ICLE Comments to FTC and DOJ on Premerger Notifications

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.

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 on reforms to the Lifeline program.[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 Universal Service Fund (USF) has expanded access to voice and data services, but it has long faced persistent waste, fraud, and abuse.[2] The program relies on mandatory contributions passed through to consumers as line-item charges on phone bills.[3] Improper payments therefore raise the cost of connectivity and undermine the program’s purpose. The Commission is right to prioritize program integrity and limit excess costs.

The FCC has taken several steps over the past two decades to address these challenges.[4] The 2012 Lifeline reforms created the National Lifeline Accountability Database (NLAD), limited benefits to one per household, and established non-usage de-enrollment rules.[5] The 2016 reforms introduced the National Verifier to centralize eligibility determinations.[6] In 2019, the Commission added further safeguards, including restrictions on enrollment-based compensation, enhanced registration requirements, and stricter documentation rules.[7] These reforms improved oversight but did not eliminate systemic vulnerabilities.

Recent evidence underscores those remaining gaps. The FCC Office of Inspector General (OIG) found that, in three opt-out states, providers received about $5 million to enroll more than 116,000 deceased individuals.[8] Nearly 40,000 of those enrollments may have occurred after death, indicating fraud beyond delays in death-record updates.[9] The report also identified duplicate claims across multiple states.[10] These findings highlight structural weaknesses that require targeted reform.

The Commission should build on prior efforts with a disciplined, cost-benefit approach. Effective reforms must reduce waste, fraud, and abuse while preserving access for eligible households and maintaining provider participation. Measures such as eliminating the opt-out framework, adopting secondary consent verification, and improving data transparency offer targeted ways to strengthen integrity. At the same time, overly burdensome requirements—whether through rigid eligibility rules, excessive compliance obligations, or misaligned service standards—risk deterring participation and undermining the program’s goals.

Lifeline policy should reflect modern network realities and user needs. Minimum service standards should focus on the level of connectivity required for meaningful participation, not parity with average consumption. Prioritizing data-enabled service, streamlining reporting requirements, and aligning incentives with an all-IP communications environment would improve both efficiency and outcomes. The Commission should adopt reforms that deliver measurable integrity gains without sacrificing access, competition, or affordability.

II.             Reducing Fraud Must Not Undermine Participation or Access

The NPRM correctly targets waste, fraud, and abuse in the Lifeline program. The USF relies on a mandatory contribution assessed on telecommunications providers, which they pass directly to consumers as a line-item surcharge. The contribution factor now stands at 37%, making the surcharge one of the largest hidden taxes on telecommunications services.[11]

Improper payments directly harm the consumers the program intends to help. Funds paid to ineligible subscribers, deceased individuals, fraudulent enrollees, or providers that do not actually deliver service reduce the resources available to eligible households. The FCC owes ratepayers a clear duty to ensure these funds serve their intended purpose.

That said, eliminating waste, fraud, and abuse is only part of the Commission’s mandate. The agency must evaluate proposed reforms through a rigorous cost-benefit framework that accounts not only for improper payments, but also for the real costs that compliance burdens impose on eligible households and participating providers.[12] Section 254 of the Communications Act requires more than fraud reduction. It requires ensuring that low-income Americans can access quality services at affordable rates.[13]

Reforms that reduce fraud but also deter eligible households from enrolling or remaining in the program risk undermining that mandate. The same holds for reforms that increase provider costs to the point that participation declines, leaving eligible consumers with fewer or no service options.[14]

Provider participation is critical to the program’s competitive structure. Lifeline depends on a sufficient number of Eligible Telecommunications Carriers (ETCs) to ensure meaningful consumer choice and coverage across geographic areas and demographic groups. If new requirements significantly raise compliance costs—especially for smaller, non-facilities-based ETCs that serve most Lifeline subscribers on thin margins—providers may scale back service, exit high-cost markets, or leave the program entirely.

The Commission should evaluate each proposed reform with a clear-eyed assessment of who bears the costs and whether those costs are proportionate to the expected gains in program integrity.

III.           The Commission Should Eliminate the Opt-Out Framework

The NPRM identifies a central problem: waste, fraud, and abuse in states that opted out of NLAD and the National Verifier.[15] The Commission should eliminate the opt-out framework and require all remaining states to transition to the federal National Verifier for eligibility verification and duplicate checking on a clear, reasonable timeline.

The evidence supports this change. The OIG Report found that providers in opt-out states received nearly $5 million in reimbursements for more than 116,000 deceased individuals over five years.[16] About 40% of those payments went to individuals who had died, or may have died, before initial enrollment.[17] These failures reflect structural weaknesses in state-based systems.

The National Verifier addresses those weaknesses. It connects directly to federal and state databases for real-time or near-real-time eligibility checks. It conducts automated death checks using authoritative federal mortality data and applies uniform identity-verification standards nationwide.[18] These safeguards do not depend on state policy choices.

State deviations can undermine program integrity. California’s decision to eliminate the Social Security number requirement for Lifeline applicants weakened identity verification and made it harder to detect duplicate enrollments. The Commission lacked a proactive mechanism to prevent that change and had to rely on revocation after the fact.[19] No comparable vulnerability exists under the federal system, where the FCC controls verification standards and processes across all states.

The opt-out framework also creates inequities among ratepayers. A low-income household in Texas faces a different verification process, documentation burden, and duplicate-checking regime than an identical household in a neighboring state that uses the National Verifier. The integrity of a federally funded program should not vary based on geography. Yet evidence shows higher rates of improper payments in opt-out states than in states using the federal system.[20] The Commission’s experience with the Affordable Connectivity Program further demonstrates that a uniform federal verification framework is both feasible and more effective than a patchwork approach.

A unified system would also reduce administrative burdens. Providers operating across both NLAD and opt-out states must comply with multiple verification frameworks, each with different processes and requirements.[21] That fragmentation increases compliance costs and complexity. Requiring all states to use the National Verifier would replace that patchwork with a single, consistent system that providers can implement once and apply nationwide.

IV.          Secondary Verification Stops Unauthorized Enrollments

FCC OIG investigations show that many consumers were enrolled in Lifeline without their knowledge or consent and never received service.[22] These unauthorized enrollments benefit only providers and agents who claim reimbursement. A secondary consent-verification requirement—conditioning enrollment or transfer on an affirmative response to a confirmation text or email—targets this fraud at its source. It does not raise eligibility barriers, add documentation, or require consumers to navigate complex processes. It simply ensures that the person listed on the application confirms their intent to enroll.

This requirement directly disrupts how enrollment fraud occurs. Fraud typically involves submitting an application using a real person’s information without consent or fabricating contact information to create fictitious subscribers.[23] Both schemes depend on the absence of a verification step requiring a response from the actual individual. A confirmation request sent to the applicant’s contact information creates an immediate check. If the contact information is fabricated, no one can respond, and the enrollment fails. If real information is used without consent, the individual receives an unexpected notice and can reject it, triggering scrutiny instead of completing a fraudulent enrollment.

This approach reflects standard fraud-prevention practices. Financial institutions, health care providers, and government agencies routinely use out-of-band confirmation to verify that the person initiating a transaction controls the relevant account.[24] Applying this well-established method to Lifeline is not experimental. It adopts a proven safeguard that works at scale in analogous contexts.

The benefits are even greater for transfers. When an ETC initiates a benefit transfer in NLAD, the system moves the subscriber to a new provider based solely on the initiating provider’s certification of consent. There is no independent verification that the subscriber actually approved the transfer.[25] The OIG Report identifies unwanted transfers as a significant source of harm.[26] Consumers can be switched without notice, lose existing service relationships, and sometimes lose their phone numbers. These transfers benefit only the receiving provider and the agent.

A secondary verification requirement closes this gap. Subscribers who did not authorize a transfer would receive a notice before it occurs and could block it. That shifts detection from after-the-fact remediation to real-time prevention.

This reform would impose minimal burdens on legitimate users. Enrollment already requires applicants to complete certification forms, provide identifying information, and verify eligibility through the National Verifier. A confirmation step—tapping a link or replying to a message—adds only seconds. Most smartphone users already perform similar actions routinely. For willing, eligible applicants, the burden is de minimis. It is far less onerous than existing documentation, annual recertification, or certification requirements.

V.             Minimum Standards Should Reflect Basic Connectivity Needs

The NPRM asks whether the Commission should revise the Lifeline program’s minimum service standards.[27] As the Commission evaluates the record, it should focus on what recipients actually need to benefit from connectivity.[28] The goal of a low-income support program is to ensure access to a threshold level of service sufficient for meaningful participation in modern economic and social life. That goal differs from providing parity with average or median consumer usage. Conflating the two has contributed to the Commission’s difficulties with the mobile broadband data-allowance update mechanism.[29]

The relevant question is not how much data the average smartphone user consumes or what median speeds look like. It is what level of service enables Lifeline subscribers to access core applications: job searches, telehealth, education, government services, emergency communications, banking, and basic social connection. The law & economics literature on broadband adoption consistently finds that the largest gains come from moving households from no connectivity to basic connectivity, not from incremental increases beyond that baseline.[30]

The applications that generate these gains are not bandwidth-intensive by modern standards. A telehealth visit typically requires about 1–6 Mbps of sustained throughput.[31] Job portals, government websites, and educational resources require far less. These are the services that justify a low-income subsidy program, and they function reliably at modest bandwidth levels consistent with current minimum service standards.

Even limited connectivity can be transformative. A household with access to a basic data plan can apply for jobs, communicate with health care providers, access benefits, and support children’s education. Those benefits do not depend on 29 GB of monthly data or gigabit speeds. They depend on reliable access to a basic level of connectivity.

VI.          Voice-Only Subsidies No Longer Make Sense

Lifeline rules should maximize benefits to recipients while minimizing costs on consumers’ phone bills. Voice-only plans may meet some users’ needs, but adding basic data service imposes minimal additional cost on providers—especially if the Commission avoids overly burdensome minimum data-cap and bandwidth requirements. The benefits of including data, by contrast, are substantial.

On modern all-IP wireless networks, the marginal cost of providing basic broadband data alongside voice service is effectively zero. Voice over Long-Term Evolution (VoLTE) calls use only about 6.6 kbps to 23.85 kbps of bandwidth[32] and run over the same IP infrastructure and spectrum as data traffic. These networks were designed for data, with voice layered on top as a managed IP service, not as a separate circuit-switched function. As a result, the incremental cost of offering data access reflects the data allowance itself, not additional infrastructure. The Commission should recognize that the cost difference between a voice-only plan and a basic bundled broadband plan is far smaller than the current $4 reimbursement differential suggests.

The consumer benefits of data access are far greater. Broadband enables participation in the full range of modern economic and social activity. In 2026, essential services—employment, health care, education, government services, banking, and communication—primarily rely on IP-based applications. A subscriber limited to voice-only service cannot fully access these opportunities. Subsidizing voice without enabling meaningful participation risks wasting program resources.

The Commission’s broader policy goals reinforce this conclusion. The FCC has long encouraged the transition from legacy copper networks to all-IP infrastructure.[33] ICLE has consistently shown that this transition benefits both providers and consumers, while maintaining legacy networks imposes rising costs and diverts investment from next-generation services.[34] Existing rules can slow this transition by making migration more costly.

Continuing to subsidize a distinct voice-only Lifeline tier conflicts with these objectives. The Commission should not promote all-IP migration on one hand while preserving a subsidy structure that assumes voice remains a separate, standalone service. Aligning Lifeline with modern network realities requires prioritizing data-enabled service as the baseline.

VII.        A One-Per-Residence Rule Would Exclude Eligible Households

The NPRM proposes a one-per-residence rule to address multiple Lifeline subscribers at a single street address.[35] Although well intentioned, a broad rule of this kind would exclude many eligible households. Many Americans share a residential address while maintaining separate economic lives. Multigenerational households are a common example. Pew Research data shows that roughly 25% of Asian, Black, and Hispanic Americans live in such arrangements.[36] These households often include distinct family units that would otherwise qualify for Lifeline support.

Rising housing costs have also increased shared living arrangements. Many young adults now live with parents while remaining financially independent.[37] Other households share a single address while renting individual rooms. Transitional housing presents similar challenges. Families recovering from homelessness, domestic violence, substance abuse, or incarceration often share addresses while maintaining separate eligibility for benefits. A bright-line, one-per-residence rule would deny support to many households that need it most.

The Commission should still address potential abuse. Requiring NLAD to display the number of Lifeline discounts claimed at a given address across all ETCs is a more targeted solution. Greater visibility would allow ETCs to identify potential duplicate claims while preserving access for legitimately independent households.

VIII.      The Commission Should Consolidate Lifeline Reporting

The NPRM seeks ways to improve program efficiency while reducing reporting burdens on ETCs.[38] The Commission should consolidate FCC Form 481 and FCC Form 555 into a single annual filing with one deadline, one submission portal, and one distribution to all relevant regulators.[39]

The two forms cover overlapping aspects of the same program. They apply to largely the same ETCs, require similar officer certifications, and duplicate administrative work. ETCs must track separate deadlines, maintain parallel workflows, and submit overlapping organizational and identifying information multiple times. A unified filing would eliminate this redundancy.

A consolidated form could combine Form 481’s financial and operational data with Form 555’s recertification metrics into a single annual snapshot of each ETC’s Lifeline participation. ETCs would submit this filing once per year through a centralized portal accessible to the Commission, the Universal Service Administrative Company (USAC), state commissions, and relevant Tribal and territorial governments. The Commission should set a deadline that aligns with the most practical point in the program’s annual cycle.

Dual filings impose the greatest burden on small- and mid-sized, non-facilities-based ETCs, which serve most Lifeline subscribers. Maintaining separate compliance processes, preparing multiple officer certifications, and submitting duplicative filings diverts resources from serving customers. These costs are not trivial.

Reporting burdens can also affect market participation. Providers considering entry must weigh compliance costs against expected Lifeline revenues. In low-density markets with thin margins, duplicative reporting can deter participation. Reducing unnecessary compliance costs would improve efficiency and strengthen the competitive provider ecosystem that supports universal Lifeline access.

IX.          Balance Integrity and Access for Non-Facilities-Based ETCs

The NPRM raises concerns about non-facilities-based ETCs and their association with higher rates of fraud. Enforcement actions show that these providers have been disproportionately linked to serious program-integrity failures. The current compliance-plan framework has not reliably detected or deterred systemic fraud. Greater scrutiny is warranted, and the Commission is right to revisit the conditions attached to its forbearance grant in light of a decade of experience.

At the same time, the Commission must account for the role these providers play in ensuring universal access. Non-facilities-based ETCs are not just a regulatory artifact. They are often essential to serving low-income consumers, particularly in markets where facilities-based providers do not participate in Lifeline.

Any redesign of the forbearance framework should reflect these market realities. Proposed measures—such as enhanced compliance plans, letters of credit, expanded financial disclosures, mandatory annual audits, and more frequent resubmission requirements—impose real costs. The Commission should weigh those costs against expected fraud-reduction benefits using the same cost-benefit framework applied elsewhere in this NPRM.

X.            Conclusion

The NPRM presents several proposals to reduce waste, fraud, and abuse in the Lifeline program. Many of these reforms move in the right direction. The Commission should evaluate each proposal through a rigorous cost-benefit framework that accounts not only for program-integrity gains, but also for effects on participation, provider incentives, and consumer access.

Effective reform requires targeting fraud at its source while preserving access for eligible households. Measures such as eliminating the opt-out framework, requiring secondary consent verification, and improving data visibility within NLAD offer high-impact, low-burden ways to strengthen program integrity. At the same time, overly rigid rules—such as a one-per-residence limit or excessive compliance burdens on providers—risk excluding eligible households and reducing provider participation.

The Commission should also align Lifeline with modern network and consumer realities. Minimum service standards should reflect the level of connectivity needed for meaningful participation, not parity with average usage. Prioritizing data-enabled service over legacy voice-only offerings would better serve recipients and reflect the all-IP networks that now deliver communications services. Streamlining reporting requirements and reducing duplicative compliance obligations would further support a competitive provider ecosystem.

Lifeline succeeds when it connects eligible households to essential services at a reasonable cost to consumers who fund the program. Reforms should focus on that objective: target support to those who need it most, deliver services that meet real-world needs, and ensure that program rules strengthen—rather than undermine—access, participation, and efficiency.

[1] Lifeline and Link Up Reform and Modernization et al., WC Docket No. 11-42 et al., Notice of Proposed Rulemaking, FCC 26-8 (rel. Feb. 23, 2026), https://docs.fcc.gov/public/attachments/FCC-26-8A1.pdf (hereinafter NPRM).

[2] Lifeline and Link Up Reform and Modernization et al., WC Docket No. 11-42 et al., Third Report and Order, Further Report and Order, and Order on Reconsideration, 31 FCC Rcd 3962, ¶ 46 (2016), https://docs.fcc.gov/public/attachments/FCC-16-38A1.pdf (hereinafter 2016 Order).

[3] Paroma Sanyal & Coleman Bazelon, The Economics of Universal Service Fund Reform, The Brattle Group 4–5 (2023), https://incompas.org/wp-content/uploads/2024/10/The-Economics-of-USF-Reform-Brattle_FINAL.pdf.

[4] TracFone Wireless, Inc., Petition for Designation as an Eligible Telecommunications Carrier in New York et al., Order, 23 FCC Rcd 6206 (2008), https://docs.fcc.gov/public/attachments/FCC-08-100A1.pdf.

[5] Lifeline and Link Up Reform and Modernization et al., Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656 (2012), https://docs.fcc.gov/public/attachments/FCC-12-11A1.pdf.

[6] 2016 Order, supra note 2.

[7] Bridging the Digital Divide for Low-Income Consumers et al., Fifth Report and Order et al., 34 FCC Rcd 10886 (2019), https://docs.fcc.gov/public/attachments/FCC-19-111A1.pdf.

[8] See FCC OIG, Advisory Regarding Deceased and Duplicate Lifeline Subscribers 4 (2026), https://www.fcc.gov/sites/default/files/FCC%20OIG%20Advisory%20Regarding%20Deceased%20and%20Duplicate%20Lifeline%20Subscribers.pdf (hereinafter OIG Report).

[9] Id. at 5

[10] Id. at 6.

[11] Proposed Second Quarter 2026 Universal Service Contribution Factor, Public Notice, DA 26-218 (rel. Mar. 16, 2026), https://docs.fcc.gov/public/attachments/DA-26-218A1.pdf.

[12] See Jerry Ellig, Why and How Independent Agencies Should Conduct Regulatory Impact Analysis, 28 Cornell J.L. & Pub. Pol’y 1 (2018), https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1489&context=cjlpp; see also Thomas Hazlett, Benefit–Cost Analysis in the 5.9 GHz Band, J. Benefit-Cost Analysis 1 (2025), https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/article/benefitcost-analysis-in-the-59-ghz-band/2788B60F3B5C9F87788F844742C7186A.

[13] 47 U.S.C. § 254(b).

[14] Comments of NCTA—The Internet & Television Association, WC Docket No. 11-42, at 4 (Apr. 19, 2021), https://www.fcc.gov/ecfs/document/1041937652451/1.

[15] NPRM, supra note 1, ¶ 8.

[16] OIG Report, supra note 8, at 4.

[17] Id. at 5.

[18] U.S. Gov’t Accountability Off., GAO-21-235, FCC Has Implemented the Lifeline National Verifier but Should Improve Consumer Awareness and Experience (2021), https://www.gao.gov/assets/gao-21-235.pdf.

[19] Lifeline and Link Up Reform and Modernization, Order, DA 25-965 (WCB Nov. 20, 2025), https://docs.fcc.gov/public/attachments/DA-25-965A1.pdf.

[20] See OIG Report, supra note 8.

[21] Univ. Serv. Admin. Co., 2026 National Verifier Annual Report and Data (2026), https://www.usac.org/wp-content/uploads/lifeline/documents/Data/2026-National-Verifier-Annual-Report-and-Data.pdf.

[22] NPRM, supra note 1, ¶ 33.

[23] 2016 Order, supra note 2, Dissenting Statement of Commissioner Ajit Pai (“Sales agents schemed with consumers—who no longer had skin in the game—to enroll them in Lifeline multiple times, even if the consumer never qualified in the first place.”).

[24] Nat’l Inst. of Standards & Tech., U.S. Dep’t of Com., NIST Special Publication 800-63B, Digital Identity Guidelines: Authentication and Lifecycle Management § 5 (2017), https://pages.nist.gov/800-63-3/sp800-63b.html#sec5.

[25] Univ. Serv. Admin. Co., Benefit Transfers, https://www.usac.org/lifeline/national-lifeline-accountability-database-nlad/benefit-transfers (last visited Apr. 29, 2026).

[26] OIG Report, supra note 8, at 5.

[27] NPRM, supra note 1, ¶¶ 43–56.

[28] Jeffrey Westling, Redefining Broadband Speeds to Reflect User Needs, Am. Action F. (June 15, 2023), https://www.americanactionforum.org/insight/redefining-broadband-speeds-to-reflect-user-needs.

[29] NPRM, supra note 1, ¶ 46.

[30] Wolfgang Briglauer, Jan Krämer & Nicole Palan, Socioeconomic Benefits of High-Speed Broadband Availability and Service Adoption: A Survey, 48 Telecomm. Pol’y 7 (2024), https://doi.org/10.1016/j.telpol.2024.102808.

[31] FCC Consumer & Gov’t Affs. Bureau, Broadband Speed Guide, https://www.fcc.gov/sites/default/files/broadband_speed_guide.pdf (last visited Apr. 29, 2026).

[32] Eur. Telecomm. Standards Inst. (ETSI), Speech Codec Speech Processing Functions; Adaptive Multi-Rate—Wideband (AMR-WB) Speech Codec; General Description, ETSI TS 126 171 V19.0.0 (3GPP TS 26.171 Ver. 19.0.0 Rel. 19), https://www.etsi.org/deliver/etsi_ts/126100_126199/126171/19.00.00_60/ts_126171v190000p.pdf.

[33] Reducing Barriers to Network Improvements and Service Changes; Accelerating Network Modernization, WC Docket Nos. 25-209 & 25-208, Report and Order, FCC 26-19 (rel. Mar. 27, 2026), https://docs.fcc.gov/public/attachments/FCC-26-19A1.pdf; Advancing IP Interconnection; Accelerating Network Modernization; Call Authentication Trust Anchor, Notice of Proposed Rulemaking, FCC 25-73 (rel. Oct. 29, 2025), https://docs.fcc.gov/public/attachments/FCC-25-73A1.pdf.

[34] Comments of ICLE, Reducing Barriers to Network Improvements and Service Changes, WC Docket Nos. 25-209 & 25-208 (Aug. 22, 2025), https://www.fcc.gov/ecfs/document/10822002748400/1; Comments of ICLE, Advancing IP Interconnection; Accelerating Network Modernization; Call Authentication Trust Anchor, WC Docket Nos. 25-304, 25-208, 17-97 (Jan. 20, 2026), https://laweconcenter.org/wp-content/uploads/2026/01/ICLE-Comments-on-Advancing-IP-Interconnection.pdf.

[35] NPRM, supra note 1, ¶ 63.

[36] D’Vera Cohn et al., Financial Issues Top the List of Reasons U.S. Adults Live in Multigenerational Homes, Pew Rsch. Ctr. (Mar. 24, 2022), https://www.pewresearch.org/social-trends/2022/03/24/the-demographics-of-multigenerational-households (reporting that 24% of Asian, 26% of Black, and 26% of Hispanic Americans lived in multigenerational households in 2021, compared with 13% of White Americans).

[37] Id.

[38] NPRM, supra note 1, ¶ 71.

[39] Comments of USTelecom, in re Delete, Delete, Delete, GN Docket No. 25-133 (Apr. 11, 2025), https://www.fcc.gov/ecfs/document/104110786700283/1; Comments of WTA—Advocates for Rural Broadband, in re Delete, Delete, Delete, GN Docket No. 25-133 (Apr. 14, 2025), https://www.fcc.gov/ecfs/document/10411148117639/1.

I.         Introduction

The International Center for Law & Economics (ICLE) appreciates the opportunity to respond to the European Commission’s consultation on proposed measures to specify Alphabet’s obligations under Article 6(11) of the Digital Markets Act (DMA). Article 6(11) requires Alphabet to provide access to certain Google Search data to third-party providers of online search engines (OSEs) on fair, reasonable, and non-discriminatory (FRAND) terms.[1] ICLE is a non-profit, non-partisan global research and policy centre that advances evidence-based policy.

These comments address the Commission’s implementing choices under Article 8(2) DMA. They do not challenge Article 6(11) or Alphabet’s designation.[2] The central issue is how the Commission defines ‘effective compliance’. That definition will shape the scope of access, the design of anonymisation, the pricing framework, and the supervisory regime.

The Preliminary Measures risk shifting Article 6(11) from a data-access obligation to a tool for delivering competitor success. The provision does not support that shift. It requires access to specified data, anonymised, on FRAND terms. It does not guarantee that recipients will match Google’s quality, gain market share, or remain in the market. The specification should reflect that legislative choice.

Four themes guide these comments.

Effectiveness. Article 6(11) is an access obligation, not a rescue regime. Effectiveness should turn on whether third parties receive lawful, workable access on FRAND terms. It should not depend on uptake, market-share shifts, or beneficiary survival. Recital 32 confirms that the DMA’s concept of contestability is procedural and opportunity-based.

Data transferability. The premise that shared, anonymised data will generate comparable gains for recipients is uncertain. The literature shows diminishing returns to data and highlights the role of complementary inputs—crawler infrastructure, indexing, ranking systems, engineering capability, and experimentation. Anonymisation further reduces the value of shared data, especially by suppressing rare and tail queries. The Commission should require evidence that specific data fields will produce material improvements, rather than assume parity with Alphabet’s internal use.

Privacy and anonymisation. Search queries are highly sensitive. The Preliminary Measures’ layered design—technical anonymisation combined with extensive contractual restrictions—reflects the limits of anonymisation alone under the General Data Protection Regulation (GDPR). Privacy should operate as a binding constraint. Data minimisation should guide scope and retention, and staged access should mitigate risk as the recipient pool expands.

FRAND pricing. Search data is an information good characterised by high fixed costs and low marginal costs. The FRAND experience with standard-essential patents (SEPs) shows that pricing such assets is inherently indeterminate and yields a range of reasonable outcomes. The draft’s weighted-average-cost-of-capital (WACC) ceiling, exclusion of core investments from the cost base, and open-ended recipient class risk shifting pricing toward recipient ability to pay. Non-discrimination should instead prevent competitive disadvantage among similarly situated recipients, consistent with Unwired Planet v. Huawei. The regime should also allow for periodic ex post review, rather than rely on fixed terms that may not remain appropriate.

These themes reflect a common concern. The Commission’s specification should preserve the balance the DMA strikes—ensuring access while respecting privacy, proportionality, and investment incentives.

II.      ‘Effectiveness’ Means Access, Not Outcomes

The Commission asks whether the proposed measures will be effective in practice.[3] That question should track the legal obligation: effective access to anonymised data on FRAND terms. It should not turn on beneficiary uptake, traffic, market-share shifts, or the survival of particular recipients.

Article 6(11) grants third parties a right of access to specified data, anonymised, on FRAND terms. It does not grant a right to succeed. Conflating ‘effective’ with ‘sufficient to make beneficiaries viable’ would distort the provision. Under that reading, any disappointing competitive outcome—rival exit, lower-quality results, or limited market-share gains—would invite claims that the measures are ineffective and must be tightened. Compliance would become a moving target, defined by the least efficient beneficiaries, rather than by whether Alphabet has met its data-access obligations.

There are strong reasons to reject that approach.

First, beneficiary outcomes depend on many factors beyond data access. Product quality, ranking architecture, engineering capacity, marketing, distribution, brand, and business-model fit all matter. In United States v. Google LLC, Google expert Edward Fox’s analysis implied that user-side data explained only about 3 per cent of the measured Google–Bing search-quality gap. Fox testified that the remaining difference was ‘not from user interaction data’, pointing instead to factors such as ‘innovation’ and ‘better algorithms’.[4] If beneficiaries underperform despite receiving data on FRAND terms, that result may reflect ordinary competition, not non-compliance.

Second, the empirical record on remedies that aim to rebalance market shares through forced disclosure or default changes is mixed. Users often revert to preferred services after intervention. In a 2016 experiment, Mozilla switched Firefox’s default search engine to Bing; Bing retained about 42 per cent of search volume by day 12, with retention declining over time.[5] In Europe, where the Android choice screen has operated since 2020, Google’s share of search has barely shifted.[6]  The UK Competition and Markets Authority likewise recognised that, although click-and-query data may improve ranking quality, ‘the empirical evidence finds rapidly diminishing returns to scale’, with effects concentrated in rare queries.[7] These findings do not show that data sharing lacks value. They show that competitive outcomes reflect a broader set of forces. Market shares are therefore a poor proxy for compliance with the DMA’s data-access obligation.

Third, even proponents of data-access remedies warn against using them to override competitive selection. The Crémer–de Montjoye–Schweitzer report acknowledges that ‘the sharing or pooling of data can discourage competitors from differentiating and improving their own data collection and analytics pipelines’.[8] The Furman Report similarly cautions that such interventions carry trade-offs:

Requiring the opening up of a part of a business’s legitimately obtained data holding would be a significant intervention. Platforms would reasonably be concerned about the impact upon their business model, the legitimacy of requiring access to a significant asset, and the impact on incentives for investment in future data collection and management.[9]

These concerns weigh against reading Article 6(11) to require parity with Google.

Some may argue that the DMA’s ‘contestability’ objective permits an outcome-based test of effectiveness. The text does not support that view. Recital 32 defines contestability in procedural terms: the ability of undertakings to overcome barriers to entry and expansion and to challenge the gatekeeper on the merits.[10] The relevant question is whether the measures materially reduce the data-access barriers identified in Recital 61, on FRAND terms and subject to anonymisation, so that eligible third-party search engines can improve and optimise their services. It is not whether those firms achieve a particular market share, user base, query volume, or advertising-revenue shift. Those outcomes depend on factors outside Article 6(11), including product quality, brand, distribution, user preferences, innovation, privacy choices, and the scale and network characteristics of search.

Tying effectiveness to recipient outcomes would also create a predictable ratchet. Beneficiaries that find anonymised data less useful than expected will press for additional data fields. Beneficiaries that find FRAND prices too high will press for lower prices, potentially calibrated to their own constraints. Each step will be framed as necessary to make the measures ‘effective’. Each step will also erode the statutory constraints—privacy, proportionality, and dynamic incentives—that the DMA preserves.

III.    Data Sharing Does Not Guarantee Transferable Value

A second, related concern is the implicit causal premise of the Preliminary Measures: that the same data Google uses internally to optimise its search service will, once anonymised and shared, produce comparable improvements for recipients. The literature does not support that assumption, and the empirical record is mixed. The Commission should treat this as a working hypothesis, not as a basis for broad scope or parity defaults.

The economic literature on data as an input is more cautious than the specification suggests. Anja Lambrecht and Catherine Tucker find that big data rarely satisfies the conditions for a sustained competitive advantage, and that ‘the simple act of amassing big data does not confer a long-term competitive advantage’.[11] Tucker summarises the evidence as showing ‘concave returns to data’—initial gains, followed by rapidly diminishing marginal benefits.[12] Hal Varian likewise notes that data scale faces statistical limits: because measurement accuracy increases with the square root of sample size, ‘you have to have four times as big a sample to get twice as good an estimate’.[13] Empirical work on internet search reaches a similar conclusion. Additional data can improve results, but its marginal value depends on context, including user-history depth, algorithmic quality, and system design.[14]

These findings align with how firms actually create value from data. Data is not a stand-alone input. It complements crawler infrastructure, indexing, ranking systems, machine-learning expertise, experimentation capabilities, and product design. The same dataset will produce different outcomes in different hands.[15]  ICLE scholars describe this as ‘data immobility’: the value of data depends on the system that generates and uses it, and disclosure cannot transfer that value in the absence of complementary capabilities.[16]

The search-specific evidence points in the same direction. The United States v. Google LLC record includes expert testimony attributing only about 3 per cent of the Google–Bing quality gap to user-side data.[17] Other evidence suggests that Bing can perform comparably to Google in some contexts, despite Google’s larger data scale. That result is difficult to square with a theory that treats data as the single binding constraint. The court itself observed that Bing’s ‘search quality on Desktop measures up to Google’s’.[18]

The Commission’s anonymisation regime further limits transferability. The Preliminary Measures recognise that anonymisation suppresses long, rare, and tail queries—the queries where marginal returns to additional data are highest.[19] The U.S. data-sharing remedy in United States v. Google LLC similarly acknowledges that DMA-style anonymisation can remove the vast majority of queries before sharing.[20] The dataset proposed for disclosure is therefore, by design, stripped of much of the information that would drive marginal improvements.

These points do not undermine Article 6(11). They do, however, support two changes to the specification. First, the Commission should require evidence—not assumption—that the data fields included in the search dataset will deliver material improvements after anonymisation and under contractual limits. Second, the Commission should resist scope expansions based on unsupported claims of necessity. The idea of ‘parity with Alphabet’s own use’[21] may reflect a statutory aspiration, but it does not establish proportionality for every data field, recipient, or use case.

IV.    Privacy Is a Binding Constraint, Not a Design Variable

The Preliminary Measures rest on a strong premise: that technical and contractual anonymisation can produce data that is both useful for search optimisation and sufficiently anonymised to satisfy the General Data Protection Regulation (GDPR). Recital 61 of the DMA recognises the tension by requiring anonymisation that does not ‘substantially degrade’ usefulness.[22] The literature on search-query anonymisation, and the Commission’s own framework, show that this trade-off is real. The Commission should treat privacy as a binding constraint on the regime’s design, not as a parameter to relax in pursuit of beneficiary success.

Search queries can reveal highly sensitive information—health, finances, sexuality, location, politics, and ideology—often in granular, longitudinal detail. The 2006 AOL data release illustrates the risk. AOL disclosed 20 million search queries from 658,000 users, replacing identities with numeric pseudonyms. Within days, a New York Times reporter identified user #4417749 as Thelma Arnold of Lilburn, Georgia, based on her queries.[23] Search histories are uniquely revealing. They can expose a user’s health concerns, political interests, religious beliefs, financial anxieties, sexual orientation, and family issues. As privacy advocates have observed, access to search queries can be ‘akin to reading someone’s most complete and intimate diary’.[24]

The technical literature confirms that this risk is not limited to crude anonymisation. Latanya Sweeney showed that 87 per cent of the U.S. population can be uniquely identified using date of birth, gender, and postal code alone.[25] Yves-Alexandre de Montjoye and co-authors found that four spatio-temporal data points can identify 95 per cent of individuals in a large mobility dataset, even when the data is coarse.[26] Cynthia Dwork’s differential-privacy framework formalises the underlying trade-off. Under the ‘Fundamental Law of Information Recovery’, sufficiently accurate answers to enough queries will erode privacy.[27] Differential privacy does not eliminate this constraint; it manages cumulative privacy loss.

The Preliminary Measures themselves recognise these limits. Section 3.1 specifies technical safeguards—removal of identifiers, suppression of long and rare queries, generalisation of metadata, and k=50 / r=50 thresholding—to reduce re-identification risk to a ‘residual level’.[28] Section 3.2 then adds extensive contractual restrictions: prohibitions on attempts to determine which records relate to the same users, prohibitions on linking with auxiliary datasets, limits on augmentation that could weaken safeguards, and audit rights.[29] The Commission describes these contractual measures as necessary to reduce risk to an ‘insignificant level’.[30]

This layered design reflects an important reality. Technical measures alone do not satisfy the GDPR’s anonymisation standard, which requires that re-identification be impossible ‘taking account of all the means reasonably likely to be used’.[31] ICLE’s prior work on the DMA–GDPR interface makes the same point: anonymisation leaves residual risk, and gatekeepers remain the first line of defence.[32] The Commission’s reliance on contractual controls confirms that anonymisation here operates as a governance regime, not a binary switch. Weakening those controls would reintroduce the very risks the regime seeks to manage.

Privacy risk also depends on who receives the data. Risk is not a property of the dataset alone, but of the dataset and the recipient set. Data that poses limited risk in the hands of a single, well-governed recipient may pose far greater risk when shared with a broad and heterogeneous group. The Preliminary Measures extend access to any third-party undertaking offering an online search engine (OSE) in the European Economic Area (EEA), ‘including AI chatbots with OSE functionalities… even if the OSE is provided as part of a broader service’.[33] Expanding eligibility expands the adversary class. It may include recipients with sophisticated inference capabilities not fully addressed in the anonymisation literature.[34]

Against this backdrop, three principles should guide the specification.

First, treat privacy as a binding constraint. If shared data proves less useful than expected, the solution is not to weaken anonymisation, expand permissible uses, or reduce safeguards. The solution is to recognise that the regime delivers what Article 6(11) requires—lawful access on FRAND terms—and that beneficiaries must compete within those limits.

Second, apply data minimisation as the controlling principle for fields, recipients, and retention. The combination of a broad search dataset and a five-year retention period[35] sits at the more permissive end of what proportionality under Recital 61 can support.

Third, consider staged access. Provide synthetic or filtered datasets first, with fuller access contingent on audit, security review, and demonstrated compliance. Staged access aligns with comparable disclosure regimes and reduces the cost of correcting recipient-side failures.

V.      FRAND Pricing Should Reflect Costs, Not Subsidise Competitors

The Preliminary Measures’ FRAND specification risks converting a data-access obligation into a competitor-subsidy regime. Search data, like standard-essential patents (SEPs) and app-store services, is a classic information good. It involves high fixed and sunk costs—collection, indexing, ranking, and quality maintenance—and near-zero marginal costs of replication.

As Carl Shapiro and Hal Varian explain, ‘Information is costly to produce but cheap to reproduce… cost-based pricing does not work’.[36] The two-decade SEP/FRAND experience confirms the point. Accepted methodologies yield a range of defensible outcomes, not a single price.[37] In Microsoft v. Motorola, the court took years to determine a FRAND rate, with a range spanning roughly thirty-fold. Unwired Planet v. Huawei accepted that FRAND yields a range of acceptable royalties, and Optis v. Apple increased the rate sevenfold on appeal.[38] The DMA has already generated a similar dispute in the Apple App Store proceedings, where the Commission has yet to converge on a stable outcome despite years of effort and a €500 million fine.[39]

The Preliminary Measures amplify these structural difficulties through three design choices.

First, paragraph 71 caps Alphabet’s return on capital employed at its weighted average cost of capital, effectively eliminating economic profit. Paragraph 72(i) relaxes that cap only where Alphabet shows it cannot recover costs from its own use of the data.[40] This approach ties pricing to Alphabet’s profitability, not to economic cost.[41] It operates as a transfer rule, not a pricing rule, and risks the under-compensation problem identified by Daniel Spulber and Christopher Yoo in regulated information industries.[42]

Second, paragraph 78 excludes ‘overhead, sunk costs, or investments in data collection, processing and storage not attributable to making the data available’.[43] Those investments create the data’s value. Pricing based only on the marginal cost of disclosure misprices the asset.

Third, paragraph 79(b) requires Alphabet to forecast ‘the expected number of eligible access recipients’.[44] That denominator is inherently unstable. The regime covers all OSE providers in the EEA, including AI chatbots with OSE functionalities. As eligibility expands, cost allocation becomes less predictable. Paragraph 75 compounds the problem by locking in FRAND terms for five years, followed by renegotiation without a clear benchmark. This structure is likely to increase, not reduce, disputes.[45]

Taken together, these features calibrate prices to recipient size and ability to pay, rather than to economic cost. Paragraph 74 makes this explicit for small and medium-sized enterprises (SMEs). It caps their charges at incremental cost and requires that other beneficiaries’ allocations be calculated as if all recipients faced that constraint. The result is cross-subsidisation. The burden of below-cost SME access shifts to other recipients.[46]

Article 6(11) does not support that outcome. It requires access on ‘fair, reasonable and non-discriminatory’ terms—not parity, and not pricing based on what recipients can afford. Properly understood, non-discrimination prevents competitive disadvantage among similarly situated licensees. It does not require identical terms for differently situated firms.[47] An access price designed to ensure viability for all would invert that principle. It would equalise outcomes by shifting the shortfall of less efficient recipients onto more efficient ones.

The incentive effects run in the same direction. Below-economic pricing weakens the gatekeeper’s incentives to invest in data quality, abuse detection, and privacy-preserving analytics. It also reduces recipients’ incentives to invest in independent crawl, ranking, and behavioural data. As noted above, even proponents of ex ante data-access duties warn that such regimes can dampen investment incentives.[48]

A more stable design would follow three principles.

First, the cost base should reflect the full economic cost of supplying the data. That includes compliance, audit, security, and monitoring costs, plus a return that reflects investment risk, not just ex post weighted average cost of capital (WACC).

Second, interpret non-discrimination in line with the SEP/FRAND tradition. The goal is to prevent competitive disadvantage among similarly situated recipients, not to impose identical terms across heterogeneous firms.

Third, build in review. The five-year lock-in, followed by renegotiation without a benchmark, trades short-term certainty for long-term instability. Periodic ex post review would better reflect the Commission’s practice and the dynamics of the market.

VI.    Conclusion

Article 6(11) is in force, and ICLE recognises the Commission’s authority to specify what effective compliance requires. The question is how that authority should be exercised. Three points follow.

First, effectiveness should track the legal obligation, not recipient outcomes. Article 6(11) guarantees access to anonymised data on FRAND terms; it does not guarantee competitive success. The DMA’s definition of contestability in Recital 32 is procedural and opportunity-based. It asks whether firms can overcome barriers and compete on the merits, not whether they achieve particular outcomes. The evidence reinforces this distinction. Competitive performance depends on multiple inputs—product quality, engineering, distribution, and business-model fit—not data access alone. A specification that equates effectiveness with competitor success will create a predictable ratchet: broader scope, lower prices, and weaker safeguards, with no principled stopping point.

Second, the Commission should address, not assume away, the core constraints identified above. Data is not a freely transferable input. Its value depends on complementary capabilities, and the empirical literature shows diminishing returns to scale. Anonymisation further limits transferability, especially where it removes tail queries that drive marginal improvements. At the same time, privacy is a binding constraint. The GDPR requires that re-identification be effectively impossible, and the Preliminary Measures’ layered technical-and-contractual regime reflects that reality. These constraints cannot be relaxed without undermining the legal framework.

The same is true for FRAND. Search data is an information good with high fixed costs and low marginal costs. The SEP/FRAND experience shows that pricing such assets yields a range of reasonable outcomes, not a single point. The current specification departs from that logic. The WACC ceiling, the exclusion of core investments from the cost base, and the open-ended recipient class together shift pricing toward recipient ability to pay rather than economic cost. That approach risks under-compensation, cross-subsidisation, and distorted incentives. It weakens investment by both the gatekeeper and recipients.

Third, the Commission should approach specification with discipline and restraint. The DMA aims to provide clarity through ex ante rules, but early experience shows that even narrow specifications can generate complex disputes and significant enforcement costs. Article 6(11) is broader and more operationally demanding than the provisions the Commission has addressed to date. That increases the risk of unintended effects on users, innovation, and privacy.

These themes point in the same direction. The Commission should anchor effectiveness in access, not outcomes; treat privacy and proportionality as binding constraints; recognise the limits of data transferability; and align FRAND with economic cost, rather than recipient viability. It should also build in mechanisms—such as staged access and periodic ex post review—that allow the regime to adjust without constant expansion.

The Commission has the authority to define what Alphabet must do. It should exercise that authority with care. Article 6(11) does not authorise a competitor-subsidy regime, and the specification should not evolve into one in the name of effectiveness.

[1] Eur. Comm’n, For Public Consultation in Case DMA.100209 — SP — Alphabet — Article 6(11): Preliminary Measures (16 Apr. 2026), https://digital-markets-act.ec.europa.eu/document/download/b3aed7f6-c45c-4bfa-b032-b8975a48bb06_en [hereinafter Preliminary Measures]; Eur. Comm’n, Case DMA.100209 — SP — Alphabet — Article 6(11) Google Search Data Sharing: Case Summary (16 Apr. 2026), https://digital-markets-act.ec.europa.eu/dma100209-consultation-proposed-measures-google-search-data-sharing_en [hereinafter Case Summary].

[2] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 Sept. 2022 on Contestable and Fair Markets in the Digital Sector, art. 6(11), 2022 O.J. (L 265) 1 [hereinafter DMA]; Eur. Comm’n, Commission Designates Six Gatekeepers Under the Digital Markets Act (5 Sept. 2023), https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4328.

[3] Case Summary, supra note 1, at 1 (‘Interested third parties are now consulted on these measures, in particular their effectiveness, completeness, and implementation timelines’).

[4] See Rebuttal Testimony of Professor Douglas W. Oard, Trial Ex. UPXD105 at 7, 32, United States v. Google LLC, No. 1:20-cv-03010-APM (D.D.C. 15 Nov. 2023) (reporting a measured Bing–Google IS4@5 gap of 3.924 and a frozen-versus-retrained Google effect of 0.113, and quoting Edward Fox’s testimony that the remaining ‘97 percent’ was ‘not from user interaction data’).

[5] United States v. Google LLC, Memorandum Opinion, No. 20-cv-3010 (APM), at 117 (D.D.C. 5 Aug. 2024), https://www.tn.gov/content/dam/tn/attorneygeneral/documents/pr/2024/pr24-59-Google.pdf; see also Geoffrey A. Manne, A Critical Analysis of the Google Search Antitrust Decision 16–17, Int’l Ctr. for L. & Econ. (14 Aug. 2024), https://laweconcenter.org/wp-content/uploads/2024/08/Manne-Google-Search-Decision-Analysis-2024-08-14.pdf [hereinafter Manne, Critical Analysis].

[6] Id.

[7] Competition & Mkts. Auth., Online Platforms and Digital Advertising: Market Study, Appendix I: Search Quality and Economies of Scale ¶ 34 (2020), https://assets.publishing.service.gov.uk/media/5fe4957c8fa8f56aeff87c12/Appendix_I_-_search_quality_v.3_WEB_.pdf.

[8] Jacques Crémer, Yves-Alexandre de Montjoye & Heike Schweitzer, Competition Policy for the Digital Era 9, Eur. Comm’n (2019).

[9] Digital Competition Expert Panel, Unlocking Digital Competition ¶ 2.87 (2019) [hereinafter Furman Report].

[10] DMA, supra note 2, recital 32.

[11] Anja Lambrecht & Catherine E. Tucker, Can Big Data Protect a Firm from Competition?, Competition Pol’y Int’l Antitrust Chron. 8 (Jan. 2017).

[12] Catherine Tucker, Digital Data, Platforms and the Usual [Antitrust] Suspects: Network Effects, Switching Costs, Essential Facility, 54 Rev. Indus. Org. 683 (2019).

[13] Tom Krazit, Google’s Varian: Search Scale Is ‘Bogus’, CNET (14 Aug. 2009), https://www.cnet.com/culture/googles-varian-search-scale-is-bogus.

[14] Maximilian Schäfer, Geza Sapi & Szabolcs Lorincz, The Effect of Big Data on Recommendation Quality: The Example of Internet Search 1 (DIW Berlin Discussion Paper No. 1730; DICE Discussion Paper No. 284, 2018), https://www.diw.de/documents/publikationen/73/diw_01.c.581628.de/dp1730.pdf; Maximilian Schäfer & Geza Sapi, Learning from Data and Network Effects: The Example of Internet Search 1 (DIW Berlin Discussion Paper No. 1894, 2020), https://www.diw.de/documents/publikationen/73/diw_01.c.798442.de/dp1894.pdf.

[15] Geoffrey A. Manne & Dirk Auer, From Data Myths to Data Reality: What Generative AI Can Tell Us About Competition Policy, Competition Pol’y Int’l (Feb. 2024) (observing that AI rivals such as OpenAI, Anthropic, and Perplexity emerged without massive incumbent data).

[16] See, e.g., Geoffrey A. Manne & Dirk Auer, Antitrust Dystopia and Antitrust Nostalgia: Alarmist Theories of Harm in Digital Markets and Their Origins, 28 Geo. Mason L. Rev. 1280 (2021).

[17] Fox testimony, in Oard, supra note 4.

[18] United States v. Google LLC, supra note 5, at 46.

[19] Preliminary Measures, supra note 1, ¶¶ 13–22 (describing technical anonymisation, including suppression of long queries and queries containing rare words and word combinations); Case Summary, supra note 1, at 3.

[20] Mikolaj Barczentewicz, Comparing the EU DMA to the Search-Query Data-Sharing Remedy in US v Google, Truth on the Mkt. (3 Sept. 2025), https://truthonthemarket.com/2025/09/03/comparing-the-eu-dma-to-the-search-query-data-sharing-remedy-in-us-v-google.

[21] Preliminary Measures, supra note 1, ¶ 3.

[22] DMA, supra note 2, recital 61.

[23] Michael Barbaro & Tom Zeller, Jr., A Face Is Exposed for AOL Searcher No. 4417749, N.Y. Times (9 Aug. 2006), https://www.nytimes.com/2006/08/09/technology/09aol.html.

[24] Chad Marlow & Jennifer Stisa Granick, Celebrating an Important Victory in the Ongoing Fight Against Reverse Warrants, ACLU (29 Jan. 2024), https://www.aclu.org/news/privacy-technology/fight-against-reverse-warrants-victory.

[25] Latanya Sweeney, Simple Demographics Often Identify People Uniquely 16 (Carnegie Mellon Univ. Data Privacy Working Paper No. 3, 2000).

[26] Yves-Alexandre de Montjoye, César A. Hidalgo, Michel Verleysen & Vincent D. Blondel, Unique in the Crowd: The Privacy Bounds of Human Mobility, 3 Sci. Rep. 1376 (2013); see also Yves-Alexandre de Montjoye et al., Unique in the Shopping Mall: On the Reidentifiability of Credit Card Metadata, 347 Science 536 (2015).

[27] Cynthia Dwork & Aaron Roth, The Algorithmic Foundations of Differential Privacy, 9 Found. & Trends Theoretical Comput. Sci. 211, 214 (2014) (‘the Fundamental Law of Information Recovery states that overly accurate answers to too many questions will destroy privacy in a spectacular way’); see also Cynthia Dwork, Differential Privacy, in Automata, Languages and Programming 1, 1–12 (Michele Bugliesi et al. eds., 2006), https://doi.org/10.1007/11787006_1.

[28] Preliminary Measures, supra note 1, ¶¶ 13–22; Case Summary, supra note 1, at 3 (technical measures reduce re-identification risk ‘to a residual level without unnecessarily degrading the quality or usefulness of the search data’).

[29] Preliminary Measures, supra note 1, ¶¶ 38–39 (prohibiting re-identification, sessionisation, linking, and augmentation), ¶¶ 40–48 (imposing purpose limitation), ¶¶ 36–37 (requiring auditor verification).

[30] Case Summary, supra note 1, at 3.

[31] Regulation (EU) 2016/679 (GDPR), recital 26.

[32] Mikołaj Barczentewicz, Comments of the International Center for Law & Economics on the Joint Guidelines on the Interplay Between the Digital Markets Act and the GDPR, Int’l Ctr. for L. & Econ. (2025), https://laweconcenter.org/resources/icle-comments-on-the-interplay-between-dma-and-gdpr.

[33] Preliminary Measures, supra note 1, ¶ 2.

[34] See Barczentewicz, supra note 20 (observing that the privacy-utility trade-off depends on who receives the data and how many recipients there are).

[35] Preliminary Measures, supra note 1, ¶ 12 (requiring data to be made available for at least five years).

[36] Carl Shapiro & Hal R. Varian, Information Rules: A Strategic Guide to the Network Economy 3 (Harv. Bus. Sch. Press 1999); see also William J. Baumol & J. Gregory Sidak, The Pricing of Inputs Sold to Competitors, 11 Yale J. on Reg. 171 (1994).

[37] Anne Layne-Farrar, A. Jorge Padilla & Richard Schmalensee, Pricing Patents for Licensing in Standard-Setting Organizations: Making Sense of FRAND Commitments, 74 Antitrust L.J. 671 (2007); J. Gregory Sidak, The Meaning of FRAND, Part I: Royalties, 9 J. Competition L. & Econ. 931 (2013).

[38] Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012); Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024 (9th Cir. 2015); Unwired Planet Int’l Ltd. v. Huawei Techs. Co. [2020] UKSC 37; Optis Cellular Tech. LLC v. Apple Retail UK Ltd. [2025] EWCA Civ 552.

[39] Press Release, Eur. Comm’n, Commission Finds Apple’s App Store Rules Breach Digital Markets Act (23 Apr. 2025), https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1085.

[40] Eur. Comm’n, For Public Consultation in Case DMA.100209 — SP — Alphabet — Article 6(11): Preliminary Measures ¶¶ 71, 72(i) (16 Apr. 2026), https://digital-markets-act.ec.europa.eu/document/download/b3aed7f6-c45c-4bfa-b032-b8975a48bb06_en [hereinafter Preliminary Measures].

[41] Sidak, supra note 37.

[42] Daniel F. Spulber & Christopher S. Yoo, On the Regulation of Networks as Complex Systems: A Graph Theory Approach, 99 Nw. U. L. Rev. 1687, 1711–12 (2005).

[43] Preliminary Measures, supra note 1, ¶ 78.

[44] Id. ¶ 79(b).

[45] Id. ¶ 75.

[46] Id. ¶ 74.

[47] Unwired Planet Int’l Ltd. v. Huawei Techs. Co. [2020] UKSC 37, ¶¶ 112–14; Valéria Silva, FRAND-Licensing Litigation Across the Atlantic, Int’l Ctr. for L. & Econ. (8 Apr. 2025), https://laweconcenter.org/resources/frand-licensing-litigation-across-the-atlantic-a-comparative-assessment-of-us-and-uk-jurisprudence-on-telecom-disputes.

[48] See supra notes 8-9 and accompanying text.

I. Introduction

The International Center for Law & Economics (ICLE) appreciates the opportunity to respond to the Competition and Markets Authority’s (CMA) call for evidence on recent developments relating to Apple’s and Google’s app-store rules.[1] ICLE is a non-profit, non-partisan global research and policy centre that advances evidence-based policy. Its scholars have written extensively on digital competition.

The call for evidence raises three related questions: (i) whether fees on steered transactions represent ‘a fair and reasonable charge for the services provided’; (ii) how the design of steering mechanisms—including side-by-side presentation of billing options, interstitial disclosures, parental gates, and attribution windows—affects user uptake; and (iii) whether the privacy, security, and fraud risks identified by Apple and Google have materialised where steering has been introduced.[2] These comments address each issue in turn.

A preliminary point frames our analysis. The CMA’s roadmaps rest on the view that Apple and Google operate an ‘effective duopoly’ subject to ‘limited competitive constraint’. ICLE has addressed that claim in prior submissions and does not repeat those arguments here.[3] The premise remains contested. Competition between iOS and Android, alongside growing pressure from AI-native firms and device manufacturers such as Samsung, materially shapes the effects of any intervention. Where competition is robust, the marginal benefits of regulation diminish, while the risks of error increase. The CMA should account for the possibility that intervention could leave UK consumers and developers worse off overall.

Our views are as follows.

On fees. The CMA asks whether steered-transaction fees are ‘fair and reasonable’. In practice, that inquiry risks sliding into cost-based rate-setting—a path with a poor track record. Pricing information goods presents well-known difficulties, as experience in the standard-essential patent (SEP) context shows. The analogy to FRAND pricing does not hold. FRAND commitments arise ex ante, before lock-in occurs. By contrast, Strategic Market Status (SMS) designation under the DMCC lacks any comparable anchor. Any cost-based approach would therefore operate ex post, inviting uncertainty and litigation. The European Commission’s ongoing dispute with Apple over alternative fee structures illustrates these risks. Even using a benchmarking approach, Apple’s and Google’s fees fall within the range charged by comparable online platforms. The CMA should avoid committing enforcement resources to rate-setting.

On design. Intervening in the design of steering mechanisms requires caution. Choice screens and mandated disclosures often fail to influence behaviour as regulators expect. Side-by-side displays, interstitial screens, parental gates, and attribution windows each serve identifiable informational, safety, or commercial functions. Removing or weakening these features to increase steering uptake risks displacing the preferences of users, developers, and platforms with those of the regulator.

On privacy, security, and fraud. The risks identified by platform operators are not hypothetical. Design mandates in curated ecosystems have, in other contexts, contributed to security failures—including the July 2024 Microsoft/CrowdStrike outage—and to unintended degradation of user experience. Steering moves transactions outside managed billing environments designed to detect fraud, resolve disputes, protect minors, and reduce exposure to social-engineering attacks. Limited evidence from jurisdictions where steering remains recent does not establish that these risks will not materialise.

A broader institutional point underlies these observations. The CMA indicates that it intends to introduce steering measures in the first half of 2026. Before doing so, it should assess experience elsewhere. Early evidence from the Digital Markets Act suggests rising compliance costs and protracted, adversarial enforcement, with limited demonstrable consumer benefit. The CMA is not obliged to replicate that approach.

II. The Limits of ‘Fair and Reasonable’ Fee Assessment

The call for evidence asks whether Apple’s and Google’s fees on steered transactions ‘reflect a fair and reasonable charge for the services provided’.[4] Framed this way, the inquiry invites a form of rate-setting, including benchmarking exercises of the kind endorsed by the 9th U.S. Circuit Court of Appeals in Epic Games v. Apple, which the CMA cites approvingly.[5] That path warrants caution.

Experience in analogous settings shows that rate-setting for information goods is difficult to administer and highly contestable. The underlying cost structures resist clean measurement, and attempts to derive a ‘correct’ price tend to devolve into discretionary judgments and protracted disputes. The CMA should consider that record before proceeding.

The analysis that follows makes three points. First, cost-based approaches cannot yield stable or non-arbitrary rates in this context. Second, analogies to FRAND rate-setting in the standard-essential patent space do not translate to the DMCC’s Strategic Market Status regime. Third, even on a conservative benchmarking approach, current fees fall within commercial norms, and the economic case for intervention is weak.

A. Cost-Based Rate-Setting for App Stores Is Indeterminate

App stores, like standard-essential patents (SEPs), are paradigmatic information goods. They involve high fixed costs of development and maintenance, near-zero marginal costs of distribution, and extensive shared inputs—security infrastructure, developer tools, payment processing, review and curation, anti-fraud systems, spam detection, accessibility APIs, and other platform-wide services. These inputs support thousands of downstream services and cannot be allocated cleanly across them.[6]

This cost structure defeats any attempt to identify a single ‘correct’ rate through cost-based analysis. Regulators face three options, none satisfactory. They can allocate shared fixed costs across services, but any allocation will be arbitrary. They can focus on narrowly defined marginal or incremental costs, but that approach systematically undercompensates investment in platform-wide goods. Or they can add a return on capital to a chosen cost base, which reintroduces discretion and judgment. None of these approaches yields a stable or principled result.

The same problem has long plagued FRAND rate-setting in the SEP context.[7] Courts and arbitrators have relied on a mix of heuristics—comparable-licence benchmarks, top-down and bottom-up methods, and hypothetical-negotiation frameworks. These approaches have not scaled well. In practice, disputes often collapse into competing expert valuations.

The 9th U.S. Circuit Court of Appeals’ suggestion in Epic that Apple could justify a steered-transaction commission based on ‘costs genuinely and reasonably necessary for its coordination of external links’[8] imports these difficulties into app-store regulation. The resulting administrative and litigation burdens are not speculative; they mirror the experience of SEP enforcement.

B. FRAND Analogies Do Not Translate to App-Store Regulation

The SEP experience may appear to offer a roadmap, but the analogy breaks down at a structural level. FRAND obligations arise as the price of inclusion in a technical standard. They reflect an ex ante commitment by a patent holder to a standard-setting organisation, made before lock-in, in exchange for the commercial benefits of standardisation. That commitment provides a conceptual baseline: a ‘fair and reasonable’ rate reflects the outcome of a hypothetical negotiation among willing parties before market power attaches.[9]

The DMCC SMS regime rests on a different foundation. Apple and Google did not seek SMS designation, nor did they make ex ante commitments to a regulatory framework. They did not voluntarily submit to any licensing regime. Instead, the CMA identified market characteristics it considered problematic and imposed conduct requirements unilaterally. There is no equivalent to the FRAND ‘hypothetical negotiation before lock-in’. The CMA would need to reconstruct, after the fact, a counterfactual rate that never existed.[10]

That difference matters. Any cost-based or benchmarking approach in this context operates ex post. It inherits the weaknesses of FRAND rate-setting—discretion, contestability, and reliance on expert judgment—without its central discipline: the ex ante anchor. Unsurprisingly, rate-setting exercises in similar contexts have proven persistently contentious.

The European Commission’s experience under the Digital Markets Act illustrates the point. After questioning Apple’s 30 per cent commission in its non-compliance findings,[11] the Commission turned to Apple’s revised fee structure, including the Core Technology Commission, the initial acquisition fee, and the tiered Store Services fee.[12] That process remains ongoing. It has absorbed significant enforcement resources without yielding a stable outcome for developers, consumers, or platforms. Instead, each revised fee structure has triggered further rounds of scrutiny and dispute.

C. Benchmarking and Evidence Do Not Support Fee Intervention

Even setting aside these threshold concerns, the case for intervening on fee levels is weaker than the call for evidence suggests. A proper benchmarking exercise indicates that current steered-transaction fees sit within—and often below—the range charged by comparable digital platforms. That undermines any inference that prevailing rates are unreasonably high. Developer dissatisfaction, standing alone, does not establish a competitive failure. Nor do claims about the benefits of lower fees rest on a sound economic foundation. They assume complete cost pass-through, which theory and evidence both reject, particularly in multi-sided markets where platforms adjust along non-price margins. Fee intervention therefore risks delivering concentrated gains to a narrow set of large developers while imposing diffuse costs across the UK app economy.

If the CMA proceeds to assess whether fees are ‘fair and reasonable’, the least-worst approach is benchmarking against comparable services. Applied conservatively, that exercise does not support intervention.

Comparable platforms typically charge commissions that overlap with, and often exceed, the 10–20 per cent range applied to steered transactions. Gaming console storefronts (PlayStation, Xbox, Nintendo eShop) charge 30 per cent. Steam charges 30 per cent, falling to 20–25 per cent at higher volumes. Amazon Marketplace referral fees range from 8 per cent to 45 per cent. Food-delivery and online-travel platforms routinely charge 15–30 per cent.[13]

By contrast, steered-transaction fees—15 per cent and 10 per cent in Japan, 10–20 per cent in Google’s global rollout, and the EU’s alternative-business-terms structure—are not outliers. In several cases, they are materially lower than comparable commissions.

Treating developer dissatisfaction as evidence of a ‘failure of competition’ conflates preference with market failure. Firms naturally prefer lower input costs. That preference does not show that prevailing rates depart from competitive benchmarks.

The call for evidence also asserts that lower fees would produce substantial benefits for UK users and developers, including ‘lower prices for digital content and services’ and ‘a wider choice of higher quality innovative goods and services’.[14] Those claims are overstated.

Cost pass-through is rarely complete. When input costs fall, firms share the resulting surplus among themselves, their customers, other complementors, and—in multi-sided markets—the other side of the platform. The outcome depends on demand elasticities, market structure, and competitive constraints, none of which the call for evidence models. In multi-sided markets with differentiated products, pass-through can be well below complete and may even be negative on one side as platforms rebalance pricing.

Empirical evidence supports this view. A 2020 study commissioned by the European Commission found that caps on payment-card interchange fees only partially translated into lower consumer prices.[15] More directly, a recent study of U.S. cities that capped delivery-platform commissions at 15 per cent found that platforms responded by reducing the visibility of independent restaurants and shifting promotion toward chain restaurants not subject to the caps. Consumers did not clearly benefit, and smaller restaurants—the intended beneficiaries—were worse off.[16]

These findings are directly relevant. Platforms respond to fee interventions through non-price adjustments, including ranking changes, advertising monetisation, service bundling, and quality reductions. Those responses can offset or reverse the intended benefits.

Fee interventions also tend to produce concentrated benefits and diffuse costs. Large developers—with scale, brand recognition, and in-house payment systems—are best positioned to exploit lower steering fees. Smaller developers, whom the CMA acknowledges ‘often do not pay the highest commission rates’,[17] gain little. They may instead face degraded distribution, new compliance costs, or reduced platform investment in shared services.

In short, the case for rate-setting is weak. Experience in the SEP context shows the difficulty of pricing information goods, and the FRAND analogy does not resolve those challenges. The European Commission’s ongoing engagement with Apple’s fee structure illustrates the institutional burden. Benchmarking does not indicate that current fees fall outside commercial norms. Pass-through assumptions lack empirical support. And the distributional effects of intervention favour a narrow group of large developers at the expense of smaller firms and consumers. The CMA should avoid drifting into rate-setting and direct its enforcement resources elsewhere.

III. Assessing Steering Design Interventions

The call for evidence identifies several design features that affect steering uptake: side-by-side presentation of native billing options, interstitial disclosures that payments occur off-platform, parental gates for users aged 13–18, attribution windows (such as the seven-day window in Japan), and scope carve-outs (such as Apple’s exclusion of apps in the ‘Kids’ category).[18] The CMA should approach any intervention in these features with caution.

These design elements fall into three broad categories. Some serve clear informational or safety functions and should be preserved, including disclosures and child-protection measures. Others reflect standard commercial terms, such as attribution windows, which do not lend themselves to regulatory calibration. Still others—such as choice architecture interventions—have an uncertain and often limited effect on user behaviour, while imposing real compliance and usability costs.

These design elements fall into three broad categories. Some serve clear informational or safety functions and should be preserved, including disclosures and child-protection measures. Others reflect standard commercial terms, such as attribution windows, which do not lend themselves to regulatory calibration. Still others—such as choice architecture interventions—have an uncertain and often limited effect on user behaviour, while imposing real compliance and usability costs.

A. Choice Screens and Disclosures Rarely Shift Behaviour

The empirical record on choice screens and mandated disclosures is not encouraging.[19] Browser and search-engine choice screens introduced on Android in Europe after the 2018 Google Android decision did not materially shift market shares over several years. As Geoffrey Manne observes in the context of the U.S. Google Search case:

In Europe, where Google has since 2020 implemented a search engine choice screen on Android following the EU’s 2018 antitrust decision against it, Google’s share of the search engine market has barely budged.[20]

Evidence from default-switching experiments points in the same direction. When Mozilla changed Firefox’s default search engine from Google to Bing in 2016, Bing retained only 42 per cent of search volume by day 12. That figure later fell to between 20 per cent and 35 per cent.[21] Users quickly revert to preferred options when defaults change.

These findings undermine the assumption that presenting alternatives at the point of purchase will meaningfully alter behaviour.[22] Similar design mandates in app-store purchase flows are likely to produce similar results. They will impose compliance costs, increase interface complexity, and risk user frustration with additional disclosures, while delivering at most modest behavioural change. The return on regulatory intervention is therefore uncertain at best.

B. Core Design Safeguards Are Legitimate

Requirements that steering links appear alongside Apple’s In-App Purchase and Google Play Billing, and that users see a disclosure explaining that the transaction is with the developer, are often framed as friction designed to deter steering. That characterisation is incomplete. These features also serve straightforward consumer-protection functions.

When users transact off-platform, they lose access to centralised billing, subscription management, refunds, and dispute-resolution mechanisms. They assume counterparty risk with developers they may not know. Many users will not realise that refunds, chargebacks, or family-sharing features no longer apply. Clear, point-of-decision disclosures enable informed choice. Removing them to increase steering uptake would prioritise developer interests over user protection.

Child-safety measures reinforce this point. Apple’s rules in Japan exclude apps in the ‘Kids’ category, prohibit steering for users under 13, and require parental gates for users aged 13–18.[23] These safeguards respond to well-established concerns about minors’ in-app purchases, exposure to fraud, and compliance with child-protection laws in the UK and elsewhere.[24]

Treating parental gates as anticompetitive—or as design friction to be removed—would invert the policy balance. The CMA should recognise that child-safety protections are core platform functions. Any intervention should preserve parental gates, age-based restrictions, and category carve-outs for services aimed at minors.

Attribution windows raise a similar issue. Apple’s seven-day window—under which reduced commissions apply only to transactions completed within seven days of a steering link—reflects a standard commercial practice.[25] It limits commission liability to transactions plausibly facilitated by the platform, while preventing arbitrage through a single steering event.

Time-limited attribution is common across affiliate marketing, referral agreements, advertising networks, and other commercial arrangements. There is no economic basis to treat a seven-day window, or any particular duration, as inherently unreasonable. The CMA should not treat attribution windows as design features requiring adjustment. Doing so would draw the authority into setting commercial terms, beyond the scope contemplated by the DMCC.

C. Design Mandates Risk Obsolescence and Harm

The CMA should approach design mandates with caution. Each feature identified for potential removal—side-by-side presentation, disclosure screens, parental gates, and attribution windows—serves legitimate user, safety, or commercial purposes. Mandated removal would likely produce modest behavioural change while imposing real costs on informed consent, child safety, and product development. Parental gates and related child-safety measures should remain outside the scope of any conduct requirements.

Design mandates also risk becoming obsolete as mobile ecosystems evolve. As ICLE has previously noted, rapid integration of artificial intelligence is reshaping how users discover and transact with apps.[26] Samsung’s AI-driven features, Apple’s on-device intelligence, Google’s Gemini integration, and the rise of third-party AI assistants are already shifting interaction models toward assistant-driven, recommendation-based, and voice-first interfaces. Mandates tied to current user-interface patterns may soon apply to design surfaces that no longer exist.

The call for evidence underestimates the risk that regulatory mandates will ossify platform design at a moment of rapid technological change. The CMA should build flexibility into any intervention it adopts—or, preferably, avoid prescriptive design mandates and allow platforms, developers, and users to iterate through standard product-development processes.

IV. Steering Introduces Real Privacy, Security, and Fraud Risks

The call for evidence asks for ‘the effect, or otherwise, of these developments on users’ privacy and security or prevalence of fraud’, and seeks ‘any examples or evidence relating to the extent to which any privacy, security or fraud risks have materialised as a result of the introduction of steered transactions’.[27] This framing is welcome. The CMA is right to insist on concrete evidence, rather than purely theoretical concerns. ICLE has likewise emphasised in prior comments that design-mandate interventions in curated digital ecosystems create concrete—not merely theoretical—risks.[28]

At the same time, the evidentiary record remains limited. In jurisdictions where steering has been introduced—Japan (since Dec. 2025), the EU (2024–2025), and the United States (since 2024)—the regimes are recent, and their effects on fraud, privacy, and security are still emerging. This makes systematic harm difficult to measure at this stage, even where the underlying risk mechanisms are well understood. The absence of large-scale, attributable failures in this short period does not establish that risks are absent. Many relevant harms—subscription traps, phishing at the point of redirect, post-transaction data exfiltration, fraudulent refund disputes, and exploitation of vulnerable users—are diffuse, underreported, and slow to surface.

App-store billing systems are not mere payment processors. They are integrated fraud-detection, subscription-management, and dispute-resolution infrastructures operating at scale. Apple reports blocking more than $9 billion in fraudulent transactions over five years, including $2 billion in 2024, terminating 146,000 developer accounts for fraud, and identifying 4.7 million stolen credit cards.[29] Google’s Play Protect performs a comparable function. Android-team analysis indicates that apps obtained outside curated stores are more than 50 times as likely to contain malware.[30] These figures illustrate the scope of the infrastructure that steering bypasses.

Steering moves transactions from this environment into developer-specific systems of widely varying quality. Most developers cannot replicate platform-scale protections. Centralised billing delivers at least three advantages. First, platform-scale fraud detection: Apple and Google rely on cross-platform signals—device anomalies, known-bad merchant identifiers, and transaction-velocity checks across millions of users—that smaller providers cannot match. Second, unified subscription management: users can manage and cancel subscriptions in one place, rather than tracking multiple external providers. Third, centralised dispute resolution: platforms offer standardised refund processes, while off-platform disputes depend on bilateral negotiations with developers. These differences matter for user protection.

Evidence from adjacent contexts underscores the risks. The July 2024 Microsoft/CrowdStrike outage—affecting airlines, hospitals, and banks—appears to have resulted, in part, from an interoperability mandate.[31] It imposed widespread disruption and economic harm far beyond its regulatory target.[32]

Closer to the present context, the Dutch Authority for Consumers and Markets required Apple to permit alternative payments for dating apps.[33] Following that change, Dutch banks reported a sharp rise in dating-app fraud. More than 160 victims came forward in 2024—a nearly 25 per cent increase on the prior year—with average losses of €25,000.[34] While causation is not conclusive, the timing is notable, particularly as transactions shifted outside the systems designed to detect such fraud.

Early evidence under the Digital Markets Act points in a similar direction. A Netcraft analysis of apps distributed through grey-market iOS sideloading sites found that around 5 per cent of a 350-app sample appeared malicious—orders of magnitude above rates observed on the official App Store.[35] These outcomes follow from the logic of the intervention: opening curated ecosystems expands the attack surface.

From a security-engineering perspective, each redirect from a trusted environment to an external site introduces new vulnerabilities. Users who follow steering links assume legitimacy, making them more susceptible to phishing, typosquatting, and look-alike payment pages. Historical patterns reinforce this dynamic. The expansion of online banking coincided with increased phishing. The growth of mobile apps brought fake app stores. Subscription commerce has seen the spread of manipulative cancellation practices. These developments reflect predictable responses to new opportunities for exploitation. Research shows that SMS and phishing vectors account for roughly 70 per cent of mobile-payment fraud—the very channels that steering amplifies.[36]

Even sceptical scholarship recognises that some interoperability measures create genuine security challenges. Daji Landis, Elettra Bietti, and Sunoo Park distinguish among ‘security engineering concerns’, ‘security vetting concerns’, and ‘hybrid concerns’.[37] Their framework shows that some risks arise from system design, not strategic behaviour.[38] The CMA should adopt a similarly granular approach. It should neither dismiss platform concerns as pretextual nor accept them uncritically. The relevant question is whether the mechanisms through which steering weakens protections—centralised fraud detection, subscription management, and dispute resolution—are substantive. The evidence indicates that they are.

The promise of ex ante regulation was clarity and predictability. Early experience under the Digital Markets Act points in the opposite direction: increased complexity, prolonged disputes, and unintended consequences.[39] Measures that appeared narrow have, in practice, expanded attack surfaces, degraded user experience, and shifted fraud losses from platforms to users without clear offsetting benefits.[40] Steering mandates risk producing similar effects. The CMA should focus not on whether these harms are possible—they are—but on whether the benefits of intervention outweigh the predictable security and fraud costs. That assessment should rest on evidence, not assumption.

Security and competition also interact through product differentiation. Many users choose iOS—and many Android users remain within Google Play Billing—because of the security, privacy, and curation these systems provide. As Randal Picker observes, the contrast between Apple’s integrated model and Google’s more open architecture reflects competition between business models, not its absence.[41] Platform-economics scholarship reaches the same conclusion. David Evans and Richard Schmalensee explain:

The full gamut of bad behavior that we encounter in society, as citizens, consumers and merchants, can happen on multisided platforms. Participants engage on offensive behavior (…). There is fraud and misrepresentation (…). Interactions become risky when platforms participants aren’t trustworthy (…). Platforms can deal with this problem by preventing low-quality entrants from joining. Steve Jobs was worried that the iPhone would attract low-quality apps that would decrease the value of the platform. Apple solved this by imposing quality control on the apps it would make available on its AppStore. This sort of quality control requires platforms to invest significant efforts into investigating participants and kicking out bad ones.[42]

Interventions that weaken these controls in the name of increasing steering uptake risk undermining a dimension of competition that users value. In a differentiated ecosystem, the objective should be to preserve user choice, not to homogenise platform design.

The empirical record on whether harms have ‘materialised’ remains limited because the relevant regimes are new. The mechanisms that generate those harms are well understood. Evidence from adjacent interventions, early DMA experience, and the literature on fraud and consumer protection all point in the same direction. The CMA should require clear, quantifiable evidence that the benefits of any steering intervention exceed its privacy, security, and fraud costs. It should not invert that burden by treating the absence of fully realised harms as evidence that risks do not exist.

V. Conclusion

The CMA considers steering interventions at a critical juncture. Its roadmaps commit the authority to ‘taking action’ in the first half of 2026, and the call for evidence seeks to build the record for that step. That decision should reflect caution, not momentum.

Three points follow.

First, the CMA should avoid rate-setting. As Section II shows, pricing information goods resists principled, administrable solutions. The SEP/FRAND analogy does not translate to the DMCC context. Experience in the EU illustrates the institutional costs of sustained rate disputes, and benchmarking does not indicate that current fees fall outside commercial norms. Moving into rate-setting would commit the CMA to a resource-intensive exercise with no clear endpoint.

Second, the CMA should approach design mandates with restraint. Section III shows that choice screens and disclosure requirements rarely shift behaviour in meaningful ways. The design features under review—side-by-side presentation, disclosure screens, parental gates, and attribution windows—serve legitimate informational, safety, and commercial functions. Removing or weakening them risks degrading informed consent, undermining child safety, and constraining product development. Static mandates also risk rapid obsolescence as AI-driven interfaces reshape how users discover and transact with apps. At a minimum, parental gates and related child-safety measures should remain outside the scope of any conduct requirements.

Third, the CMA should require clear evidence that steering does not impose privacy, security, and fraud costs. Section IV shows that the relevant regimes are new, but the mechanisms of harm are well understood. Steering shifts transactions out of platform infrastructures that provide fraud detection, subscription management, and dispute resolution at scale. Evidence from adjacent interventions—from interoperability mandates to early Digital Markets Act experience—shows that well-intentioned design changes can expand attack surfaces and shift risk onto users. The burden should rest on proponents of intervention to show that the benefits outweigh these costs.

A broader theme runs through these points. Competition in mobile ecosystems reflects differentiation as well as rivalry. Apple’s integrated model and Google’s more open architecture offer distinct trade-offs that users actively choose between. Regulatory interventions that push toward uniformity risk weakening that dimension of competition.

The intensity of rivalry between iOS and Android—now joined by AI-driven entrants—further narrows the case for intervention. Where competitive constraints are strong, the marginal benefits of regulation fall, while the risks of error rise. The DMCC grants the CMA substantial authority, but it also requires disciplined use of that authority. Decisions should rest on evidence, reflect institutional limits, and account for both intended and unintended effects.

The CMA should proceed accordingly.

 

[1] Competition & Mkts. Auth., Views Sought: Recent Developments in Relation to Apple’s and Google’s App Store Rules (Mar. 2026), https://assets.publishing.service.gov.uk/media/69cce7e0eafd66b876458b25/Call_for_evidence_.pdf [hereinafter Call for Evidence].

[2] Id. ¶ 22(a).

[3] See Geoffrey A. Manne, Dirk Auer & Mario A. Zúñiga, ICLE Comments to UK CMA on Competition in Mobile Ecosystems, Int’l Ctr. for L. & Econ. (12 Feb. 2025), https://laweconcenter.org/resources/icle-comments-to-uk-cma-on-competition-in-mobile-ecosystems; Geoffrey A. Manne, Dirk Auer & Mario A. Zúñiga, Comments of the International Center for Law & Economics on CMA’s Proposal to Designate Apple and Google with Strategic Market Status, Int’l Ctr. for L. & Econ. (20 Aug. 2025), https://laweconcenter.org/wp-content/uploads/2025/08/ICLE-CMA-Apple-Google-Designation-comments.pdf.

[4] Call for Evidence, supra note 1, ¶ 22(a)(i).

[5] See Call for Evidence, supra note 1, ¶ 15; Epic Games, Inc. v. Apple, Inc., No. 23-16234 (9th Cir. 11 Dec. 2025), at 41 (discussing a cost-based measure for commissions).

[6] Carl Shapiro & Hal R. Varian, Information Rules: A Strategic Guide to the Network Economy 3 (Harv. Bus. Sch. Press 1999) (‘Information is costly to produce but cheap to reproduce … cost-based pricing does not work: a 10 or 20 per cent markup on unit cost makes no sense when unit cost is zero.’).

[7] See, e.g., Jonathan M. Barnett, Has the Academy Led Patent Law Astray?, 32 Berkeley Tech. L.J. 1313 (2017); Anne Layne-Farrar, Moving Past the SEP RAND Obsession: Some Thoughts on the Economic Implications of Unilateral Commitments and the Complexities of Patent Licensing, 21 Geo. Mason L. Rev. 1093 (2014); Daniel F. Spulber, Patent Licensing and Bargaining with Innovative Complements and Substitutes, 70 Res. Econ. 693 (2016).

[8] Epic Games, Inc. v. Apple, Inc., No. 23-16234 (9th Cir. 11 Dec. 2025), at 41.

[9] Daniel G. Swanson & William J. Baumol, Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power, 73 Antitrust L.J. 1 (2005).

[10] Joseph Farrell, John Hayes, Carl Shapiro & Theresa Sullivan, Standard Setting, Patents, and Hold-Up, 74 Antitrust L.J. 603 (2007).

[11] Press Release, Eur. Comm’n, Commission Finds Apple’s App Store Rules Breach Digital Markets Act (23 Apr. 2025), https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1085.

[12] See Apple, Communication and Promotion of Offers on the App Store in the EU (last visited 21 Apr. 2026), https://developer.apple.com/news/?id=communication-and-promotion-of-offers-on-the-app-store-in-the-eu.

[13] See 1D3, Platform Fees in the Videogame Industry (13 Nov. 2024), https://1d3.com/platform-fees; see also Press Release, Steam, New Revenue Share Tiers and Other Updates to the Steam Distribution Agreement (30 Nov. 2018), https://steamcommunity.com/games/593110/announcements/detail/1697191267930157838 (30 per cent commission on gross revenue, falling to 25 per cent after $10 million and 20 per cent after $50 million per title); Amazon, Selling on Amazon Fee Schedule (last visited 21 Apr. 2026), https://sell.amazon.com/pricing (referral fees range from 8 per cent to 45 per cent, with most digital-adjacent categories at 15 per cent); Scott Sage, How Much Does Booking.com Charge Hosts?, AirDNA (4 Aug. 2024), https://www.airdna.co/blog/bookingcom-charges-for-owners (typical hotel commissions of 10 per cent to 25 per cent). These negotiated fee structures among sophisticated parties provide a conservative benchmark for assessing whether app-store commissions fall outside ordinary commercial norms.

[14] Call for Evidence, supra note 1, ¶¶ 5–7.

[15] Ernst & Young & Copenhagen Econ., Study on the Application of the Interchange Fee Regulation (2020), https://www.copenhageneconomics.com/dyn/resources/Publication/publicationPDF/9/559/1583763875/copenhagen-economics_march_ifr-report.pdf.

[16] Li Zhuoxin & Wang Gang, Regulating Powerful Platform: Evidence From Commission Cap Fees, 36 Info. Sys. Res. 126 (2025), https://pubsonline.informs.org/doi/10.1287/isre.2022.0191 (finding that, in regulated cities, consumers face higher delivery fees and longer wait times as platforms recoup lost commission revenue through other channels).

[17] Call for Evidence, supra note 1, ¶ 21 (acknowledging that ‘smaller developers, which often do not pay the highest commission rates, make up a large proportion of the UK developer base’).

[18] Call for Evidence, supra note 1, ¶¶ 13–18.

[19] See ICLE Mobile Ecosystems Comments, supra note 3, at 10–12 (documenting that browser and search-engine choice screens in the EU failed to shift user behaviour).

[20] Geoffrey A. Manne, A Critical Analysis of the Google Search Antitrust Decision, Int’l Ctr. for L. & Econ. (14 Aug. 2024), at 16–17, https://laweconcenter.org/wp-content/uploads/2024/08/Manne-Google-Search-Decision-Analysis-2024-08-14.pdf (references omitted).

[21] Id. at 16–17.

[22] Id. at 17.

[23] Call for Evidence, supra note 1, ¶ 13(a).

[24] See Online Safety Act 2023, c. 50 (UK); Information Comm’r’s Off., Age-Appropriate Design Code (2020); see also Org. for Econ. Co-operation & Dev., Children in the Digital Environment: Revised Typology of Risks (2021) (documenting harms from unsupervised digital transactions by minors).

[25] Call for Evidence, supra note 1, ¶ 13(b).

[26] See ICLE Designation Comments, supra note 3, at 13–15 (discussing AI integration and the risk that static regulatory mandates ossify platform design amid rapid technological change).

[27] Call for Evidence, supra note 1, ¶ 22(a)(iii).

[28] See, e.g., ICLE Mobile Ecosystems Comments, supra note 3; ICLE Designation Comments, supra note 3.

[29] See Apple, App Store Prevented More than $9 Billion in Fraudulent Transactions (May 2025), https://www.apple.com/newsroom/2025/05/the-app-store-prevented-more-than-9-billion-usd-in-fraudulent-transactions (reporting $2 billion in blocked fraudulent transactions in 2024, termination of 146,000 developer accounts for fraud, and identification of 4.7 million stolen credit cards).

[30] Suzanne Frey, A New Layer of Security for Certified Android Devices, Android Devs. Blog (25 Aug. 2025), https://android-developers.googleblog.com/2025/08/elevating-android-security.html.

[31] Geoffrey A. Manne, Dirk Auer & Mario Zúñiga, Comments of ICLE to Commission Consultation on Proposed Measures for Interoperability Between Apple’s iOS Operating System and Connected Devices, Int’l Ctr. for L. & Econ. (8 Jan. 2025), at 8, https://laweconcenter.org/resources/comments-of-icle-to-commission-consultation-on-proposed-measures-for-interoperability-between-apples-ios-operating-system-and-connected-devices-dma-100203 [hereinafter ICLE Interoperability Comments] (citing Josephine Wolff, Software Crash Exposes Tensions Between Security and Competition, Fin. Times (28 Jul. 2024), https://www.ft.com/content/60dde560-194a-40d1-8c98-1d96d6d019a0). Both measures—interoperability mandates and requirements to allow sideloading or steering—require platforms to share information or open systems, thereby reducing platform control over security and system integrity.

[32] Adam Satariano et al., Outage for Microsoft Users Knocks Out Systems for Airlines and Hospitals in Chaotic Day, N.Y. Times (19 Jul. 2024), https://www.nytimes.com/live/2024/07/19/business/global-tech-outage.

[33] Auth. for Consumers & Mkts., ACM: Apple Changes Unfair Conditions, Allows Alternative Payment Methods in Dating Apps (11 Jun. 2022), https://www.acm.nl/en/publications/acm-apple-changes-unfair-conditions-allows-alternative-payments-methods-dating-apps.

[34] See NL Times, Dutch Banks Worried About Rise in Dating App Scams; Victims’ Average Loss €25,000 (25 Nov. 2024), https://nltimes.nl/2024/11/25/dutch-banks-worried-rise-dating-app-scams-victims-average-loss-eu25000 (reporting that, in 2024, more than 160 victims came forward—nearly a 25 per cent increase over 2023—with average losses of €25,000; noting also that, in Oct. 2025, authorities arrested two individuals in Utrecht for defrauding 26 victims of €550,000). The Dutch ACM’s alternative-payment mandate for dating apps preceded these developments; while causation is not established, the temporal correlation is notable.

[35] See Bilaal Rashid, What Apple Is Afraid of — Pre-DMA Alternative iOS App Stores Are Already Riddled with Malware, Netcraft (6 Mar. 2024), https://www.netcraft.com/blog/apple-dma-app-store-malware-review.

[36] See Umar Sayibu et al., Fraud Prediction and Prevention in Mobile Money Payment Systems: A Systematic Literature Review of Text-Based Detection Methods, Sec. & Commc’n Networks 1 (2025), https://onlinelibrary.wiley.com/doi/10.1155/sec/8913715 (finding that 70 per cent of mobile payment fraud follows SMS and phishing vectors).

[37] Daji Landis, Elettra Bietti & Sunoo Park, SoK: ‘Interoperability vs Security’ Arguments: A Technical Framework (2026) (unpublished manuscript), https://arxiv.org/abs/2502.04538.

[38] Id. at 8–12 (categorising security claims into ‘security engineering concerns’, ‘security vetting concerns’, and ‘hybrid concerns’, and noting that the framework aims to identify ‘where security and interoperability are and are not in tension’).

 [39] See Satya Marar, Brightline Rules and Case-by-Case Courts: The DMA and Epic v Apple, Truth on the Mkt. (2 Feb. 2026), https://truthonthemarket.com/2026/02/02/brightline-rules-and-case-by-case-courts-the-dma-and-epic-v-apple; see also 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.

[40] See Selçukhan Ünekbas & Lazar Radic, Implementing the EU’s Digital Markets Act: The Seen and the Unseen, Truth on the Mkt. (25 June 2025), https://truthonthemarket.com/2025/06/25/implementing-the-eus-digital-markets-act-the-seen-and-the-unseen.

[41] Randal C. Picker, Security Competition and App Stores, Network L. Rev. (2024), https://www.networklawreview.org/picker-app-stores.

[42] David S. Evans & Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms 138–39 (2016).

INTEREST OF AMICI CURIAE[1]

The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy. ICLE promotes using law and economics methodologies and economic learning to inform policy and has expertise evaluating antitrust law and policy.

ICLE has an interest in ensuring that antitrust law promotes the public interest by remaining grounded in rules informed by sound economic analysis.

Professor Thomas A. Lambert is the Wall Chair in Corporate Law and Governance at the University of Missouri, School of Law, a recognized antitrust scholar, and an academic affiliate of ICLE.

PRELIMINARY STATEMENT

The First Amended Class Action Complaint (“FAC”) by named plaintiff Reading Hospital (“Reading”) against defendant Hill-Rom Holdings, et. al. (“Hill-Rom”) is remarkably unspecific. Reading complains about “corporate enterprise agreements” (“CEAs”) between Hill-Rom and various “integrated delivery networks” (“IDNs”), which are health systems that own or manage multiple hospitals. The IDN with which Reading is affiliated, Tower Health, is a party to one of those CEAs, so Reading surely knows what the agreements entail.

Despite that fact, Reading alleges little about the specific content of the CEAs it is challenging. The FAC avers that the challenged agreements required or encouraged IDN members to buy all or most of their requirements of three types of hospital beds (standard, ICU, and birthing beds) from Hill-Rom rather than from its two leading competitors, Stryker and Linet, both of which produce all three types of beds and compete to secure their own multi-product supply agreements with IDNs. But the FAC alleges nothing about the precise nature of the CEAs’ requirements or incentives, instead referring vaguely to “exclusive dealing” provisions, rebates conditioned on hitting purchase targets (“loyalty rebates”), and discounts for buying multiple separate products from Hill-Rom (“bundled discounts”).

Regardless of whether the FAC is challenging exclusive dealing arrangements, loyalty rebates, bundled discounts, or some combination of the three, it is legally deficient. Because all three practices are often procompetitive—with loyalty rebates and bundled discounts providing an immediate benefit to consumers in the form of lower prices—courts condemn them only when the factual prerequisites to anticompetitive harm are satisfied. For exclusive dealing, the challenged arrangements must foreclose rivals from a large enough proportion of available sales opportunities to hold them below “minimum efficient scale” (“MES”)—i.e., the output level at which all economies of scale (i.e., per-unit cost-savings that result simply from producing more units) are exhausted. Absent such “substantial foreclosure,” an exclusive dealing contract may disadvantage a competitor (by causing it to lose business) but does not injure competition itself (by rendering rivals less efficient and thus less formidable). Loyalty rebates harm competition only if they result in a below-cost price that could drive an equally efficient, but less deep-pocketed, rival from the market. Bundled discounts can cause competitive harm only if they result in a below-cost price for the bundle or include products that the discounter’s rivals do not produce so that they could not match the entire dollar amount of the bundled discount on their own bundles.

Because the FAC does not allege substantial foreclosure that would hold Hill-Rom’s rivals below MES, below-cost pricing on any of Hill-Rom’s products, or a lack of product diversification on the part of Hill-Rom’s rivals so that they could not offer competitive bundled discounts, it does not plead any harm to competition itself. To prevent the Third Circuit from becoming a mecca for antitrust strike suits, this Court should reject plaintiffs’ attempt to saddle defendants with burdensome discovery obligations on the basis of threadbare allegations that do not aver competitive harm. It should affirm the district court’s order dismissing plaintiffs’ complaint with prejudice.

ARGUMENT

I.          Plaintiffs Have Not Alleged Anticompetitive Exclusive Dealing

a.    Exclusive Dealing Is Usually Procompetitive and Injures Market Competition Only In a Narrow Set of Circumstances.

“Exclusive dealing” refers to an arrangement under which two parties agree to do business exclusively with one another for a period of time. Such contracts are often “of economic advantage to buyers as well as to sellers, and thus indirectly of advantage to the consuming public.” Standard Oil Co v. United States, 337 U.S. 293, 306 (1949). They are ubiquitous, and prohibited only if “competition has been foreclosed in a substantial share of the line of commerce affected.” Id. at 314. Standard Oil held that the government could challenge exclusive contracts if their effect “may be to substantially lessen competition.” Id. at 302. But the Court later held that private parties must do more. They must be able to show that “the contract will foreclose competition in a substantial share of the line of commerce affected” based on “facts peculiar to the case.” Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961).

This test reflects the prevalence of exclusive dealing in highly competitive markets where such arrangements strengthen competition and increase output. One way they do so is by eliminating “interbrand free riding.” To win sales, producers seek to make their offerings more attractive, often by investing in their distributors. A gasoline manufacturer, for example, may boost sales by providing retailers with attractive signage, good lighting, and free customer items (e.g., roadmaps). If those retailers also carried gasoline from a rival that made no comparable investments (and thus faced lower costs and could charge lower wholesale prices), some of the investing producer’s gains would accrue to that rival. By ensuring that distributor investments do not benefit competitors, exclusive dealing can encourage output-enhancing, consumer-friendly investments. See generally Howard P. Marvel, Exclusive Dealing, 25 J. L. & Econ. 1, 6–11 (1982); Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice 440 (3d ed. 2005).

Exclusive dealing may also benefit consumers by intensifying competition for distribution. To secure exclusivity and the resulting increase in sales, producers often reduce wholesale prices. Retail competition then tends to pass those savings on to consumers as lower retail prices, which can outweigh any loss from reduced product variety and produce net consumer benefits. See generally Benjamin Klein & Kevin M. Murphy, Exclusive Dealing Intensifies Competition for Distribution, 75 Antitrust L. J. 433 (2008).

Even early enforcement decisions like Standard Oil recognized that exclusive dealing can further enhance output by “assur[ing] supply, afford[ing] protection against rises in price, enabl[ing] long-term planning… and obviat[ing] the expense and risk of storage.” Standard Oil, 337 U.S. at 306. A gasoline retailer, for instance, may want adequate inventory for peak summer demand. Committing in advance to a fixed quantity risks either surplus or shortage. A requirements contract—under which the retailer agrees to buy all its needs from one supplier in exchange for guaranteed supply—may minimize those risks. See id.

On the producer side, exclusive dealing reduces uncertainty by securing a more “predictable market.” Id. at 306-07.  By improving demand forecasts, such arrangements can encourage producers to expand capacity. See generally Hovenkamp, supra, at 440.

Because of these benefits, exclusive dealing can be anticompetitive only when they substantially foreclose competition on metrics relevant to the line of commerce and facts of a particular industry. Tampa, 365 U.S. at 327. Most industries exhibit economies of scale, meaning that average costs decline as output rises—up to a point. Beyond that point, diminishing returns cause average costs to increase. The lowest output level at which scale economies are exhausted is the industry’s MES. See Robert S. Pindyck & Daniel S. Rubinfeld, Microeconomics 237 (6th ed. 2008); Hal R. Varian, Intermediate Economics 428 (1987). To compete most effectively, firms must reach that level of output.

In certain cases exclusive dealing by a dominant rival can prevent them from doing so. Because expansion requires access to buyers, a dominant firm can restrict rivals’ growth by locking up distribution outlets. If foreclosure is sufficiently substantial, rivals may be unable to reach MES. See generally Joshua D. Wright, Moving Beyond Naïve Foreclosure Analysis, 19 Geo. Mason L. Rev. 1163, 1166–71 (2012).The economic results—reduced output and higher prices—can injure competition, not just competitors, where three conditions are present.

First, foreclosure must be substantial enough to push rivals below MES. Id. at 1166. Second, rivals must lack practical alternatives, such as competing for their own exclusive or direct distribution contracts. Third, barriers to entry into the producer’s market must be so significant that new firms cannot enter in response to supracompetitive pricing.

Given the many procompetitive benefits of exclusive dealing it is unsurprising that empirical studies generally find that these conditions are rarely satisfied, and that exclusive dealing enhances rather than reduces competition. See Jan B. Heide et. al., Exclusive Dealing and Business Efficiency, 41 J. L. & Econ. 387 (1998) (finding that “firms are more likely to use exclusive dealing when there is a potential that other manufacturers can free ride on the services they provide” and that “when manufacturers are concerned about the costs that exclusive dealing imposes on end customers, such arrangements are less likely”); Tim R. Sass, The Competitive Effects of Exclusive Dealing, 23 Int’l J. Indus. Org. 203 (2005) (concluding that exclusive dealing in the beer market increases market output); James C. Cooper et. al., Vertical Antitrust Policy as a Problem of Inference, 23 Int’l J. Indus. Org. 639, 658 (2005) (observing that although “some studies find evidence consistent with both pro- and anticompetitive effects . . . virtually no studies claim to have identified instances where vertical practices were likely to have harmed competition”); Francine Lafontaine & Margaret Slade, Exclusive Contracts and Vertical Restraints, in Handbook of Antitrust Economics 391, 409 (2008) (“[I]t appears that when manufacturers choose to impose restraints, not only do they make themselves better off but they also typically allow consumers to benefit from higher quality products and better service provision”); Daniel O’Brien, The Antitrust Treatment of Vertical Restraints, in The Pros and Cons of Vertical Restraints 40, 76 (2008) (observing that “with few exceptions, the literature does not support the view that [vertical restraints] are used for anticompetitive reasons”).

b.    Reflecting Economic Learning, Supreme Court Precedent Requires Substantial Foreclosure as a Necessary, Though Insufficient, Condition for Exclusive Dealing Liability.

Because (1) procompetitive uses of exclusive dealing are quite common, (2) anticompetitive harm from exclusive dealing can occur only under rare conditions, and (3) most instances of exclusive dealing enhance market output, courts impose a “qualitative foreclosure” test for assessing the legality of such arrangements. They typically start by assessing the percentage of sales opportunities in the relevant geographic and product market the challenged deal has foreclosed to the defendant’s rivals. Tampa, 365 U.S. at 327-29. But the analysis is not merely quantitative. See Jonathan M. Jacobson, Exclusive Dealing, “Foreclosure,” and Consumer Harm, 70 ANTITRUST L.J. 311, 322 (2002) (explaining why governing standard is qualitative foreclosure). As Tampa explains:

“To determine substantiality [of market foreclosure] in a given case, it is necessary to weigh the probable effect of the contract on the relevant area of effective competition, taking into account the relative strength of the parties, the proportionate volume of commerce involved in relation to the total volume of commerce in the relevant market area, and the probable immediate and future effects which preemption of that share of the market might have on effective competition therein.”

Tampa Electric, 365 U.S. at 329 (emphasis added).[2]

Tampa’s effects-based, qualitative foreclosure approach properly reflects economic insights about exclusive dealing’s ability to enhance market output even when it forecloses some sales opportunities for a defendant’s rivals. The Court’s emphasis on the competitive effects of foreclosure requires an assessment of whether the challenged arrangement occasioned an actual change in market output—i.e., a significant change in the total number of units sold, their quality, or the prices charged. If the evidence on that question is indeterminate, courts should then consider:

• what is minimum efficient scale in the industry at issue, and whether the foreclosure occasioned by the arrangement threatens to drive or hold a rival below that level of output;
• the likelihood that the challenged arrangement creates procompetitive benefits by reducing interbrand free-riding, intensifying competition for distribution, or cutting costs or otherwise enhancing output by guaranteeing demand for producers or supply for distributors; and
• barriers to entering the relevant markets.

To state a claim for anticompetitive exclusive dealing, a plaintiff must plead the above or other facts that, taken as true, show that the challenged arrangements actually caused market foreclosure substantial enough to hold the defendants’ rivals below MES or otherwise prevent them from continuing to supply output to the relevant markets.

c.     Plaintiffs Have Not Alleged the Factual Prerequisites to Anticompetitive Harm from Exclusive Dealing.

Given that economically informed pleading requirement, plaintiffs’ FAC is deficient. A well pled exclusive dealing complaint should allege that the challenged agreements would result in a degree of market foreclosure sufficient to hold the defendants’ rivals below MES and that they have consequently been forced out of the market for the output consumers want (here, hospital beds). Yet the FAC says nothing about MES. It provides a conclusory allegation that competitors were deprived of scale but does not allege that the challenged agreements have driven those competitors below MES, much less in ways that have substantially foreclosed them from continuing to offer competitive output. Instead, it admits that these competitors have continued to supply beds in the decade since the challenged agreements were first used.

For this and other reasons the district court noted, the “Plaintiff does not plead facts regarding the necessary degree of foreclosure.” Mem. Op. at 16. Plaintiff says the allegedly exclusive contracts (CEAs) substantially foreclose competition, but “Plaintiff does not attach, quote, or otherwise reference anything from the CEA” to support this conclusion. Id. at 19. That is particularly true because the FAC “is noticeably absent of any allegation that Plaintiff itself has entered into a CEA with Defendants.” Id. at n.2. This point alone makes this case fundamentally different from Tampa and Standard Oil. And the FAC’s failure to allege how CEAs deprived other hospitals of the opportunity to choose among competing suppliers for each contract cycle makes this case fundamentally different from LePage’s and all the other well-pled exclusive dealing cases Plaintiff cites. Indeed, the FAC here admits that hospitals continue to have the same choice of suppliers they have always had, and that those suppliers compete for exclusive contract cycles because they are efficient for hospitals given the installation and training costs associated with the line of commerce (smart beds). These allegations confirm that this case does not allege the actual economic and anticompetitive effects the law requires to state an antitrust claim for exclusive dealing.

The district court correctly found these and other pleading defects fatal to this case. “The share of the market that has allegedly been foreclosed is a major component of a finding of substantial foreclosure.” Mem. Op. at 16. And even where substantial foreclosure is adequately pled, a plaintiff must relate it to consumer harm in the form of reduced output or higher prices caused by the allegedly unlawful terms of the exclusive arrangement. The FAC does neither. It alleges that the deals caused price inflation, but it does not cite any contract or market prices at all, much less tie them to any exclusivity provisions. Instead, plaintiff admits it was not forced to sign any exclusive deal and admits that the other hospitals it purports to represent still have the same choice of bed suppliers they had before the exclusive dealing began over a decade ago. The FAC thus fails to plead any of the economic facts required to challenge exclusive deals under the Supreme Court cases above.

d.    Plaintiffs’ Allegations Suggest Procompetitive Rationales for the Alleged Exclusive Dealing.

The pleading failures above are not surprising, because the FAC describes economic reasons for the allegedly exclusive CEAs that would make them procompetitive for the line of commerce and industry at issue. As discussed above, it is widely recognized that exclusive dealing agreements can provide for supply stability and can mitigate the costs of uncertainty across market fluctuations, to the extent that the agreements increase a seller’s incentive to meet a customer’s requirements fully, and on a reliable basis. See Jacobson, Exclusive Dealing, supra, at 359. The FAC itself describes such conditions that would benefit from exclusive agreements. For example, it cites high, rising, and volatile input costs: “To manufacture hospital beds, new entrants need to purchase commodities such as aluminum and steel that are subject to significant volatility. Similarly, hospital bed manufacturing increasingly requires chips and sensors, which have been subject to shortages that have led to rising prices throughout the country.” FAC at 20-21. The FAC characterizes these uncertainties as entry barriers, but uncertainty about the price and availability of key production inputs is a challenge—and a cost—for any incumbent manufacturer of the relevant hospital beds. And “episodic rather than smooth demand” for hospital beds, FAC ¶ 30, confounds planning for the consumers of hospital beds—hospitals, hospital systems, and other health care providers—as well as producers. Both upstream and downstream exclusive dealing agreements can mitigate these costs in ways beneficial to the manufacturers and the IDNs, GPOs, and health care providers with whom they contract. That is a straightforward—and legitimate—business rationale for both parties to an exclusive dealing contract regarding the supply of hospital beds.

Such inconsistencies on both the supply side and the demand side can exacerbate stock inconsistencies as well; and it is understood that exclusive dealing arrangements can reduce stock inconsistencies associated with multiple product lines and myriad SKUs. That is, streamlined stocks and supply chains may be a significant advantage to hospitals, even as a wide range of product choices may be desirable at the time of contracting. See id. at 357 (citing Joyce Beverages, Inc. v. Royal Crown Cola Co., 555 F. Supp. 271, 276 (S.D.N.Y. 1983)). Moreover, the FAC acknowledges that IDNs, such as Tower Health, “naturally prefer to standardize,” their agreements, and that the “promise of future low prices” encourages IDNs (not manufacturers) “to force its individual hospitals to stick to the agreement.” Appx94-95, 118, 120 ¶¶ 70, 178, 181. Again, these are demand-side pressures on manufacturers, such as Hil-Rom, to enter into exclusive arrangements with IDNs. They do not suggest that such agreements result from anticompetitive exploitation of manufacturer market power rather than efficient, procompetitive arrangements.

The FAC also alleges that the importance of product support in hospital bed markets should be seen as a barrier to entry. For example, “U.S. hospital customers demand that suppliers have a local sales and service organization in order to provide dedicated sales support, as well as in-service training, education, and clinical support specific to the U.S. health care industry.” FAC at ¶ 24. Perhaps, but the demand for such services is a demand-side pressures on manufacturers, such as Hil-Rom, Stryker, and Linet, as is the risk that competitors might free-ride on a manufacturer’s investments in such support services, Jacobson, Exclusive Dealing, supra, at 312. Exclusive dealing agreements can mitigate the risk of inter-brand free riding and thus enhance incentives for the investments required to meet such demands. Id.

II.          Plaintiffs Have Not Stated a Claim Based on Hill-Rom’s Agreements to Provide Discounts for Meeting Purchase Targets.

While plaintiffs focus primarily on Hill-Rom’s alleged exclusive dealing agreements (without identifying the agreements’ precise terms), they also suggest that Hill-Rom has used conditional price cuts to exclude its rivals, impairing market competition. The Complaint alleges that Hill-Rom’s CEAs “ensur[e] that an IDN cannot achieve its maximum rebate unless the hospitals in the system purchase effectively all of their requirements for the Relevant Products from Hill-Rom.” Cmplt. ¶ 172 (emphasis added). It also refers to purchase thresholds of 80-90% of a hospital’s requirements. Id. at ¶ 160. The Complaint thus suggests (again, with no specificity) that Hill-Rom is using “loyalty rebates”—price cuts conditioned upon meeting purchase targets on individual products—to foreclose its rivals from sales opportunities. Elsewhere, the Complaint alleges that Hill-Rom offers IDNs “bundled discounts”—discounts conditioned on buying a package of different products—to exclude less diversified rivals.[3]

Although both loyalty rebates and bundled discounts may be anticompetitive in certain circumstances, they are not inevitably so. And they always entail immediate consumer benefit in the form of lower prices. To ensure that antitrust law does not chill consumer-friendly discounting without justification, courts wisely limit antitrust liability based on loyalty rebates and bundled discounts to situations in which the factual prerequisites to anticompetitive harm exist. Because plaintiffs have not alleged such factual prerequisites here, they have failed to state an antitrust claim on the basis of either loyalty rebates or bundled discounts.

a.    Plaintiffs Have Not Alleged the Below-Cost Pricing Required to Establish Actionable Loyalty Rebates.

For single-product loyalty rebates—e.g., “we will provide a 20% rebate on all your purchases of standard hospital beds if you purchase at least 80% of your standard bed requirements from us”—there can be no harm to competition unless the discounted price is below the discounter’s cost. A loyalty rebate resulting in a below-cost price may harm competition by winning business from, and perhaps driving from the market, a rival that is as efficient as the discounter but does not have the reserves required to endure losses from below-cost pricing. But if the loyalty rebate results in an above-cost price, any equally efficient rival could match it by cutting its profit margin while still charging a sustainable price. See Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 768 (3d ed. 2008) (“For single-item discounts, no matter how measured or aggregated, exclusion of an equally efficient rival seems implausible, provided that the fully discounted price remains above the seller’s cost.”). Any rival excluded by an above-cost loyalty rebate, then, would be either less efficient than the discounter or less willing to lower its price to a sustainable, though less profitable, level. Winning business from a less efficient or less aggressive rival by enhancing the benefits offered to consumers is hardly anticompetitive; it is the essence of price competition. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986) (“[C]utting prices in order to increase business often is the very essence of competition.”).

The Supreme Court has thus limited antitrust liability for simple price cuts to those that result in below-cost prices that an equally efficient rival could not sustainably match. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222 (1993) (“[A] plaintiff seeking to establish competitive injury resulting from a rival’s low prices must prove that the prices complained of are below an appropriate measure of its rival’s costs.”); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990) (“Low prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition.”). The Circuit Courts—including this Court—have extended that holding to rebates conditioned on meeting single-product purchase targets. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 274 n. 11 (3d Cir. 2012) (“[W]e join our sister circuits in holding that the price-cost test applies to market share or volume rebates offered by suppliers in a single-product market.”) (citing NicSand, Inc. v. 3M Co., 507 F.3d 442, 452 (6th Cir. 2007); Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1061 (8th Cir. 2000); Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 236 (1st Cir. 1983)).

Although plaintiffs’ complaint does appear to allege some sort of loyalty rebate (albeit with no specificity), it never alleges that the post-rebate price on any product was below Hill-Rom’s cost. Accordingly, the complaint does not state an antitrust claim arising from loyalty rebates.

b.    Plaintiffs Have Not Alleged Actionable Bundled Discounts Because They Have Not Identified Less Diversified Rivals that Are Plausibly Excluded By Hill-Rom’s Discount Arrangements.

While below-cost pricing is not a prerequisite to anticompetitive harm from a bundled discount, no such harm can result when (1) the discounted bundle price is non-predatory in that it exceeds the aggregate cost of the items in the bundle (i.e., the discount is an “above-cost bundled discount”), and (2) the discounter’s rivals can offer all the products in the discounted bundle and can thus, if equally efficient, match the discounted price without pricing below cost. Because plaintiffs have not alleged either that Hill-Rom’s bundled discounts resulted in below-cost pricing or that its identified rivals could not replicate its bundle, plaintiffs have failed to state an antitrust claim based on Hill-Rom’s bundled discounts. Indeed, plaintiffs have not plead any facts about the product bundle that Hil-Rom is alleged to have offered or any other product bundle in the industry.

Admittedly, an above-cost bundled discount may exclude an equally efficient, aggressive rival in one line of commerce if the rival cannot offer a comparable bundle, and must therefore price its more limited offerings below cost to match the discount on the bundle. That is the situation the LePage’s plaintiff pled with supporting facts about the bundled items and prices at issue, but this case does not plead at all. Instead, the FAC admits the challenged bundles do not result in below cost pricing on the defendants’ beds (the relevant lines of commerce here). Nor does it plead any facts showing that the defendants’ bundles require rivals to price their beds below cost because they cannot offer comparable bundled discounts.

Nor does the FAC plead the practical (non-price) foreclosure the Third Circuit addressed in rejecting a safe harbor for above-cost bundled discounts in LePage’s Inc. v. 3M, 324 F.3d 141 (3rd Cir. 2003) (en banc). The plaintiff in that case, LePage’s, produced private label transparent tape. It complained of bundled discounts offered by 3M, which produced branded “Scotch” tape, private label transparent tape, and a number of other products. 3M offered retailers rebate programs conditioned upon meeting purchase targets across multiple 3M lines of commerce beyond transparent tape. Id. at 154. LePage’s alleged that 3M’s bundled discounts were anticompetitive because they induced retailers to eliminate LePage’s as a supplier so that they could meet 3M’s purchase target for private label tape and thereby qualify for rebates on purchases from a number of 3M product lines. Id. at 160-61. A jury found that LePage’s had established illegal monopolization, but a divided panel of this Court reversed on the ground that LePage’s “did not even attempt to show that it could not compete by calculating the discount that it would have had to provide in order to match the discounts offered by 3M through its bundled rebates.” LePage’s Inc. v. 3M, 2002 WL 46961, at *9 (3rd Cir. Jan. 14, 2002). On rehearing en banc, this Court reinstated the jury verdict in favor of LePage’s on grounds the FAC does not plead here. LePage’s, 324 F.3d at 164-66.

The en banc Court first emphasized that the principal anticompetitive danger of bundled discounts is that they can disadvantage competitors that sell narrower product lines and therefore could only compete by offering discounts so deep they cannot stay in the marketplace. Id. at 155. Once LePage’s showed that the bundle 3M’s customers had to buy to secure the discounts included product lines that LePage’s could not offer and that this fact made it difficult for LePage’s to compete with 3M, the burden shifted to 3M to prove that its bundled discounts were “justified” by cost savings of some sort. Id. at 163-64. Because 3M failed to prove that selling its products in a bundled fashion reduced cost by an amount equal to or exceeding the discount, its bundled discounts were deemed unjustified and thus exclusionary. Id. at 164. LePage’s thus holds that (1) bundled discounts may be exclusionary if the discounter is bundling product lines its rivals do not produce and foreclosing those rivals from competing, but (2) the presumption may be rebutted if the discounter proves a “business reasons justification” for the bundled discounts, meaning that the bundling saves costs in excess of the total discount.

LePage’s has been limited to its facts in this circuit and generated a great deal of critical commentary in other circuits and among antitrust scholars. See, e.g., In re Epi Pen, 44 F.4^th 959, 991-1000 (10th Cir. 2022); Collins Inkjet Corp. v. Eastman Kodak Co., 781 F.3d 264, 273-74 (6th Cir. 2015); Cascade Health Sols. v. PeaceHealth, 515 F.3d 883 (9th Cir. 2009); FTC v. Church & Dwight Co., Inc., 665 F.3d 1312, 1316–17 (D.C. Cir. 2011);^[4] Thomas A. Lambert, Evaluating Bundled Discounts, 89 Minn. L. Rev. 1688, 1722-26 (2005); Daniel L. Rubinfeld, 3M’s Bundled Rebates: An Economic Perspective, 72 U. Chi. L. Rev. 243, 254–56, 262–64 (2005); Daniel A. Crane, Multiproduct Discounting: A Myth of Non-Price Predation, 72 U. Chi. L. Rev. 27 (2005); Gary P. Zanfagna, LePage’s v. 3M: A Reality Check, Antitrust Source 1 (Nov. 2004) (“The Third Circuit en banc decision in LePage’s is a giant step backwards in Section 2 jurisprudence.”). A primary criticism is that, by eschewing consideration of the relative efficiency of a complaining rival and focusing solely on product line breadth, it can enable inefficient but less diversified competitors to block consumer-friendly discounts or even recover treble damages based upon them thus punishing suppliers who offer customers the best prices and most varied or innovative products. Indeed, one of the expert economists hired by LePage’s admitted that LePage’s—which walked away with more than $68 million in damages—was a less efficient producer of transparent tape than 3M. LePage’s, 324 F.3d at 177 (Greenberg, J., dissenting). Given that LePage’s may prop up less efficient rivals at the expense of consumers, other courts have declined to follow it. See, e.g., Cascade, 515 F.3d at 899-900 (9^th Cir. 2008); see also EpiPen, Collins, and Church, supra.

Even under LePage’s, however, the plaintiffs here have not alleged actionable bundled discounts. The LePage’s Court emphasized that “[t]he principal anticompetitive effect of bundled rebates as offered by 3M is that when offered by a monopolist they may foreclose portions of the market to a potential competitor who does not manufacture an equally diverse group of products and who therefore cannot make a comparable offer.” Id. at 155 (emphasis added). If a bundled discount does not result in bundled price that is below the aggregate cost of the items in a bundle (a situation that might trigger liability for predatory pricing under Brooke Group), then it can harm competition only if it excludes a less diversified rival. A rival that produces all the bundled product lines or some comparable array of products could match any above-cost bundled discount if it were as efficient as the discounter, and antitrust law should not intervene to protect less efficient rivals or those that are equally efficient but unwilling to reduce their profit margin to win business from discounters. For this reason, this Court has restricted liability under LePage’s to above-cost bundled discounts that exclude less diversified rivals where plaintiffs plead (and ultimately prove) that they are substantially foreclosed from competition by exclusivity terms with offsetting efficiencies. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 274 n. 11 (“The reasoning of LePage’s is limited to cases in which a single-product producer is excluded through a bundled rebate program offered by a producer of multiple products, which conditions the rebates on purchases across multiple different product lines.”). Where, as here, the defendant’s rivals produce all of the relevant lines of commerce, see Cmplt. ¶¶ 36, 52, 68 (alleging that defendant Hill-Rom’s chief rivals produce the standard, ICU, and birthing beds at issue in this case), there can be no liability for bundled discounting absent facts that show the defendant has bundled the relevant product lines with other lines for which rivals have no comparable offerings and thus can only compete by offering unsustainable below-cost prices on the relevant products. The FAC does not allege any such facts here. It alleges no prices or bundle components at all. It also alleges no facts about what bundles or discounts Hill-Rom offers and how they compare to rival bundles and discounts. Nor does it allege any facts showing that Hill-Rom’s bundles involve discounts that rival bed makers can match only by pricing their beds below-cost. Instead, the FAC admits that rivals continue to offer all relevant bed product lines to customers now, and that these rivals include Stryker—one of the largest medical suppliers in the world with product lines far beyond what Hill-Rom offers. See Stryker Corp., Annual Report (Form 10-K), at 1 (Feb. 11, 2026). The district court was therefore correct in concluding that “this set of facts does not fit into the limited scope of the [Court’s] opinion in LePage’s.” Mem. Op. at 18.

Amici supporting the plaintiffs contend otherwise. They read ZF Meritor as instructing that an exclusionary effect on a less diversified rival is a sufficient, not a necessary, condition for liability under LePage’s. Brief of Amicus Curiae American Antitrust Institute in Support of Appellant (“AAI Brief”) at 9 n. 4 (“ZF Meritor may have been suggesting that a single-product rival is sufficient to impose liability under LePage’s, but it was not suggesting that it is necessary.”). They also maintain that an excluded rival need not be a single-product producer in order to impose liability for above-cost bundled discounting because LePage’s itself produced multiple products, as did the plaintiff in SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056 (3rd Cir. 1978), another Third Circuit decision condemning bundled discounts. AAI Brief at 9, n. 4; Brief of Committee to Support the Antitrust Laws as Amicus Curiae in Support of Plaintiff-Appellant at 20-21. Amici thus imply that this Court should allow the imposition of liability for above-cost bundled discounts even when the discounter’s rivals are equally diversified and could, if equally efficient, match the bundled discounts at issue.

Amici are unpersuasive. The relevant language of ZF Meritor—“The reasoning of LePage’s is limited to cases in which a single-product producer is excluded through a bundled rebate program offered by a producer of multiple products, which conditions the rebates on purchases across multiple different product lines,” ZF Meritor, 696 F.3d at 274 n. 11 (emphasis added)—is plainly stating a necessary, not sufficient, condition for liability under LePage’s. Moreover, the LePage’s Court itself was clear that the anticompetitive effect of an above-cost bundled discount is its potential to exclude less diversified rivals that cannot, even if they are as efficient as the discounter in producing the products they make, match the total dollar value of the discount on their narrower product line. LePage’s, 324 F.3d at 141 (“The principal anticompetitive effect of bundled rebates … is that when offered by a monopolist they may foreclose portions of the market to a potential competitor who does not manufacture an equally diverse group of products and who therefore cannot make a comparable offer.”) (emphasis added). Critically, both the LePage’s and SmithKline plaintiffs were far less-diversified than their bundled discounting rival, see id. at 144, 157; SmithKline, 575 F.2d at 1059, and would thus have had to match the entire dollar volume of its discount on their narrower line of products.[5] Hill-Rom’s rivals, by contrast, produce the same types of hospital beds as Hill-Rom—standard, ICU, and birthing—and thus could, if equally efficient, match any above-cost discount on bundles of beds. The district court was therefore correct to conclude that LePage’s is inapposite.[6]

Amici’s apparent position—that a plaintiff complaining of a bundled discount may state an antitrust claim without identifying a less diversified rival and explaining why it cannot match the discount at issue—would empower antitrust plaintiffs to subject defendants to burdensome discovery obligations by simply stating that the defendant had offered a bundled discount. After all, there will almost always be some rival out there that produces some, but not all, items in the bundle. This Court should decline plaintiffs’ and their amici’s invitation to transform the already pro-plaintiff LePage’s decision into an open invitation to file strike suits.

CONCLUSION

The District Court’s judgment should be affirmed.

[1] No counsel for any party authored this brief in whole or in part. Apart from amici curiae, no person contributed money intended to fund the brief’s preparation and submission. The parties consented to the filing of this brief.

[2] This language from Tampa Electric, which assessed liability under Section 3 of the Clayton Act, 15 U.S.C. § 14, undermines the bizarre claim of amicus Open Markets Institute that “the Tampa Electric decision is not an invitation to lower courts to apply the rule of reason.” Brief of Open Markets Institute as Amicus Curiae in Support of Plaintffs-Appellants at 15. In directing courts to assess “the probable effect” of a challenged exclusive dealing agreement in light of a number of context-specific factors, Tampa Electric explicitly prescribed a rule of reason analysis.

[3] See Cmplt. ¶ 139 (“The CEAs were therefore designed to bundle and link together all of the purchasing decisions by hospitals in numerous distinct product markets … into a single overarching agreement with a collective rebate.”); id. at ¶ 173 (“The CEAs thus ensure that it is impossible for any competitor in the Relevant Markets which does not manufacture a similarly broad line of products to demonstrate how offered savings could offset the rebate potential on other products with Hill-Rom.”).

[4] Even in Church, which was a government enforcement case, the D.C. Circuit stressed that LePage’s “has been roundly criticized.” Church, 665 F.3d at 1316–17 (citing Antitrust Modernization Comm’n, Report and Recommendations 94 (2007) (“The lack of clear standards regarding bundling, as reflected in LePage’s v. 3M, may discourage conduct that is procompetitive or competitively neutral and thus may actually harm consumer welfare”); Bruce H. Kobayashi, The Law and Economics of Predatory Pricing, in Antitrust Law and Economics 116, 148 (Keith N. Hylton ed., 2009) (“The potential for liability will result in [firms with sufficient market power and multiple product lines] being deterred from using bundling that would have led to reduced prices for consumers and higher welfare”); Richard A. Epstein, Monopoly Dominance or Level Playing Field? The New Antitrust Paradox, 72 U. Chi. L.Rev. 49, 71 (2005) (“highly unlikely that 3M would tailor practices that cover six of its departments solely because of the effects that it would have on” the one product market in which it competed with LePage’s).

[5] The ZF Meritor Court’s reference to a “single-product producer” in its limitation of LePage’s, see ZF Meritor, 696 F.3d at 274 n. 11, is just case-specific shorthand for the actual “reasoning of LePage’s,” which facially applies only to less diversified (if not single-product) rivals.

[6] To the extent plaintiffs complain of bundled discounts involving products besides hospital beds, their complaint is deficient because it does not identify what the products are and thus why equally efficient competitors could not match the discounts across them.