remedies unavailable under the FTC Act. Consumer education also remains an underused, error-cost-minimizing first-line response. The Commission can help consumers understand that delivery fees vary, that “free delivery” may exclude service fees, and that tips are optional. See Question 65.

The Commission should also continue to develop the basis for any future rulemaking through more thorough—and public—analysis of the enforcement record, review of newly submitted data, literature reviews, and research by the FTC’s Bureau of Economics.

If the Commission later proceeds with rulemaking, any rule should be narrowly tailored. It should:

• Target the timing of disclosure rather than the format or number of line items;
• Treat delivery-related charges as structurally equivalent to the “shipping charges” already excluded from 16 C.F.R. part 464;
• Apply with competitive neutrality to both third-party platforms and merchant-operated first-party delivery services;
• Include platform-based compliance standards and small-entity safe harbors—including proportionate pathways for small first-party operators—as preconditions, not afterthoughts; and
• Reject cost-of-service pricing requirements that would exceed the Commission’s statutory authority. See Question 43.

Before issuing any NPRM, the Commission should make and support the prevalence determination Section 57a(b)(3) requires and build the economic record Section 57a(d) demands. That record should include systematic evidence on fee-disclosure practices across platform types and sizes; consumer-perception evidence specific to food delivery, including distinctions between first-time and repeat users; analysis of whether existing state laws already address the challenged conduct in jurisdictions where they apply; and supply-side analysis of how disclosure mandates may affect service availability.

That last point is critical. A disclosure mandate that effectively constrains variable fee structures can function as a de facto price cap, compressing the price signals that make high-cost delivery routes economically viable. The resulting service exits are likely to fall hardest on low-density, rural, and late-night delivery zones, where consumers have the fewest alternatives.

Building the record before committing to a regulatory approach will produce a better-designed rule and a more defensible one under post-Loper Bright judicial review.

[1] Rule on Unfair or Deceptive Fees in Online Food Delivery Services, 91 Fed. Reg. 20,381 (Apr. 16, 2026) (advance notice of proposed rulemaking) [hereinafter ANPRM].

^[2] We recognize that the ANPRM does not expressly cite Section 12 of the FTC Act, 15 U.S.C. § 52, which prohibits false advertisements for food, drugs, devices, services, or cosmetics. Congress may have omitted Section 12 because violations of that provision are statutorily deemed unfair or deceptive acts or practices under Section 5. See 15 U.S.C. § 52(b). We note the provision here because Congress separately addressed false advertisements for food in Section 12.

[3] See Complaint ¶¶ 4, 7, 34–57, FTC v. Grubhub Inc., No. 1:24-cv-12923 (N.D. Ill. Dec. 17, 2024); Complaint ¶¶ 3, 14–34, FTC v. Maplebear Inc. d/b/a Instacart, No. 3:25-cv-10783 (N.D. Cal. Dec. 18, 2025); Complaint ¶¶ 6–9, 26–34, 50–52, In re Amazon.com, Inc., No. C-4746 (F.T.C. June 9, 2021); Complaint ¶¶ 13, 18, 102–07, 123–25, FTC v. Walmart Inc., No. 3:26-cv-01655 (N.D. Cal. Feb. 26, 2026).

[4] Id.

[5] See 15 U.S.C. § 45(a); Fed. Trade Comm’n, FTC Policy Statement on Deception, appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174 (1984).

[6] ANPRM, supra note 1, at 20,381 n.15.

[7] Complaint ¶ 192, FTC v. Grubhub Inc., No. 1:24-cv-12923 (N.D. Ill. Dec. 17, 2024).

[8] Complaint ¶¶ 48–49, In re Amazon.com, Inc., No. C-4746 (F.T.C. June 9, 2021) (alleging Amazon changed its practices “only after learning it was under investigation by the FTC”).

[9] Stipulated Order at 6-7, FTC v. Grubhub Inc., No. 1:24-cv-12923 (N.D. Ill. Dec. 31, 2024).

[10] Stipulated Order, FTC v. Maplebear Inc. d/b/a Instacart, No. 3:25-cv-10783 (N.D. Cal. Jan. 13, 2026).

[11] Decision and Order, In re Amazon.com, Inc., No. C-4746 (F.T.C. June 9, 2021); Stipulated Order, FTC v. Walmart Inc., No. 3:26-cv-01655 (N.D. Cal. Mar. 3, 2026).

[12] Fed. Trade Comm’n, Press Release, FTC Sends Warning Letters to 13 Property Management Software Providers Nationwide (Dec. 9, 2025).

^[13] AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341, 1344 (2021).

^[14] Id. at 1352.

^[15] Fed. Trade Comm’n, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, Commission File No. P221202 (Nov. 10, 2022).

^[16] See, e.g., Dissenting Statement of Commissioner Christine S. Wilson Regarding the Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, Commission File No. P221202 (Nov. 10, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyWilsonDissentStmt.pdf. Commissioner Christine Wilson criticized the 2022 Policy Statement as rejecting precedent, the rule of reason, and the consumer-welfare standard, while asserting that “the Commission has the authority summarily to condemn essentially any business conduct it finds distasteful.” Id.; see also, e.g., Daniel J. Gilman & Gus Hurwitz, The FTC’s UMC Policy Statement: Untethered from Consumer Welfare and the Rule of Reason, Int’l Ctr. for L. & Econ. (Nov. 16, 2022), https://laweconcenter.org/resources/the-ftcs-umc-policy-statement-untethered-from-consumer-welfare-and-the-rule-of-reason.

[17] Eric Fruits & Daniel J. Gilman, ICLE Comments to the FTC on Unfair or Deceptive Rental Housing Fee Practices, Project No. R207011, at 4–5 (Apr. 9, 2026) (discussing Colorado/Greystar co-enforcement and state-law monetary remedies), attached as Appendix A.

[18] 15 U.S.C. § 57a(b)(2)–(3), (d).

[19] Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024).

[20] ANPRM, supra note 1, at 20,381 (citing CapitalOne Shopping, Online Grocery Shopping Statistics (Dec. 11, 2025)).

[21] The ANPRM reports that “about one third of American adults (and more than half of those under 45) now say they order delivery from restaurants at least once a week.” ANPRM, supra note 1, at 20,381.

[22] Complaint ¶ 14, FTC v. Grubhub Inc., No. 1:24-cv-12923 (N.D. Ill. Dec. 17, 2024).

[23] Complaint ¶ 27, FTC v. Maplebear Inc. d/b/a Instacart, No. 3:25-cv-10783 (N.D. Cal. Dec. 18, 2025).

[24] Todd J. Zywicki, Geoffrey A. Manne & Kristian Stout, Behavioral Law & Economics Goes to Court: The Fundamental Flaws in the Behavioral Economics Arguments Against No-Surcharge Laws, 82 Mo. L. Rev. 769, 840 (2017).

[25] Alexander Rasch, Miriam Thöne & Tobias Wenzel, Drip Pricing and Its Regulation: Experimental Evidence, 176 J. Econ. Behav. & Org. 353 (2020); Shelle Santana, Steven K. Dallas & Vicki G. Morwitz, Consumer Reactions to Drip Pricing, 39 Mktg. Sci. 188 (2020).

[26] Zywicki, Manne & Stout, supra note 24, at 784 (“This uniformly underwhelming track record of BLE in attempting to convert supposed anomalies found in economics lab experiments into real-world realities should give courts serious pause before following academia into the faddish regulatory proposals offered by BLE academics.”).

[27] Statement of Basis and Purpose, Rule on Unfair or Deceptive Fees, 90 Fed. Reg. 2,089, 2,119 (2025).

[28] Complaint ¶ 49, FTC v. Grubhub Inc., No. 1:24-cv-12923 (N.D. Ill. Dec. 17, 2024) (quoting an internal Grubhub executive communication describing the company’s fee practices as a “pricing shell game”).

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

[30] Fruits & Gilman, supra note 17, at 6-7.

[31] James M. Lacko & Janis K. Pappalardo, Fed. Trade Comm’n Bureau of Econ., Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms 128 (June 2007).

[32] Fruits & Gilman, supra note 17, at 8-9.

[33] 16 C.F.R. § 464.1 (2026) (defining “shipping charges” and excluding them from the definition of “total price”).

[34] Va. Code Ann. § 59.1-586 et seq. (2025).

[35] Minn. Stat. § 325D.44, subd. 1a(c), 1(a)(h) (2025).

[36] Cal. Civ. Code § 1770(a)(29)(D)(i)–(iv) (2026); Cal. Bus. & Prof. Code § 22598 et seq. (2026).

[37] See Geoffrey A. Manne, The Hydraulic Theory of Disclosure Regulation and Other Costs of Disclosure, 58 Ala. L. Rev. 473 (2007) (arguing that disclosure regulation can redirect behavior toward dimensions not subject to disclosure).

[38] See E. Glen Weyl & Michal Fabinger, Pass-Through as an Economic Tool: Principles of Incidence Under Imperfect Competition, 121 J. Pol. Econ. 528, 533, 535 (2013).

[39] William J. Baumol & David F. Bradford, Optimal Departures from Marginal Cost Pricing, 60 Am. Econ. Rev. 265, 267 (1970).

[40] Zywicki, Manne & Stout, supra note 24, at 828.

[41] Cal. Civ. Code § 1770(a)(29) (2026); Colo. Rev. Stat. § 6-1-737 (2026); 940 Mass. Code Regs. § 38.00 et seq. (2025); Minn. Stat. § 325D.44 et seq. (2025); Va. Code Ann. § 59.1-607 et seq. (2025).

[42] See Jay Harris, FTC Launches Anticipated Rulemaking on Rental Housing Fee Practices, Hudson Cook (Mar. 13, 2026); Fruits & Gilman, supra note 17, at 12.

[43] Rebecca Diamond, Tim McQuade & Franklin Qian, The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco, 109 Am. Econ. Rev. 3365, 3369, 3393 (2019).

I.         Introduction

The International Center for Law & Economics (ICLE) appreciates the opportunity to respond to the European Commission’s consultation on proposed measures specifying Alphabet’s obligations under Article 6(7) of the Digital Markets Act (DMA). On 27 April 2026, the Commission adopted preliminary findings proposing measures Alphabet must implement to comply with the interoperability obligation for Google Android features relevant to providers of artificial-intelligence (‘AI’) services.[1]

The proceedings target a defined set of features grouped into four categories: (i) invocation, (ii) context, (iii) actions on apps and the operating system, and (iv) access to resources. The Annex to the preliminary findings also sets out 13 feature-specific measures, alongside a horizontal set of ‘measures for all features’ governing ecosystem-wide implementation, user consent, integrity, eligibility, equal effectiveness, free-of-charge access, documentation, technical assistance, future updates, reporting, and waivers.[2]

Article 6(7) DMA requires designated gatekeepers to provide third parties with ‘effective interoperability with, and access for the purposes of interoperability to, the same hardware and software features’ available to the gatekeeper’s own services, subject only to integrity measures that are ‘strictly necessary and proportionate’.[3] Google Android was designated a core platform service in September 2023. These proceedings therefore represent a significant early application of Article 6(7) to AI-facing operating-system features.

These comments address the proposed measures from two perspectives. First, the measures, as currently framed, do not appear well-targeted to the empirical realities of AI use on mobile devices or to the competitive dynamics of the upstream AI-assistant market. Requiring Google to dismantle a key source of Android product differentiation risks softening competition between Google and leading AI providers, such as OpenAI and Anthropic, under the guise of promoting intra-Android rivalry.

Second, the proposed measures do not adequately account for the security and integrity tradeoffs that arise when third parties receive system-privileged access to ambient sensor data, on-device databases, screen-automation APIs, and background-execution channels. The Commission’s narrow interpretation of the integrity provision in Article 6(7) risks leaving both Google and end users with insufficient flexibility to manage emerging security risks.

II.      Weak Gateway Theory and Softer AI Competition

Against this backdrop, two questions become central. First, does mobile in fact constitute a critical gateway for AI services such that intervention at the Android layer is justified? Second, even if it does, how are the proposed remedies likely to affect competition in the AI-services market itself?

The answers to both questions cast doubt on the Commission’s approach. Current evidence suggests that users still access AI services predominantly through desktop browsers and browser-based interfaces, rather than through mobile-device integrations. That weakens the factual basis for treating Android as an indispensable gateway for AI-assistant providers.

At the same time, the proposed measures risk reshaping competition in ways the preliminary findings do not fully confront. To the extent the remedies limit Google’s ability to integrate Gemini deeply into Android, they may weaken rather than strengthen rivalry in AI services. The measures would reduce one of the principal ways Google can compete against specialist AI firms, while simultaneously granting equivalent system access to rivals that already hold leading positions in the market.

This creates a potential tension between the DMA’s twin objectives of fairness and contestability. Measures intended to expand intra-platform access may, in practice, reduce inter-firm competition in AI services overall.

A. Android Is Not Yet a Critical Gateway for AI Services

The DMA’s application turns on whether the relevant core platform service constitutes an ‘important gateway for business users to reach end users’.[4] The preliminary findings invoke that premise by observing that ‘around 60 per cent of mobile users in Europe own a Google Android smart mobile device’ and concluding that ‘mobile devices powered by Google Android represent a crucial gateway for providers of stand-alone AI services to reach end users’. That conclusion does not automatically follow from Android’s share of mobile devices. The relevant question is not whether Android is a popular operating system in the abstract, but whether mobile devices serve as a critical channel through which providers of stand-alone AI services reach end users.

The available evidence suggests that AI services remain disproportionately desktop-centric. Google’s own AI offering illustrates the point. In October 2025, Gemini recorded roughly 813 million monthly desktop sessions, compared with 369 million on mobile devices—a desktop-to-mobile ratio exceeding two-to-one.[5] Industry analyses indicate similar usage patterns across leading AI services.[6] AI firms currently build user engagement primarily through browser-based and desktop interfaces, rather than through mobile-device integrations.

That pattern reflects the nature of current AI-assistant use cases. Activities such as research, drafting, coding, and long-form querying typically involve sustained-attention workflows that users perform on larger screens. Mobile interactions, by contrast, remain shorter and more intermittent.

These figures weaken the empirical basis for treating Google Android as an ‘important gateway’ for AI services in the manner suggested by the preliminary findings. End users currently access AI services predominantly through other channels, most notably desktop browsers. This does not call Android’s gatekeeper designation into question more broadly. It does, though, counsel caution. Given current AI-usage patterns, the Commission’s limited enforcement resources may be better directed elsewhere.

B. The Proposed Measures May Soften Competition in AI Services

Even if Android constitutes a meaningful distribution channel for AI services, the proposed measures should still be assessed in light of their likely effect on competition in the AI-services market itself. The most recent industry data indicate that Gemini is not the market leader in AI-assistant usage. ChatGPT reportedly accounted for roughly 70 per cent of EU AI-chatbot usage in April 2026.[7] Claude, meanwhile, has captured substantial enterprise and developer demand, with an estimated $14 billion annualised revenue run-rate by February 2026 and adoption by eight of the Fortune 10.[8] In the market targeted by the proposed measures, Google is therefore the challenger, not the incumbent.

That distinction matters because the proposed measures threaten one of the principal ways Google differentiates its AI offering. As the Commission itself recognises, Google’s AI strategy relies on a vertically integrated stack that spans chips (Tensor and TPU), cloud infrastructure (Google Cloud), foundation models (the Gemini family), platform integration (Search, Maps, Calendar, Gmail, YouTube, and Photos), and distribution channels (Android, Chrome, and Google Play). Deep system-level integration with Android—including wake-word reservation, on-device database access through the default-assistant role, AI Core preferential RAM access, and structured App Functions—is one of the few mechanisms through which Google can translate that integrated stack into a differentiated end-user experience capable of competing with the specialist offerings of leading AI labs.

Requiring Google to reduce that integration to the level available to third-party applications may promote intra-Android rivalry. It may also deprive Google of a key means of competing against OpenAI and Anthropic. The likely effect would not necessarily be a more competitive AI-assistant market overall, but a softer one in which the trailing integrated competitor cannot compete on the basis of its comparative strengths. This raises a potential tension within the DMA’s dual objectives. Measures intended to promote fairness through intra-platform competition may simultaneously reduce contestability by weakening inter-firm rivalry in AI services.

The likely beneficiaries further reinforce this concern. The firms best positioned to take immediate advantage of equal access to wake-word detection, screen automation, App Functions, AI Core, and ambient sensor data are the companies that already lead the global AI-assistant market, including OpenAI and Anthropic, alongside well-resourced firms such as Microsoft, Meta, and major Chinese model providers. In practice, the remedies risk transferring competitive advantages from the trailing integrated operator of the Android platform to dominant specialist AI firms. That outcome sits uneasily with the DMA’s contestability rationale, which ordinarily targets entrenched market leaders rather than reinforcing their position.

This concern is not merely theoretical. A close functional analogue emerged in connection with Meta’s integration of its AI assistant into WhatsApp. In October 2025, Meta amended its WhatsApp Business Solution Terms to restrict the provision of general-purpose AI-assistant services through the WhatsApp Business API, while preserving the preferential in-platform position of Meta AI. The Italian Competition Authority subsequently adopted interim measures requiring Meta to suspend the policy. The European Commission opened formal proceedings in December 2025, and other authorities launched parallel investigations. The remedies under consideration would require Meta to allow third-party AI assistants to operate on equivalent terms to Meta AI within the platform.

At a high level, the policy objective resembles that of the present proceedings: protecting AI competition on widely used consumer platforms. The practical effect, though, may again be to remove a differentiating integration that Meta could otherwise use to compete with leading AI providers. Taken together, the two cases suggest a broader pattern. Enforcement actions nominally aimed at promoting AI competition on major digital platforms may instead require Google and Meta to grant equivalent system access to the very firms—OpenAI, Anthropic, and others—that already lead the AI-assistant market.

III.    The Proposed Measures Underestimate Security Risks

The proposed measures, taken together, would grant third-party AI services access to an unusually broad and sensitive set of system capabilities. In practical terms, the Annex would require Alphabet to provide third parties with access, on terms ‘equally effective’ to those available to Google’s own services, including:

• continuous background access to core ambient sensors—including the microphone, camera, screen, speakers, accelerometer, and GPS—with consent flows, latency, and data quality equivalent to Google’s own services (paragraphs (48)–(56));
• centralised and concurrent access to data donated by apps through on-device databases such as AppSearch, including data donated by Google’s own first-party applications (paragraphs (21)–(28));
• always-on custom wake-word detection operating through the digital signal processor, including in battery-saver mode and with third-party-controlled second-stage validation (paragraphs (9)–(20));
• the ability to control other applications through screen automation, simulate user inputs, observe screen content, and execute multi-step transactions in a virtual background window (paragraphs (66)–(74));
• interaction with operating-system settings and ongoing system activities—including Bluetooth, do-not-disturb, media playback, alarms, and messaging—on the same footing as Gemini (paragraphs (85)–(93));
• system-level access to AI Core, Gemini Nano, and underlying NPU, GPU, and RAM resources, including the ability for users to grant third-party on-device models the same preferential hardware access currently reserved for Google’s own services (paragraphs (94)–(111)); and
• expanded background-execution privileges, including the ability for users to grant third-party applications the same level of persistent background execution that Alphabet requires OEMs to provide to Google applications (paragraphs (112)–(120)).

Each capability raises substantial security and privacy concerns on its own. Taken together, they create an attack surface qualitatively different from anything Article 6(7) has previously been used to open.[9] The Apple iOS specification decisions adopted in March 2025 concerned comparatively bounded connectivity functions, such as NFC, Bluetooth pairing, Wi-Fi accessory configuration, and notification forwarding.[10] By contrast, the measures proposed here concern continuous ambient audio and video capture, cross-application access to device-level data layers, and agentic control over other applications. In the wrong hands, such capabilities could facilitate mass surveillance, credential exfiltration, and unauthorised transactions.

Article 6(7), properly interpreted, does not require unconditional openness. The provision expressly permits ‘strictly necessary and proportionate’ measures to ensure interoperability does not compromise the integrity of the operating system or its features. Recital 50 likewise recognises integrity protections as a legitimate component of Article 6(7) compliance. The relevant question, therefore, is not whether integrity measures are permissible, but how they should be scoped so as not to nullify interoperability obligations while still recognising that greater openness can materially increase security risks.

The proposed measures nonetheless interpret the security and integrity exceptions narrowly. Section 5.3 of the Annex requires any integrity measure to be ‘duly justified’ and based on ‘transparent, objective, precise, and non-discriminatory conditions’ that also apply to Google’s own services. It further requires ‘objective and verifiable evidence showing the existence and magnitude of the integrity risk’, proof of the measure’s effectiveness, and the possibility of ‘independent verification’ not ‘exclusively within the gatekeeper’s control’.[11]

Applied together, these requirements substantially constrain the most natural response to genuinely novel security risks: declining to expose highly sensitive capabilities until the threat landscape becomes better understood. By definition, emerging harms rarely produce ‘objective and verifiable’ evidence ex ante.

Three concerns with the current framework deserve particular attention. First, the requirement for ‘objective and verifiable evidence’ sits uneasily with established security-engineering practice. Many successful security architectures rely on conservative assumptions about adversarial behaviour, rather than waiting for demonstrated exploitation. A framework that treats the absence of proven past harm as evidence against precaution risks undermining the very safeguards that make modern operating systems secure.

Second, the requirement that integrity measures apply equally to Google’s own services compresses the available design space in ways that may ultimately harm users. On paper, symmetry appears attractive. In practice, Google differentiates between first-party services and third-party applications across multiple trust dimensions, including code-signing provenance, internal security review, contractual relationships with OEMs, and the company’s ability to revoke access rapidly if problems emerge. The Annex would nonetheless require any restriction imposed on third parties to apply equally to Google’s own services, regardless of those trust differences.

That creates a stark binary choice: either Google extends highly sensitive capabilities to third parties on equal terms, or it withdraws those capabilities from its own services entirely. The former may create unacceptable security risks. The latter would reduce consumer welfare by degrading—or preventing access to—innovative features.

Third, the Annex underestimates the interaction between interoperability mandates and the EU’s own data-protection framework. Mandated openness may place gatekeepers in tension with their parallel obligations to protect user data. This concern is especially acute where Google would need to provide third-party AI services with concurrent access to data stored on-device by first-party applications such as Gmail, Calendar, and Photos.

User consent alone does not fully resolve that tension. Consent frameworks that produce formal parity at the system level may still generate meaningful asymmetries in user understanding where one party is a globally recognised platform and the other is a newly installed third-party application.

IV.    Conclusion

The Commission’s proposed measures face two fundamental problems.

First, the preliminary findings do not adequately account for the broader competitive effects of the remedies in AI services themselves. Current evidence suggests that AI usage remains heavily desktop-centric, which weakens the premise that Android presently functions as an indispensable gateway for AI-assistant providers. More importantly, Google is not the dominant player in the AI-assistant market. It is a trailing integrated competitor attempting to challenge specialist firms such as OpenAI and Anthropic through deep integration across hardware, software, cloud infrastructure, and distribution.

The proposed measures would weaken one of Google’s principal channels of differentiation while simultaneously extending equivalent system access to rivals that already lead the market. In practice, the remedies risk protecting intra-Android rivalry at the expense of broader inter-firm competition in AI services. The parallel proceedings concerning Meta AI and WhatsApp underscore the point. Taken together, the cases suggest an emerging enforcement pattern in which vertically integrated platform operators must open key integration points to specialist AI firms that already occupy leading market positions.

Second, the proposed measures interpret the integrity exception in Article 6(7) too narrowly. The capabilities covered by the Annex—including ambient sensor access, centralised on-device databases, always-on wake-word detection, agentic screen automation, system-level AI resources, and expanded background execution—create security and privacy risks materially different in scale and kind from those addressed in prior Article 6(7) proceedings. Yet the framework for integrity protections has narrowed correspondingly.

The Annex’s insistence on ‘objective and verifiable’ evidence of harm risks preventing gatekeepers from responding prudently to emerging threats before those threats materialise. That approach sits uneasily with established security-engineering principles, which frequently rely on precautionary assumptions precisely because novel attack vectors are difficult to demonstrate ex ante. Likewise, the requirement that restrictions apply identically to Google’s own services disregards meaningful differences in trust, accountability, and security oversight between first-party and third-party applications.

The likely result is one of two undesirable outcomes. Either the Android ecosystem becomes materially less secure for European users, or Google responds by withdrawing or degrading advanced AI functionality across the platform in order to avoid asymmetric obligations. Early DMA implementation in other contexts already points toward the risk of this kind of defensive levelling-down.

The Commission should therefore reconsider three aspects of the proposed measures. First, it should reassess whether extensive intervention at the Android layer represents a prudent use of enforcement resources given current AI-usage patterns. Second, it should evaluate more explicitly the cross-market consequences of the remedies for competition in AI services, including their asymmetric effects on Google relative to the market leaders. Third, it should recalibrate the integrity framework to preserve meaningful room for genuine security protections, including temporary restrictions on particularly sensitive functionalities where the risks remain uncertain or rapidly evolving.

In short, the Commission should give equal weight to both halves of Article 6(7): openness and integrity. Effective DMA enforcement should promote competition without undermining security, innovation, or rivalry in the AI markets that matter most to European consumers.

[1] Eur. Comm’n, Case DMA.100220, Alphabet—Google Android (AI) (2026).

[2] Eur. Comm’n, Case DMA.100220, Annex (Draft Measures), Google Android Interoperability (2026), https://digital-markets-act.ec.europa.eu/document/download/bb7151ff-5d0a-420e-abaa-a2bdbfd30c26_en?filename=DMA.100220%20-%20Annex%20%28draft%20measures%29%20-%20Google%20Android%20-%20interoperability.pdf [hereinafter Annex].

[3] Regulation 2022/1925 of the Eur. Parl. & of the Council of 14 Sept. 2022 on Contestable & Fair Markets in the Digital Sector (Digital Markets Act), art. 6(7), 2022 O.J. (L 265) 1.

[4] Regulation 2022/1925, supra note 3, art. 3(1)(b) (defining a core platform service as an important gateway for business users to reach end users).

[5] Elton Chan, 30+ Google Gemini Statistics for 2026: Usage, Market Share, Growth, & Performance, SecondTalent (21 Apr. 2026), https://www.secondtalent.com/resources/google-gemini-statistics.

[6] How Desktop & Mobile Influence AI Search Traffic Referrals, Passionfruit (10 Nov. 2025), https://www.getpassionfruit.com/blog/how-desktop-and-mobile-influence-ai-search-traffic-referrals.

[7] AI Chatbots—Market Share Europe, StatCounter, https://gs.statcounter.com/ai-chatbot-market-share/all/europe (last visited 12 May 2026).

[8] Anthropic, Press Release, Anthropic Raises $30 Billion in Series G Funding at $380 Billion Post-Money Valuation (12 Feb. 2026), https://www.anthropic.com/news/anthropic-raises-30-billion-series-g-funding-380-billion-post-money-valuation.

[9] Mikolaj Barczentewicz, Opening Pandora’s Interface: AI Assistants and the DMA, Truth on the Mkt. (14 Apr. 2026), https://truthonthemarket.com/2026/04/14/opening-pandoras-interface-ai-assistants-and-the-dma.

[10] Eur. Comm’n, Case DMA.100203, Apple iOS (Features for Connected Physical Devices) (2025).

[11] Annex, supra note 2, ¶¶ 125–131, 138–142.