Executive Summary

The International Center for Law & Economics (ICLE) identifies multiple European Union regulatory frameworks that function as significant barriers to U.S. exports of goods and services, and to U.S. foreign direct investment. These measures include the Digital Markets Act, General Data Protection Regulation, Artificial Intelligence Act, the FDI Regulation, and draft regulations on cybersecurity certification and space activities. Each imposes or is likely to impose direct compliance costs on major U.S. technology firms that exceed $100 million annually, with additional indirect costs from foregone innovation, delayed market entry, and reduced investment substantially exceeding this figure.

These regulatory frameworks share common structural features. They impose fixed compliance costs that foreclose market entry for smaller U.S. firms, while raising operational expenses for larger enterprises. They embed vague legal standards that grant enforcement authorities broad discretion, creating uncertainty that deters investment. They also extend regulatory jurisdiction extraterritorially to capture transactions occurring outside EU borders.

Despite formal technological neutrality, these measures disproportionately burden U.S. firms. The Digital Markets Act designates five U.S. companies among seven total “gatekeepers.” The General Data Protection Regulation’s largest enforcement actions target U.S. firms, including a record €1.2 billion fine against Meta. The Artificial Intelligence Act’s penalty structure is based on worldwide turnover, creating disproportionate liability for global U.S. enterprises. The draft Cybersecurity Certification Scheme imposes sovereignty requirements—EU headquarters, EU ownership, immunity from non-EU laws—that U.S. firms cannot meet without divesting ownership or violating U.S. law.

These regulations embed industrial-policy objectives within ostensibly neutral technical standards. EU officials explicitly link the Digital Markets Act to the “digital sovereignty” goals of reducing dependence on non-European technology providers. The FDI Regulation uses security rationales to advance strategic-autonomy objectives. The Cybersecurity Certification Scheme incorporates requirements designed to create protected market segments from which foreign providers are excluded. This approach substitutes political discretion for market-based competition.

Several provisions also constitute forced technology transfer. The Digital Markets Act’s interoperability and data-access obligations compel designated firms to disclose proprietary algorithms and datasets to competitors without meaningful safeguards. Unlike traditional competition remedies that balance access against innovation incentives, these requirements are categorical and unconditional. The asymmetry is deliberate: designated firms must share intellectual property, while they are simultaneously prohibited from using data generated by third parties on their platforms.

The draft Cybersecurity Certification Scheme likely violates EU commitments under World Trade Organization agreements. Sovereignty requirements imposing local-presence mandates and effectively establishing zero quotas for foreign suppliers contravene GATS Articles XVI and XVII on market access and national treatment.

These comments recommend that the Office of the U.S. Trade Representative (USTR) formally designate these measures as significant foreign trade barriers in the 2026 National Trade Estimate Report. Following designation, the USTR should initiate bilateral engagement through the U.S.-EU Trade and Technology Council, with specific negotiating objectives to address the discriminatory provisions. The USTR should raise these barriers in multilateral forums, including the WTO Technical Barriers to Trade and Services Committees.

The United States should not respond through retaliatory tariffs or reciprocal regulatory restrictions. Such measures impose costs on U.S. consumers, harm U.S. firms, and undermine U.S. credibility when advocating for rules-based trade. The appropriate response combines formal trade-barrier designation, sustained diplomatic engagement, and readiness to pursue dispute settlement where violations of international commitments are clear.

I. Introduction

The International Center for Law & Economics (ICLE) thanks the Office of the United States Trade Representative (USTR) for the opportunity to comment on this public consultation on foreign barriers to U.S. exports of goods and services and U.S. foreign direct investment.

ICLE is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our scholars have identified multiple foreign policies and practices that deviate from free-trade and free-market principles and that impose measurable costs on U.S. firms seeking to export goods and services, or to make foreign direct investments.

This submission focuses primarily on European Union (“EU”) regulatory measures that function as substantial barriers to U.S. commerce. The Digital Markets Act (DMA), General Data Protection Regulation (GDPR), and Artificial Intelligence Act (AI Act) each impose direct compliance costs on major U.S. technology firms that exceed $100 million annually. In addition to these mandatory expenditures, the measures also subject U.S. firms to indirect costs that substantially exceed this figure from foregone innovation, delayed market entry, and reduced investment.

Beyond digital regulations, our comments examine the EU’s FDI Regulation, which has encouraged the proliferation of national investment-screening mechanisms across EU member states under various security rationales, while serving the industrial-policy objectives of strategic autonomy. We further analyze draft regulations on cybersecurity certification and space activities that impose nationality-based criteria and sovereignty requirements that U.S. firms cannot meet without divesting ownership or violating U.S. law. We also address digital services taxes that multiple jurisdictions have implemented with revenue thresholds designed to capture predominantly U.S. firms. And we examine foreign pharmaceutical-pricing practices that refuse to internalize meaningful portions of innovation costs, while free riding on the benefits of American-funded medical breakthroughs.

These measures share certain common structural features that create non-tariff barriers. They impose fixed compliance costs disproportionate to firm size, effectively foreclosing market entry for U.S. small and medium enterprises. They embed vague legal standards that grant enforcement authorities broad discretion, raising risk premiums that deter investment. They extend regulatory jurisdiction extraterritorially to transactions occurring outside EU borders. They deviate from established international standards through processes that exclude meaningful U.S. participation. They incorporate forced technology-transfer requirements that compel the disclosure of proprietary information to competitors without safeguards against misappropriation.

Despite formal technological neutrality, these frameworks disproportionately burden U.S. firms. The DMA designates five U.S. companies among seven total “gatekeepers” subject to its obligations. The GDPR’s largest enforcement actions target U.S. firms, including a record €1.2 billion fine against Meta for transatlantic data transfers. The AI Act’s penalty structure is based on worldwide turnover, thereby creating disproportionate liability for global U.S. enterprises as compared to EU-focused competitors. The draft Cybersecurity Certification Scheme imposes requirements for EU headquarters, EU ownership, and immunity from non-EU laws that only EU-domiciled firms can satisfy. The draft Space Act establishes size-based constellation thresholds that exempt existing European systems while capturing U.S. large-constellation operators.

The regulations embed industrial-policy objectives within ostensibly neutral technical standards. EU officials have explicitly linked the DMA to the “digital sovereignty” goals of reducing dependence on non-European technology providers. The European Commission has encouraged other jurisdictions, including Brazil, to adopt similar frameworks, extending the reach of EU regulatory protectionism beyond its borders. Multiple countries have implemented or are considering DMA-style asymmetric regulations that target the same U.S. technology firms.

This submission documents these barriers through analysis grounded in economic principles and empirical evidence. Section II examines the DMA’s technical barriers to trade, intellectual-property erosion, services restrictions, investment deterrence, and industrial-policy orientation. Section III analyzes the GDPR’s compliance-cost structure, market distortions, systemic legal uncertainty in transatlantic data transfers, and discriminatory enforcement patterns. Section IV addresses the AI Act’s fixed compliance costs, including market-entry barriers; extraterritorial jurisdiction; technical barriers, which include conformity assessment and prescriptive data requirements; investment deterrence, and regulatory fragmentation. Section V examines the FDI Regulation’s expansion of screening mechanisms, its effects on investment, and its use for industrial-policy objectives. Section VI addresses digital-services taxes. Section VII analyzes foreign pharmaceutical-pricing practices. Section VIII evaluates the draft Cybersecurity Certification Scheme’s evolution toward protectionism, economic inefficiency, specific trade-barrier provisions, and inconsistency with WTO commitments. Section IX addresses the proposed Space Act.

Each section concludes with specific recommendations for USTR action. We recommend formal designation of these measures as significant foreign trade barriers in the 2026 National Trade Estimate Report under the appropriate categories, including Technical Barriers to Trade, Services, Investment, Anticompetitive Practices, and Other Non-Market Policies and Practices. We recommend bilateral engagement through the U.S.-EU Trade and Technology Council with specific negotiating objectives to address discriminatory provisions. We also recommend raising these barriers in multilateral forums, including WTO Technical Barriers to Trade and Services Committees.

The appropriate U.S. response should not involve retaliatory tariffs or similar measures. Such actions would impose costs on American consumers through higher prices and restricted choice, while undermining the global competitiveness of U.S. industries. Instead, we advocate vigorous enforcement of international trade principles, promotion of evidence-based regulation aligned with international standards, and engagement through diplomatic and legal channels to dismantle foreign protectionism. By systematically identifying and challenging these barriers through proper trade policy channels, the USTR can advance the interests of American businesses and workers, while promoting open markets and robust competition in the global economy.

II. Digital Markets Act

The EU’s DMA[1] establishes an expansive regulatory framework governing large online platforms, which it designates as “gatekeepers.” Although formally neutral, the DMA in practice applies almost exclusively to U.S.-headquartered firms that export digital services and invest heavily in Europe’s digital ecosystem. Indeed, five out of the seven firms targeted by the regulation are U.S.-based.[2] By altering the terms of competition and imposing disproportionate compliance costs on a handful of foreign companies, the DMA effectively functions as a non-tariff barrier to trade.[3] It raises the cost of market access, redistributes economic rents toward certain competitors and business users, and restricts the ability (and incentives) of U.S. firms to innovate and invest.[4] In sum, the law’s cumulative effect is likely to disadvantage U.S. exports of digital services and intellectual property, while also deterring U.S. foreign direct investment, in ways inconsistent with the principles of open and nondiscriminatory trade.

A. Technical Barriers to Trade

The DMA introduces an elaborate system of operational and technical obligations that resemble a conformity-assessment regime, which are applied selectively to foreign providers of digital services. Its prescriptive interoperability, data-sharing, and self-preferencing mandates require designated firms to redesign key aspects of their products, interfaces, and internal processes to conform to EU-specific requirements. In practice, designated companies must cooperate and consult the Commission when launching products or making design decisions to ensure that their offerings conform to the Commission’s evolving interpretation of what constitutes “fair” conduct.[5] Indeed, some gatekeepers have observed that “when no two people agree on what the DMA’s substantive obligations mean, the resulting ambiguity undermines the rule of law itself.”[6]

Further, the measures required by the DMA are neither aligned with existing international standards nor with the outcome of transparent, multi-stakeholder processes. By prescribing far-reaching “antitrust-like” obligations and prohibitions absent a finding of market power and without the need to prove harm, the DMA deviates from established antitrust principles, which typically require in-depth case-by-case economic analysis and a clear theory of harm.[7] Instead of adhering to antitrust law’s long-established procedural safeguards and reliance on rigorous economic analysis, the EU has opted to bypass them, using its political and regulatory power to export its policy preferences globally and compel U.S. firms to tailor their products and services “for Brussels.”

The law also embeds an extensive auditing and reporting apparatus that requires firms to produce detailed and costly compliance documentation, appoint an internal compliance officer, submit to technical assessments, and engage in continuous dialogue with the European Commission.[8] These procedures mirror conformity-assessment mechanisms in goods markets and impose compliance costs that fall almost exclusively on U.S. service exporters. Furthermore, U.S. stakeholders and standards organizations have extremely limited influence over the criteria and benchmarks by which “fairness” and “contestability” are assessed, resulting in a process that lacks transparency and inclusivity. As many scholars have pointed out, the terms “fair” and “contestable” are themselves vague and abstract.[9] This ambiguity leaves significant scope for discretion on the Commission’s part, further eroding legal certainty and companies’ freedom to do business however and with whomever they choose.

Collectively, the DMA’s rigid ex-ante requirements function as technical barriers to trade, erecting regulatory hurdles that selectively disadvantage U.S. firms.

B. Intellectual-Property Protection

The DMA’s interoperability and data-access obligations compel designated firms to disclose proprietary information—including technical documentation, algorithms, and datasets—to competitors and third parties. This forced sharing of commercially sensitive materials erodes trade-secret protection and effectively appropriates intellectual property developed by U.S. companies. Unlike traditional competition law, which balances access remedies against innovation incentives,[10] the DMA’s obligations are categorical and unconditional, offering no meaningful safeguards against misuse or loss of proprietary value.

The practical result is a regime of de facto compulsory licensing that weakens incentives to invest in research and development. The DMA thereby undermines the foundational principle that secure intellectual-property rights are essential to innovation. It replaces market discipline with regulatory discretion, transforming proprietary technologies into shared resources, subject to administrative redistribution. Yet the flow of benefits under this regime is entirely one-sided: while the DMA compels designated companies to share data and intellectual property with rivals, it simultaneously prohibits them from using data generated by third parties on their own platforms when competing with those same parties. This asymmetry further weakens their competitive positions and devalues the significant investments that gatekeepers have made in collecting that data and sustaining the platforms on which it is created. Such an approach is inconsistent with international commitments to protect intellectual property, and risks eroding the global value of U.S. innovation.

C. Services

The DMA imposes far-reaching constraints on how U.S. digital-service providers may design, operate, and monetize their offerings within the EU. While the legislation purports to promote “fairness” and “contestability,” its practical effect is to discriminate against foreign suppliers of digital services. The criteria for gatekeeper designation—focusing on global scale and user reach—ensure that almost all targeted firms are American, while “comparable” European companies remain exempt. Indeed, the DMA only applies to one European company, Booking.com.

The obligations themselves restrict the configuration of digital services, including prohibitions on combining data across platforms, limitations on self-preferencing, and mandatory interoperability with third-party software and hardware. These measures directly interfere with platforms’ service design and business models, effectively dictating how U.S. firms may compete and innovate. The DMA also fragments cross-border data flows by compelling firms to maintain separate data-processing structures and by subjecting transatlantic data transfers to heightened compliance risks. This fragmentation functions as a data-localization measure in disguise, impeding the seamless delivery of U.S. cloud, AI, and digital-advertising services across the single market.[11]

Compounding these barriers, the Commission retains broad discretionary authority to interpret and expand DMA obligations through delegated acts and individual enforcement decisions. This open-ended regulatory environment creates substantial uncertainty for U.S. service providers and chills entry and innovation. Together, these features amount to a comprehensive restriction on cross-border trade in digital services, disadvantaging U.S. exporters under the guise of boosting “fairness” and contestability.

D. Investment Deterrence

The DMA deters U.S. foreign direct investment in the European Union. The law likely lowers the expected returns on U.S. capital invested in EU digital markets by constraining profitable business models and imposing unpredictable regulatory costs. For instance, the law’s technology-sharing and data-access obligations constitute a form of forced technology transfer, requiring U.S. investors to surrender valuable intellectual assets as a condition for operating in Europe. Similarly, prohibitions of otherwise standard and often procompetitive business practices, such as favoring a firm’s own products and services,[12] ensure that targeted companies cannot enjoy the full benefits of their investments, including—but not limited to—efficiency-enhancing vertical integration.[13]

At a broader level, the DMA operates as an industrial-policy instrument aimed at advancing the EU’s “digital sovereignty” agenda. Its stated goal of reducing dependence on foreign technology providers translates in practice into the strategic reallocation of rents from globally competitive U.S. firms to European business users and domestic competitors.[14] This policy orientation distorts market incentives and discourages further U.S. investment in the European technology sector. It also risks triggering retaliatory trade measures or reciprocal restrictions on European investment in the United States, further undermining transatlantic economic cooperation.

E. Other Non-Market Policies and Practices: Favoring European Firms and Champions

The DMA exemplifies the EU’s broader shift toward non-market industrial policymaking in the digital sphere. EU officials have openly linked the legislation to Europe’s pursuit of “digital sovereignty”—a policy framework explicitly aimed at reducing reliance on non-European technology providers. The EU has blurred the line between competition policy and protectionism by using regulatory tools to advance industrial and strategic objectives.

This approach distorts global competition by penalizing foreign firms for their success, rather than remedying demonstrable market failures. It undermines commitments to technological neutrality and nondiscrimination under World Trade Organization (WTO) and Organisation for Economic Co-operation and Development (OECD) principles, while signaling to other jurisdictions that digital industrial policy can be pursued through selective regulation, rather than open competition.

Meanwhile, the EU has openly encouraged other countries, such as Brazil, to converge on DMA-style rules.[15] And, sure enough, a number of jurisdictions have already taken note and are following—or considering following—a similar path, targeting the same U.S.-based technology firms with heavy-handed, asymmetric regulations.[16] In this way, the DMA is likely to extend its reach—and the EU’s particular flavor of tech protectionism—well beyond its borders.

F. Recommendations

In substance and effect, the DMA represents a significant foreign trade barrier to U.S. exports of digital services and intellectual property, as well as to U.S. foreign direct investment. While framed as an instrument to foster “fairness” (whatever that may mean), its discriminatory structure, forced technology-transfer obligations, negation of U.S. companies’ legitimate investments efforts, and interference with cross-border data flows reveal a clear industrial policy intent. By selectively burdening U.S. firms under the pretext of promoting “fairness,” the EU has erected a new form of regulatory protectionism in digital markets—and one that is likely to be exported abroad. As such, it imposes restrictions on “Services” (Category 6) and “Investment” (Category 7), and implements “Other Non-Market Policies and Practices” (Category 11) that disadvantage U.S. companies.

The United States should recognize the DMA as a trade measure of concern under the National Trade Estimate process and raise these issues in bilateral and multilateral forums, including the U.S.–EU Trade and Technology Council and the WTO’s Technical Barriers to Trade and Services Committees. Doing so would help to ensure that U.S. firms receive nondiscriminatory treatment and that global digital markets remain open, competitive, and innovation-driven.

III. General Data Protection Regulation

The GDPR is a significant foreign trade barrier that distorts U.S. exports of goods and services and U.S. foreign direct investment. The regulation’s design and enforcement create substantial impediments that fall within several categories enumerated in the USTR’s request for comments.

Under “Services” (Category 6), the GDPR imposes “discriminatory or burdensome barriers to cross-border data flows” and “discriminatory practices affecting trade in digital products.” Its prescriptive rules on data processing and consent create “unreasonable restrictions on what services may be offered,” particularly for U.S. firms whose business models depend on data-driven services. Under “Investments” (Category 7), the GDPR’s high compliance costs, severe financial penalties, and the legal uncertainty surrounding its core provisions deter U.S. foreign direct investment. By increasing operational costs and reducing the expected return on investment, the GDPR discourages U.S. capital from entering the European digital market. In addition, under “Other Barriers” (Category 14), the regulation’s effects are cross-cutting, combining elements of services restrictions, investment deterrence, and anticompetitive market distortions (ACMDs) that justify its inclusion in this category for complex barriers.

The GDPR operates as a formidable non-tariff barrier. The regulation’s real-world economic consequences, the incentive structures it creates, and its effects on market efficiency reveal a system that, regardless of its stated objectives, systematically impedes U.S. commerce. The total economic harm to U.S. interests is estimated to be well in excess of $500 million annually.

A. The GDPR’s Architecture as a Non-Tariff Barrier

A regulation’s compliance costs can function as an implicit tax on economic activity. Notably, Mario Draghi, former president of the European Central Bank and former prime minister of Italy, wrote in the Financial Times:

The IMF estimates that Europe’s internal barriers are equivalent to a tariff of 45 per cent for manufacturing and 110 per cent for services. These effectively shrink the market in which European companies operate: trade across EU countries is less than half the level of trade across US states. And as activity shifts more towards services, their overall drag on growth becomes worse.[17]

When these costs are substantial and disproportionately burdensome on foreign entities, they become a potent non-tariff barrier. The GDPR imposes such a burden on U.S. businesses, creating a financial impediment to operating within the EU market. For example, the Computer & Communications Industry Association estimates the GDPR costs the five largest U.S. providers of online digital services a total of more than $55 million annually.[18]

Beyond these direct outlays, the GDPR imposes indirect costs that reduce productivity and distort resource allocation. A study published by the Centre for Economic Policy Research found that the GDPR caused an average 8.1% drop in profits and a 2.2% decline in sales for affected businesses.[19] The larger effect on profits than on sales indicates that the primary driver of this economic harm is the weight of compliance costs, not a reduction in consumer demand.⁶

The regulation has also altered the production function for data-driven businesses. A study using seven years of data from a global cloud-computing provider—conducted by researchers that included Mert Demirer of MIT—found that the GDPR effectively increased the cost of data as a production input by approximately 20%.[20] In response, EU-based firms—and U.S. firms serving them—decreased their data storage by 26% and their data processing by 15%. This regulatory friction causes firms to become less data-intensive and, therefore, less efficient. For the United States, whose firms are global leaders in using data for economic value, this functions as a tax on a primary source of competitive advantage.

The GDPR’s “one-size-fits-all” approach, which applies a single set of complex rules regardless of firm size, imposes a regressive burden. The high fixed costs of compliance are disproportionately harmful to smaller U.S. enterprises. Giorgio Presidente and Carl Benedikt Frey found that, behind the 8% average drop in profits, there was a more severe effect for smaller companies. In the IT sector, large firms saw a 4.6% profit drop, while small IT firms suffered a 12.1% drop.[21] This regressive cost structure creates a formidable barrier to entry. U.S. startups and small and medium-sized enterprises (SMEs) must either absorb costs that cripple their profitability or forego the EU market entirely, as noted in Antitrust Source:

Investors, also, may face new uncertainties, information acquisition hurdles, and due diligence costs pertaining to venture deals in the EU due to the introduction of the GDPR. Moreover, those costs may be particularly pronounced for investors who are not based in the EU and are less familiar and less able to monitor ongoing and shifting aspects of compliance and potential enforcement. Investors also face the risks that the value of their investments may diminish if, for instance, an expansion to the EU is put off due to compliance costs, or a funded firm’s assets are less valuable due to limitations on the collection and processing of data.[22]

B. Market Distortions and Disincentives for Innovation

The GDPR’s regulatory design actively distorts the digital economy’s competitive landscape. Its operational requirements create inefficient market outcomes by stifling competition and creating disincentives for innovation. These effects systematically disadvantage the dynamic, data-driven business models in which U.S. firms are global leaders.

The regulation’s rules on data collection—particularly its consent requirements—favor large, established platforms over smaller challengers. Large, vertically integrated platforms with diverse, consumer-facing services are better positioned to obtain broad, bundled user consent across their ecosystems.[23] A user interacting with multiple services from a single provider is more likely to provide sweeping consent than a user interacting with multiple, smaller providers. This dynamic creates a data-collection advantage for incumbents. Empirical research has documented that, in the wake of the GDPR, market concentration increased among web technology vendors, with Google and Meta-owned vendors increasing their relative market share.[24]

Furthermore, large platforms can use the GDPR to justify restricting rivals’ access to data and interoperability, effectively using the regulation as a competitive “weapon.”[25] Such “weaponization” of privacy undermines the contestability of digital markets, harming U.S. firms that often rely on access to platform data to offer complementary services. As John Yun has noted, while the GDPR aims to bolster user privacy, empirical evidence suggests it has also triggered adverse effects, including diminished startup activity and increased market concentration.[26]

The GDPR’s restrictive approach to data processing, combined with its legal ambiguity, acts as a drag on innovation, particularly in data-intensive sectors like artificial intelligence (AI). Economic studies show that venture-capital funding for data-related ventures in the EU fell significantly after the GDPR’s implementation.[27] This lack of investment translates into fewer new companies and less innovation. The regulation’s burdens have also led to market contraction. One study of the Google Play Store found that the GDPR induced the exit of approximately one third of available apps, and that the entry of new apps fell by half following the regulation’s implementation.[28] This signals that the regulatory burden is deterring developers, particularly smaller U.S. software firms, from serving the EU market.

The barriers are particularly acute for the development of AI. Core GDPR principles, such as purpose limitation and data minimization, are in tension with the foundational needs of machine learning, which often requires large, diverse datasets for training.[29] The legal uncertainty surrounding the re-use of data for AI training creates risks for U.S. innovators. Miko?aj Barczentewicz reports that some activists advocate interpreting the GDPR to effectively prohibit some AI research and business applications altogether.[30] Such uncertainty forces firms to either avoid using EU data for training or to adopt overly cautious approaches that limit the effectiveness of their AI models.

C. Systemic Legal Uncertainty in Transatlantic Data Transfers

The GDPR functions as a trade barrier by creating systemic legal uncertainty surrounding the transfer of personal data from the EU to the United States. This chronic instability chills commerce and deters investment.

A series of decisions by the Court of Justice of the European Union (CJEU), stemming from complaints brought by privacy activist Max Schrems, has dismantled the legal architecture for transatlantic data flows. The rulings in Schrems I (2015) and Schrems II (2020) invalidated the “Safe Harbor” and “Privacy Shield” frameworks, respectively.[31] The CJEU’s reasoning in both cases was that U.S. national-security surveillance laws do not provide EU citizens with a level of data protection and judicial redress that is “essentially equivalent” to the rights guaranteed under EU law.

The economic disruption caused by these invalidations was immediate, creating “legal uncertainty for thousands of companies.”[32] U.S. firms were forced to use alternative, more complex transfer mechanisms—primarily Standard Contractual Clauses (SCCs). The Schrems II decision compounded this problem by casting doubt on the validity of SCCs themselves, imposing an obligation on data exporters to conduct a case-by-case assessment of the recipient country’s laws and to implement undefined “supplementary measures.”[33] This created significant operational complexity and regulatory risk for U.S. firms.¹⁸

The successor mechanism—the EU-U.S. Data Privacy Framework (DPF), which entered into force in 2023—is built on a precarious legal foundation. Critics argue that the DPF fails to resolve the fundamental conflict between U.S. surveillance law and the CJEU’s “essential equivalence” standard.[34] Legal challenges to the DPF are already underway, and there is a possibility that the framework will be struck down.[35]

This state of perpetual legal jeopardy is a potent economic barrier. The instability of transfer mechanisms raises the risk premium for any U.S. firm doing business with Europe. Companies must invest in continuous legal analysis and contingency planning for the next framework’s collapse, diverting capital from productive activities.[36] The constant threat of a court decision severing data flows makes long-term investment in data-dependent services in the EU an unacceptably risky proposition.

While the EU has not imposed an explicit data-localization mandate, its legal approach creates a powerful de facto incentive for that outcome. For a risk-averse U.S. company, the only safe option is to avoid transferring personal data out of the EU altogether, requiring the construction of duplicative and economically inefficient data infrastructure within the EU’s borders. This outcome is functionally identical to a formal data-localization requirement, a practice recognized by the USTR as a significant barrier to trade in digital services.

D. Discretionary Enforcement and Punitive Sanctions

The final pillar of the GDPR’s architecture as a trade barrier is its enforcement regime. Characterized by vague legal standards, broad regulatory discretion, and punitive sanctions, the regime creates a hostile and uncertain environment for U.S. firms.

The GDPR’s penalty structure has been applied aggressively, with U.S. technology firms the primary targets of the most significant enforcement actions. Since 2018, EU data-protection authorities (DPAs) have issued billions of euros in fines. The record-breaking €1.2 billion fine against Meta in 2023 for its transatlantic data transfers is the largest GDPR fine ever issued.[37] This is part of a pattern that includes a €390 million fine against Meta for its legal basis for advertising and a €310 million fine against LinkedIn. The GDPR empowers authorities to levy fines of up to 4% of a company’s total global annual .[38] This mechanism creates a disproportionate economic threat for large, global U.S. firms, turning any potential compliance issue into a significant financial risk.

Major enforcement actions are frequently based not on clear-cut violations, but on broad, ambiguous principles, granting EU DPAs immense discretion. The €1.2 billion Meta data-transfer fine was based on a violation of Article 46(1) GDPR. The Irish DPA, at the direction of the European Data Protection Board (EDPB), asserted that Meta’s use of SCCs could not overcome the systemic risks posed by U.S. surveillance law. In effect, the decision punished a U.S. company for the perceived shortcomings of the U.S. legal system, a factor outside the company’s control. In the €390 million Meta advertising case, the DPC found that Meta could not rely on “contractual necessity” under Article 6(1)(b) as a legal basis for processing user data for personalized advertising. This decision was contested among EU regulators and overturned the DPC’s own initial view, showing the lack of legal certainty for core business models.[39]

The legal interpretations underlying these actions reflect a regulatory philosophy of “privacy absolutism.” As Miko?aj Barczentewicz has argued, this approach elevates a maximalist interpretation of data protection above other principles, such as economic efficiency and regulatory proportionality.[40] This system, which combines vaguely worded legal principles with the discretionary power to impose massive fines, is ripe for arbitrary enforcement. The evidence shows that this power is disproportionately targeted at high-profile U.S. technology firms, often based on novel interpretations of these vague principles. This transforms the GDPR from a predictable set of rules into a tool that can be wielded to achieve unstated industrial-policy goals, creating a powerful deterrent to U.S. investment and trade.

E. Recommendations

We recommend the USTR formally designate the GDPR as a “Significant Foreign Trade Barrier” in the 2026 National Trade Estimate Report, under the categories of “Services” (Category 6), “Investment” (Category 7), and “Other Non-Market Policies and Practices” (Category 11).

Following this designation, the USTR should initiate high-level engagement with the European Commission to address the specific economic distortions identified. These diplomatic efforts should seek to establish a durable and predictable legal mechanism for EU-U.S. data transfers that can withstand judicial scrutiny and provide the long-term stability needed to support U.S. exports and investment. The USTR should also promote a more risk-based and proportionate approach to GDPR enforcement, advocating for greater legal certainty and nondiscriminatory application of sanctions.

Finally, engagement should address the anticompetitive effects of the GDPR’s design by advocating for interpretations that lower barriers to entry for SMEs and foster a more dynamic and competitive digital single market open to U.S. firms.

IV. Artificial Intelligence Act

The EU’s AI Act constitutes a substantial foreign barrier to U.S. exports of goods and services and U.S. foreign direct investment.[41] This barrier manifests across multiple categories identified in the USTR’s request for comments, including “Technical Barriers to Trade” (Category 2), “Services” (Category 6), Investment (Category 7), and “Anticompetitive Practices” (Category 9).

The AI Act’s regulatory architecture imposes costs on U.S. firms that are substantial in magnitude and poorly calibrated to demonstrated harms. The framework operates through three mechanisms: (1) imposing fixed compliance costs that function as barriers to market entry; (2) creating legal uncertainty that deters investment; and (3) extending EU regulatory jurisdiction extraterritorially to transactions occurring entirely outside EU borders.

A. Fixed Compliance Costs as Market-Entry Barriers

The AI Act requires providers of “high-risk AI systems” to implement extensive compliance infrastructure before placing products on the EU market. Article 9 mandates continuous risk-management systems. Article 10 requires data-governance frameworks that meet specific technical criteria. Article 11 demands detailed technical documentation. Articles 13-15 impose transparency, human-oversight, and technical-performance obligations.

These requirements generate substantial fixed costs that must be incurred regardless of a firm’s EU market scale. The Computer & Communications Industry Association estimates the AI Act will cost large providers of online digital services an average of $15.2 million annually per firm.[42] For small firms, estimates suggest compliance costs of up to €400,000 per high-risk AI system.[43] Other estimates indicate that compliance costs could account for 15-20% of R&D budgets for SMEs.[44]

The European Commission initially projected that 5-15% of AI systems would be classified as high-risk.[45] Recent surveys of AI developers suggest the actual figure is 33-50%.[46] This gap between projected and realized regulatory scope indicates massive underestimation of the act’s economic footprint and trade effects.

Fixed costs create market power by raising minimum efficient scale. For U.S. startups and SMEs, which disproportionately drive AI innovation, these costs would likely exceed expected EU revenue, effectively foreclosing market entry. Large incumbent firms spread compliance costs across larger revenue bases, reducing per-unit costs. While the AI Act includes provisions intended to support SMEs, such as prioritized access to regulatory sandboxes and proportional conformity-assessment fees, these measures are unlikely to offset the immense structural burden of the “high-risk AI systems” (HRAIS) compliance regime. By creating such high hurdles for market entry, the act insulates incumbent EU-based firms from competition from innovative U.S. challengers.

B. Extraterritorial Jurisdiction and Services Trade

Article 2(1)(c) extends the AI Act’s scope to “providers and deployers of AI systems that are located in a third country, where the output produced by the AI system is used in the Union.” This “output-based” jurisdiction represents a significant expansion of regulatory reach that directly restricts U.S. exports of digital services.

A U.S. financial-services firm using a proprietary AI model in New York to generate risk assessments for an EU client becomes subject to EU regulation because the assessment—the “output”—is used in the EU. A U.S. consulting firm using AI tools in Chicago to develop strategy recommendations for an EU company faces identical requirements. A U.S. software company using AI-powered analytics internally to optimize supply chains that serve EU customers likewise must comply with the act.

This jurisdictional approach transforms ordinary cross-border service provision into a regulated activity. U.S. service exporters face costly choices: develop parallel EU-compliant versions of internal processes, accept legal risk of noncompliance, or exit the EU market. Each option imposes costs. Creating parallel systems eliminates economies of scale. Accepting legal risk increases the cost of capital. Market exit represents foregone revenue.

Services represent approximately 35% of total U.S. exports.[47] The European Center for International Political Economy reports that U.S. exports of information and communications technology (ICT) services to the EU have exceeded $220 billion in recent years.[48] The AI Act’s extraterritorial reach subjects significant portions of these services exports to novel compliance requirements and legal risks.

C. Technical Barriers to Trade

The AI Act establishes a significant set of technical barriers that will disproportionately affect U.S. firms. The regulation creates a costly, restrictive framework for U.S. AI exporters through its provisions on conformity assessment, standards development, and data governance.

1. Conformity assessment as gatekeeping

Articles 43 and Annexes VI-VII establish conformity-assessment regimes that AI system providers must complete before placing products on the EU market. For certain high-risk systems, assessment requires the involvement of third-party “notified bodies” designated by EU member states.

This ex-ante requirement delays market entry and imposes costs disproportionate to any feasible risk-reduction benefits. The WTO Technical Barriers to Trade Agreement, Article 5.1.2, requires that conformity-assessment procedures “not be stricter than necessary.”[49] The AI Act’s framework inverts this standard by applying uniform, stringent assessment requirements based on system classification, rather than actual risk.

Delays to market entry translate directly into foregone revenue. In technology markets characterized by rapid obsolescence and network effects, delay often determines market success. A U.S. firm spending six months navigating conformity assessment while competitors launch immediately faces more than lost sales—it may lose the market permanently if competitors establish network effects during that period.

2. Harmonized standards and procedural exclusion

Article 40 directs the European Commission to request European standardization organizations (ESOs)—specifically, the European Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization (CENELEC), and the European Telecommunications Standards Institute (ETSI)—to develop “harmonized standards” for AI systems. Article 41 grants “presumption of conformity” to AI systems that comply with these standards, creating powerful incentives for adherence.

ESOs develop standards through technical committees composed of experts nominated by EU member states’ national standards bodies. While international standards organizations like the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) include U.S. representatives with voting rights, the ESO process provides no such direct participation to non-EU stakeholders. U.S. firms and U.S.-based standards-development organizations (SDOs) may observe or comment but cannot vote on the adoption of standards.

This procedural structure creates the risk of standards-based protectionism. Standards that appear neutral can advantage domestic producers if they codify approaches or technical architectures common in one market but not another. A harmonized standard specifying particular data structures, software architectures, or testing methodologies familiar to EU developers but foreign to U.S. developers imposes differential compliance costs that advantage EU firms without explicit discrimination.

3. Prescriptive data requirements

Article 10 of the AI Act requires that training, validation, and testing datasets be “relevant, sufficiently representative, and to the best extent possible, free of errors and complete.” These requirements are not performance standards, which would allow firms to choose optimal compliance methods. They are, instead, input mandates that specify the characteristics of data that may be used in development.

The requirements are vague, subjective, and unrealistic, restricting access to usable data and slowing product development. The act’s goal of eliminating bias completely has been deemed technologically unattainable, even for leading AI firms.[50] Additionally, extensive logging and traceability mandates increase compliance costs, privacy risks, and operational complexity, particularly given the opaque nature of large language models (LLMs). U.S. firms have pioneered novel approaches to bias mitigation or data efficiency that do not conform to Article 10’s prescriptive requirements and therefore face regulatory barriers, regardless of their technical merit.

D. Investment Deterrence

A U.S. firm considering whether to establish an AI development facility in the EU must compare expected returns to alternative investment locations. The AI Act raises the costs of EU operations through required risk-management systems, data-governance infrastructure, documentation processes, and conformity assessments. All these costs are specific to EU operations. A firm conducting identical AI research in the United States, Japan, or other jurisdictions faces no comparable burden. At a 10% discount rate, the estimated $15.2 million annual compliance cost has a present value of $152 million—potentially three times an initial capital investment. This dramatically reduces investment returns and causes capital to flow elsewhere. That’s because investment decisions under uncertainty create option value for delay. When regulatory uncertainty is high, the option value of waiting increases, causing firms to delay or abandon investments, even when the expected net present value is positive.[51]

The AI Act creates multiple sources of legal uncertainty. The definition of “high-risk” systems depends on Annex III categories that are broad and subject to updating through delegated acts. Whether specific AI systems qualify as “general purpose AI,” thereby triggering additional requirements under Articles 51-56, depends on assessments of “significant impact” that will be refined through not-yet-adopted implementing regulations. The liability regime for AI-caused harm remains unresolved following the European Commission’s withdrawal of its proposed AI Liability Directive in October 2024.

Article 99 establishes administrative fines for noncompliance. Placing prohibited AI systems on the EU market triggers fines of up to €35 million, or 7% of total worldwide annual turnover, whichever is higher. For large U.S. technology firms with annual revenues that exceed $100 billion, the 7% turnover penalty represents potential liability of more than $7 billion per violation.

This penalty structure creates asymmetry between U.S. and EU firms. The “worldwide turnover” basis means large U.S. firms with substantial global operations face far larger absolute penalties than EU firms of comparable size operating primarily within Europe. This differential penalty burden advantages EU-headquartered competitors.

E. Regulatory Fragmentation

The AI Act represents an attempt to exercise what Anu Bradford of Columbia Law School has termed the “Brussels Effect”—the EU’s strategy of leveraging its large internal market to set de facto global regulatory standards.[52] This effect is failing with respect to AI regulation. The United Kingdom, Japan, Singapore, and the United States have explicitly rejected the EU’s prescriptive, rights-based approach in favor of alternative models that emphasize flexibility, sectoral regulation, and voluntary frameworks.

This regulatory divergence creates trade barriers through fragmentation. U.S. firms seeking to operate globally must develop and maintain compliance systems for multiple, inconsistent regulatory regimes. Rather than creating a unified global standard that reduces compliance costs through harmonization, the Act is producing a fragmented regulatory landscape that multiplies compliance costs and creates barriers to international commerce.

F. Quantifying the Trade Barrier

The available evidence suggests the AI Act’s impact on U.S. exports likely falls into USTR’s highest category: more than $500 million annually. This estimate derives from multiple components. Direct compliance costs for at least 30 major U.S. technology companies with substantial EU AI business exceed $450 million annually. Foregone revenue from delayed launches of Apple Intelligence, Google Gemini, and Meta AI features represents additional hundreds of millions. Lost sales from market exit by smaller U.S. firms, reduced foreign direct investment, and suppressed innovation all compound these effects.

G. Recommendations

The USTR should formally identify the EU AI Act in the 2026 National Trade Estimate Report as a significant foreign barrier affecting U.S. exports and investment under Categories 2, 6, 7, and 9.

The United States should pursue bilateral engagement through the U.S.-EU Trade and Technology Council with specific objectives: (1) negotiate mutual recognition of conformity assessments conducted according to U.S. standards, particularly the National Institute of Standards and Technology (NIST) AI Risk Management Framework procedures; (2) secure direct voting rights for U.S. stakeholders in ESO technical committees developing harmonized standards; (3) urge modification of Article 2(1)(c) to limit extraterritorial jurisdiction to AI systems specifically targeted at the EU market; and (4) advocate for revising prescriptive requirements like Article 10 to performance-based standards that specify outcomes, rather than processes.

These recommendations aim to reduce trade friction while respecting legitimate regulatory objectives concerning AI safety and security.

V. Foreign Ownership Regulations

Regulation (EU) 2019/452, establishing a framework for screening foreign direct investment into the European Union (FDI Regulation),[53] was adopted under the stated objective of protecting “security and public order.” In practice, however, it institutionalizes a permanent mechanism for political intervention in cross-border capital allocation, embedding the logic of “strategic autonomy” into what had previously been an open and integrated internal market.

To be clear, the FDI Regulation does not create a centralized EU screening authority. Instead, it establishes a cooperation mechanism through which the European Commission and member states exchange information and issue nonbinding opinions on individual transactions. Formally, member states retain full sovereignty over whether to screen investments and how to conduct such reviews. Yet the regulation’s design and subsequent implementation have had profound and unintended consequences: it has encouraged the proliferation and expansion of national screening mechanisms, extended the scope of “security” into broad categories of technology and infrastructure, and thereby raised the transaction costs and uncertainty surrounding U.S. investment in the EU.

Ultimately, the framework functions less as a narrow national-security safeguard than as a structural non-tariff barrier to investment—one that distorts market signals, amplifies bureaucratic discretion, and provides a convenient channel for industrial-policy objectives under the guise of “security.”

A. De Facto Expansion of Screening Mechanisms

The FDI Regulation creates an EU-level process for coordinating member-state screening mechanisms but does not harmonize substantive criteria. Member states “may maintain, amend or adopt mechanisms to screen foreign direct investments,” and the Regulation lists a non-exhaustive set of factors—such as control of critical infrastructure, access to sensitive information, or involvement in projects of EU interest—that may justify intervention.[54]

While the regulation is formally voluntary, its cooperative structure and reporting obligations have functioned as a strong incentive for adoption. Member states that lack screening regimes cannot meaningfully participate in the information-exchange process or respond to Commission inquiries. Once several large member states—notably Germany, France, and Italy—began operating comprehensive systems, others faced reputational and administrative pressure to follow suit, lest they be viewed as weak links in the EU’s economic-security chain.[55] This dynamic illustrates collective-action and path-dependence effects familiar in regulatory economics: once a coordination mechanism exists, the marginal political cost of adopting a regime falls, while the cost of abstention rises.

The result has been a near-complete diffusion of screening mechanisms across the EU. In 2018, only about a dozen member states maintained such regimes; by 2025, 26 of 27 had either adopted or substantially expanded them.[56] A procedural framework thus evolved into a de facto mandatory system, extending to sectors only tangentially related to national security, and imposing new layers of uncertainty and delay on cross-border investment.

B. Effects on Investment

By de facto replacing predictable, rules-based market access with open-ended administrative discretion, the FDI Regulation increases both the fixed and variable costs of foreign investment. Because “security or public order” is undefined, and varies from EU member state to member state, investors must evaluate potential exposure across 27 distinct national systems, each with different triggers, thresholds, and timelines. The expected value of an investment falls as both the probability and variance of regulatory delay rise. In effect, the regulation imposes an implicit entry tax on foreign investment, particularly in capital-intensive and time-sensitive sectors, where delay can destroy value.

Moreover, the extension of screening to technology and data-related sectors could create distortions in research collaboration and access to innovation funding. While evidence remains limited regarding the direct application of FDI screening to joint research ventures, the FDI Regulation’s scope explicitly extends to investments that involve EU projects and programs of “Union interest,” such as Horizon Europe.[57] This raises a credible risk that screening mechanisms could be used to scrutinize or constrain foreign participation in collaborative R&D initiatives. The possibility that foreign partners—particularly U.S. firms—might be subjected to review or additional administrative conditions introduces uncertainty and may discourage engagement in EU-funded research consortia.

The FDI Regulation also allows authorities to reexamine previously approved investments if new “security concerns” arise, creating an option for ex-post intervention that investors must price into their discount rates. This regulatory-risk premium raises the cost of capital, deters reinvestment, and diverts resources toward jurisdictions where the expected value of government noninterference is higher.

C. Non-Market Policies and Practices

The FDI Regulation’s implementation demonstrates how security rationales can be repurposed for industrial policy. EU institutions increasingly describe FDI screening as a tool to reduce “strategic dependencies” and, implicitly, to foster European champions.[58] This represents a shift from a market-based framework for capital allocation to one in which political discretion determines ownership patterns in key sectors. Such policies substitute bureaucratic decision making for market discovery, inviting rent seeking and protectionism and reducing consumer welfare.

Despite formal neutrality, the FDI Regulation has disproportionately affected U.S. investors. The European Commission’s own reporting suggests that most screened transactions in 2023 likely involve U.S. acquirers, given that the United States is the primary foreign investor in the EU and given that the United States accounted for 49% of total investments in semiconductors (an area considered sensitive).[59]

D. Caveats

To be sure, the FDI Regulation also incorporates several constructive elements. Prior to its adoption, member-state regimes were highly fragmented—varying widely in scope, procedure, and transparency. The regulation represents a step toward greater institutional coherence, introducing minimum procedural guarantees—such as transparency obligations, defined timelines, and access to judicial review—that help to reduce some of the transaction costs and legal uncertainty associated with purely national systems.[60] It also provides investors with a baseline degree of predictability by clarifying notification processes and information-exchange requirements across jurisdictions.

Moreover, the European Commission has recognized that excessive divergence among national mechanisms can itself act as a barrier to investment and has therefore announced plans to further harmonize screening rules within the union.[61] While these developments modestly improve legal certainty and procedural fairness, they also underscore the underlying tension of the EU’s current approach: the pursuit of uniformity and “strategic autonomy” simultaneously expands the administrative perimeter of investment control.

Paradoxically, therefore, the FDI Regulation seeks to manage the fallout of regulatory fragmentation that arises, to a significant degree, from its own existence. By effectively nudging member states to adopt FDI-screening mechanisms—while leaving the substance of screening in national hands—it is likely to engender a multiplicity of divergent rules and standards, potentially exacerbating legal uncertainty and discouraging investment by foreign firms, the majority of which are U.S.-based.

E. Recommendations

Though nominally adopted to protect “security and public order,” the FDI Regulation has, in practice, spurred the proliferation and expansion of national-screening mechanisms across nearly all EU member states. This dynamic functions as a structural non-tariff barrier, replacing rules-based market access with administrative discretion, which in turn raises transaction costs and creates significant regulatory uncertainty for U.S. investors. The USTR should therefore regard the framework as a potential non-tariff barrier to investment under “Investment” (Category 7) and “Other Non-Market Policies and Practices” (Category 11), as it uses “security” as a guise for industrial-policy objectives that distort market signals and deter U.S. capital. To mitigate its distortive effects, the USTR should:

1. Urge the EU to encourage member states to narrow their definitions of “security and public order” to objectively verifiable and relatively uniform risks to defense, intelligence, or critical infrastructure.
2. Advocate for binding procedural disciplines—clear timelines, transparency, and proportionality—to reduce uncertainty and limit rent seeking.
3. Encourage differentiation between market-based and state-directed investors so that scrutiny targets genuinely nonmarket acquisitions, rather than U.S. commercial investment.
4. Promote dialogue on proportionality and due process in FDI review to ensure that legitimate security objectives are pursued through narrowly tailored, evidence-based measures.

Member states properly retain the sovereign authority to screen foreign direct investment where genuine national-security interests are implicated. To the extent that the FDI Regulation establishes minimum standards of transparency, legal certainty, and procedural safeguards, it moves in the right direction. Nonetheless, the regulation has also catalyzed the proliferation of national screening mechanisms. Because competence over screening remains decentralized, and because member states continue to define “public order” and “security” according to their own policy preferences, the framework risks entrenching a fragmented and unpredictable regulatory landscape that deters efficient cross-border investment.

VI. Digital Services Taxes (DSTs)

Digital services taxes (DSTs) represent another significant and growing non-tariff trade barrier that disproportionately targets U.S. firms operating in the global digital economy. This barrier may be categorized within the “Other Barriers” category (Category 14) on the USTR’s request for comments.

DSTs are typically structured as a percentage of gross revenue derived from specific digital activities, rather than profits, rendering them highly discriminatory and economically distortive. They often fall most heavily on large, profitable U.S.-based technology companies, fostering an uneven playing field and shifting the cost of compliance and operation back to the origin country of innovation.

A core flaw of DSTs is their inherent bias against foreign (particularly U.S.) digital-service providers. Many DSTs are designed with revenue thresholds that effectively exempt domestic (and typically smaller) players, while capturing only the largest multinational corporations, which are predominantly American. This selective application creates an unfair competitive advantage for local firms and disincentivizes foreign investment. For example, a 2019 report highlighted how European DSTs, despite their broad rhetoric, would disproportionately affect U.S. companies due to their global scale and reliance on digital advertising and user data.[62]

Furthermore, DSTs contribute to significant economic inefficiencies and double taxation. By taxing gross revenue, rather than profits, DSTs fail to account for a given firm’s actual profitability or expenses, potentially imposing tax burdens even on firms operating at a loss. As early as 2018, the European Economic and Social Committee (EESC) expressed apprehension regarding the potential for adverse effects on smaller economies and nascent businesses, along with the heightened risk of double taxation.[63]

This departure from long-standing international tax principles creates overlapping tax claims and discourages investment in the digital sector. The lack of a harmonized international approach compels firms to navigate a complex patchwork of varying tax regimes and growing compliance costs and administrative burdens, as detailed by a PricewaterhouseCoopers analysis of the global landscape of DSTs.[64]

The unilateral implementation of DSTs also fundamentally undermines efforts toward a stable and predictable global tax framework. Despite ongoing multilateral efforts at the OECD to establish a consensus-based solution for taxing the digital economy (such as Pillars One and Two), several countries have proceeded with or maintained their own DSTs. This fragmentation risks trade retaliation (exemplified by U.S. Section 301 investigations into various DSTs), which threaten to escalate trade disputes and harm global economic cooperation.[65] As such, DSTs are not merely a revenue-raising tool but a protectionist measure that obstructs the free flow of digital services and capital, ultimately to the detriment of consumers and innovation worldwide.

VII. Pharmaceutical Pricing

ICLE has previously submitted comments to the USTR regarding foreign pharmaceutical-pricing practices that distort trade and erode U.S. firms’ incentives to innovate and shift the financial burden of pharmaceutical innovation disproportionately onto U.S. consumers.[66] This barrier may fit in the “Other Barriers” (Category 14) of the USTR’s request for comments.

Centralized-negotiation systems are a primary mechanism that foreign governments use to distort pharmaceutical pricing.[67] Nations operating national-health-care or single-payer models leverage their substantial buying power to negotiate or impose stringent price limits on medications.[68] Such centralized systems effectively establish monopsony conditions, confronting pharmaceutical companies with a single buyer that possesses overwhelming market power, and thereby eliminating competitive-pricing dynamics.

Biased health-technology assessments (HTAs) are another mechanism that suppress value-based prices abroad. In Germany, for instance, the Federal Joint Committee (G-BA) routinely refuses to recognize key surrogate or intermediate endpoints—such as progression-free survival or HbA1c—unless sponsors meet exceptionally strict criteria.[69] The United Kingdom’s National Institute for Health and Clinical Excellence (NICE) has maintained its £20k-£30k per “quality adjusted life year” threshold since 1999, despite cumulative UK inflation of approximately 90%.[70] Similarly, France’s Comité Économique des Produits de Santé routinely links new drugs to five-year volume contracts.[71] Once in-market sales reach the agreed cap, manufacturers face mandatory clawbacks that can range from 50–70% of “excess revenue.”[72] Moreover, these agencies often discount future health gains, thereby underweighting the decades-long cumulative benefits of curative or disease-modifying therapies.[73]

External-reference pricing (ERP) systems compound these distortions by systematically benchmarking pharmaceutical prices to suppress market values. These systems ensure foreign drug prices remain artificially low—significantly below what would naturally emerge under competitive market conditions.[74] For instance, Canada’s 2022 shift to the Patented Medicine Prices Review Board (PMPRB11) basket deliberately excluded the United States and Switzerland—its two highest-price peers—substituting them with six mid-priced OECD countries.[75] The Canadian Parliamentary Budget Officer estimates that adopting this slimmer benchmark would have reduced Canada’s 2018 spending on patented drugs by approximately 19%.[76]

South Korea’s “two-waiver” pathway presents an even more stark example: a drug must first be priced below the lowest figure among the A7 high-income comparators (which includes the United States). The subsequent National Health Insurance Service (NHIS) negotiation then references “OECD countries other than A7,” explicitly omitting U.S. prices and locking Korean ceilings well below other advanced-economy levels.[77] Such ERP creates a “race to the bottom” effect, where artificially suppressed prices in one jurisdiction become the ceiling for pricing in others, further entrenching below-market pricing globally

Though foreign governments may claim legitimate cost-containment objectives, pricing systems that refuse to internalize any meaningful portion of innovation costs, while free riding on the benefits of U.S.-funded medical breakthroughs, constitute a massive scheme of industrial policy and subsidization. Indeed, in effect, the entire financial burden of global pharmaceutical development is shifted to U.S. patients.

The key test for distinguishing legitimate regulation from trade distortion would be to focus on whether pricing policies create barriers to U.S. market access and fair competition that extend beyond legitimate regulatory objectives. Typically, these policies constitute ACMDs that systematically prevent U.S. pharmaceutical companies from competing on equal terms, shift competitive burdens disproportionately to foreign markets, or create artificial advantages for domestic competitors.

Addressing foreign pharmaceutical-pricing distortions requires surgical trade-policy responses that target specific discriminatory practices, while preserving the innovation ecosystem that benefits U.S. and global health outcomes. The path forward requires rejecting not only counterproductive retaliation but also counterproductive domestic policies, and to instead pursue targeted international remedies. Rejecting most-favored nation (MFN) pricing for Medicaid, for instance, represents a critical policy imperative to avoid importing foreign distortions into the U.S. market. Implementing MFN pricing that benchmarks U.S. reimbursement rates to foreign prices would significantly undermine revenue streams critical to funding ongoing innovation. This would risk replication of Europe’s historical experience, where similar policies transformed the continent from the global leader in pharmaceutical innovation in the 1970s to its current marginal role.

Instead, policymakers should target specific distortions through calibrated trade remedies, including ACMD tariffication, bilateral negotiations with binding enforcement mechanisms, and multilateral coordination that addresses documented competitive harms without disrupting beneficial trade relationships.

VIII. Draft Cybersecurity Rules

The European Union’s (EU) proposed Cybersecurity Certification Scheme for Cloud Services (EUCS) is a proposed regulatory instrument currently under development that purports to harmonize technical security standards for cloud computing across the EU’s Digital Single Market. The scheme, in development by the European Union Agency for Cybersecurity (ENISA) under the authority of the 2019 EU Cybersecurity Act,[78] has progressively incorporated non-technical, nationality-based criteria that function as significant barriers to U.S. exports of goods and services and U.S. foreign direct investment.[79] These provisions, often grouped under the political objective of achieving “digital sovereignty,” repurpose a technical certification framework into a tool of industrial policy designed to alter market outcomes in favor of domestic European firms.[80]

ICLE scholars have previously cautioned that this conflation of security with protectionism risks erecting digital barriers between the EU and its democratic allies, including the United States.[81] The requirements for data localization, EU-based corporate headquarters and ownership, and immunity from non-EU laws are overtly discriminatory. They create substantial hurdles for U.S. firms, which currently hold a dominant share of the EU cloud market, and are inconsistent with the EU’s commitments under international trade law.

The EUCS was originally conceived to replace a fragmented landscape of national certification schemes with a unified, EU-wide framework. Early drafts from 2020 and 2021 focused on establishing a baseline of technical security requirements organized around three assurance levels—“basic,” “substantial,” and “high”—which corresponded to the level of risk associated with a cloud service’s intended use.[82] This initial direction was consistent with international standards and industry best practices.

The scheme’s trajectory shifted following a push by the European Commission and a bloc of member states—including France, Italy, and Spain—to embed the political doctrine of “digital sovereignty” into its requirements. This doctrine reflects a stated European objective to reduce technological dependence on non-EU countries and insulate European data from the extraterritorial jurisdiction of foreign laws, such as the U.S. Clarifying Lawful Overseas Use of Data (CLOUD) Act.[83] Consequently, later drafts of the EUCS introduced non-technical criteria modeled on France’s highly restrictive national SecNumCloud regime.[84] These criteria include mandates that, for the highest assurance levels, data must be stored and processed exclusively within the EU; that cloud-service providers must be headquartered and owned by EU entities; and that CSPs must demonstrate immunity from non-EU legal jurisdictions.[85]

This evolution was contentious within the EU. A coalition of more trade-oriented member states—including Denmark, Estonia, Greece, Ireland, the Netherlands, Poland, and Sweden—expressed strong concerns that these requirements were political, did not enhance cybersecurity, and were inserted into a technical standard without proper debate.[86] ENISA itself reportedly did not see the need for such sovereignty requirements, viewing them as insufficiently grounded in genuine cybersecurity needs, but ultimately included them at the European Commission’s request.[87]

While the EUCS is officially designated a “voluntary” scheme,[88] this description is misleading.[89] The EU’s Network and Information Security Directive (NIS2)[90] grants member states and the European Commission authority to mandate the use of certified services for a wide range of “essential” and “important” entities.[91] These entities span critical sectors of the European economy, including finance, health care, and energy—all of which must require cloud services certified at the highest assurance levels.[92] It is at these levels that the most discriminatory sovereignty requirements are concentrated. This regulatory mechanism effectively transforms a nominally voluntary scheme into a tool for market foreclosure, creating a protected submarket from which U.S. providers will be excluded.

A. Economic Inefficiency and Protectionist Consequences

From an economic perspective, the EUCS’ sovereignty requirements would be inefficient and would impose significant costs on the European economy. The policy of data localization, which requires data to be stored and processed within a country’s borders, is fundamentally at odds with the economic model of cloud computing.[93] Cloud services derive their efficiency from economies of scale achieved by pooling computing resources and managing data across a distributed global network. Localization fragments this model, forcing the costly duplication of infrastructure like data centers and specialized personnel in multiple jurisdictions.[94] Studies show that such measures increase costs for businesses, particularly SMEs, which are then passed on to consumers.[95]

By excluding or disadvantaging the world’s leading cloud-service providers, the EUCS will reduce competition and innovation in the European market. The European cloud market is a high-growth sector, valued at $185 billion in 2024 and projected to be nearly $590 billion by 2030.[96] U.S.-based providers such as Amazon Web Services, Microsoft Azure, and Google Cloud collectively hold a market share of approximately 70%.[97] This position was achieved through technological leadership and sustained investment. Indeed, U.S. providers invest more than €10 billion each quarter in European capital expenditure.[98]

In contrast, the market share of European cloud-service provides has fallen from 29% in 2017 to 15% in 2022, where it has remained stagnant.[99] Denying European businesses full access to the most advanced and cost-effective global services limits their choices and forces them to rely on a smaller pool of less competitive domestic providers. This protectionist environment reduces the pressure for local firms to innovate and improve efficiency.

The economic damage of such exclusionary policies is quantifiable. An economic analysis by Matthias Bauer and Philipp Lamprecht calculated that, under a maximalist approach to data localization as promoted by the French government, the EU’s annual GDP could fall by as much as 3.9% within two years of implementation, accounting for lost and forgone cloud capacity and productivity growth.[100] They project annual EU GDP losses ranging from €29 billion to €610 billion, depending on the scope of sectors to which the highest assurance levels are applied.

The EUCS’ sovereignty requirements are also likely to weaken—rather than enhance—cybersecurity. Effective cybersecurity relies on the ability to detect and respond to threats in real time across a global network, sharing threat intelligence across borders and employing a 24/7 operational model. As Peter Swire and his co-authors have detailed, data localization fragments these integrated security systems, creating data silos that are more vulnerable to attack.[101] It prevents European customers from benefiting from the global threat visibility that only hyperscale providers can offer and may force them to use smaller local providers who cannot match the multi-billion-dollar annual security investments of their U.S. counterparts.[102]

B. EUCS Provisions as Specific US Trade Barriers

The sovereignty requirements in the EUCS would function as significant barriers to U.S. trade and investment, aligning with several categories of concern outlined in the USTR’s request for comments.

First, the provisions constitute “Technical Barriers to Trade” (Category 2). As currently drafted, the EUCS would impose “unnecessarily trade restrictive standards” and “technical regulations” that deviate from established international norms, such as the ISO/IEC 27000 series, to impose criteria based on nationality and geography. By mandating data localization, EU corporate headquarters, and EU ownership, the scheme would supplant global, risk-based standards with a bespoke “sovereignty” standard that, by design, only a narrow subset of EU-domiciled firms can meet. This is a misuse of the standards-setting process to achieve industrial-policy goals.

Second, the scheme would erect barriers to “Services” (Category 6). The mandate for a cloud-service provider to have its global headquarters in the EU to qualify for the highest assurance levels is a direct “local-presence requirement.” More restrictive is the requirement for “immunity from non-EU laws,” a standard that is legally impossible for any U.S. company to meet. U.S. firms are subject to U.S. laws, such as the CLOUD Act and the Foreign Intelligence Surveillance Act (FISA),[103] which establish legal processes for government authorities to request data, regardless of where that data is stored globally. A U.S. company cannot certify that it is “immune” to U.S. law without violating that law. This provision creates a legal paradox designed for the express purpose of disqualifying U.S. providers.

Third, the framework creates barriers to “Investment” (Category 7). The sovereignty provisions function as de facto “limitations on foreign equity participation” and can compel “technology transfer requirements.” To comply with the scheme’s highest assurance levels, a U.S. cloud-service provider would likely need to establish legally separate, EU-controlled joint ventures with European partners, thereby limiting foreign equity. Such arrangements often come with the requirement to share sensitive intellectual property and operational knowledge with the local partner, which is a form of forced technology transfer.

C. Inconsistency with WTO Commitments Under GATS

The EUCS’ sovereignty requirements would also place the EU in conflict with its legal commitments under the WTO’s General Agreement on Trade in Services (GATS). The measures violate GATS’ core principles of “National Treatment” and “Market Access.”

GATS Article XVII, the national-treatment obligation, requires each WTO member to accord to the services and service suppliers of any other member “treatment no less favorable than that it accords to its own like services and service suppliers” in sectors where commitments have been made. The EUCS fails this test. Cloud-computing services offered by U.S. and EU providers are “like services.” The EUCS accords “less favorable” treatment to U.S. suppliers by imposing requirements for an EU headquarters or “immunity” from non-EU laws. These criteria modify the conditions of competition to the detriment of U.S. suppliers based on their nationality and legal domicile, not on the quality or security of their service. An EU provider can qualify for the highest assurance levels while a U.S. provider offering an identical or superior service is disqualified, which is a clear violation of the national-treatment obligation.

GATS Article XVI, the market-access obligation, prohibits WTO members from maintaining certain types of market-access limitations, including “limitations on the number of service suppliers.” By making it legally and practically impossible for any non-EU firm to meet the criteria for the highest assurance levels, the EUCS effectively imposes a “zero quota” on foreign participation in that segment of the cloud market. WTO jurisprudence, as established in the U.S.—Gambling case,[104] has found that a complete prohibition on a particular mode of service supply constitutes a zero quota in violation of Article XVI. The EUCS achieves the same result through its discriminatory certification criteria.

The EU would likely be unable to justify these measures under the exceptions available in GATS Article XIV, which permit measures “necessary to protect public morals or to maintain public order.” The term “necessary” in WTO law requires that no less trade-restrictive alternative is reasonably available to achieve the same policy objective. In this case, numerous less restrictive alternatives exist to ensure an elevated level of cloud security, including a focus on robust technical controls, strong encryption standards, and rigorous third-party audits, all of which can be applied on a nondiscriminatory basis. Because these effective, nondiscriminatory alternatives exist, the EUCS’ nationality-based requirements are not “necessary.”

Furthermore, Article XIV requires that such measures not be applied in a manner that constitutes “a disguised restriction on international trade in services.” The protectionist intent and effect of the EUCS’ sovereignty requirements indicate they are a “disguised restriction on trade,” making a defense under Article XIV untenable.

The draft EUCS framework is not a legitimate, risk-based security measure. It is an economically inefficient and legally questionable policy that uses the pretext of cybersecurity to favor domestic firms at the expense of market-leading U.S. service providers. The scheme will raise costs for European consumers, reduce innovation, weaken cybersecurity, and place the EU in violation of its foundational commitments under GATS.

D. Recommendations

The USTR should engage with the European Commission immediately, before the EUCS is finalized, to advocate removing the nationality-based sovereignty requirements from the draft framework. The United States should emphasize that opposition to these provisions does not reflect opposition to rigorous cybersecurity standards but rather concern that geographic and ownership criteria are unrelated to genuine security risk and violate WTO commitments.

The primary objective should be alignment of the scheme with the ISO/IEC 27000 series standards and other established international cybersecurity frameworks that focus on technical security controls—such as encryption, access management, and audit mechanisms—rather than corporate domicile or ownership structure. The United States should propose that, where the EU maintains concerns about foreign government access to data, technical safeguards subject to objective conformity assessments provide superior security outcomes than do nationality-based restrictions. Early engagement offers the opportunity to influence the regulatory design before political commitments harden, and implementation investments are made.

The USTR should make clear that, if the EUCS is adopted with the discriminatory sovereignty requirements intact, the United States will designate the scheme as a significant foreign trade barrier in future National Trade Estimate Reports under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), and “Investment” (Category 7). Such designation would be followed by formally raising concerns in the WTO Technical Barriers to Trade and Services Committees, and potentially by dispute-settlement consultations.

The United States should coordinate with other advanced economies whose cloud-service providers would face similar barriers under the draft scheme. Japan, South Korea, Canada, Australia, and other countries with significant technology sectors share U.S. interests in preventing the adoption of sovereignty-based certification frameworks. Joint representations to EU institutions during the finalization process would carry greater weight than unilateral complaints and may provide political cover for European officials seeking to resist member-state pressure for protectionist provisions.

IX. Draft Space Act

ICLE has submitted comments^[105] to the U.S. Departments of State and Commerce in which we conclude that provisions of the proposed EU Space Act^[106] would function as non-tariff barriers under WTO principles (Appendix A to these comments):

Our analysis concludes that the EU Space Act functions as a nontariff barrier (NTB) under World Trade Organization principles. In design and effect, it selectively targets U.S. large-constellation operators, imposing compliance burdens that are not proportionate to any demonstrated safety or sustainability benefits. The regulation’s structure and procedural mechanisms—most notably its size-based “giga-constellation” threshold, dual-track registration process, and extraterritorial inspection provisions—create discriminatory market-access barriers. These provisions are likely to harm both U.S. and EU economic welfare, slow the pace of innovation in the sector, and shift market share toward geopolitical competitors whose strategic objectives may run counter to transatlantic security interests.

In light of these findings, we recommend that the U.S. government treat the EU Space Act’s discriminatory provisions as nontariff barriers in trade negotiations with the European Union and, where appropriate, pursue remedies through the WTO Technical Barriers to Trade framework. At a minimum, U.S. policy should press for alignment of the EU Space Act with established international orbital safety standards, including those developed by the International Standards Organization, the Inter-Agency Space Debris Coordination Committee, NASA, and the Federal Communications Commission. Such alignment would reduce the risk of market fragmentation, provide regulatory certainty, and ensure that safety objectives are met without imposing unnecessary and discriminatory costs on foreign operators.

ICLE comments are directly responsive to the USTR’s request, as they specifically identify the proposed EU Space Act as a “significant foreign barrier.” The comments detail how the act creates “discriminatory market-access barriers,” aligning with the USTR’s interest in “Technical Barriers to Trade” (Category 2) and “Services” (Category 6) via “discriminatory licensing requirements or regulatory standards.”

Specific examples provided by ICLE, such as the “size-based ‘giga-constellation’ threshold” designed to exempt EU systems and a “dual-track registration process” that creates conflicts of interest, are precisely the types of distortions the USTR seeks to identify for the 2026 National Trade Estimate Report.

X. Conclusion and Recommendations

Our analysis above demonstrates that a concerning pattern of non-tariff trade barriers is emerging (or worsening, if we consider some longstanding trade barriers) from the European Union’s regulatory landscape, significantly impeding U.S. exports of goods and services and deterring U.S. foreign direct investment. From the DMA’s targeted obligations on U.S. gatekeepers to the GDPR’s restrictive data-processing rules, the EU AI Act’s onerous compliance costs, the EUCS’ protectionist cybersecurity mandates, the EU Space Act’s discriminatory satellite regulations, and EU member states’ pharmaceutical-pricing schemes, these policies collectively create a formidable array of challenges for U.S. firms. The FDI Regulation—officially adopted to protect “security and public order”—has, in practice, spurred highly discretionary and costly screening mechanisms across nearly all EU member states.

Regardless of their stated intent, these measures fundamentally distort market competition, erect regulatory hurdles, weaken intellectual-property protections, and shift the burdens of innovation and compliance disproportionately onto U.S. companies and consumers.

A recurring theme across these barriers is the EU’ embrace of goals like “sovereignty” or “fairness” as justifications for policies that are, in practice, highly protectionist. This approach deliberately blurs the lines between legitimate regulatory objectives and industrial policy, using technical standards, data governance, and investment screening as tools to favor domestic champions and reduce reliance on non-EU (primarily U.S.) technology providers. This institutional bias runs counter to the principles of technological neutrality and nondiscrimination that underpin the multilateral trading system, setting a dangerous precedent that encourages other jurisdictions to adopt similar economically harmful and discriminatory regimes.

The path forward requires a firm commitment to promoting free-trade principles and evidence-based regulation, rather than resorting to retaliatory tariffs that ultimately harm U.S. consumers and the broader U.S. economy. We recommend that the USTR actively engage in bilateral and multilateral fora to challenge these discriminatory practices. This includes advocating for narrowing overly broad definitions of indeterminate legal concepts such as “security” and “public order,” pressing for transparent and predictable regulatory processes, encouraging alignment with established international standards, and promoting policies that genuinely foster innovation and competition, rather than protect incumbents.

By systematically addressing these entrenched non-tariff barriers, the USTR can defend the interests of U.S. businesses and innovators, reinforce the integrity of the global trading system, and ensure that the digital economy and other advanced sectors remain arenas for open competition, innovation, and growth, rather than becoming fragmented by protectionist regulatory empires.

The USTR should formally designate the following measures as significant foreign trade barriers in the 2026 National Trade Estimate Report:

• Digital Markets Act: List under “Services” (Category 6), “Investment” (Category 7), and “Other Non-Market Policies and Practices” (Category 11). The designation should identify specific provisions that function as barriers, including the gatekeeper-designation criteria that disproportionately capture U.S. firms, forced interoperability and data-sharing obligations that appropriate intellectual property, prohibitions on self-preferencing that restrict service design, and data-processing fragmentation that impedes cross-border delivery.
• General Data Protection Regulation: List under “Services” (Category 6), “Investment” (Category 7), and “Other Barriers” (Category 14). The designation should emphasize the chronic legal uncertainty surrounding transatlantic data transfers following the Schrems I and Schrems II decisions, the regressive compliance-cost structure that forecloses market entry for U.S. SMEs, discriminatory enforcement patterns targeting U.S. firms for record penalties, and the regulation’s demonstrated effects of raising data costs and reducing business productivity.
• Artificial Intelligence Act: List under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), “Investment” (Category 7), and “Anticompetitive Practices” (Category 9). The designation should highlight the regulation’s extraterritorial jurisdiction extending to outputs used in the EU, conformity-assessment requirements that delay market entry, prescriptive data-governance mandates that deviate from international standards, exclusion of U.S. stakeholders from European standardization processes, and penalty structure based on worldwide turnover that creates disproportionate liability for global U.S. firms.
• FDI Regulation: List under “Investment” (Category 7) and “Other Non-Market Policies and Practices” (Category 11). The designation should note the framework’s role in encouraging the proliferation of national screening mechanisms, expansion of “security” definitions to encompass broad technology and infrastructure categories and use as a tool to advance “strategic autonomy” industrial-policy objectives under a national-security pretext.
• Proposed Cybersecurity Certification Scheme: List under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), and “Investment” (Category 7). The designation should identify the sovereignty requirements that mandate EU headquarters and ownership, immunity from non-EU-law provisions that create legally impossible conditions for U.S. firms, data-localization requirements that fragment cloud-computing efficiency, and mandatory certification for critical sectors that transforms a nominally voluntary framework into a market-foreclosure mechanism.
• Proposed Space Act: List under “Technical Barriers to Trade” (Category 2) and “Services” (Category 6). The designation should reference size-based constellation thresholds designed to exempt EU operators while capturing U.S. firms, dual-track registration processes creating conflicts of interest, and extraterritorial inspection provisions.

The USTR should pursue bilateral engagement through the U.S.-EU Trade and Technology Council with specific negotiating objectives for each designated barrier.

For the DMA, seek commitments that gatekeeper obligations will be applied only following case-specific findings of market power and demonstrable consumer harm, consistent with established antitrust principles. Negotiate the removal of asymmetric restrictions that compel data sharing, while prohibiting designated firms from using third-party data.

For the GDPR, establish durable transatlantic data-transfer mechanisms incorporating binding commitments that successor frameworks will not be subject to unilateral invalidation. Advocate for enforcement guidelines that establish objective criteria to limit discretion and ensure the nondiscriminatory application of penalties.

For the AI Act, negotiate mutual recognition of conformity assessments conducted according to NIST AI Risk Management Framework procedures. Secure direct voting rights for U.S. stakeholders in European standards organizations’ technical committees. Urge modification of Article 2(1)(c)’s extraterritorial jurisdiction provisions to limit application to AI systems specifically targeted at EU markets. Advocate for converting prescriptive input requirements into performance-based outcome standards.

For the EUCS, demand alignment with ISO/IEC 27000 series international standards and removal of nationality-based sovereignty criteria.

For the Space Act, press for alignment with International Standards Organization, Inter-Agency Space Debris Coordination Committee, NASA, and Federal Communications Commission (FCC) orbital-safety standards.

The USTR should raise these barriers in multilateral forums. File concerns with the Technical Barriers to Trade Committee regarding the AI Act’s conformity-assessment regime, the EUCS’ deviation from international cybersecurity standards, and the Space Act’s discriminatory constellation thresholds. Bring concerns to the Services Committee regarding GDPR data-transfer restrictions, DMA limitations on service design, and EUCS local-presence requirements. Consider requesting WTO dispute-settlement consultations on EUCS provisions that appear to violate GATS Articles XVI and XVII market-access and national-treatment obligations.

The United States should coordinate with like-minded trading partners facing similar barriers. Japan, South Korea, Singapore, Canada, and other advanced economies with significant technology sectors share U.S. interests in preventing proliferation of EU regulatory protectionism. Joint representations carry greater weight than unilateral complaints and reduce the risk that EU regulatory approaches will be adopted as de facto global standards.

The United States should not respond to these barriers through retaliatory tariffs or reciprocal regulatory restrictions. Such measures impose costs on U.S. consumers through higher prices and reduced choice, harm U.S. firms through supply-chain disruption, and undermine U.S. credibility when advocating for open markets and rules-based trade. The appropriate response combines formal trade-barrier designation, sustained bilateral and multilateral diplomatic engagement, and readiness to pursue dispute settlement where violations of international commitments are clear.

These recommendations aim to reduce trade friction and restore competitive neutrality, while respecting legitimate regulatory objectives. Where foreign governments pursue genuine public-interest goals through nondiscriminatory, proportionate, and evidence-based measures aligned with international standards, U.S. trade policy should acknowledge those objectives. Where regulatory frameworks systematically disadvantage U.S. firms through discriminatory design, vague standards that enable arbitrary enforcement, or explicit nationality-based criteria, trade policy should identify those practices as barriers and seek their removal through the appropriate channels.

[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), 2022 O.J. (L 265) 1.

[2] Gatekeepers—Digital Markets Act (DMA), Eur. Comm. (last visited Oct. 29, 2025), https://digital-markets-act.ec.europa.eu/gatekeepers_en.

[3] This has also been recognized by the USTR. See, e.g., 2025 National Trade Estimate Report on Foreign Trade Barriers, Off. U.S. Trade Rep. (Mar. 2025), at 154, available at https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf. (“The ‘gatekeepers’ designated by the DMA disproportionately capture U.S. firms compared to their EU competitors, and therefore undermine U.S. competitiveness in the European market by increasing the compliance costs on certain U.S. firms while not placing a similar burden on EU competitors. The Commission is currently investigating U.S. firms and has imposed excessive fines for violating the DMA”).

[4] For a more thorough critique of the DMA, see, e.g., Lazar Radic, Geoffrey A. Manne, & Dirk Auer, Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulations, 22 Berkeley Bus. L.J. 1 (2025).

[5] The so-called DMA workshops illustrate the opaque and one-sided dynamics of DMA enforcement, in which companies are expected to anticipate when the Commission will deem a product-design decision “fair” and sufficiently conducive to “contestability.” See DMA Stakeholders Workshops, Digital Markets Act (DMA), Eur. Comm., https://digital-markets-act.ec.europa.eu/events/workshops_en (last visited Oct. 29, 2025).

[6] Miko?aj Barczentewicz, EU DMA Workshops: Google, Amazon, Apple, Meta, and Microsoft, EUTechReg (Jul. 8, 2025), https://eutechreg.com/p/eu-dma-workshops-google-amazon-apple.

[7] See Radic et al., supra note 4, at 213-227.

[8] See Barczentewicz, supra note 7.

[9] Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, 68 Antitrust Bull. 669 (2023).

[10] See, e.g., Giuseppe Colangelo, Android Auto: The End of the Essential Facility Doctrine as We Know It, Kluwer Compet. Law Blog (Mar. 13, 2025), https://legalblogs.wolterskluwer.com/competition-blog/android-auto-the-end-of-the-essential-facility-doctrine-as-we-know-it.

[11] See Geoffrey A. Manne, Dirk Auer, Lazar Radic, & Selcukhan Ünekbas, Response of the International Center for Law & Economics: Consultation on the First Review of the Digital Markets Act, Int’l Ctr. Law & Econ. (Sep. 24, 2025), at 8-9 available at https://laweconcenter.org/wp-content/uploads/2025/09/ICLE-DMA-Consultation.pdf. (“An example is the interaction between the DMA and the Data Act, both of which contain data sharing rules. Read together, these measures contribute to what might be described as a policy of data immobility. The Data Act explicitly excludes gatekeepers from benefitting as recipients of data sharing… Even where transfers are permitted, the Data Act imposes a requirement that they be made on fair, reasonable, and non-discriminatory terms, including a prohibition on favourable treatment of affiliated enterprises. This reduces the attractiveness of intrafirm data transfers, effectively constraining data flows even within the same corporate group.”)

[12] For the argument that self-preferencing is not presumptively harmful, see Pablo Ibáñez Colomo, Self-Preferencing: Yet Another Epithet in Need of Limiting Principles, 43 World Compet. (4) 417 (2020). (arguing that self-preferencing is, in fact, a reflection of competition on the merits); see also Lazar Radic & Geoffrey A. Manne, Amazon Italy’s Efficiency Offense, Truth on the Mkt. (Jan. 11, 2022), https://truthonthemarket.com/2022/01/11/amazon-italys-efficiency-offense (arguing that there can be multiple procompetitive reasons why Amazon would choose to give preferential treatment to its own products or services).

[13] On the misguided notion—especially popular among regulators in the context of digital markets—that vertical integration should be presumed anticompetitive, see Geoffrey A. Manne, Against the Vertical Discrimination Presumption, Concurrences No. 2-2020, art. No. 94267 (May 2020), (“The problem, however, is that the claims of presumptive harm from vertical discrimination are based neither on sound economics nor evidence.”).

[14] See Radic et al., supra note 4, 243-249; see also Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth on the Mkt. (Nov. 8, 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation (“Prior to the DMA’s adoption, many leading European politicians were touting the text as a protectionist industrial-policy tool that would hinder U.S. firms to the benefit of European rivals. This logic dovetails neatly with the EU’s broader push for ‘technology sovereignty,’ a strategy intended to reduce the continent’s dependence on technologies that originate abroad (even if that means stifling the companies from its biggest ally: the United States).”).

[15] CADE and European Commission Discuss Collaboration on Digital Market Agenda, Conselho Administrativo de Defesa Econômica (Mar. 29, 2023), https://www.gov.br/cade/en/matters/news/cade-and-european-commission-discuss-collaboration-on-digital-market-agenda.

[16] These include Japan, Brazil, Turkey, Australia, India, South Africa, Vietnam, and South Korea, among others. Not all these countries, however, have adopted DMA-like rules. See Radic et al., supra note 4; see also Lazar Radic, Your Definitive End-of-Year Global Tech Regulation Wrap-Up: Who’s Doing What, Where, and What to Make of It, Truth on the Mkt. (Dec. 21, 2022), https://truthonthemarket.com/2022/12/21/your-definitive-end-of-year-global-tech-regulation-wrap-up-whos-doing-what-where-and-what-to-make-of-it.

[17] Mario Draghi, Forget the US—Europe Has Successfully Put Tariffs on Itself, Financ. Times (Feb. 14, 2025), https://www.ft.com/content/13a830ce-071a-477f-864c-e499ce9e6065.

[18] Carl J. Schramm, Costs to U.S. Companies from EU Digital Services Regulation, Comp. & Commcn’s Ind. Ass’n (Jul. 2025), available at https://ccianet.org/wp-content/uploads/2025/07/CCIA_Costs-to-US-Companies-from-EU-Digital-Services-Regulation_finalreport.pdf.

[19] Giorgio Presidente & Carl Benedikt Frey, The GDPR Effect: How Data Privacy Regulation Shaped Firm Performance Globally, VoxEU (Mar. 10, 2022), https://cepr.org/voxeu/columns/gdpr-effect-how-data-privacy-regulation-shaped-firm-performance-globally.

[20] Mert Demirer, Diego J. Jiménez Hernández, Dean Li, & Sida Peng, Data, Privacy Laws and Firm Production: Evidence from the GDPR (NBER Working Paper No. 32146, Dec. 2024), available at https://www.nber.org/system/files/working_papers/w32146/w32146.pdf.

[21] Presidente & Frey, supra note 19.

[22] Jian Jia , Ginger Zhe Jin, & Liad Wagman, The Persisting Effects of the EU General Data Protection Regulation on Technology Venture Investment, Antitrust Source (Jun. 2021), available at https://www.americanbar.org/content/dam/aba/publishing/antitrust-magazine-online/2021/june-2021/jun2021-jia.pdf.

[23] See Damien Geradin, Theano Karanikioti, & Dimitrios Katsifis, GDPR Myopia: How a Well-Intended Regulation Ended Up Favouring Large Online Platforms—the Case of Ad Tech, 17 Eur. Competition J. 47 (2020).

[24] Adam Thierer, GDPR & European Innovation Culture: What the Evidence Shows, Medium (Feb. 5, 2023), https://medium.com/@AdamThierer/gdrp-european-innovation-culture-what-the-economic-evidence-shows-b19d2309de07.

[25] Damien Geradin, Theano Karanikioti, & Dimitrios Katsifis, supra note 23, at 51 (2020) (“[L]arge online platforms are increasingly invoking the GDPR—or privacy concerns more generally—as an excuse to engage in controversial and potentially restrictive practices. This could be referred to as the “weaponization” of the GDPR and privacy.”).

[26] See John Yun, A Report Card on the Impact of Europe’s Privacy Regulation (GDPR) on Digital Markets, 31 Geo. Mason L. Rev. F. 104 (2024).

[27] See, e.g., Garrett Johnson, Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond (NBER Working Paper No. 30705, Dec. 2022), available at https://www.nber.org/system/files/working_papers/w30705/w30705.pdf.

[28] Rebecca Janßen, Reinhold Kesler, Michael E. Kummer, & Joel Waldfogel, GDPR and the Lost Generation of Innovative Apps, (NBER Working Paper No. 30028, May 2022), available at https://www.nber.org/system/files/working_papers/w30028/w30028.pdf.

[29] Miko?aj Barczentewicz, Should the GDPR Prohibit AI?, Truth on the Mkt. (Nov. 5, 2024), https://truthonthemarket.com/2024/11/05/should-the-gdpr-prohibit-ai.

[30] Id.

[31] Maximillian Schrems v. Data Prot. Comm’r, Case C-362/14, ECLI:EU:C:2015:650 (Oct. 6, 2015) (“Shrems I”); Data Prot. Comm’r v. Facebook Ireland Ltd., Case C-311/18, ECLI:EU:C:2020:559 (July 16, 2020) (“Shrems II”).

[32] Frances M. Green, Adequacy of the EU–U.S. Data Privacy Framework Survives Challenge, Epstein Becker Green (Sep. 12, 2025), https://www.workforcebulletin.com/adequacy-of-the-eu-u-s-data-privacy-framework-survives-challenge.

[33] Vanessa Zimmer, Winter Is Here: The Impossibility of Schrems II for U.S.-Based Direct-to-Consumer Companies, 42 Nw. J. Int’l L. & Bus. 75 (2021).

[34] See Sergi Batlle & Arnaud van Waeyenberge, EU-US Data Privacy Framework: A First Legal Assessment, 15 Eur. J. Risk Reg. 191 (2024).

[35] See Miko?aj Barczentewicz, Schrems III: Gauging the Validity of the GDPR Adequacy Decision for the United States, Int’l Ctr. Law & Econ. (Sep. 25, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/09/ICLE-Schrems-III_2023.09.21.pdf.

[36] Ross McKean, John Magee, & Rachel de Souza, DLA Piper GDPR Fines and Data Breach Survey: January 2025, DLA Piper (Jan. 2025), https://www.dlapiper.com/en-us/insights/publications/2025/01/dla-piper-gdpr-fines-and-data-breach-survey-january-2025.

[37] CMR, GDPR Enforcement Tracker (retrieved Oct. 29, 2025), https://www.enforcementtracker.com.

[38] Regulation (EU) 2016/679, art. 83(5), 2016 O.J. (L 119) 1, 28.

[39] Rachel De Souza, EU & Ireland: Meta’s Legal Basis for Targeted Ads Found to Breach GDPR, DLA Piper (Jan. 10,2023), https://privacymatters.dlapiper.com/2023/01/eu-ireland-metas-legal-basis-for-targeted-ads-found-to-breach-gdpr.

[40] Miko?aj Barczentewicz, The EU’s GDPR “Fix” Misses the Point Entirely, Truth on the Mkt. (Jun. 24, 2025), https://truthonthemarket.com/2025/06/24/the-eus-gdpr-fix-misses-the-point-entirely.

[41] Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024 on Artificial Intelligence and amending Regulations (EC) No. 300/2008, (EU) No. 167/2013, (EU) No. 168/2013, (EU) 2018/858, (EU) 2018/1139, and (EU) 2019/2144 and Directives 2014/90/EU, (EU) 2016/797, and (EU) 2020/1828, 2024 O.J. (L 206) 1 (EU).

[42] Schramm, supra note 18, at 39.

[43] Benjamin Mueller, How Much Will the Artificial Intelligence Act Cost Europe?, Ctr. for Data Innov. (Jul. 2021), available at https://www2.datainnovation.org/2021-aia-costs.pdf.

[44] Gideon Abako, It’s Too Hard for Small and Medium-Sized Businesses to Comply with the EU AI Act: Here’s What to Do, AI Pol’y Bull. (May 19, 2025), https://www.aipolicybulletin.org/articles/its-too-hard-for-small-and-medium-sized-businesses-to-comply-with-eu-ai-act-heres-what-to-do.

[45] Commission Staff Working Document, Impact Assessment Accompanying the Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act) and Amending Certain Union Legislative Acts, Eur. Comm., SWD (2021) 84 final, at 68 (Apr. 21, 2021), https://ec.europa.eu/newsroom/dae/redirection/document/75792 (“[G]iven that in this option high-risk applications are based on exceptional circumstances, one could estimate that no more than 5% to 15% of all applications should be concerned by the requirements.”).

[46] Andreas Liebl & Till Klein, AI Act Impact: Survey Exploring the Impact of the AI Act on Startups in Europe, Init. for Applied Int’l Intelligence (Dec. 12, 2022), available at https://aai.frb.io/assets/files/AI-Act-Impact-Survey_Report_Dec12.2022.pdf.

[47] USITC Analyzes Market Conditions and Outlook for Professional Services in Annual Services Report, U.S. Int’l Trade Comm’n (Jul. 2, 2025), https://www.usitc.gov/keywords/services-trade.

[48] Matthias Bauer, Dyuti Pandya & Oscar du Roy, Openness as Strength: The Win-Win in EU-US Digital Services Trade, Eur. Ctr. for Int’l Pol. Econ. (Mar. 2024), https://ecipe.org/wp-content/uploads/2024/03/ECI_24_PolicyBrief_05-2024_LY03.pdf.

[49] Agreement on Technical Barriers to Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, 1868 U.N.T.S. 120 (1994).

[50] Oliver Roberts, EU AI Act’s Burdensome Regulations Could Impair AI Innovation, Bloomberg Law (Feb. 21, 2025), https://news.bloomberglaw.com/us-law-week/eu-ai-acts-burdensome-regulations-could-impair-ai-innovation.

[51] See, e.g., Kenneth J. Arrow & Anthony C. Fisher, Environmental Preservation, Uncertainty, and Irreversibility, 88 Q. J. Econ. 312 (1974) (explaining that, when a decision is irreversible and future benefits and costs are uncertain, immediate action eliminates the opportunity to learn more before committing resources; by waiting, society retains an “option value,” i.e., the value of preserving flexibility to act later when uncertainty has been reduced).

[52] Anu Bradford, The Brussels Effect: How the European Union Rules the World (2019).

[53] Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, 2019 O.J. (L 79) 1.

[54] FDI Regulation, Arts. 3-4.

[55] Luis Alonso Cabezas Villagarcia, Foreign Direct Investment in the European Union: A Critical and Comparative Overview, Mondo Internazionale (Feb. 11, 2025), https://mondointernazionale.org/en/focus-allegati/foreign-direct-investment-in-the-european-union-a-critical-and-comparative-overview.

[56] Commission Staff Working Document, Third Annual Report on the Screening of Foreign Direct Investments into the Union, SWD (2024) 281 final (Sep. 11, 2024).

[57] See Investment Screening in the EU, Eur. Comm., https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en (last visited Oct. 29, 2025); Framework for Screening of Foreign Direct Investment into the European Union, OECD (2022), available at https://www.oecd.org/content/dam/oecd/en/publications/reports/2022/01/framework-for-screening-foreign-direct-investment-into-the-eu_d966075e/f75ec890-en.pdf.

[58] Joint Communication to the European Parliament, the European Council and the Council, European Economic Security Strategy, JOIN (2023) 20 final (Jun. 20, 2023); see also Jorge Valero, 19 EU Countries Call for New Antitrust Rules to Create ‘European Champions’, Euractiv (Dec. 18, 2018), https://www.euractiv.com/news/19-eu-countries-call-for-new-antitrust-rules-to-create-european-champions.

[59] Commission Staff Working Document, Third Annual Report on the Screening of Foreign Direct Investments into the Union, SWD (2024) 281 final (Sep. 11, 2024).

[60] FDI Regulation, Art. 3(2).

[61] See Proposal for a Regulation of the European Parliament and of the Council Amending Regulation (EU) 2019/452, Eur. Comm. (Jul. 3, 2024), COM (2024) 395 final (recognizing “uneven implementation” among member states and proposing greater harmonization); Third Annual Report on the Screening of Foreign Direct Investments into the Union, Eur. Comm. SWD (2024) 281 final (Sep. 11, 2024).

[62] Matthias Bauer, Digital Services Taxes as Barriers to Trade: Case Study, Eur. Ctr. for Int’l Pol. Econ. (Nov. 2019), available at https://ecipe.org/wp-content/uploads/2019/11/CaseStudy_DigitalService.pdf.

[63] Proposal for a Council Directive Laying Down Rules Relating to the Corporate Taxation of a Significant Digital Presence, COM(2018) 147 final – 2018/0072 (CNS); Proposal for a Council Directive on the Common System of a Digital Services Tax on Revenues Resulting from the Provision of Certain Digital Services, Eur. Econ. & Social Commit., COM(2018) 148 final – 2018/0073 (CNS) (Jul. 30, 2018), available at https://data.consilium.europa.eu/doc/document/ST-11484-2018-INIT/en/pdf.

[64] State of Play of Digital Services Taxes (DSTs) and Other Similar Measures, PricewaterhouseCoopers (Aug. 29, 2025), available at https://www.pwc.com/gx/en/tax/newsletters/tax-policy-bulletin/assets/pwc-state-of-play-of-dsts-and-other-similar-measures.pdf.

[65] Id.

[66] Comments of the International Center for Law & Economics, Re: Request for Comments Regarding Foreign Nations Freeloading on American-Financed Innovation, Int’l Ctr. Law & Econ. (Jun. 26, 2025), https://laweconcenter.org/resources/icle-comments-to-ustr-on-pharmaceutical-pricing.

[67] Funding the Global Benefits to Biopharmaceutical Innovation, Counc. Econ. Advis. (2020), at 5, available at https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/02/Funding-the-Global-Benefits-to-Biopharmaceutical-Innovation.pdf.

[68] Id.

[69] German Benefit Assessment—White Paper: Latest Methodological Requirements in the German Benefit Assessment, Eur. Fed. Stat. Pharm. Ind. (May 2025), at 4, 39, available at https://www.efspi.org/wp-content/uploads/2025/05/GermanHTA_WhitePaper_2025.pdf (“’Key surrogate’ and ‘intermediate endpoints’ refer to measurable indicators used in clinical trials to approximate the effect of a treatment on meaningful patient outcomes. Surrogate endpoints (e.g., tumor shrinkage in cancer trials) function as substitutes for direct clinical outcomes (e.g., survival), while intermediate endpoints (e.g., blood pressure reduction or HbA1c levels in diabetes) reflect early changes that may predict long-term benefits. These markers are often used when direct outcomes take years to observe, but their validity for regulatory or reimbursement decisions depends on evidence linking them to patient-relevant effects.”).

[70] Jacoline Bouvy, Should NICE’s Cost-Effectiveness Thresholds Change?, NICE Blogs (Dec. 13, 2024), https://www.nice.org.uk/news/blogs/should-nice-s-cost-effectiveness-thresholds-change; John Appleby, Nancy Devlin, & David Parkin, NICE’s Cost-Effectiveness Threshold, 335 Br. Med. J. 358 (2007), available at https://pmc.ncbi.nlm.nih.gov/articles/PMC1952475/pdf/bmj-335-7616-edit-00358.pdf; As of June 25, 2025, £1 in 1999 is worth £1.92. Current inflation rates can be calculated on the Bank of England’s site. See Inflation and the 2% Target, Bank Eng., available at https://www.bankofengland.co.uk/monetary-policy/inflation (last visited Jun. 25, 2025).

[71] Marc A. Rodwin, What Can the United States Learn from Pharmaceutical Spending Controls in France? (Commonwealth Fund Issue Brief, Nov. 11, 2019), https://www.commonwealthfund.org/publications/issue-briefs/2019/nov/what-can-united-states-learn-drug-spending-controls-france.

[72] Id.

[73] Rick Chapman et al., Value Assessment Methods and Pricing Recommendations for Potential Cures: A Technical Brief, at 13 (Inst. Clin. Econ. Rev., Aug. 6, 2019), available at https://icer.org/wp-content/uploads/2020/10/Valuing-a-Cure-Technical-Brief.pdf.

[74] CEA, supra note 51 at 5-8.

[75] Teresa A. Reguly & Eileen M. McMahon, PMPRB Regulations: New Basket of Comparator Countries Has Arrived, Absent Guidance, Torys (Jul. 7, 2022), https://www.torys.com/en/our-latest-thinking/publications/2022/07/pmprb-regulations.

[76] Canadian Patented Drug Prices: Gauging the Change in Reference Countries, Parliam. Budg. Off. (Jun. 14, 2022), https://distribution-a617274656661637473.pbo-dpb.ca/1135d8aba4de3c35a1098e80fd5209fddb097920d354f8ac79ec3b1cf8918ff5.

[77] Seung-Rae Yu, Improving the Reimbursement Process for New Drugs: A Case Study of a Two-Waiver System in South Korea, 31 J. Evaluation Clin. Prac. e70074 (2025), https://pmc.ncbi.nlm.nih.gov/articles/PMC11959314.

[78] Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act), 2019 O.J. (L 151) 1.

[79] Miko?aj Barczentewicz & Kristian Stout, EU’s Cybersecurity Draft Shifts Toward Hard Protectionism, Truth on the Mkt. (Nov. 14, 2023), https://truthonthemarket.com/2023/11/14/eus-cybersecurity-draft-shifts-toward-hard-protectionism.

[80] Miko?aj Barczentewicz & Kristian Stout, How Not to Use Industrial Policy to Promote Europe’s Digital Sovereignty, Truth on the Mkt. (Oct. 5, 2022), https://truthonthemarket.com/2022/10/05/how-not-to-use-industrial-policy-to-promote-europes-digital-sovereignty.

[81] Id.

[82] See, e.g., John Salmon, Louise Crawford, Lavan Thasarathakumar, Daniel Lee, & Giulia Mariuz, EUCS: Controversial Sovereignty Issues Continue to Drive Debate for Cloud Services, Hogan Lovells (Jun. 12, 2024), https://www.hoganlovells.com/en/publications/eucs-controversial-data-sovereignty-issues-continue-to-drive-debate-around-the-eu-certification-scheme-for-cloud-services.

[83] Nigel Cory, Europe’s Cloud Security Regime Should Focus on Technology, Not Nationality, Info. Tech. & Innovation Found. (Mar. 27, 2023), https://itif.org/publications/2023/03/27/europes-cloud-security-regime-should-focus-on-technology-not-nationality; see also Clarifying Lawful Overseas Use of Data Act, Pub. L. No. 115-141, div. V, 132 Stat. 1213, 1213–25 (2018).

[84] Meredith Broadbent, The European Cybersecurity Certification Scheme for Cloud Services, Ctr. for Strategic & Int’l Stud. (Sep. 1, 2023), https://www.csis.org/analysis/european-cybersecurity-certification-scheme-cloud-services.

[85] Id.

[86] Barczentewicz & Stout, supra note 79.

[87] Barczentewicz & Stout, supra note 80.

[88] Press Release, ENISA Launches a Public Consultation on a New Draft Candidate Cybersecurity Certification Scheme in a Move to Enhance Trust in Cloud Services Across Europe, Eur. Union Agency for Cybersecurity ENISA (Dec. 22, 2020), https://www.enisa.europa.eu/news/enisa-news/cloud-certification-scheme.

[89] Barczentewicz & Stout, supra note 79.

[90] Directive (EU) 2022/2555 of the European Parliament and of the Council of 14 December 2022 on measures for a high common level of cybersecurity across the Union, amending Regulation (EU) No 910/2014 and Directive (EU) 2018/1972, and repealing Directive (EU) 2016/1148 (NIS 2 Directive), 2022 O.J. (L 333) 80.

[91] The EU’s Cloud Service Restrictions, Info. Tech. & Innovation Found. (Aug. 26, 2025), https://itif.org/publications/2025/05/25/eu-cloud-service-restrictions.

[92] Broadbent, supra note 84.

[93] See, e.g., Conan French, Brad Carr, & Clay Lowery, Data Localization: Costs, Tradeoffs, and Impacts Across the Economy, Inst. of Int’l Fin. (Dec. 2020), https://www.iif.com/portals/0/Files/content/Innovation/12_22_2020_data_localization.pdf.

[94] The “Real Life Harms” of Data Localization Policies (Ctr. for Info. Pol’y Leadership Discussion Paper 1, Mar. 2023), at 1, available at https://www.informationpolicycentre.com/uploads/5/7/1/0/57104281/cipl-tls_discussion_paper_paper_i_-_the_real_life_harms_of_data_localization_policies.pdf.

[95] French et al., supra note 93; see also Kruthi Venkatesh, The Data Localization Debate in International Trade Law, Ikigai Law (Jun. 22, 2020), https://www.ikigailaw.com/article/273/the-data-localization-debate-in-international-trade-law (“According to most studies, such forced localization measures create a huge burden on businesses, particularly for small and medium-sized enterprises (SMEs), increasing costs up to 30–60% for acquiring local computing facilities and data storage infrastructure. In fact, as per a study conducted by the European Centre for International Policy Economy, forced data localization norms lead to a negative impact on the GDP and considerable impact on investments.”).

[96] Europe Cloud Computing Market Size & Outlook, 2024-2030, Grand View Res. (retrieved Oct. 28, 2025), https://www.grandviewresearch.com/horizon/outlook/cloud-computing-market/europe.

[97] European Cloud Providers’ Local Market Share Now Holds Steady at 15%, Synergy Res. Grp. (Jul. 24, 2025), https://www.srgresearch.com/articles/european-cloud-providers-local-market-share-now-holds-steady-at-15.

[98] Id.

[99] Id.

[100] Matthias Bauer & Philipp Lamprecht, The Economic Impacts of the Proposed EUCS Exclusionary Requirements: Estimates for EU Member States, Eur. Ctr. for Int’l Pol. Econ. (Oct. 2023), https://ecipe.org/publications/eucs-immunity-requirements-economic-impacts.

[101] See, e.g., Peter Swire, DeBrae Kennedy-Mayo, Drew Bagley, Sven Krasser, Avani Modak, &Christoph Bausewein, Risks to Cybersecurity from Data Localization, Organized by Techniques, Tactics and Procedures, 9 J. Cyber Pol’y 20 (2024).

[102] Zach Meyers, Can the EU Afford to Drive Out American Cloud Services?, Ctr. for Eur. Reform (Mar. 2, 2023), https://www.cer.eu/insights/can-eu-afford-drive-out-american-cloud-services.

[103] 50 U.S.C. §§ 1801–1813 (2020).

[104] United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Appellate Body Report, WT/DS285/AB/R (adopted Apr. 20, 2005), summarized at https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds285sum_e.pdf.

^[105] ICLE Comments to the Department of Commerce and Department of State’s Consultation on the EU Space Act, Int’l Ctr. Law & Econ. (Aug. 13, 2025), https://laweconcenter.org/wp-content/uploads/2025/08/EU-Space-Act-Comments.pdf.

^[106] Proposal for a Regulation of the European Parliament and of the Council on the Safety, Resilience and Sustainability of Space Activities in the Union, 2025/0335 (COD) (Jun. 25, 2025).

WASHINGTON D.C. – October 30, 2025 – The LEO Policy Working Group today released a comprehensive report urging U.S. policymakers to modernize regulations governing Low Earth Orbit (LEO) to ensure sustainable growth, fair competition, and effective deployment of next-generation satellite connectivity. The report, titled “Low Earth Orbit Satellites: Policies to Promote Spectrum Sharing, Foster Competition, and Close Digital Divides,” identifies three critical policy areas requiring action as LEO becomes increasingly congested with large communication constellations.

The report emphasizes that while LEO technology promises increases in network capacity and ubiquitous service, its full potential is currently hamstrung by outdated, burdensome, and overly restrictive licensing systems; this includes the regulatory frameworks they operate under.

Over the past year, New America’s Wireless Future program and the International Center for Law & Economics (ICLE) have co-chaired a series of discussions bringing together industry, public policy, academic, and regulatory experts to explore the challenges facing the development and deployment of LEO satellites for universal connectivity. The LEO Policy Working Group, created as a result of these efforts, has identified three central themes that must guide U.S. policy:

1. Enabling Effective LEO Spectrum Sharing and Coexistence: The current satellite licensing system is characterized as being “overly slow, bespoke, and burdensome.” To realize the full potential of LEO systems, the report recommends a significant shift from bespoke processes to clear, uniform ex ante rules with targeted ex post enforcement. It also advocates for a robust spectrum pipeline that allocates far greater availability for satellite use, underpinned by modernized interference protection frameworks.
2. Fostering a Sustainable Competitive Environment: The report analyzes the LEO market as a hybrid arena where statecraft and economics interact, noting the influence of state-backed constellations and heavy subsidies that skew the competitive field. While competition is real and intensifying, market consolidation is likely. The Working Group urges policymakers to remain alert to potential anticompetitive conduct, specifically monitoring vertical integration, tying, and merger activity, while recognizing that efficiency-enhancing integration can also be pro-consumer.
3. Optimizing LEO Connectivity’s Role in Closing the Digital Divide: LEO satellite service can now deliver high-speed broadband (100/20 Mbps) directly to homes, making it a powerful tool for achieving universal service goals. The report finds LEO service is uniquely appropriate for otherwise hard-to-reach locations (due to its minimal ground infrastructure). Policymakers must address existing barriers and create a regulatory environment that effectively incorporates LEO systems into ongoing and future federal broadband subsidy programs to help them effectively serve unserved and underserved households.

Kristian Stout, Director of Innovation Policy at ICLE shared the following: “The promise of next-generation LEO connectivity remains constrained by outdated assumptions in the satellite industry. Spectrum policies are still shaped by overly restrictive regulatory frameworks long past due for modernization. At the same time, competition law must recognize that this remains a nascent market—one where even well-capitalized firms face extraordinary investment risk and uncertain returns. As telecom authorities pursue universal connectivity, satellites have become a central element of that policy mix. The barriers and opportunities identified in our report highlight the need for policymakers to move beyond slow, legacy regimes toward more adaptive, forward-looking regulation.”

Michael Calabrese, Director of Wireless Future at New America, added: “LEO satellite constellations have the potential to fill remaining broadband coverage gaps and to enable seamless connectivity for both consumers and enterprise. To achieve this, regulators will need to promote intensive spectrum sharing and streamline the regulatory process. The LEO Policy Working Group report provides a roadmap in relation to abundant spectrum capacity, enhanced competition, and closing digital divides.”

To interview Kristian or Michael, contact Jim Fellinger at [email protected]. 

This figure shows the orbital ranges of three different kinds of satellites: Geostationary Earth Orbit (GEO), Medium Earth Orbit (MEO), and Low Earth Orbit (LEO). LEO satellites operate in the closest range to Earth, 300–2000km above the planet’s surface. Source: Screenshot from “Large Constellations of Low-Altitude Satellites: A Primer,” May 2023, Congressional Budget Office, cbo.gov/publication/59175.

The LEO Policy Working Group calls on government agencies, including the FCC and NTIA, to utilize the report’s findings to drive immediate and effective regulatory change.

Signers include: 

• Michael Calabrese (co-chair), Director of Wireless Future at New America
• Kristian Stout (co-chair), Director of Innovation Policy, International Center for Law & Economics (ICLE)
• Jeffrey Carlisle, Managing Member, Lerman Senter PLLC, Former Chief of the FCC’s Wireline Competition Bureau
• Patricia Cooper, Founder, Constellation Advisory LLC, Former President, Satellite Industry Association
• Harold Feld, Senior Vice President, Public Knowledge
• Paul Garnett, Chief Executive Officer, Vernonburg Group, Former Assistant Vice President, Regulatory Affairs, at CTIA-The Wireless Association
• Mark Jamison, Gerald Gunter Professor, University of Florida, and Director, Public Utility Research Center (PURC) and Digital Markets Initiative
• Joe Kane, Director, Broadband and Spectrum Policy, Information Technology and Innovation Foundation
• J. Armand Musey, President and Founder, Summit Ridge Group, LLC
• Michael O’Rielly, Strategic Advisor and Advocate, MPORielly Consulting LLC, Former FCC Commissioner
• Jon Peha, Professor, Electrical Engineering and Public Policy, Carnegie Mellon University, Former Chief Technologist at the Federal Communications Commission and Assistant Director, White House Office of Science & Technology Policy
• Ruth Pritchard-Kelly, Principal, RPK Advisors, Former Senior Advisor for Regulatory and Space Policy, OneWeb
• David Reed, Scholar in Residence, University of Colorado Boulder, Former Telecommunications Policy Analyst at the Office of Plans and Policy, FCC
• Nicol Turner Lee, Director, Center for Technology Innovation and Senior Fellow of Governance Studies, Brookings Institution

About the LEO Policy Working Group 

The LEO Policy Working Group is an independent body dedicated to providing forward-looking, data-driven analysis and policy recommendations to ensure the successful and sustainable deployment of next-generation Low Earth Orbit satellite systems. 

About ICLE

The International Center for Law & Economics is a nonprofit, nonpartisan research center working with a roster of more than one-hundred academic affiliates and research centers from around the globe. ICLE scholars promote the use of law and economics methodologies to inform public policy debates.

About New America

New America is a think-and-action tank dedicated to renewing the promise of America in an age of rapid technological and social change. Our work prioritizes care and family wellbeing, advances technology in the public interest, reimagines global cooperation, builds effective democracy, and ensures affordable and accessible education for all. Learn more at newamerica.org.

The European Commission’s ongoing review of its merger guidelines attempts to reconcile the seemingly heterogeneous objectives of competitiveness, resilience, innovation, and legal certainty within a single framework. This naturally raises a key question: can the commission square the circle?

The International Center for Law & Economics (ICLE) and the University of Liège Institute for EU Legal Studies sought to address this critical issue during an Oct. 15 conference in Brussels. Across two insightful panels, leading competition-policy experts addressed the most pressing questions in European competition policy today: How should new guidelines reconcile expanded enforcement goals with existing EU law, court rulings, and standards of evidence? And how can merger control remain coherent and predictable while addressing emerging theories of harm and fast-moving markets?

Introduction

We thank the European Commission for this opportunity to respond to the request for information on the revision of Regulation 1/2003, the flagship legislation on the implementation of competition law at the European level. The Call for Evidence correctly identifies that legal and economic developments brought about significant challenges for competition enforcement in Europe. While Regulation 1/2003 has been largely effective, it could also benefit from certain improvements, especially considering the digitalization of business over recent decades.

The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth. ICLE previously submitted comments to the Commission regarding the first consultation on the Digital Markets Act (DMA), as well as the revision of the regulatory framework on merger control. These comments concentrate on three questions raised in the Call for Evidence: interim measures and commitments, rights of complainants, and legal fragmentation.

First, the consultation proposes making interim measures and commitment procedures under Regulation 1/2003 faster and easier. While attractive in theory, lowering the legal or procedural thresholds for Article 8 interim measures or compressing Article 9 commitment negotiations would heighten the risk of false positives. Such interventions may chill procompetitive conduct before any infringement has been proven. EU law has long cautioned against this danger. The Court of Justice of the European Union’s (CJEU) case law requires a strict test of urgency, serious and irreparable harm, and a prima facie finding before interim measures can be imposed, precisely to avoid irreversible remedies that later prove unjustified. Similarly, Article 9 commitments already provide for broad Commission discretion. Imposing deadlines or procedural shortcuts could pressure firms into overly broad concessions that are not calibrated to actual harm, thereby locking in industry structures and deterring innovation.

These risks are particularly acute in dynamic markets, where rapid change makes it difficult to distinguish in real time examples of competition on the merits from exclusionary conduct. Interim measures providing access to inputs or redesigns may be operationally irreversible. Rushed commitments may entrench inefficient outcomes. The better path would be to preserve and reinforce existing safeguards: interim measures should remain exceptional and grounded in strong evidence of irreparable harm (without themselves creating such irreparable harm), while commitments should remain voluntary, flexible, and proportionate. Speed is valuable, but only if it comes with reliable evidence and sober effects analysis; otherwise, consumer welfare may be reduced, rather than enhanced.

Second, the Commission is considering whether to simplify the participation of complainants and third parties in competition investigations, including by abolishing the right to a formal rejection decision. We support this option. Under the current framework, complainants face minimal costs to file, but the Commission bears significant procedural burdens in responding, which include the duty to issue detailed, reasoned rejection decisions within tight deadlines. This asymmetric allocation of rights and obligations creates moral hazard: rivals and self-interested parties have strong incentives to exploit the system for strategic gain, while the Commission is forced to expend scarce resources on marginal complaints.

Abolishing the obligation to issue formal rejection decisions would help to correct this imbalance, reduce procedural costs, free up enforcement resources, and allow the Commission to focus on cases with genuine anticompetitive harm. This does not mean complainants’ input should be discouraged: useful information should still be welcomed and can help to detect real infringements. But forcing the Commission to issue detailed dismissal decisions in every case magnifies enforcement costs without improving outcomes. In line with error-cost reasoning, complaints that are clearly inconsistent with protecting competition—for example, those aimed at protecting competitors from lower prices—should be deprioritised. Streamlining complainants’ rights in this way would enhance procedural economy, while safeguarding the Commission’s ability to act where it truly matters.

Finally, the Commission is right to revisit Article 3(2) of Regulation 1/2003, which permits member states to adopt stricter national rules on unilateral conduct. While such flexibility was intentional, its recent proliferation—from Belgium’s abuse of economic dependence law to Germany’s regime for firms of “paramount significance”—risks serious fragmentation of the internal market. Parallel national enforcement not only multiplies compliance costs for firms but also raises ne bis in idem concerns when layered on top of EU competition law and the DMA. Cases such as the Bundeskartellamt’s investigations into Meta, Amazon, and Booking.com illustrate how national and EU rules can converge on similar conduct—blurring substantive differences, while multiplying burdens.

Strengthening coordination is therefore not an “option” but a necessity. The ECN+ Directive already envisages information exchange, but its practical use remains limited. A more robust framework is needed to ensure complementarity, rather than duplication, consistent with the CJEU’s insistence on uniform interpretation and coherence of enforcement. More fundamentally, the Commission should reassess whether the asymmetric pre-emption logic of Regulation 1/2003, strong for Article 101 but loose for Article 102, remains justified. If the original rationale has lost its force, reform should aim to rebalance towards greater harmonisation, while carefully weighing the trade-off between uniformity and Member State autonomy.

I. Interim Measures and Commitments

The Commission asks whether it should amend Article 8 of Regulation 1/2003 to enable swifter interim interventions, including by revising the substantive legal test and/or streamlining procedural requirements so that measures can be adopted even in cases of extreme urgency. It also asks whether it should adapt Article 9 by imposing deadlines for parties to submit binding-commitment offers to speed up commitment decisions:

Option 1: amend the Commission’s power under Article 8 of Regulation 1/2003 to allow for faster interventions when necessary. Sub-option 1: Change the legal test for imposing interim measures to allow for the effective use of interim measures. and/or Sub-option 2: Change the procedural requirements for imposing interim measures to allow for faster proceedings. and/or

Option 2: adapt the Commission’s power to make commitments binding under Article 9 of Regulation 1/2003 by imposing a deadline for the submission of binding commitment offers on the investigated parties to ensure faster.[1]

Unfortunately, simply making it easier for the Commission to impose interim measures or to extract commitments is unlikely to benefit consumers. This is particularly the case in markets characterized by rapid innovation and network effects, where premature intervention risks imposing irreversible constraints on firms not yet proven to be infringing. This would raise the likelihood and cost of false positives.

Indeed, the central insight of the error-cost framework is that, when (competition) enforcers act under significant uncertainty, the expected welfare loss from deterring procompetitive conduct can exceed the harm from delayed intervention against actual violations.[2] EU competition law has long recognized this danger, which why it establishes demanding substantive and procedural requirements before any kind of remedy is imposed—not least when this is done prior to a full infringement decision.

From a procedural standpoint, both Regulation 1/2003 and the CJEU’s case law require genuine urgency and a real risk of serious and irreparable harm (as well as a prime facie finding of liability) before interim measures can be imposed pending a merits outcome:

In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures.[3]

These requirements are echoed by the CJEU. For instance, in NDC Health Corp. v. IMS Health, the CJEU’s president refused to order interim measures because, among other things, the defendant’s conduct was not unambiguously illegal:

[W]here the abusive nature of the applicant’s conduct is not unambiguous having regard to the relevant case-law and where there is a tangible risk that it will suffer serious and irreparable harm if forced, in the meantime, to license its competitors, the balance of interests favours the unimpaired preservation of its copyright until judgment in the main action.[4]

In that same case, the CJEU also cautioned against interim measures when their effect would be hard to reverse:

[M]any of the market developments to which immediate execution of the decision is likely to give rise would be very difficult, if not impossible, later to reverse if the application in the main action were to be upheld.[5]

Arguing further that:

[I]t cannot be excluded that implementation of the contested decision will restrict the applicant’s freedom to define its business policy.[6]

These procedural rules echo European competition law’s broader concern with false positives. After all, on the substance, the CJEU has fleshed out numerous legal tests that aim to avoid wrongly punishing innocent firms. For instance, the court in Bronner and IMS Health (concerned about interferences with parties’ property rights) confined duty-to-deal theories to “exceptional circumstances”, requiring indispensability, elimination of competition, and (in intellectual-property cases) the prevention of a new product for which there is consumer demand, absent objective justification.[7] Likewise, in Post Danmark, the court held that exclusionary “effects” must be assessed with care, so as to avoid chilling procompetitive conduct:

Not every exclusionary effect is necessarily detrimental to competition… Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.…[8]

Finally, the Intel court made clear that, where the dominant firm adduces evidence that its conduct is incapable of restricting competition, the Commission must undertake an effects-based assessment—examining dominance, market coverage, conditions, duration, amounts, and any strategy to exclude equally efficient rivals.[9] This reflects clear concern about Commission decisions being made without a sufficiently robust evidentiary basis.

Importantly for the matter at hand, all these substantive guardrails would be rendered ineffective if enforcers had free rein to mandate interim measures before a case is decided. Lowering those standards, whether by softening the legal test or compressing procedural safeguards, would shift error-cost risk onto consumers and defendants by making Type I errors of overenforcement more likely, along with their chilling effect on investment and rivalry. Interim measures are thus rightly circumscribed to exceptional situations where the balance of interests warrants their imposition.

Commitment decisions raise a distinct-but-related risk. Article 9 decisions are expressly designed to trade a formal infringement finding for speed and procedural economy. The CJEU has emphasized that the Commission enjoys broad discretion in accepting commitments and that proportionality review is correspondingly limited—i.e., whether the commitments address the stated concerns and whether less onerous commitments would do so.[10] Given these already limited guardrails surrounding the application of this proportionality test, Article 9 can readily undershoot or overshoot what would be necessary under Article 7 after full fact-finding, especially if deadlines or procedural shortcuts pressure firms into overly broad concessions. That dynamic can lock in industry structures, deter entry, or curb product changes that would benefit consumers. Further eroding the limited requirements of Article 9 to tilt the bargaining scales in the Commission’s favor of would thus likely do more harm than good.

Against this legal backdrop, the consultation’s Option 1 (changing Article 8’s legal or procedural tests to accelerate interim measures) and Option 2 (imposing deadlines that pressure Article 9 commitments) would predictably increase the incidence and cost of false positives. Interim orders are often operationally irreversible (e.g., forced access, product redesigns, long-term supply or interoperability obligations) and could chill procompetitive experimentation. Commitment deadlines risk extracting overly broad, innovation-reducing concessions that are not calibrated to proven harm.

These error-cost risks are particularly acute in dynamic digital markets, where short-run structure is a poor proxy for long-run consumer welfare, and where rapid data-driven iteration can make intense platform competition look like anticompetitive foreclosure. Several scholars have therefore cautioned against hastening to intervene, absent robust evidence of anticompetitive effects.[11]

Concrete examples illustrate the point. As ICLE scholars discussed in an amicus brief submitted to the Epic Games litigation in the United States, overly hasty platform remedies risk degrading product quality, security, privacy, and multisided pricing models before a record proves competitive harm (a risk at odds with Post Danmark’s warning not to protect less-efficient rivals at consumers’ expense):

The Order would effectively obviate various of Apple’s legal business practices, including steps Apple might take to protect the integrity and security of its platform and IAP, the privacy and data security of consumers who use the Apple ecosystem, and the value of its intellectual property, all of which were previously identified by this Court as legitimate. [12]

Accordingly, if reforms are pursued, they should preserve (and, where needed, reinforce) the evidentiary and proportionality safeguards that EU law has developed precisely to mitigate error costs. For interim measures, that means retaining a stringent merits-and-urgency filter keyed to serious and irreparable harm and to sound effects evidence. For commitments, it counsels against rigid deadlines or presumptions that would shift bargaining power in ways likely to produce overly inclusive, innovation-reducing remedies. Speed can be valuable, but only when paired with procedures that ensure decisions rest on a reliable factual foundation and a sober assessment of competitive effects.

II. Rights of Complainants

With respect to the participation of complainants and third parties in competition investigations, the Commission asks whether it should simplify the procedure to reduce complexity and resource intensity. Under Regulation 1/2003, natural or legal persons with a ‘legitimate interest’ may lodge a formal complaint. But the evaluation of Regulation 1/2003 revealed the current system is burdensome for both complainants and the Commission, and that the existing categories of third-party rights may undermine effectiveness and add procedural complexity. The following options are under consideration:

Option 1: abolish formal complainants’ right to a rejection decision. and/or

Option 2: streamline or clarify the rights of third parties in competition investigations to reduce complexity and improve effectiveness.[13]

Abolishing complainants’ rights to a rejection decision would free a substantial share of the Commission’s resources, reduce overall procedural costs under Articles 101 and 102 TFEU, and streamline enforcement by eliminating a cumbersome three-step procedure that requires complainants’ active participation—disproportionately burdensome for the Commission. By contrast, option two would likely only add pressure to resources that are already overstretched. We therefore support option one, for reasons set out below.

In competition law, disgruntled rivals and self-interested parties often have a strong incentive to lodge complaints. These grievances may or may not coincide with the public interest—that is, the protection of competition for the ultimate benefit of consumers—and indeed, they very often do not. As U.S. Judge Frank Easterbrook observed in 1984:

Courts cannot review old decrees on their own motion, but they should be careful not to create new restraints. They therefore should treat suits by horizontal competitors with the utmost suspicion. They should dismiss outright some categories of litigation between rivals and subject all such suits to additional scrutiny.[14]

Easterbrook’s advice was addressed to U.S. courts, where antitrust litigation is predominantly private and driven by plaintiffs. There is, however, no reason the same guidance should not also inform the Commission’s approach under the EU’s public-enforcement system. Indeed, much of Easterbrook’s reasoning stems from a deeper ambiguity that underlies both U.S. antitrust and EU competition law alike: the fine distinction between protecting competition and protecting competitors.

That enduring dilemma ensures that rivals and other self-interested parties will always have strong incentives to exploit enforcement for private gain. In the EU, this dynamic is reinforced by the Commission and the European Courts’ recognition of a broad range of actors as having a “legitimate interest” in lodging complaints under Articles 101 and 102 TFEU. These include, among others, competitors,[15] undertakings excluded from a distribution system,[16] traders unable to penetrate a market because customers are allegedly tied to another supplier,[17] and suppliers paid “low” prices by large purchasers.[18]

The incentive to employ the mechanism of competition law for private interest is further compounded by certain procedural rules that make the benefits of filing a complaint—even if potential—vastly outweigh its costs.

Indeed, lodging a complaint with the Commission entails only modest costs for complainants, at least at the initial phase. There is no filing fee and no sanction for submitting a meritless claim. Completing Form C of the Commission’s complaint notice may entail minor costs—such as gathering information on the parties involved or submitting relevant documents (texts, minutes, terms of transactions, etc.)—but the form itself is concise, high-level, and limited to a single page.

At the same time, the potential rewards of a successful complaint can be substantial, and likely to far outweigh any filing costs incurred. A strategically framed complaint may weaken a rival’s competitive position by imposing fines, remedies, or the financial burden of compliance with an investigation under Regulation 1/2003. This can allow a third party to secure access to another firm’s infrastructure at little or no cost, or by create grounds for follow-on private litigation (follow-on litigation constitutes the lion’s share of EU private enforcement). Meanwhile, the bulk of investigative costs falls on the Commission.

While the Commission is under no obligation to investigate every complaint, it does not have unlimited discretion on how it handles complaints. On receipt of a complaint, the Commission must consider whether, if confirmed, the facts would constitute an infringement and whether there is an EU interest in pursuing the matter;[19] carry out an assessment on the basis of matters of fact and law;[20] and undertake a diligent and impartial examination of the complaint in accordance with the principle of sound administration.[21][22] It must also, in each case, assess the seriousness and duration of any interferences with competition and the persistence of their consequences,[23] and take into account the existence of other similar complaints. If the reason given by the Commission for rejecting a complaint is inconsistent with its previous treatment of such conduct, the decision rejecting the complaint may be challenged on the grounds of lack of reasoning under Art. 296 TFEU.[24]

It is unclear how much time and staff the Commission must devote to meeting these procedural requirements, but the burden is unlikely to be negligible. For reference, the Commission has committed to responding to all complaints within four months.[25] As of the late 1990s, Advocate General Giuseppe Tesauro considered a period of three to six months a “reasonable” timeframe for issuing a decision.[26] Such compressed deadlines place additional strain on the Commission’s already-limited resources. In 2024, the Directorate-General for Competition employed 851 staff members, 70% of which are dedicated to enforcement activities.[27] These resources are now spread even thinner due to the enforcement needs of the DMA.

To be sure, complainants also bear some costs when a rejection decision is at stake under Article 7 of Regulation 73/2004—e.g., engaging in exchanges with the Commission or submitting additional written observations. [28] Yet the bulk of the burden still falls on the Commission, which must adopt a detailed decision rejecting the complaint within a reasonable period or risk legal challenge: either for failure to act under Article 265 TFEU, for insufficient reasoning under Article 296 TFEU, or for annulment under Article 263 TFEU. Conferring these review rights onto interested parties therefore means the Commission must act diligently and within a tight deadline or risk litigation, which would require additional operational and reputational costs.

This lopsided allocation of rights and obligations generates moral hazard. Complainants face limited downside but potentially significant upside, which systematically encourages an oversupply of complaints and thereby increases the system’s total procedural costs, of which they bear only a fraction. Complainants therefore have incentives to over-report, while the Commission bears almost the full cost of monitoring and enforcement. Critically, because the law requires the Commission to respond even to frivolous complaints with a reasoned decision, the procedural rules amplify the inefficiency. Complaints are almost costless to lodge, but never costless to process. Even those that pass the initial threshold, yet ultimately prove unfounded, consume substantial administrative and investigative resources.

Viewed economically, this is a suboptimal outcome. The procedural system’s objective is to minimize the combined costs of erroneous judicial decisions and the operation of the system itself.[29] Given many substantive and procedural factors—including the inherent complexity of competition law, its susceptibility to be used both to stifle competitors and to free ride on their investments, and the relatively low cost of filing a complaint—parties have strong incentives to lodge more complaints than is socially optimal. Abolishing the duty to respond to every complaint will not fix this, but relieving the Commission of the obligation to issue a formal rejection in every case would mitigate at least some of the procedural costs of enforcing Arts. 101 and 102 TFEU.

Legal decisionmaking and enforcement are always difficult and potentially costly.[30] In competition law, those costs are especially high, because competition decisions are rarely straightforward. Most conduct falls into a grey zone where effects are ambiguous and possibly forward-looking,[31] knowledge is incomplete, and enforcement operates under conditions of genuine ignorance and uncertainty.[32]

Granted, some of these costs are mitigated by the valuable information provided by complainants. Indeed, to the extent that they contribute useful insights and evidence, complaints should be encouraged.[33] But forcing the Commission to devote scarce time and expertise to explaining the dismissal of marginal or strategic complaints only magnifies the already high operating costs of enforcing EU competition law and diverts attention from genuinely anticompetitive practices—where those limited resources would be better deployed.

Which suits the Commission should dismiss automatically is a different question altogether. But, once again, one can look to the error-cost framework for guidance. As Easterbrook explains:

Some of these suits explicitly request the court to order a business rival to raise price, and they may be dismissed quickly.[34]

And:

One category of complaints that should not be entertained at all concerns lower prices … dismissal should be automatic.[35]

In other words, complaints that, on their face, challenge competitive rather than anticompetitive conduct should be summarily dismissed. Admittedly, distinguishing between the two is rarely straightforward, and much—if not virtually all—of competition law is devoted to precisely that task.[36] As a result, only a fraction of complaints may fall into the “dismiss outright” category. Yet where a complaint is clearly at odds with the overarching purpose of the law, principles of procedural economy and the error-cost framework counsel that it be treated with minimal attention. Such complaints, in particular, should not trigger any obligation to issue a formal rejection decision.

III. Legal Fragmentation in Unilateral-Conduct Cases

Finally, the Commission asks whether the system of pre-emption under Article 3 should be amended. This is especially pertinent as regards unilateral conduct, on which member states are empowered to adopt stricter national laws under the second sentence of Article 3 (2).

The Commission notes that numerous member states have recently introduced stricter laws on unilateral conduct, such as abuse-of-economic-dependence rules and targeted measures on digital markets. Such instruments may pose challenges from an internal-market perspective, as multiplying regulatory regimes may cause fragmentation and administrative inefficiency.

In response, the Commission proposes two potential solutions:

Option 1: Adapt the existing coordination and information exchange mechanisms between competition authorities under Regulation 1/2003 so that these cover the application of stricter national laws on unilateral conduct in order to ensure the coherent, effective and complementary enforcement of available competition law instruments.

Option 2: Discontinue the current system as described here under section B.[37]

In addition, the Commission wishes to adapt relevant notices to provide additional guidance where necessary. The Commission also intends to incorporate recent CJEU case law into the regulations. Finally, it notes the possibility of simplifying and clarifying the rules where possible, including in areas where the evaluation identified a need for clarification.

We welcome the Commission’s questions as timely and warranted. In particular, we note that strengthening the coordination of enforcement constitutes not merely an option but a necessity in contemporary competition policy. Furthermore, we invite the Commission to reconsider the pre-emption procedure under Article 3(2) and to consider seriously whether the conditions for the special treatment of unilateral-conduct rules continue to be relevant.

Given member states’ growing reliance on stricter national rules on unilateral conduct, the Commission’s proposal to enhance coordination under Regulation 1/2003 is, in principle, difficult to contest. Stronger coordination can bring clear benefits: improving the effectiveness and deterrence of enforcement, safeguarding firms’ rights of defence, ensuring complementarity between overlapping regimes, and promoting efficient use of administrative resources.[38]

With that said, presenting this as merely an “option” is somewhat misleading. The current system already permits member states to maintain “stricter national laws” that pursue objectives similar to Article 102 TFEU.[39] These include, for instance, rules on abuse of economic dependence, resale below cost, termination of supply, or sector-specific competition laws that apply more stringent rules. When applied in parallel with EU rules, such laws allow undertakings to be investigated and potentially sanctioned twice for the same conduct. This raises issues under the fundamental right to ne bis in idem. According to the CJEU, exceptions to this principle are permissible only if enshrined in law, respect the essence of the right, and are proportionate.[40] Proportionality, in turn, requires an “appropriate legal framework” of coordination—not just on paper, but in practice.

The ECN+ Directive already provides for information exchange between the Commission and national competition authorities. But the Commission’s consultation suggests that existing mechanisms are not functioning effectively. Indeed, recent enforcement actions, particularly in the digital sector, demonstrate that stricter national laws have been applied in ways that risk fragmenting the internal market. Against this backdrop, strengthening coordination looks less like an “option” and more like a “necessity” if the current system is to remain compatible with both the internal-market objective and the protection of fundamental rights.

Article 3(2) Regulation 1/2003 permits member states to maintain stricter national competition rules on unilateral conduct. Over time, many have done so. Belgium’s abuse-of-economic-dependence rules and France’s “petit droit de la concurrence” are notable examples. With growing regulatory interest in digital platforms, these national laws have multiplied.

The most prominent case is Germany’s amendment to its competition law that empowers the Bundeskartellamt to designate firms as being of “paramount significance for competition across markets” and to impose special obligations on them. This framework has already underpinned investigations against Apple, Meta, and Amazon. In Meta’s case, the Bundeskartellamt relied on its “stricter” powers under Article 3(2), which resulted in a long-running case that has reached the German federal courts and the CJEU.[41] Other member states, such as Italy and Spain, have also enacted or contemplated similar rules.

Such enforcement actions raise two kinds of concerns. First, they risk engaging the principle of ne bis in idem, especially when layered on top of parallel enforcement under EU competition law and the DMA. Second, even if double (or triple) jeopardy is avoided, businesses still face double (or triple) the compliance costs.[42]

A recent Bundeskartellamt case illustrates the point. In June, the German authority announced an investigation of Amazon and Booking’s “price control mechanisms” under national law.[43] To be sure, the Bundeskartellamt is targeting pricing practices in Amazon’s own platform, while the price-parity clauses regulated under the DMA limit Amazon’s reach into prices set by sellers on alternative platforms. That difference, nonetheless, may be exaggerated. Both mechanisms serve a similar purpose of making Amazon’s marketplace more attractive, while the rules targeting them (under the DMA, as well as competition law) seek to ensure sellers’ freedom to set prices.

Hence, the substantive differences may be marginal. If sellers’ freedom to set prices is the core concern, then the DMA is the natural instrument through which such practices should be addressed—not divergent national rules. The Commission should therefore weigh carefully whether the benefits of parallel enforcement (if any) justify the costs. Fragmentation of the internal market and rising compliance burdens may ultimately hinder innovation and harm consumer welfare.

The Commission has signalled its intent to incorporate recent CJEU case law into the regulations. In its latest judgments, the court has underlined the importance of a consistent and uniform interpretation of competition rules within the EU legal order.[44] This principle extends not only to substantive interpretation, but also to the overall coherence of the enforcement architecture established by Regulation 1/2003.

That insight raises a structural question. Under the current framework, Regulation 1/2003 adopts different pre-emption logics for Articles 101 and 102 TFEU.[45] Article 101 is subject to strong pre-emption, preventing member states from adopting stricter rules on interfirm agreements. By contrast, Article 102 allows member states to apply stricter rules on unilateral conduct. This asymmetry was deliberate when Regulation 1/2003 was adopted, but it is legitimate to ask whether the rationale for differentiated treatment still holds today.[46]

If the legislative reasons for looser pre-emption under Article 102 have lost their force, the Commission—as the initiator of legislative reform—has both the opportunity and the responsibility to steer the debate toward a new approach. Any shift would, of course, need to weigh the benefits of uniformity against the costs of reducing member state autonomy. But a reassessment now seems warranted, considering both recent case law and the evident risks of fragmentation.

[1] See Call for Evidence for an Impact Assessment: EU Antitrust Procedural Rules (Revision), Eur. Comm’n (10 July 2025), https://competition-policy.ec.europa.eu/public-consultations/eu-antitrust-revision-procedural-rules-revision_en.

[2] See Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984); see also Keith N. Hylton & Michael Salinger, Tying Law and Policy: A Decision-Theoretic Approach, 69 Antitrust L.J. 469 (2001); Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405 (2013).

[3] Regulation 1/2003, Art. 8.

[4] See Order of the President, Case C-481/01 P(R), NDC Health Corp. v. IMS Health Inc., 2002 E.C.R. I-3401, ¶144.

[5] Id. ¶ 129.

[6] Id. ¶ 130.

[7] See Case C-7/97, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791; Case C-418/01, IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG, 2004 E.C.R. I-5039.

[8] See Case C-209/10, Post Danmark A/S v. Konkurrencerådet, EU:C:2012:172, ¶ 22,

[9] See Case C-413/14 P, Intel Corp. v. Commission, EU:C:2017:632.

[10] See Case C-441/07 P, Commission v. Alrosa Co. Ltd., 2010 E.C.R. I-5949, ¶ 50.

[11] See, e.g., Daniel F. Spulber, Unlocking Technology: Antitrust and Innovation, 4 J. Competition L. & Econ. 915 (2008).

[12] See Brief of Amicus Curiae Int’l Ctr. for Law & Econ., Epic Games, Inc. v. Apple Inc., No. 21-16506 (9th Cir. 2022), at 2; see also Brief of Amicus Curiae Int’l Ctr. for Law & Econ., Epic Games, Inc. v. Google LLC, No. 25-70072 (9th Cir. 2025) (emergency-stay filings).

[13] Commission Call for Evidence, supra note 1, at 3.

[14] Easterbrook, supra note 2, at 35.

[15] See, e.g., Joined Cases 142 & 156/82, British Am. Tobacco Co. & R.J. Reynolds Indus., Inc. v. Commission, 1987 E.C.R. 4487

[16] Case 26/76, Metro SB-Großmärkte GmbH & Co. KG v. Commission, 1977 E.C.R. 1875.

[17] Commission Decision 79/86/EEC, Vaessen/Moris, 1979 O.J. (L 19) 32.

[18] Case 298/83, CICCE v. Commission, 1985 E.C.R. 1105.

[19] Case T-24/90, Automec Srl v. Commission, 1992 E.C.R. II-2223.

[20] Case T-306/05, Scippacercola & Terezakis v. Commission, ECLI:EU:T:2008:9.

[21] Case T-54/99, max.mobil Telekommunikation Service GmbH v. Commission, 2002 E.C.R. II-313.

[22] The three criteria outlined above are codified in Article 7 of Regulation Council Regulation 773/2004. See Commission Regulation (EC) No 773/2004 of 7 April 2004, 2004 O.J. (L 123) 18, art. 7 (“Regulation 773/2004”).

[23] Case C-119/97 P, Ufex & Others v. Commission, 1999 E.C.R. I-1341.

[24] Case T-206/99, Métropole Télévision v. Commission, 2001 E.C.R. II-1057.

[25] Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 & 102 TFEU, 2011 O.J. (C 308) 6, ¶ 16 (“Best Practices”).

[26] Case C-282/95 P, Guérin Automobiles v. Commission, 1997 E.C.R. I-1503.

[27] European Commission, Directorate-General for Competition, Annual Activity Report 2024, Ref. Ares (2025) 2900758 (Apr. 9, 2025), at 851.

[28] Commission Notice on the Handling of Complaints by the Commission Under Articles 81 and 82 of the EC Treaty, 2004 O.J. (C 101) 65, ¶ 69 (“Complaints Notice”).

[29] Richard A. Posner, Economic Analysis of Law 773 (9^th ed., 2014).

[30] Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 Yale L.J. 213 (1979).

[31] Posner, supra note 27, at 4. (“Information is costly, and often the costs are prohibitive, especially when the information one would like to have concerns the future”.).

[32] Geoffrey A. Manne, Error Costs in Digital Markets, in The Global Antitrust Institute Report on the Digital Economy 33, 34–41 (Joshua D. Wright & Douglas H. Ginsburg eds., 2020).

[33] Complaint Notice, paras. 2–3

[34] Easterbrook, supra note 2, at 36.

[35] Id., at 35.

[36] Dirk Auer & Lazar Radic, The Growing Legacy of Intel, 14 J. Eur. Comp. L. & Prac. 1, 15 (2022).

[37] Commission Call for Evidence, supra note 1, at 3.

[38] Claudia Massa, Sincere Cooperation and Antitrust Enforcement: Insights from the Damages and ECN+ Directives, 16 Eur. Compet. J. 126 (2020).

[39] Directive (EU) 2019/1 of the European Parliament and of the Council of 11 Dec. 2018, 2019 O.J. (L 11) 3, art. 2(1)(3).

[40] Marco Cappai & Giuseppe Colangelo, Applying ne bis in idem in the Aftermath of bpost and Nordzucker: The Case of EU Competition Policy in Digital Markets, 60 Common Mkt. L. Rev. 431 (2023)

[41] Giuseppe Colangelo & Mariateresa Maggiolino, Antitrust Über Alles: Whither Competition Law After Facebook?, 42 World Compet. 372 (2019).

[42] Mikolaj Barczentewicz, The Digital Markets Act as an EU Digital Tax: When Compliance Costs Dwarf Regulatory Estimates, Truth on the Market (8 July 2025), https://truthonthemarket.com/2025/07/08/the-digital-markets-act-as-an-eu-digital-tax-when-compliance-costs-dwarf-regulatory-estimates.

[43] Giuseppe Colangelo, Still Haven’t Found What the Bundeskartellamt Is Looking For: Thoughts on the German Amazon Case, Truth on the Market (11 June 2025), https://truthonthemarket.com/2025/06/11/still-havent-found-what-the-bundeskartellamt-is-looking-for-thoughts-on-the-german-amazon-case.

[44] Case C-606/23, AS “Tallinna Kaubamaja Grupp” & AS “KIA Auto” v. Konkurences padome, ECLI:EU:C:2024:1004.

[45] Miguel Mota Delgado & Nicolas Petit, Article 3 of Regulation 1/2003 and the Doctrine of Pre-emption, in The Transformation of EU Competition Law: Next Generation Issues 113 (Anca D. Claici, Assimakis P. Komninos & Denis Waelbroeck eds., 2023).

[46] Koen Lenaerts & Damien Gerard, Decentralisation of EC Competition Law Enforcement: Judges in the Frontline, 27 World Compet. 313 (2004).

The Supreme Court of Korea’s Oct. 16 decision in the long-awaited NAVER Shopping case delivered a resounding defeat for the Korea Fair Trade Commission (KFTC). In finding that NAVER—a local search-based platform that competes with Google in Korea—had not violated Korean competition law, the court overturned both the KFTC’s January 2021 decision and the December 2022 decision of the Seoul High Court.

The court’s judgment is particularly notable for the broader antitrust community, because it represents—along with the social backlash against the Korean government’s platform-regulation initiatives of the early 2020s—one of the most significant pushbacks against the government’s recent pursuit of the EU’s regulatory approach to the digital economy.

Just as the previous attempts to transplant Digital Markets Act (DMA)-style regulation failed amid social resistance, the enforcer’s hasty effort to make a “self-preferencing case” (misaligned with Korea’s market and institutional context) has now been halted by this ruling. It is a rightful correction—one that offers valuable lessons for non-EU jurisdictions seeking to design their own digital competition governance frameworks.

Read the full piece here.

Stephen Breyer’s “Regulation and Its Reform” (1982) and Richard H.K. Vietor’s “Contrived Competition: Regulation and Deregulation in America” (1994) both address a central problem in American economic policy: when does government intervention improve market outcomes, and when does it create the very problems it seeks to solve?

Breyer, then a judge of the 1st U.S. Circuit Court of Appeals and a former special counsel to the Senate Judiciary Committee during the airline-deregulation hearings (and now, famously, a retired associate justice of the U.S. Supreme Court), constructed a taxonomy for diagnosing regulatory failure. Vietor, a Harvard Business School historian, documented how firms and markets adapted when decades-old regulatory structures collapsed.

More than three decades after their publication, these books provide both the analytical framework to identify regulatory dysfunction and the empirical record of what happens when reform transpires—together offering a durable guide for contemporary policy debates.

Read the full piece here.

Brazil’s long-anticipated Bill 4,675/2025, which President Luiz Inácio Lula da Silva’s government submitted last month to Congress, proposes to enact ex-ante regulation for digital markets (I offered an initial assessment here). While presented as a natural evolution of competition law, the proposal would instead alter some foundational aspects of the Brazilian antitrust framework.

The measure would amend Brazil’s existing Competition Law, rather than create a standalone regime like the European Union’s Digital Markets Act (DMA). But in doing so, it establishes an entirely new set of competition goals that risks undermining the existing economically grounded enforcement system—or, at least, conflating the ex-post and ex-ante enforcement of antitrust rules.

Read the full piece here.

Since its explosion into the mainstream around 2022, AI has inspired speculation, hope, fear, and an equal measure of utopianism and dystopianism. AI was almost immediately flagged as a threat by competition enforcers in the US, Britain and the EU, despite the nascent sector being demonstrably dynamic, competitive and innovative.

Breaking from this tendency for irrational fear, CCI chose to study AI, rather than immediately move to endorse its regulation. CCI’s September 2025 report, Market Study on Artificial Intelligence and Competition, marks a prudent and welcome departure from the premature, heavy-handed approach adopted in other jurisdictions.

Read the full piece here.

Every major technological leap in human history—whether it be the printing press or the automobile or the internet—has been greeted by an uneasy blend of optimism and trepidation. Optimism for the opportunities each new technology offers—for change, evolution, empowerment, and growth. And trepidation that the new equilibrium might upend the established order, destroy jobs, devalue human dignity, or tear at the social fabric.

The same was always going to be true for artificial intelligence. Since its explosion into the mainstream around 2022, AI has inspired speculation, hope, fear, and an equal measure of utopianism and luddism. In competition-policy circles, AI was almost immediately flagged as a threat in the United States, United Kingdom, and European Union, despite the nascent sector being demonstrably dynamic, competitive, and innovative. This underscores that irrational fears, rather than evidence, have often driven public-policy reactions.

Against this backdrop, the Competition Commission of India’s (CCI) recent “Market Study on Artificial Intelligence and Competition” arrives at a crucial moment. Its choice to study AI, rather than immediately move to endorse its regulation, marks a prudent and welcome departure from the premature, heavy-handed approach adopted in other jurisdictions. It may yet prove to be India’s biggest competitive advantage.

Read the full piece here.

Elsewhere in this series, Thom Lambert has looked at recent statements by Assistant Attorney General Gail Slater of the United States Department of Justice, Federal Trade Commission (FTC) Chairman Andrew Ferguson, and Republican FTC Commissioner Mark Meador to identify and critique their understanding of “conservative antitrust.” I initially planned to take a similar approach, but Lambert has covered this ground better than I would have. I will instead focus more on where conservative antitrust is going—or not going, as the case may be. I will focus first on defining the dimensions of this new conservative antitrust—or, as Thom rightly calls it, “New Right” antitrust. Following Meador’s recent appearances, I think it is best understood as the application of antitrust to achieve populist ends. Unlike the Neo-Brandeisian approach to antitrust of the previous administration, which coupled concerns about market concentration with concerns about democratic outcome such that antitrust became a lens through which all political disagreement could be seen, this does give the new antitrust flavor an identifiable limiting principle that was sorely lacking during the Biden years. But ultimately, I argue that this limiting principle is insufficient to chart a viable path forward.

Read the full piece here.

The 2025 Economics Nobel went to Joel Mokyr, Philippe Aghion, and Peter Howitt for exploring innovation-driven economic growth. I already wrote a general explainer about the prize.

Here I want to make a different claim: If you work in antitrust, you should pay particular attention to their scholarship. Their work, especially that of Aghion and Howitt, fundamentally changes how we think about competition in markets.

The standard antitrust framework inherited from 1960s industrial organization focuses on market structure. Count the firms. Measure concentration. Assume that structure determines conduct, which determines performance. More firms mean more competition, which means lower prices and better outcomes. The U.S. Merger Guidelines embody this view with their use of Herfindahl–Hirschman index (HHI) thresholds.

The Aghion-Howitt framework tells a different story. Competition is a process of innovation and displacement. Firms compete by trying to make better products, not just by cutting prices on existing ones. What matters is not the number of firms at any point in time, but whether new innovators can challenge incumbents. Market structure is an outcome of this competitive process, not just a cause of competitive behavior.

Let me walk through what Aghion and Howitt’s work actually says and what it means for how we think about competition policy.

Read the full piece here.

The U.S. legal landscape is riddled with anachronisms, but few are as indefensible and economically nonsensical as the justifications for regulating broadcast content. This bizarre notion that radio and television broadcasters deserve fewer First Amendment protections than newspapers, websites, or cable networks is a vestige of mid-20th-century technological reasoning that has long overstayed its constitutional welcome.

The U.S. Supreme Court has a clear path to correct this historical error: it must overturn both Red Lion Broadcasting Co. v. FCC (1969) and FCC v. Pacifica Foundation (1978). As my colleague Eric Fruits has been writing about, creative destruction has largely upended the marketplace that the Court considered in those cases nearly 50-60 years ago. Overturning these outdated cases is a necessary step to restore full First Amendment rights to broadcasters and give them a chance to compete in the 21st century. Justice Clarence Thomas has already laid the groundwork in his concurrence in FCC v. Fox Television Stations (2009).

Read the full piece here.

Congress’ latest foray into copyright and administrative law, the Promoting Responsible and Open Codes Act (PRO Codes Act), has surfaced a longrunning tension in the world of standards development. On its face, the bill appears benign—ensuring that, when private standards are incorporated by reference into law, citizens can access them for free. But beneath this promise lies a more complex and potentially destabilizing reality. Indeed, the act risks turning copyright from a stable property right into a conditional license, revocable whenever the government adopts a private work.

Sponsoring U.S. Reps. Darrell Issa (R-Calif.) and Deborah Ross (D-N.C.) have framed the PRO Codes Act as a measure to “protect public access to federal rules,” while maintaining incentives for innovation. They cast the bill as a balanced fix: transparency without expropriation. Supporters like the Copyright Alliance and the International Code Council echo that narrative, portraying the measure as essential to sustain the “public-private partnership” model of technical regulation.

But closer inspection reveals that the PRO Codes Act would dramatically reengineer the economics of standards development. The bill’s simplicity—free posting or loss of copyright—obscures the diversity of the standards ecosystem and the subtle legal balance that already governs it.

Read the full piece here.

The timing could hardly be better. As traditional television continues on its years-long decline—with millions of cable subscribers cutting the cord, broadcast audiences shrinking, and streaming splintering into a dozen rival platforms—this year’s Nobel Memorial Prize in Economic Sciences has gone to three scholars who have spent their careers studying this very kind of market transformation.

The Royal Swedish Academy of Sciences awarded the 2025 prize to Joel Mokyr, Philippe Aghion, and Peter Howitt for their research on innovation-driven economic growth. The committee highlighted their insights into the sources of long-term prosperity. For a detailed explanation of the laureates’ work, read Brian Albrecht post.

Their research is both revolutionary and relevant. Their ideas explain one of the most visible market transformations we can see from the comfort of our living rooms—the collapse of traditional television and the rise of streaming.

Read the full piece here.

There are years when the Royal Swedish Academy of Sciences’ selection for the Nobel Memorial Prize in Economic Sciences is good, years when it is bad, and years when it is outstanding. This year is outstanding. This is the prize I’ve been waiting for. Not because I predicted it or had money riding on it, but because it recognizes work that tackles THE question: Why did we get rich?

The 2025 Economics Nobel went to Joel Mokyr, Philippe Aghion, and Peter Howitt “for having explained innovation-driven economic growth.”

The biggest question in economics is the hockey stick. For most of human history, living standards barely budged. Then something shifted. We got the hockey stick. Why did this happen? When? What made it possible? Many economics papers are small. Many of my papers are small. But not this work.

This prize splits among two different contributions. Mokyr gets half for explaining the prerequisites—what conditions needed to exist before sustained growth could happen in the first place. Aghion and Howitt share the other half, for building the workhorse model of how innovation actually drives growth once those conditions are met. It’s history meets theory. Last year’s prize was history and theory but this is actually history. And that’s how economics should work.

Read the full piece here.

The AI Action Plan unveiled in July by President Donald Trump could mark a turning point for U.S. antitrust policy. By directing the Federal Trade Commission (FTC) to prioritize innovation, the plan offers a historic opportunity to lift onerous regulatory burdens, restore measured enforcement, and repudiate the overreaches of former FTC Chair Lina Khan’s regime.

To seize this moment, the FTC should pursue an alignment strategy to ensure that its guidance, regulations, and enforcement actions reflect the action plan’s pro-innovation vision, rather than the speculative anti-business theories of the past. In practice, the FTC should:

1. publicly repudiate Khan-era guidance and affirm the pro-competitive benefits of common business practices;
2. use its competition-advocacy tools to push states toward pro-innovation laws;
3. withdraw from its misguided cooperation agreement with European and British regulators; and
4. reevaluate ongoing litigation to ensure alignment with precedent and the action plan’s principles.

At the same time, the White House should broaden the plan’s reach to include the U.S. Justice Department (DOJ) and all forms of American innovation.

Read the full piece here.

Artificial intelligence is driving what amounts to a new industrial revolution. But instead of waiting to see how the technology matures, states are rushing to regulate it — risking a confusing patchwork of rules before a truly national (let alone global) AI market can even form.

Read the full piece here.

Frank H. Easterbrook’s 1984 Texas Law Review article “Limits of Antitrust” advances a deceptively simple thesis that fundamentally reoriented competition policy: antitrust law should recognize its own institutional limitations and design rules accordingly.

The article contains two central insights. The first is that, because “antitrust is costly,” and because “judges act with imperfect information about the effects of the practices at stake,” (p. 4):

The legal system should be designed to minimize the total costs of (1) anticompetitive practices that escape condemnation; (2) competitive practices that are condemned or deterred; and (3) the system itself. (p. 16)

The second is that:

For a number of reasons, errors on the side of excusing questionable practices are preferable. (p. 15)

Together, these insights have become perhaps the most influential and fundamental animating principle of modern antitrust jurisprudence.

Easterbrook argues that antitrust faces an inescapable knowledge problem: courts cannot reliably distinguish beneficial business practices from harmful ones because most business arrangements involve complex tradeoffs between cooperation and competition. Every firm represents massive internal cooperation (“Exxon,” he notes, “entails far more coordination than the average cartel,” (p. 1)), yet we don’t condemn this cooperation, because it produces economic value. The challenge is determining when cooperation crosses the line into harmful collusion—a line that economic theory can’t precisely draw and that courts are ill-equipped to identify.

Read the full piece here.

Aspate of major investments by large tech firms in U.S. artificial-intelligence (AI) companies should be viewed as a sign of vibrant competition that drives innovation. Antitrust intervention to limit such investments would be inappropriate. A cautious approach to antitrust, combined with deregulation, could be the ticket to ensuring continued American leadership in AI.

Read the full piece here.

The Federal Communications Commission’s (FCC) recently issued notice calling for a review of the agency’s broadcast-ownership rules raises a foundational question: what purpose do these rules serve in a world of digital abundance?

Indeed, FCC Chair Brendan Carr has observed the fundamental changes in how broadcasters compete in a marketplace of “numerous online audio and video streaming services.” But in this post, we take the question a step further with a thought experiment: If we began with a clean slate, would we create any of the regulations that currently exist?

Read the full piece here.

Merger-control regimes around the world have for some time now engaged with the theory of harm known as “killer acquisitions.” The idea is simple: an incumbent buys a rival in order to shut down its operations and preempt future competition. Indeed, the original paper that laid out the theory found that 5-7% of mergers may qualify as killer acquisitions.

This thorough analysis of competition and innovation in the pharmaceutical industry led to an explosion of academic and policy interest around the world. But it is in digital markets, which were not covered by the initial empirical research, that the underlying ideas appear to have caught on most with policymakers.

But was this attention warranted? A new working paper, co-authored by one of the builders of the original idea, suggests otherwise.

Read the full piece here.

INTEREST OF AMICUS 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 the use of law and economics methodologies and economic learning to inform policy debates and has longstanding expertise evaluating antitrust law and policy.

ICLE has an interest in ensuring that antitrust law promotes the public interest by remaining grounded in sensible rules informed by sound economic analysis.  That includes advising against improperly excessive antitrust remedies that could deteriorate the quality of mobile ecosystems, thereby harming the welfare of consumers and app developers.

SUMMARY OF ARGUMENT

Courts are not central planners.  Broad, market-altering injunctions should rarely be granted in antitrust cases.  And such injunctions should be exceedingly rare in single-plaintiff, private antitrust suits.  Yet here the district court issued an injunction that would fundamentally reshape the Google Play ecosystem for all participants.  And the Ninth Circuit affirmed that injunction.  This Court should grant Google’s application to partially stay the district court’s injunction for three reasons.

First, the injunction imposes a duty to deal with competitors, a measure rejected by this Court in all but the most extreme circumstances.  See Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).  In affirming that injunction, the Ninth Circuit brushed Trinko aside, stating that it addressed the question of “liability” for a refusal to deal, not the question of an appropriate “remedy” after a finding of liability.  But the Court has recently made clear that its concerns in Trinko—deterring investment, inviting regulatory supervision, and enlisting courts as “central planners”—apply equally to remedies.  Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69, 102-03 (2021) (quoting Trinko, 540 U.S. at 415).  Trinko’s skepticism about forced sharing is rooted in both the difficulty of crafting and supervising such remedies and the market distortions they are likely to produce.  540 U.S. at 408, 411, 415.  The complex and burdensome order below only underscores such difficulties.

Second, the district court’s injunction mandates that Google make fundamental changes to the Google Play ecosystem without establishing the requisite causal relationship between the ordered relief and the conduct that was found unlawful.  As a general rule, courts reject remedies untethered from the conduct they are supposed to address.  Thus, courts properly require a significant causal connection between a particular violation and the terms of the order that may be imposed to remedy it.  See United States v. Microsoft Corp., 253 F.3d 34, 105 (D.C. Cir. 2001).

Here the district court’s order establishes no such connection: Its rationale for the app-store distribution provision is a single paragraph focused on a single witness; its catalog-access provision is justified largely by loose and highly generalized network-effects rhetoric—not by proof that the mandate will remedy the violation, least of all for developers not party to the suit.  Based on a finding of harm to a single plaintiff, the injunction would require a universal redesign of Google Play.  While this may benefit some developers, it would manifestly harm many others.  Yet the court did not establish that this intervention was either proportionate or necessary to remedy the adjudicated injury.

Third, the overbroad injunction exceeds the scope of relief appropriate for private antitrust litigation, see Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 111–13 (1986), and it exceeds the scope of the district court’s authority it issue injunctions designed to provide “relief” to non-parties, see Trump v. CASA, Inc., 606 U.S. 831 (2025).  CASA emphasizes the general impropriety of sweeping, system?wide relief affecting non-parties with heterogeneous interests.  And its focus on the “party-specific principles that permeate [the Court’s] understanding of equity,” id. at 844, applies with particular force in private antitrust suits governed by procedural limits (antitrust injury) that aim to ensure that courts address only direct injuries to specific plaintiffs.

The injunction here would not only force Google to aid its direct competitors by granting them a privileged position in its Android operating system, but it would also redesign Android for more than 100 million non-party U.S. users and 500,000 non-party app developers.  In turn, that remedy would potentially expose users and app developers to lax data security, ecosystem fragmentation, increased risks of fraud and piracy, and the degradation of platform value these mandated changes would entail.

The harms threatened by the injunction are immediate and irreversible: a fundamental restructuring of the Android ecosystem, an erosion of user trust, and a permanent alteration of relationships with developers and device manufacturers.  By imposing novel, quasi-regulatory duties on Google that are not borne by its chief competitor, the injunction threatens to distort the competitive landscape, chill incentives for platform innovation, and, ultimately, harm consumers by degrading a major product in the market.  Accordingly, a stay is warranted both to protect Google from irreparable harm and to help ensure that a contested remedy does not itself become a source of anti-competitive instability before its legal and economic implications are fully reviewed.

ARGUMENT

1.     THE DISTRICT COURT’S DUTY-TO-DEAL INJUNCTION IS IMPROPER

The district court’s injunction mandates that Google deal with rivals.  Trinko strongly cautions against such mandates.  The Ninth Circuit addressed Trinko by suggesting that it does not apply because the Trinko Court was concerned solely about liability, not remedies.  App. 45a-46a.  That is wrong.  Rather, as this Court explained in Alston, Trinko’s concerns about chilling investment, facilitating collusion, and forcing courts to act as “central planners” “apply” when courts craft antitrust remedies.  594 U.S. at 102 (quoting Trinko, 540 U.S. at 415).  Trinko’s reluctance to impose a duty to deal rests not only on the problems of finding liability for a refusal to deal, but also of imposing a viable remedy mandating such a duty: “The problem should be deemed irremedia[ble] by antitrust law when compulsory access requires the court to assume the day-to-day controls characteristic of a regulatory agency.”  540 U.S. at 415 (cleaned up).  Indeed, the risk of a remedial morass fundamentally animates the decision because it is the remedy (forced sharing) that raises the specters of blunted future incentives (for the defendant and for rivals), ongoing judicial oversight, and the suppression of procompetitive innovation.  See id. at 407-08; 414-15; see also Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1073 (10th Cir. 2013) (Gorsuch, J.).

Compelling a firm to deal with rivals on court?supervised terms creates the very anticompetitive harm that refusal?to?deal doctrine protects against, effectively short?circuiting the rule?of?reason analysis.  A remedy that mandates the distribution of app stores is tantamount to a determination that the failure to distribute constitutes a violation of the law; and imposing a duty to deal without a showing of anticompetitive effect imposes liability by inference.  See Herbert Hovenkamp, Unilateral Refusals to Deal, Vertical Integration, and the Essential Facility Doctrine, U. Iowa Leg. Stud. Rsrch. Paper No. 08-31, 28 (Jul. 14, 2008), http://bit.ly/33Q5fIM (“[Unilateral refusal to deal under §2] comes dangerously close to being a form of ‘no?fault’ monopolization.”).  Such a remedy also risks mistakenly condemning legitimate business arrangements, which is “‘especially costly, because [it] chill[s] the very’ procompetitive conduct ‘the antitrust laws are designed to protect.’”  Alston, 594 U.S. at 99 (quoting Tinko, 540 U.S. at 414).

2.     THE DISTRICT COURT’S INJUNCTION IS NOT TAILORED TO THE HARM FOUND AT TRIAL

To ensure properly tailored remedies, courts have long required clear evidence of a strong casual connection between the competitive injury and the corresponding cure.  Here, the Ninth Circuit observed that “the available injunctive relief” in antitrust cases “is broad.”  App. 42a-43a (quoting Optronic, 20 F.4th at 486).  But that observation ignores that not all available remedies are proper ones.  To the contrary, injunctive relief must rest on a “clear indication of a significant causal connection between the conduct enjoined or mandated and the violation found,” and must be a reasonable method of remedying the proven harm.  Microsoft, 253 F.3d at 105.  The district court’s injunction fails both the causal nexus and proportionality requirements.

A. The injunction lacks a causal nexus to the harm identified

In Microsoft, the D.C. Circuit vacated the district court’s remedy because the district court failed to explain how the ordered relief would “unfetter [the] market from anticompetitive conduct,” and because structural relief “designed to eliminate the monopoly altogether” required a clearer indication of causation.  253 F.3d at 103, 106–07 (quoting Ford Motor Co. v. United States, 405 U.S. 562, 577 (1972)).  Here, the district court’s remedy should have met the same fate.  The court’s justification for the app-store-distribution mandate is a single paragraph, anchored in one witness’ testimony about sideloading friction and the number of steps some users encountered.  Order re UCL Claim and Injunctive Relief, 12, In re Google Play Store Antitrust Litig., 3:20-cv-05671-JD, Dkt. No. 701.  App. 83a  That explanation does not demonstrate that forcing Google to carry rival stores (as opposed to less intrusive alternatives) is causally tied to any proven violation.

The “catalog access” provision fares no better.  The district court relied on network effects, but those are a feature of platform markets, not anticompetitive conduct to be rectified.  Id.  Treating network effects as a license for compelled access improperly converts a mundane, inherent market feature into a causal nexus.  See Microsoft, 253 F.3d at 106–07 (requiring specific, demonstrated causal connection at the remedy stage, not conjecture); Catherine Tucker, Network Effects and Market Power: What Have We Learned in the Last Decade? ANTITRUST, 72–79 (Spring 2018) (“[N]ew findings suggest that network effects are not the guarantor of market dominance.”).

More fundamentally, neither the district court nor the Ninth Circuit explained how either remedy is causally related to the alleged harm.  Users can and do obtain apps through multiple channels, and rivals can compete for distribution of specific apps without mirroring the entire catalog.  In fact, the connection between the conduct to be remedied and the alleged harm was specifically disclaimed by Jury Instruction No. 24 at trial: “It is not unlawful for Google to prohibit the distribution of other app stores through the Google Play Store, and you should not infer or conclude that doing so is unlawful in any way.”  Final Jury Instrs., 33, In re Google, 3:20-cv-05671-JD, Dkt. No. 592.

The district court’s injunction therefore lacks a causal nexus to Epic’s alleged anticompetitive harm—and that applies a fortiori to third parties.

B. The injunction is disproportionate to the harm identified

An antitrust injunction must reflect a “proportionality between the severity of the remedy and the strength of the evidence of the causal connection.”  United States v. Microsoft, 231 F. Supp. 2d 144, 164 (D.D.C. 2002), aff’d sub nom. Massachusetts v. Microsoft Corp., 373 F.3d 1199 (D.C. Cir. 2004) (quoting 3 Areeda & Hovenkamp, Antitrust Law ¶650a, 67).  The “[m]ere existence of an exclusionary act does not itself justify full feasible relief.”  Id.

The district court’s injunction here goes far beyond “stopping” the allegedly exclusionary act; it mandates that Google create and maintain new modes of business—hosting rival stores and exposing Play’s catalog—under continuing judicial supervision.  But ordering a firm to expand or reconfigure facilities puts courts “nearly in the shoes of the regulator.”  Hovenkamp, supra, at 25.  Such a remedy could be proportionate only to the most severe, widespread, and pervasive anticompetitive conduct—nowhere near what was presented on the facts here.

A critical distinction also separates this case from Microsoft (and from classic precedents like Associated Press v. United States, 326 U.S. 1 (1945)): those cases addressed discriminatory restrictions that prevented others—intermediaries or members—from dealing with rivals.  The appropriate remedy in those cases was to prohibit the discrimination and require equal terms for similarly situated actors.  See also Optronic, 20 F.4th at 486 (injunction curing discriminatory terms).  Here, by contrast, the district court’s injunction mandates that Google provide a brand new form of access it has never offered: distribution of rival app stores in Play and wholesale access to its curated catalog.  Trinko precludes a court from ordering a defendant to provide access to a competitor if the defendant is not already providing access elsewhere.  See MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1132 (9th Cir. 2004).  And this Court in Associated Press refused to embrace a “public utility concept” obliging a firm to deal with all newcomers; its remedy simply forbade discriminatory denial of admission.  See Hovenkamp, supra, at 10–11.

3.     THE INJUNCTION IS INCONSISTENT WITH THIS COURT’S REMEDIAL JURISPRUDENCE

This Court’s precedents require that a remedy be tailored to the plaintiff’s injuries—not those of non-parties.  See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 111–13 (1986) (requiring antitrust injury “‘that flows from that which makes defendants’ acts unlawful’” for injunctive relief under Section 16) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)).

Here, the district court ordered Google to (i) host rival app stores inside Play and (ii) open Play’s catalog to rival stores.  But that remedy necessarily regulates the entire Android mobile?distribution ecosystem.  In so doing, it gives potential benefits to some non-parties and imposes costs and risks on other non-parties, many of whom may be harmed by reduced security or by fragmentation they do not want.

The injunction thus runs counter to the rule that relief in private antitrust enforcement actions must be tailored to the plaintiffs’ injury.  Antitrust injunctions can incidentally affect non-parties.  But the classic examples involve nondiscrimination obligations—in which equal treatment requires an order running across similarly situated customers or suppliers.  See, e.g., Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483–86 (1992); Optronic, 20 F.4th at 486 (approving relief that eliminated discriminatory terms and ensured access on comparable terms).  The district court’s order here is categorically different: it imposes a new duty to provide across-the-board access where no such access was previously ever offered.

This Court’s decision in CASA confirms that injunctive relief must be tailored to the parties before the court—not used to deliver de facto, class?wide remedies to non-parties.  In CASA, the Court drew a sharp line between (i) injunctions that afford “complete relief between the parties,” even if they “incidentally” advantage others, and (ii) injunctions designed to confer direct relief “to nonparties.”  CASA, 606 U.S. at 851 (citation omitted); see Califano v. Yamasaki, 442 U.S. 682, 702 (1979) (“[I]njunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs.”).

That logic applies with full force in the antitrust context.  Indeed, Section 16 of the Clayton Act, authorizes injunctions to prevent “threatened loss or damage” to the plaintiff, not to redesign an industry for the benefit of non-parties.  See Zenith Radio Corp. v. Hazeltine Rsch., Inc., 395 U.S. 100, 130 (1969) (“[Section] 16 of the Clayton Act, 15 U.S.C. § 26, which was enacted by the Congress to make available equitable remedies previously denied private parties, invokes traditional principles of equity and authorizes injunctive relief upon the demonstration of ‘threatened’ injury.”).

Under the principles articulated in CASA, any injunction should be limited to eliminating the challenged restraints as to the named plaintiff’s proven antitrust injury; market-wide relief for all app developers or all app store providers is improper.  The distinction between the parties to the case and the parties to be affected by the order is especially salient in this matter.  Approximately 97% of the developers on Google’s Play Store offer only free apps and pay no commission on the distribution of those apps through the Play Store, and the large majority of the remaining 3% who do pay commissions are also non-parties to the suit here.  Google’s business model is supported by the fees charged for app downloads and in-app purchases—and that model would be jeopardized by the district court’s overbroad injunction.

Again, while a party?specific remedy here may properly yield incidental marketplace effects, equity forbids crafting an order for the purpose of conferring direct benefits on non-parties.  Yet that is what the injunction does by mandating platform?wide entitlements for “all developers.”  The injunction thus exceeds its proper bounds even independent of the serious question whether it would confer benefits or harms on non-parties on net.

In that respect, the Ninth Circuit’s reliance on Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969), is misplaced.  See App. 62a.  Zenith does not confer unfettered discretion to impose any remedy that may promote competition.  Rather, while the antitrust remedy in that case went beyond the specific source of harm identified, it still applied to the same locus of harm—i.e., against likely conduct by the same defendant against the same plaintiff.  Zenith, 395 U.S. at 131; see id. at 132 (citing NLRB v. Express Publ’g Co., 312 U.S. 426, (1941)).  But a broad injunction to prevent an end-run around the court’s ruling with respect to the specific plaintiff is far afield from a market-wide injunction based on the claim of a single market participant.

Similarly, the Ninth Circuit erred in relying on this Court’s statement that “district courts are ‘clothed with “large discretion” to . . . pry open to competition a market that has been closed by defendants’ illegal restraints.’”  App. 42a (quoting Ford Motor, 405 U.S. at 573, 577–78).  This Court has distinguished between the government’s role in obtaining broad, structural relief (as in Ford Motor) and the constraints on private plaintiffs—who must show antitrust injury, and whose relief must be tethered to their threatened loss. See, e.g., Cal. v. Am. Stores Co., 495 U.S. 271, 295-96 (1990) (“In a Government case, the proof of the violation of law may itself establish sufficient public injury to warrant relief. . . . A private litigant . . . must prove ‘threatened loss or damage’ to his own interests.”) (citing Cargill, 479 U. S. 104).  (And even government plaintiffs face limits.  See Microsoft, 253 F.3d at 103, 106–07 (vacating remedy obtained by the Department of Justice)).

The district court’s injunction that effectively regulates a national platform and imposes costs on non-parties with divergent interests is at odds with traditional equitable principles and this Court’s precedent.

CONCLUSION

For the foregoing reasons, amicus respectfully urges the Court to grant Google’s application.

[1] Pursuant to Rule 37.6, amicus affirms that no counsel for a party authored this brief in whole or in part, and that no person other than amicus or its counsel contributed money intended to fund preparing or submitting this brief.

WASHINGTON D.C. – October 30, 2025 – The LEO Policy Working Group today released a comprehensive report urging U.S. policymakers to modernize regulations governing Low Earth Orbit (LEO) to ensure sustainable growth, fair competition, and effective deployment of next-generation satellite connectivity. The report, titled “Low Earth Orbit Satellites: Policies to Promote Spectrum Sharing, Foster Competition, and Close Digital Divides,” identifies three critical policy areas requiring action as LEO becomes increasingly congested with large communication constellations.

The report emphasizes that while LEO technology promises increases in network capacity and ubiquitous service, its full potential is currently hamstrung by outdated, burdensome, and overly restrictive licensing systems; this includes the regulatory frameworks they operate under.

Over the past year, New America’s Wireless Future program and the International Center for Law & Economics (ICLE) have co-chaired a series of discussions bringing together industry, public policy, academic, and regulatory experts to explore the challenges facing the development and deployment of LEO satellites for universal connectivity. The LEO Policy Working Group, created as a result of these efforts, has identified three central themes that must guide U.S. policy:

1. Enabling Effective LEO Spectrum Sharing and Coexistence: The current satellite licensing system is characterized as being “overly slow, bespoke, and burdensome.” To realize the full potential of LEO systems, the report recommends a significant shift from bespoke processes to clear, uniform ex ante rules with targeted ex post enforcement. It also advocates for a robust spectrum pipeline that allocates far greater availability for satellite use, underpinned by modernized interference protection frameworks.
2. Fostering a Sustainable Competitive Environment: The report analyzes the LEO market as a hybrid arena where statecraft and economics interact, noting the influence of state-backed constellations and heavy subsidies that skew the competitive field. While competition is real and intensifying, market consolidation is likely. The Working Group urges policymakers to remain alert to potential anticompetitive conduct, specifically monitoring vertical integration, tying, and merger activity, while recognizing that efficiency-enhancing integration can also be pro-consumer.
3. Optimizing LEO Connectivity’s Role in Closing the Digital Divide: LEO satellite service can now deliver high-speed broadband (100/20 Mbps) directly to homes, making it a powerful tool for achieving universal service goals. The report finds LEO service is uniquely appropriate for otherwise hard-to-reach locations (due to its minimal ground infrastructure). Policymakers must address existing barriers and create a regulatory environment that effectively incorporates LEO systems into ongoing and future federal broadband subsidy programs to help them effectively serve unserved and underserved households.

Kristian Stout, Director of Innovation Policy at ICLE shared the following: “The promise of next-generation LEO connectivity remains constrained by outdated assumptions in the satellite industry. Spectrum policies are still shaped by overly restrictive regulatory frameworks long past due for modernization. At the same time, competition law must recognize that this remains a nascent market—one where even well-capitalized firms face extraordinary investment risk and uncertain returns. As telecom authorities pursue universal connectivity, satellites have become a central element of that policy mix. The barriers and opportunities identified in our report highlight the need for policymakers to move beyond slow, legacy regimes toward more adaptive, forward-looking regulation.”

Michael Calabrese, Director of Wireless Future at New America, added: “LEO satellite constellations have the potential to fill remaining broadband coverage gaps and to enable seamless connectivity for both consumers and enterprise. To achieve this, regulators will need to promote intensive spectrum sharing and streamline the regulatory process. The LEO Policy Working Group report provides a roadmap in relation to abundant spectrum capacity, enhanced competition, and closing digital divides.”

To interview Kristian or Michael, contact Jim Fellinger at [email protected]. 

This figure shows the orbital ranges of three different kinds of satellites: Geostationary Earth Orbit (GEO), Medium Earth Orbit (MEO), and Low Earth Orbit (LEO). LEO satellites operate in the closest range to Earth, 300–2000km above the planet’s surface. Source: Screenshot from “Large Constellations of Low-Altitude Satellites: A Primer,” May 2023, Congressional Budget Office, cbo.gov/publication/59175.

The LEO Policy Working Group calls on government agencies, including the FCC and NTIA, to utilize the report’s findings to drive immediate and effective regulatory change.

Signers include: 

• Michael Calabrese (co-chair), Director of Wireless Future at New America
• Kristian Stout (co-chair), Director of Innovation Policy, International Center for Law & Economics (ICLE)
• Jeffrey Carlisle, Managing Member, Lerman Senter PLLC, Former Chief of the FCC’s Wireline Competition Bureau
• Patricia Cooper, Founder, Constellation Advisory LLC, Former President, Satellite Industry Association
• Harold Feld, Senior Vice President, Public Knowledge
• Paul Garnett, Chief Executive Officer, Vernonburg Group, Former Assistant Vice President, Regulatory Affairs, at CTIA-The Wireless Association
• Mark Jamison, Gerald Gunter Professor, University of Florida, and Director, Public Utility Research Center (PURC) and Digital Markets Initiative
• Joe Kane, Director, Broadband and Spectrum Policy, Information Technology and Innovation Foundation
• J. Armand Musey, President and Founder, Summit Ridge Group, LLC
• Michael O’Rielly, Strategic Advisor and Advocate, MPORielly Consulting LLC, Former FCC Commissioner
• Jon Peha, Professor, Electrical Engineering and Public Policy, Carnegie Mellon University, Former Chief Technologist at the Federal Communications Commission and Assistant Director, White House Office of Science & Technology Policy
• Ruth Pritchard-Kelly, Principal, RPK Advisors, Former Senior Advisor for Regulatory and Space Policy, OneWeb
• David Reed, Scholar in Residence, University of Colorado Boulder, Former Telecommunications Policy Analyst at the Office of Plans and Policy, FCC
• Nicol Turner Lee, Director, Center for Technology Innovation and Senior Fellow of Governance Studies, Brookings Institution

About the LEO Policy Working Group 

The LEO Policy Working Group is an independent body dedicated to providing forward-looking, data-driven analysis and policy recommendations to ensure the successful and sustainable deployment of next-generation Low Earth Orbit satellite systems. 

About ICLE

The International Center for Law & Economics is a nonprofit, nonpartisan research center working with a roster of more than one-hundred academic affiliates and research centers from around the globe. ICLE scholars promote the use of law and economics methodologies to inform public policy debates.

About New America

New America is a think-and-action tank dedicated to renewing the promise of America in an age of rapid technological and social change. Our work prioritizes care and family wellbeing, advances technology in the public interest, reimagines global cooperation, builds effective democracy, and ensures affordable and accessible education for all. Learn more at newamerica.org.

Executive Summary

The International Center for Law & Economics (ICLE) identifies multiple European Union regulatory frameworks that function as significant barriers to U.S. exports of goods and services, and to U.S. foreign direct investment. These measures include the Digital Markets Act, General Data Protection Regulation, Artificial Intelligence Act, the FDI Regulation, and draft regulations on cybersecurity certification and space activities. Each imposes or is likely to impose direct compliance costs on major U.S. technology firms that exceed $100 million annually, with additional indirect costs from foregone innovation, delayed market entry, and reduced investment substantially exceeding this figure.

These regulatory frameworks share common structural features. They impose fixed compliance costs that foreclose market entry for smaller U.S. firms, while raising operational expenses for larger enterprises. They embed vague legal standards that grant enforcement authorities broad discretion, creating uncertainty that deters investment. They also extend regulatory jurisdiction extraterritorially to capture transactions occurring outside EU borders.

Despite formal technological neutrality, these measures disproportionately burden U.S. firms. The Digital Markets Act designates five U.S. companies among seven total “gatekeepers.” The General Data Protection Regulation’s largest enforcement actions target U.S. firms, including a record €1.2 billion fine against Meta. The Artificial Intelligence Act’s penalty structure is based on worldwide turnover, creating disproportionate liability for global U.S. enterprises. The draft Cybersecurity Certification Scheme imposes sovereignty requirements—EU headquarters, EU ownership, immunity from non-EU laws—that U.S. firms cannot meet without divesting ownership or violating U.S. law.

These regulations embed industrial-policy objectives within ostensibly neutral technical standards. EU officials explicitly link the Digital Markets Act to the “digital sovereignty” goals of reducing dependence on non-European technology providers. The FDI Regulation uses security rationales to advance strategic-autonomy objectives. The Cybersecurity Certification Scheme incorporates requirements designed to create protected market segments from which foreign providers are excluded. This approach substitutes political discretion for market-based competition.

Several provisions also constitute forced technology transfer. The Digital Markets Act’s interoperability and data-access obligations compel designated firms to disclose proprietary algorithms and datasets to competitors without meaningful safeguards. Unlike traditional competition remedies that balance access against innovation incentives, these requirements are categorical and unconditional. The asymmetry is deliberate: designated firms must share intellectual property, while they are simultaneously prohibited from using data generated by third parties on their platforms.

The draft Cybersecurity Certification Scheme likely violates EU commitments under World Trade Organization agreements. Sovereignty requirements imposing local-presence mandates and effectively establishing zero quotas for foreign suppliers contravene GATS Articles XVI and XVII on market access and national treatment.

These comments recommend that the Office of the U.S. Trade Representative (USTR) formally designate these measures as significant foreign trade barriers in the 2026 National Trade Estimate Report. Following designation, the USTR should initiate bilateral engagement through the U.S.-EU Trade and Technology Council, with specific negotiating objectives to address the discriminatory provisions. The USTR should raise these barriers in multilateral forums, including the WTO Technical Barriers to Trade and Services Committees.

The United States should not respond through retaliatory tariffs or reciprocal regulatory restrictions. Such measures impose costs on U.S. consumers, harm U.S. firms, and undermine U.S. credibility when advocating for rules-based trade. The appropriate response combines formal trade-barrier designation, sustained diplomatic engagement, and readiness to pursue dispute settlement where violations of international commitments are clear.

I. Introduction

The International Center for Law & Economics (ICLE) thanks the Office of the United States Trade Representative (USTR) for the opportunity to comment on this public consultation on foreign barriers to U.S. exports of goods and services and U.S. foreign direct investment.

ICLE is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our scholars have identified multiple foreign policies and practices that deviate from free-trade and free-market principles and that impose measurable costs on U.S. firms seeking to export goods and services, or to make foreign direct investments.

This submission focuses primarily on European Union (“EU”) regulatory measures that function as substantial barriers to U.S. commerce. The Digital Markets Act (DMA), General Data Protection Regulation (GDPR), and Artificial Intelligence Act (AI Act) each impose direct compliance costs on major U.S. technology firms that exceed $100 million annually. In addition to these mandatory expenditures, the measures also subject U.S. firms to indirect costs that substantially exceed this figure from foregone innovation, delayed market entry, and reduced investment.

Beyond digital regulations, our comments examine the EU’s FDI Regulation, which has encouraged the proliferation of national investment-screening mechanisms across EU member states under various security rationales, while serving the industrial-policy objectives of strategic autonomy. We further analyze draft regulations on cybersecurity certification and space activities that impose nationality-based criteria and sovereignty requirements that U.S. firms cannot meet without divesting ownership or violating U.S. law. We also address digital services taxes that multiple jurisdictions have implemented with revenue thresholds designed to capture predominantly U.S. firms. And we examine foreign pharmaceutical-pricing practices that refuse to internalize meaningful portions of innovation costs, while free riding on the benefits of American-funded medical breakthroughs.

These measures share certain common structural features that create non-tariff barriers. They impose fixed compliance costs disproportionate to firm size, effectively foreclosing market entry for U.S. small and medium enterprises. They embed vague legal standards that grant enforcement authorities broad discretion, raising risk premiums that deter investment. They extend regulatory jurisdiction extraterritorially to transactions occurring outside EU borders. They deviate from established international standards through processes that exclude meaningful U.S. participation. They incorporate forced technology-transfer requirements that compel the disclosure of proprietary information to competitors without safeguards against misappropriation.

Despite formal technological neutrality, these frameworks disproportionately burden U.S. firms. The DMA designates five U.S. companies among seven total “gatekeepers” subject to its obligations. The GDPR’s largest enforcement actions target U.S. firms, including a record €1.2 billion fine against Meta for transatlantic data transfers. The AI Act’s penalty structure is based on worldwide turnover, thereby creating disproportionate liability for global U.S. enterprises as compared to EU-focused competitors. The draft Cybersecurity Certification Scheme imposes requirements for EU headquarters, EU ownership, and immunity from non-EU laws that only EU-domiciled firms can satisfy. The draft Space Act establishes size-based constellation thresholds that exempt existing European systems while capturing U.S. large-constellation operators.

The regulations embed industrial-policy objectives within ostensibly neutral technical standards. EU officials have explicitly linked the DMA to the “digital sovereignty” goals of reducing dependence on non-European technology providers. The European Commission has encouraged other jurisdictions, including Brazil, to adopt similar frameworks, extending the reach of EU regulatory protectionism beyond its borders. Multiple countries have implemented or are considering DMA-style asymmetric regulations that target the same U.S. technology firms.

This submission documents these barriers through analysis grounded in economic principles and empirical evidence. Section II examines the DMA’s technical barriers to trade, intellectual-property erosion, services restrictions, investment deterrence, and industrial-policy orientation. Section III analyzes the GDPR’s compliance-cost structure, market distortions, systemic legal uncertainty in transatlantic data transfers, and discriminatory enforcement patterns. Section IV addresses the AI Act’s fixed compliance costs, including market-entry barriers; extraterritorial jurisdiction; technical barriers, which include conformity assessment and prescriptive data requirements; investment deterrence, and regulatory fragmentation. Section V examines the FDI Regulation’s expansion of screening mechanisms, its effects on investment, and its use for industrial-policy objectives. Section VI addresses digital-services taxes. Section VII analyzes foreign pharmaceutical-pricing practices. Section VIII evaluates the draft Cybersecurity Certification Scheme’s evolution toward protectionism, economic inefficiency, specific trade-barrier provisions, and inconsistency with WTO commitments. Section IX addresses the proposed Space Act.

Each section concludes with specific recommendations for USTR action. We recommend formal designation of these measures as significant foreign trade barriers in the 2026 National Trade Estimate Report under the appropriate categories, including Technical Barriers to Trade, Services, Investment, Anticompetitive Practices, and Other Non-Market Policies and Practices. We recommend bilateral engagement through the U.S.-EU Trade and Technology Council with specific negotiating objectives to address discriminatory provisions. We also recommend raising these barriers in multilateral forums, including WTO Technical Barriers to Trade and Services Committees.

The appropriate U.S. response should not involve retaliatory tariffs or similar measures. Such actions would impose costs on American consumers through higher prices and restricted choice, while undermining the global competitiveness of U.S. industries. Instead, we advocate vigorous enforcement of international trade principles, promotion of evidence-based regulation aligned with international standards, and engagement through diplomatic and legal channels to dismantle foreign protectionism. By systematically identifying and challenging these barriers through proper trade policy channels, the USTR can advance the interests of American businesses and workers, while promoting open markets and robust competition in the global economy.

II. Digital Markets Act

The EU’s DMA[1] establishes an expansive regulatory framework governing large online platforms, which it designates as “gatekeepers.” Although formally neutral, the DMA in practice applies almost exclusively to U.S.-headquartered firms that export digital services and invest heavily in Europe’s digital ecosystem. Indeed, five out of the seven firms targeted by the regulation are U.S.-based.[2] By altering the terms of competition and imposing disproportionate compliance costs on a handful of foreign companies, the DMA effectively functions as a non-tariff barrier to trade.[3] It raises the cost of market access, redistributes economic rents toward certain competitors and business users, and restricts the ability (and incentives) of U.S. firms to innovate and invest.[4] In sum, the law’s cumulative effect is likely to disadvantage U.S. exports of digital services and intellectual property, while also deterring U.S. foreign direct investment, in ways inconsistent with the principles of open and nondiscriminatory trade.

A. Technical Barriers to Trade

The DMA introduces an elaborate system of operational and technical obligations that resemble a conformity-assessment regime, which are applied selectively to foreign providers of digital services. Its prescriptive interoperability, data-sharing, and self-preferencing mandates require designated firms to redesign key aspects of their products, interfaces, and internal processes to conform to EU-specific requirements. In practice, designated companies must cooperate and consult the Commission when launching products or making design decisions to ensure that their offerings conform to the Commission’s evolving interpretation of what constitutes “fair” conduct.[5] Indeed, some gatekeepers have observed that “when no two people agree on what the DMA’s substantive obligations mean, the resulting ambiguity undermines the rule of law itself.”[6]

Further, the measures required by the DMA are neither aligned with existing international standards nor with the outcome of transparent, multi-stakeholder processes. By prescribing far-reaching “antitrust-like” obligations and prohibitions absent a finding of market power and without the need to prove harm, the DMA deviates from established antitrust principles, which typically require in-depth case-by-case economic analysis and a clear theory of harm.[7] Instead of adhering to antitrust law’s long-established procedural safeguards and reliance on rigorous economic analysis, the EU has opted to bypass them, using its political and regulatory power to export its policy preferences globally and compel U.S. firms to tailor their products and services “for Brussels.”

The law also embeds an extensive auditing and reporting apparatus that requires firms to produce detailed and costly compliance documentation, appoint an internal compliance officer, submit to technical assessments, and engage in continuous dialogue with the European Commission.[8] These procedures mirror conformity-assessment mechanisms in goods markets and impose compliance costs that fall almost exclusively on U.S. service exporters. Furthermore, U.S. stakeholders and standards organizations have extremely limited influence over the criteria and benchmarks by which “fairness” and “contestability” are assessed, resulting in a process that lacks transparency and inclusivity. As many scholars have pointed out, the terms “fair” and “contestable” are themselves vague and abstract.[9] This ambiguity leaves significant scope for discretion on the Commission’s part, further eroding legal certainty and companies’ freedom to do business however and with whomever they choose.

Collectively, the DMA’s rigid ex-ante requirements function as technical barriers to trade, erecting regulatory hurdles that selectively disadvantage U.S. firms.

B. Intellectual-Property Protection

The DMA’s interoperability and data-access obligations compel designated firms to disclose proprietary information—including technical documentation, algorithms, and datasets—to competitors and third parties. This forced sharing of commercially sensitive materials erodes trade-secret protection and effectively appropriates intellectual property developed by U.S. companies. Unlike traditional competition law, which balances access remedies against innovation incentives,[10] the DMA’s obligations are categorical and unconditional, offering no meaningful safeguards against misuse or loss of proprietary value.

The practical result is a regime of de facto compulsory licensing that weakens incentives to invest in research and development. The DMA thereby undermines the foundational principle that secure intellectual-property rights are essential to innovation. It replaces market discipline with regulatory discretion, transforming proprietary technologies into shared resources, subject to administrative redistribution. Yet the flow of benefits under this regime is entirely one-sided: while the DMA compels designated companies to share data and intellectual property with rivals, it simultaneously prohibits them from using data generated by third parties on their own platforms when competing with those same parties. This asymmetry further weakens their competitive positions and devalues the significant investments that gatekeepers have made in collecting that data and sustaining the platforms on which it is created. Such an approach is inconsistent with international commitments to protect intellectual property, and risks eroding the global value of U.S. innovation.

C. Services

The DMA imposes far-reaching constraints on how U.S. digital-service providers may design, operate, and monetize their offerings within the EU. While the legislation purports to promote “fairness” and “contestability,” its practical effect is to discriminate against foreign suppliers of digital services. The criteria for gatekeeper designation—focusing on global scale and user reach—ensure that almost all targeted firms are American, while “comparable” European companies remain exempt. Indeed, the DMA only applies to one European company, Booking.com.

The obligations themselves restrict the configuration of digital services, including prohibitions on combining data across platforms, limitations on self-preferencing, and mandatory interoperability with third-party software and hardware. These measures directly interfere with platforms’ service design and business models, effectively dictating how U.S. firms may compete and innovate. The DMA also fragments cross-border data flows by compelling firms to maintain separate data-processing structures and by subjecting transatlantic data transfers to heightened compliance risks. This fragmentation functions as a data-localization measure in disguise, impeding the seamless delivery of U.S. cloud, AI, and digital-advertising services across the single market.[11]

Compounding these barriers, the Commission retains broad discretionary authority to interpret and expand DMA obligations through delegated acts and individual enforcement decisions. This open-ended regulatory environment creates substantial uncertainty for U.S. service providers and chills entry and innovation. Together, these features amount to a comprehensive restriction on cross-border trade in digital services, disadvantaging U.S. exporters under the guise of boosting “fairness” and contestability.

D. Investment Deterrence

The DMA deters U.S. foreign direct investment in the European Union. The law likely lowers the expected returns on U.S. capital invested in EU digital markets by constraining profitable business models and imposing unpredictable regulatory costs. For instance, the law’s technology-sharing and data-access obligations constitute a form of forced technology transfer, requiring U.S. investors to surrender valuable intellectual assets as a condition for operating in Europe. Similarly, prohibitions of otherwise standard and often procompetitive business practices, such as favoring a firm’s own products and services,[12] ensure that targeted companies cannot enjoy the full benefits of their investments, including—but not limited to—efficiency-enhancing vertical integration.[13]

At a broader level, the DMA operates as an industrial-policy instrument aimed at advancing the EU’s “digital sovereignty” agenda. Its stated goal of reducing dependence on foreign technology providers translates in practice into the strategic reallocation of rents from globally competitive U.S. firms to European business users and domestic competitors.[14] This policy orientation distorts market incentives and discourages further U.S. investment in the European technology sector. It also risks triggering retaliatory trade measures or reciprocal restrictions on European investment in the United States, further undermining transatlantic economic cooperation.

E. Other Non-Market Policies and Practices: Favoring European Firms and Champions

The DMA exemplifies the EU’s broader shift toward non-market industrial policymaking in the digital sphere. EU officials have openly linked the legislation to Europe’s pursuit of “digital sovereignty”—a policy framework explicitly aimed at reducing reliance on non-European technology providers. The EU has blurred the line between competition policy and protectionism by using regulatory tools to advance industrial and strategic objectives.

This approach distorts global competition by penalizing foreign firms for their success, rather than remedying demonstrable market failures. It undermines commitments to technological neutrality and nondiscrimination under World Trade Organization (WTO) and Organisation for Economic Co-operation and Development (OECD) principles, while signaling to other jurisdictions that digital industrial policy can be pursued through selective regulation, rather than open competition.

Meanwhile, the EU has openly encouraged other countries, such as Brazil, to converge on DMA-style rules.[15] And, sure enough, a number of jurisdictions have already taken note and are following—or considering following—a similar path, targeting the same U.S.-based technology firms with heavy-handed, asymmetric regulations.[16] In this way, the DMA is likely to extend its reach—and the EU’s particular flavor of tech protectionism—well beyond its borders.

F. Recommendations

In substance and effect, the DMA represents a significant foreign trade barrier to U.S. exports of digital services and intellectual property, as well as to U.S. foreign direct investment. While framed as an instrument to foster “fairness” (whatever that may mean), its discriminatory structure, forced technology-transfer obligations, negation of U.S. companies’ legitimate investments efforts, and interference with cross-border data flows reveal a clear industrial policy intent. By selectively burdening U.S. firms under the pretext of promoting “fairness,” the EU has erected a new form of regulatory protectionism in digital markets—and one that is likely to be exported abroad. As such, it imposes restrictions on “Services” (Category 6) and “Investment” (Category 7), and implements “Other Non-Market Policies and Practices” (Category 11) that disadvantage U.S. companies.

The United States should recognize the DMA as a trade measure of concern under the National Trade Estimate process and raise these issues in bilateral and multilateral forums, including the U.S.–EU Trade and Technology Council and the WTO’s Technical Barriers to Trade and Services Committees. Doing so would help to ensure that U.S. firms receive nondiscriminatory treatment and that global digital markets remain open, competitive, and innovation-driven.

III. General Data Protection Regulation

The GDPR is a significant foreign trade barrier that distorts U.S. exports of goods and services and U.S. foreign direct investment. The regulation’s design and enforcement create substantial impediments that fall within several categories enumerated in the USTR’s request for comments.

Under “Services” (Category 6), the GDPR imposes “discriminatory or burdensome barriers to cross-border data flows” and “discriminatory practices affecting trade in digital products.” Its prescriptive rules on data processing and consent create “unreasonable restrictions on what services may be offered,” particularly for U.S. firms whose business models depend on data-driven services. Under “Investments” (Category 7), the GDPR’s high compliance costs, severe financial penalties, and the legal uncertainty surrounding its core provisions deter U.S. foreign direct investment. By increasing operational costs and reducing the expected return on investment, the GDPR discourages U.S. capital from entering the European digital market. In addition, under “Other Barriers” (Category 14), the regulation’s effects are cross-cutting, combining elements of services restrictions, investment deterrence, and anticompetitive market distortions (ACMDs) that justify its inclusion in this category for complex barriers.

The GDPR operates as a formidable non-tariff barrier. The regulation’s real-world economic consequences, the incentive structures it creates, and its effects on market efficiency reveal a system that, regardless of its stated objectives, systematically impedes U.S. commerce. The total economic harm to U.S. interests is estimated to be well in excess of $500 million annually.

A. The GDPR’s Architecture as a Non-Tariff Barrier

A regulation’s compliance costs can function as an implicit tax on economic activity. Notably, Mario Draghi, former president of the European Central Bank and former prime minister of Italy, wrote in the Financial Times:

The IMF estimates that Europe’s internal barriers are equivalent to a tariff of 45 per cent for manufacturing and 110 per cent for services. These effectively shrink the market in which European companies operate: trade across EU countries is less than half the level of trade across US states. And as activity shifts more towards services, their overall drag on growth becomes worse.[17]

When these costs are substantial and disproportionately burdensome on foreign entities, they become a potent non-tariff barrier. The GDPR imposes such a burden on U.S. businesses, creating a financial impediment to operating within the EU market. For example, the Computer & Communications Industry Association estimates the GDPR costs the five largest U.S. providers of online digital services a total of more than $55 million annually.[18]

Beyond these direct outlays, the GDPR imposes indirect costs that reduce productivity and distort resource allocation. A study published by the Centre for Economic Policy Research found that the GDPR caused an average 8.1% drop in profits and a 2.2% decline in sales for affected businesses.[19] The larger effect on profits than on sales indicates that the primary driver of this economic harm is the weight of compliance costs, not a reduction in consumer demand.⁶

The regulation has also altered the production function for data-driven businesses. A study using seven years of data from a global cloud-computing provider—conducted by researchers that included Mert Demirer of MIT—found that the GDPR effectively increased the cost of data as a production input by approximately 20%.[20] In response, EU-based firms—and U.S. firms serving them—decreased their data storage by 26% and their data processing by 15%. This regulatory friction causes firms to become less data-intensive and, therefore, less efficient. For the United States, whose firms are global leaders in using data for economic value, this functions as a tax on a primary source of competitive advantage.

The GDPR’s “one-size-fits-all” approach, which applies a single set of complex rules regardless of firm size, imposes a regressive burden. The high fixed costs of compliance are disproportionately harmful to smaller U.S. enterprises. Giorgio Presidente and Carl Benedikt Frey found that, behind the 8% average drop in profits, there was a more severe effect for smaller companies. In the IT sector, large firms saw a 4.6% profit drop, while small IT firms suffered a 12.1% drop.[21] This regressive cost structure creates a formidable barrier to entry. U.S. startups and small and medium-sized enterprises (SMEs) must either absorb costs that cripple their profitability or forego the EU market entirely, as noted in Antitrust Source:

Investors, also, may face new uncertainties, information acquisition hurdles, and due diligence costs pertaining to venture deals in the EU due to the introduction of the GDPR. Moreover, those costs may be particularly pronounced for investors who are not based in the EU and are less familiar and less able to monitor ongoing and shifting aspects of compliance and potential enforcement. Investors also face the risks that the value of their investments may diminish if, for instance, an expansion to the EU is put off due to compliance costs, or a funded firm’s assets are less valuable due to limitations on the collection and processing of data.[22]

B. Market Distortions and Disincentives for Innovation

The GDPR’s regulatory design actively distorts the digital economy’s competitive landscape. Its operational requirements create inefficient market outcomes by stifling competition and creating disincentives for innovation. These effects systematically disadvantage the dynamic, data-driven business models in which U.S. firms are global leaders.

The regulation’s rules on data collection—particularly its consent requirements—favor large, established platforms over smaller challengers. Large, vertically integrated platforms with diverse, consumer-facing services are better positioned to obtain broad, bundled user consent across their ecosystems.[23] A user interacting with multiple services from a single provider is more likely to provide sweeping consent than a user interacting with multiple, smaller providers. This dynamic creates a data-collection advantage for incumbents. Empirical research has documented that, in the wake of the GDPR, market concentration increased among web technology vendors, with Google and Meta-owned vendors increasing their relative market share.[24]

Furthermore, large platforms can use the GDPR to justify restricting rivals’ access to data and interoperability, effectively using the regulation as a competitive “weapon.”[25] Such “weaponization” of privacy undermines the contestability of digital markets, harming U.S. firms that often rely on access to platform data to offer complementary services. As John Yun has noted, while the GDPR aims to bolster user privacy, empirical evidence suggests it has also triggered adverse effects, including diminished startup activity and increased market concentration.[26]

The GDPR’s restrictive approach to data processing, combined with its legal ambiguity, acts as a drag on innovation, particularly in data-intensive sectors like artificial intelligence (AI). Economic studies show that venture-capital funding for data-related ventures in the EU fell significantly after the GDPR’s implementation.[27] This lack of investment translates into fewer new companies and less innovation. The regulation’s burdens have also led to market contraction. One study of the Google Play Store found that the GDPR induced the exit of approximately one third of available apps, and that the entry of new apps fell by half following the regulation’s implementation.[28] This signals that the regulatory burden is deterring developers, particularly smaller U.S. software firms, from serving the EU market.

The barriers are particularly acute for the development of AI. Core GDPR principles, such as purpose limitation and data minimization, are in tension with the foundational needs of machine learning, which often requires large, diverse datasets for training.[29] The legal uncertainty surrounding the re-use of data for AI training creates risks for U.S. innovators. Miko?aj Barczentewicz reports that some activists advocate interpreting the GDPR to effectively prohibit some AI research and business applications altogether.[30] Such uncertainty forces firms to either avoid using EU data for training or to adopt overly cautious approaches that limit the effectiveness of their AI models.

C. Systemic Legal Uncertainty in Transatlantic Data Transfers

The GDPR functions as a trade barrier by creating systemic legal uncertainty surrounding the transfer of personal data from the EU to the United States. This chronic instability chills commerce and deters investment.

A series of decisions by the Court of Justice of the European Union (CJEU), stemming from complaints brought by privacy activist Max Schrems, has dismantled the legal architecture for transatlantic data flows. The rulings in Schrems I (2015) and Schrems II (2020) invalidated the “Safe Harbor” and “Privacy Shield” frameworks, respectively.[31] The CJEU’s reasoning in both cases was that U.S. national-security surveillance laws do not provide EU citizens with a level of data protection and judicial redress that is “essentially equivalent” to the rights guaranteed under EU law.

The economic disruption caused by these invalidations was immediate, creating “legal uncertainty for thousands of companies.”[32] U.S. firms were forced to use alternative, more complex transfer mechanisms—primarily Standard Contractual Clauses (SCCs). The Schrems II decision compounded this problem by casting doubt on the validity of SCCs themselves, imposing an obligation on data exporters to conduct a case-by-case assessment of the recipient country’s laws and to implement undefined “supplementary measures.”[33] This created significant operational complexity and regulatory risk for U.S. firms.¹⁸

The successor mechanism—the EU-U.S. Data Privacy Framework (DPF), which entered into force in 2023—is built on a precarious legal foundation. Critics argue that the DPF fails to resolve the fundamental conflict between U.S. surveillance law and the CJEU’s “essential equivalence” standard.[34] Legal challenges to the DPF are already underway, and there is a possibility that the framework will be struck down.[35]

This state of perpetual legal jeopardy is a potent economic barrier. The instability of transfer mechanisms raises the risk premium for any U.S. firm doing business with Europe. Companies must invest in continuous legal analysis and contingency planning for the next framework’s collapse, diverting capital from productive activities.[36] The constant threat of a court decision severing data flows makes long-term investment in data-dependent services in the EU an unacceptably risky proposition.

While the EU has not imposed an explicit data-localization mandate, its legal approach creates a powerful de facto incentive for that outcome. For a risk-averse U.S. company, the only safe option is to avoid transferring personal data out of the EU altogether, requiring the construction of duplicative and economically inefficient data infrastructure within the EU’s borders. This outcome is functionally identical to a formal data-localization requirement, a practice recognized by the USTR as a significant barrier to trade in digital services.

D. Discretionary Enforcement and Punitive Sanctions

The final pillar of the GDPR’s architecture as a trade barrier is its enforcement regime. Characterized by vague legal standards, broad regulatory discretion, and punitive sanctions, the regime creates a hostile and uncertain environment for U.S. firms.

The GDPR’s penalty structure has been applied aggressively, with U.S. technology firms the primary targets of the most significant enforcement actions. Since 2018, EU data-protection authorities (DPAs) have issued billions of euros in fines. The record-breaking €1.2 billion fine against Meta in 2023 for its transatlantic data transfers is the largest GDPR fine ever issued.[37] This is part of a pattern that includes a €390 million fine against Meta for its legal basis for advertising and a €310 million fine against LinkedIn. The GDPR empowers authorities to levy fines of up to 4% of a company’s total global annual .[38] This mechanism creates a disproportionate economic threat for large, global U.S. firms, turning any potential compliance issue into a significant financial risk.

Major enforcement actions are frequently based not on clear-cut violations, but on broad, ambiguous principles, granting EU DPAs immense discretion. The €1.2 billion Meta data-transfer fine was based on a violation of Article 46(1) GDPR. The Irish DPA, at the direction of the European Data Protection Board (EDPB), asserted that Meta’s use of SCCs could not overcome the systemic risks posed by U.S. surveillance law. In effect, the decision punished a U.S. company for the perceived shortcomings of the U.S. legal system, a factor outside the company’s control. In the €390 million Meta advertising case, the DPC found that Meta could not rely on “contractual necessity” under Article 6(1)(b) as a legal basis for processing user data for personalized advertising. This decision was contested among EU regulators and overturned the DPC’s own initial view, showing the lack of legal certainty for core business models.[39]

The legal interpretations underlying these actions reflect a regulatory philosophy of “privacy absolutism.” As Miko?aj Barczentewicz has argued, this approach elevates a maximalist interpretation of data protection above other principles, such as economic efficiency and regulatory proportionality.[40] This system, which combines vaguely worded legal principles with the discretionary power to impose massive fines, is ripe for arbitrary enforcement. The evidence shows that this power is disproportionately targeted at high-profile U.S. technology firms, often based on novel interpretations of these vague principles. This transforms the GDPR from a predictable set of rules into a tool that can be wielded to achieve unstated industrial-policy goals, creating a powerful deterrent to U.S. investment and trade.

E. Recommendations

We recommend the USTR formally designate the GDPR as a “Significant Foreign Trade Barrier” in the 2026 National Trade Estimate Report, under the categories of “Services” (Category 6), “Investment” (Category 7), and “Other Non-Market Policies and Practices” (Category 11).

Following this designation, the USTR should initiate high-level engagement with the European Commission to address the specific economic distortions identified. These diplomatic efforts should seek to establish a durable and predictable legal mechanism for EU-U.S. data transfers that can withstand judicial scrutiny and provide the long-term stability needed to support U.S. exports and investment. The USTR should also promote a more risk-based and proportionate approach to GDPR enforcement, advocating for greater legal certainty and nondiscriminatory application of sanctions.

Finally, engagement should address the anticompetitive effects of the GDPR’s design by advocating for interpretations that lower barriers to entry for SMEs and foster a more dynamic and competitive digital single market open to U.S. firms.

IV. Artificial Intelligence Act

The EU’s AI Act constitutes a substantial foreign barrier to U.S. exports of goods and services and U.S. foreign direct investment.[41] This barrier manifests across multiple categories identified in the USTR’s request for comments, including “Technical Barriers to Trade” (Category 2), “Services” (Category 6), Investment (Category 7), and “Anticompetitive Practices” (Category 9).

The AI Act’s regulatory architecture imposes costs on U.S. firms that are substantial in magnitude and poorly calibrated to demonstrated harms. The framework operates through three mechanisms: (1) imposing fixed compliance costs that function as barriers to market entry; (2) creating legal uncertainty that deters investment; and (3) extending EU regulatory jurisdiction extraterritorially to transactions occurring entirely outside EU borders.

A. Fixed Compliance Costs as Market-Entry Barriers

The AI Act requires providers of “high-risk AI systems” to implement extensive compliance infrastructure before placing products on the EU market. Article 9 mandates continuous risk-management systems. Article 10 requires data-governance frameworks that meet specific technical criteria. Article 11 demands detailed technical documentation. Articles 13-15 impose transparency, human-oversight, and technical-performance obligations.

These requirements generate substantial fixed costs that must be incurred regardless of a firm’s EU market scale. The Computer & Communications Industry Association estimates the AI Act will cost large providers of online digital services an average of $15.2 million annually per firm.[42] For small firms, estimates suggest compliance costs of up to €400,000 per high-risk AI system.[43] Other estimates indicate that compliance costs could account for 15-20% of R&D budgets for SMEs.[44]

The European Commission initially projected that 5-15% of AI systems would be classified as high-risk.[45] Recent surveys of AI developers suggest the actual figure is 33-50%.[46] This gap between projected and realized regulatory scope indicates massive underestimation of the act’s economic footprint and trade effects.

Fixed costs create market power by raising minimum efficient scale. For U.S. startups and SMEs, which disproportionately drive AI innovation, these costs would likely exceed expected EU revenue, effectively foreclosing market entry. Large incumbent firms spread compliance costs across larger revenue bases, reducing per-unit costs. While the AI Act includes provisions intended to support SMEs, such as prioritized access to regulatory sandboxes and proportional conformity-assessment fees, these measures are unlikely to offset the immense structural burden of the “high-risk AI systems” (HRAIS) compliance regime. By creating such high hurdles for market entry, the act insulates incumbent EU-based firms from competition from innovative U.S. challengers.

B. Extraterritorial Jurisdiction and Services Trade

Article 2(1)(c) extends the AI Act’s scope to “providers and deployers of AI systems that are located in a third country, where the output produced by the AI system is used in the Union.” This “output-based” jurisdiction represents a significant expansion of regulatory reach that directly restricts U.S. exports of digital services.

A U.S. financial-services firm using a proprietary AI model in New York to generate risk assessments for an EU client becomes subject to EU regulation because the assessment—the “output”—is used in the EU. A U.S. consulting firm using AI tools in Chicago to develop strategy recommendations for an EU company faces identical requirements. A U.S. software company using AI-powered analytics internally to optimize supply chains that serve EU customers likewise must comply with the act.

This jurisdictional approach transforms ordinary cross-border service provision into a regulated activity. U.S. service exporters face costly choices: develop parallel EU-compliant versions of internal processes, accept legal risk of noncompliance, or exit the EU market. Each option imposes costs. Creating parallel systems eliminates economies of scale. Accepting legal risk increases the cost of capital. Market exit represents foregone revenue.

Services represent approximately 35% of total U.S. exports.[47] The European Center for International Political Economy reports that U.S. exports of information and communications technology (ICT) services to the EU have exceeded $220 billion in recent years.[48] The AI Act’s extraterritorial reach subjects significant portions of these services exports to novel compliance requirements and legal risks.

C. Technical Barriers to Trade

The AI Act establishes a significant set of technical barriers that will disproportionately affect U.S. firms. The regulation creates a costly, restrictive framework for U.S. AI exporters through its provisions on conformity assessment, standards development, and data governance.

1. Conformity assessment as gatekeeping

Articles 43 and Annexes VI-VII establish conformity-assessment regimes that AI system providers must complete before placing products on the EU market. For certain high-risk systems, assessment requires the involvement of third-party “notified bodies” designated by EU member states.

This ex-ante requirement delays market entry and imposes costs disproportionate to any feasible risk-reduction benefits. The WTO Technical Barriers to Trade Agreement, Article 5.1.2, requires that conformity-assessment procedures “not be stricter than necessary.”[49] The AI Act’s framework inverts this standard by applying uniform, stringent assessment requirements based on system classification, rather than actual risk.

Delays to market entry translate directly into foregone revenue. In technology markets characterized by rapid obsolescence and network effects, delay often determines market success. A U.S. firm spending six months navigating conformity assessment while competitors launch immediately faces more than lost sales—it may lose the market permanently if competitors establish network effects during that period.

2. Harmonized standards and procedural exclusion

Article 40 directs the European Commission to request European standardization organizations (ESOs)—specifically, the European Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization (CENELEC), and the European Telecommunications Standards Institute (ETSI)—to develop “harmonized standards” for AI systems. Article 41 grants “presumption of conformity” to AI systems that comply with these standards, creating powerful incentives for adherence.

ESOs develop standards through technical committees composed of experts nominated by EU member states’ national standards bodies. While international standards organizations like the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) include U.S. representatives with voting rights, the ESO process provides no such direct participation to non-EU stakeholders. U.S. firms and U.S.-based standards-development organizations (SDOs) may observe or comment but cannot vote on the adoption of standards.

This procedural structure creates the risk of standards-based protectionism. Standards that appear neutral can advantage domestic producers if they codify approaches or technical architectures common in one market but not another. A harmonized standard specifying particular data structures, software architectures, or testing methodologies familiar to EU developers but foreign to U.S. developers imposes differential compliance costs that advantage EU firms without explicit discrimination.

3. Prescriptive data requirements

Article 10 of the AI Act requires that training, validation, and testing datasets be “relevant, sufficiently representative, and to the best extent possible, free of errors and complete.” These requirements are not performance standards, which would allow firms to choose optimal compliance methods. They are, instead, input mandates that specify the characteristics of data that may be used in development.

The requirements are vague, subjective, and unrealistic, restricting access to usable data and slowing product development. The act’s goal of eliminating bias completely has been deemed technologically unattainable, even for leading AI firms.[50] Additionally, extensive logging and traceability mandates increase compliance costs, privacy risks, and operational complexity, particularly given the opaque nature of large language models (LLMs). U.S. firms have pioneered novel approaches to bias mitigation or data efficiency that do not conform to Article 10’s prescriptive requirements and therefore face regulatory barriers, regardless of their technical merit.

D. Investment Deterrence

A U.S. firm considering whether to establish an AI development facility in the EU must compare expected returns to alternative investment locations. The AI Act raises the costs of EU operations through required risk-management systems, data-governance infrastructure, documentation processes, and conformity assessments. All these costs are specific to EU operations. A firm conducting identical AI research in the United States, Japan, or other jurisdictions faces no comparable burden. At a 10% discount rate, the estimated $15.2 million annual compliance cost has a present value of $152 million—potentially three times an initial capital investment. This dramatically reduces investment returns and causes capital to flow elsewhere. That’s because investment decisions under uncertainty create option value for delay. When regulatory uncertainty is high, the option value of waiting increases, causing firms to delay or abandon investments, even when the expected net present value is positive.[51]

The AI Act creates multiple sources of legal uncertainty. The definition of “high-risk” systems depends on Annex III categories that are broad and subject to updating through delegated acts. Whether specific AI systems qualify as “general purpose AI,” thereby triggering additional requirements under Articles 51-56, depends on assessments of “significant impact” that will be refined through not-yet-adopted implementing regulations. The liability regime for AI-caused harm remains unresolved following the European Commission’s withdrawal of its proposed AI Liability Directive in October 2024.

Article 99 establishes administrative fines for noncompliance. Placing prohibited AI systems on the EU market triggers fines of up to €35 million, or 7% of total worldwide annual turnover, whichever is higher. For large U.S. technology firms with annual revenues that exceed $100 billion, the 7% turnover penalty represents potential liability of more than $7 billion per violation.

This penalty structure creates asymmetry between U.S. and EU firms. The “worldwide turnover” basis means large U.S. firms with substantial global operations face far larger absolute penalties than EU firms of comparable size operating primarily within Europe. This differential penalty burden advantages EU-headquartered competitors.

E. Regulatory Fragmentation

The AI Act represents an attempt to exercise what Anu Bradford of Columbia Law School has termed the “Brussels Effect”—the EU’s strategy of leveraging its large internal market to set de facto global regulatory standards.[52] This effect is failing with respect to AI regulation. The United Kingdom, Japan, Singapore, and the United States have explicitly rejected the EU’s prescriptive, rights-based approach in favor of alternative models that emphasize flexibility, sectoral regulation, and voluntary frameworks.

This regulatory divergence creates trade barriers through fragmentation. U.S. firms seeking to operate globally must develop and maintain compliance systems for multiple, inconsistent regulatory regimes. Rather than creating a unified global standard that reduces compliance costs through harmonization, the Act is producing a fragmented regulatory landscape that multiplies compliance costs and creates barriers to international commerce.

F. Quantifying the Trade Barrier

The available evidence suggests the AI Act’s impact on U.S. exports likely falls into USTR’s highest category: more than $500 million annually. This estimate derives from multiple components. Direct compliance costs for at least 30 major U.S. technology companies with substantial EU AI business exceed $450 million annually. Foregone revenue from delayed launches of Apple Intelligence, Google Gemini, and Meta AI features represents additional hundreds of millions. Lost sales from market exit by smaller U.S. firms, reduced foreign direct investment, and suppressed innovation all compound these effects.

G. Recommendations

The USTR should formally identify the EU AI Act in the 2026 National Trade Estimate Report as a significant foreign barrier affecting U.S. exports and investment under Categories 2, 6, 7, and 9.

The United States should pursue bilateral engagement through the U.S.-EU Trade and Technology Council with specific objectives: (1) negotiate mutual recognition of conformity assessments conducted according to U.S. standards, particularly the National Institute of Standards and Technology (NIST) AI Risk Management Framework procedures; (2) secure direct voting rights for U.S. stakeholders in ESO technical committees developing harmonized standards; (3) urge modification of Article 2(1)(c) to limit extraterritorial jurisdiction to AI systems specifically targeted at the EU market; and (4) advocate for revising prescriptive requirements like Article 10 to performance-based standards that specify outcomes, rather than processes.

These recommendations aim to reduce trade friction while respecting legitimate regulatory objectives concerning AI safety and security.

V. Foreign Ownership Regulations

Regulation (EU) 2019/452, establishing a framework for screening foreign direct investment into the European Union (FDI Regulation),[53] was adopted under the stated objective of protecting “security and public order.” In practice, however, it institutionalizes a permanent mechanism for political intervention in cross-border capital allocation, embedding the logic of “strategic autonomy” into what had previously been an open and integrated internal market.

To be clear, the FDI Regulation does not create a centralized EU screening authority. Instead, it establishes a cooperation mechanism through which the European Commission and member states exchange information and issue nonbinding opinions on individual transactions. Formally, member states retain full sovereignty over whether to screen investments and how to conduct such reviews. Yet the regulation’s design and subsequent implementation have had profound and unintended consequences: it has encouraged the proliferation and expansion of national screening mechanisms, extended the scope of “security” into broad categories of technology and infrastructure, and thereby raised the transaction costs and uncertainty surrounding U.S. investment in the EU.

Ultimately, the framework functions less as a narrow national-security safeguard than as a structural non-tariff barrier to investment—one that distorts market signals, amplifies bureaucratic discretion, and provides a convenient channel for industrial-policy objectives under the guise of “security.”

A. De Facto Expansion of Screening Mechanisms

The FDI Regulation creates an EU-level process for coordinating member-state screening mechanisms but does not harmonize substantive criteria. Member states “may maintain, amend or adopt mechanisms to screen foreign direct investments,” and the Regulation lists a non-exhaustive set of factors—such as control of critical infrastructure, access to sensitive information, or involvement in projects of EU interest—that may justify intervention.[54]

While the regulation is formally voluntary, its cooperative structure and reporting obligations have functioned as a strong incentive for adoption. Member states that lack screening regimes cannot meaningfully participate in the information-exchange process or respond to Commission inquiries. Once several large member states—notably Germany, France, and Italy—began operating comprehensive systems, others faced reputational and administrative pressure to follow suit, lest they be viewed as weak links in the EU’s economic-security chain.[55] This dynamic illustrates collective-action and path-dependence effects familiar in regulatory economics: once a coordination mechanism exists, the marginal political cost of adopting a regime falls, while the cost of abstention rises.

The result has been a near-complete diffusion of screening mechanisms across the EU. In 2018, only about a dozen member states maintained such regimes; by 2025, 26 of 27 had either adopted or substantially expanded them.[56] A procedural framework thus evolved into a de facto mandatory system, extending to sectors only tangentially related to national security, and imposing new layers of uncertainty and delay on cross-border investment.

B. Effects on Investment

By de facto replacing predictable, rules-based market access with open-ended administrative discretion, the FDI Regulation increases both the fixed and variable costs of foreign investment. Because “security or public order” is undefined, and varies from EU member state to member state, investors must evaluate potential exposure across 27 distinct national systems, each with different triggers, thresholds, and timelines. The expected value of an investment falls as both the probability and variance of regulatory delay rise. In effect, the regulation imposes an implicit entry tax on foreign investment, particularly in capital-intensive and time-sensitive sectors, where delay can destroy value.

Moreover, the extension of screening to technology and data-related sectors could create distortions in research collaboration and access to innovation funding. While evidence remains limited regarding the direct application of FDI screening to joint research ventures, the FDI Regulation’s scope explicitly extends to investments that involve EU projects and programs of “Union interest,” such as Horizon Europe.[57] This raises a credible risk that screening mechanisms could be used to scrutinize or constrain foreign participation in collaborative R&D initiatives. The possibility that foreign partners—particularly U.S. firms—might be subjected to review or additional administrative conditions introduces uncertainty and may discourage engagement in EU-funded research consortia.

The FDI Regulation also allows authorities to reexamine previously approved investments if new “security concerns” arise, creating an option for ex-post intervention that investors must price into their discount rates. This regulatory-risk premium raises the cost of capital, deters reinvestment, and diverts resources toward jurisdictions where the expected value of government noninterference is higher.

C. Non-Market Policies and Practices

The FDI Regulation’s implementation demonstrates how security rationales can be repurposed for industrial policy. EU institutions increasingly describe FDI screening as a tool to reduce “strategic dependencies” and, implicitly, to foster European champions.[58] This represents a shift from a market-based framework for capital allocation to one in which political discretion determines ownership patterns in key sectors. Such policies substitute bureaucratic decision making for market discovery, inviting rent seeking and protectionism and reducing consumer welfare.

Despite formal neutrality, the FDI Regulation has disproportionately affected U.S. investors. The European Commission’s own reporting suggests that most screened transactions in 2023 likely involve U.S. acquirers, given that the United States is the primary foreign investor in the EU and given that the United States accounted for 49% of total investments in semiconductors (an area considered sensitive).[59]

D. Caveats

To be sure, the FDI Regulation also incorporates several constructive elements. Prior to its adoption, member-state regimes were highly fragmented—varying widely in scope, procedure, and transparency. The regulation represents a step toward greater institutional coherence, introducing minimum procedural guarantees—such as transparency obligations, defined timelines, and access to judicial review—that help to reduce some of the transaction costs and legal uncertainty associated with purely national systems.[60] It also provides investors with a baseline degree of predictability by clarifying notification processes and information-exchange requirements across jurisdictions.

Moreover, the European Commission has recognized that excessive divergence among national mechanisms can itself act as a barrier to investment and has therefore announced plans to further harmonize screening rules within the union.[61] While these developments modestly improve legal certainty and procedural fairness, they also underscore the underlying tension of the EU’s current approach: the pursuit of uniformity and “strategic autonomy” simultaneously expands the administrative perimeter of investment control.

Paradoxically, therefore, the FDI Regulation seeks to manage the fallout of regulatory fragmentation that arises, to a significant degree, from its own existence. By effectively nudging member states to adopt FDI-screening mechanisms—while leaving the substance of screening in national hands—it is likely to engender a multiplicity of divergent rules and standards, potentially exacerbating legal uncertainty and discouraging investment by foreign firms, the majority of which are U.S.-based.

E. Recommendations

Though nominally adopted to protect “security and public order,” the FDI Regulation has, in practice, spurred the proliferation and expansion of national-screening mechanisms across nearly all EU member states. This dynamic functions as a structural non-tariff barrier, replacing rules-based market access with administrative discretion, which in turn raises transaction costs and creates significant regulatory uncertainty for U.S. investors. The USTR should therefore regard the framework as a potential non-tariff barrier to investment under “Investment” (Category 7) and “Other Non-Market Policies and Practices” (Category 11), as it uses “security” as a guise for industrial-policy objectives that distort market signals and deter U.S. capital. To mitigate its distortive effects, the USTR should:

1. Urge the EU to encourage member states to narrow their definitions of “security and public order” to objectively verifiable and relatively uniform risks to defense, intelligence, or critical infrastructure.
2. Advocate for binding procedural disciplines—clear timelines, transparency, and proportionality—to reduce uncertainty and limit rent seeking.
3. Encourage differentiation between market-based and state-directed investors so that scrutiny targets genuinely nonmarket acquisitions, rather than U.S. commercial investment.
4. Promote dialogue on proportionality and due process in FDI review to ensure that legitimate security objectives are pursued through narrowly tailored, evidence-based measures.

Member states properly retain the sovereign authority to screen foreign direct investment where genuine national-security interests are implicated. To the extent that the FDI Regulation establishes minimum standards of transparency, legal certainty, and procedural safeguards, it moves in the right direction. Nonetheless, the regulation has also catalyzed the proliferation of national screening mechanisms. Because competence over screening remains decentralized, and because member states continue to define “public order” and “security” according to their own policy preferences, the framework risks entrenching a fragmented and unpredictable regulatory landscape that deters efficient cross-border investment.

VI. Digital Services Taxes (DSTs)

Digital services taxes (DSTs) represent another significant and growing non-tariff trade barrier that disproportionately targets U.S. firms operating in the global digital economy. This barrier may be categorized within the “Other Barriers” category (Category 14) on the USTR’s request for comments.

DSTs are typically structured as a percentage of gross revenue derived from specific digital activities, rather than profits, rendering them highly discriminatory and economically distortive. They often fall most heavily on large, profitable U.S.-based technology companies, fostering an uneven playing field and shifting the cost of compliance and operation back to the origin country of innovation.

A core flaw of DSTs is their inherent bias against foreign (particularly U.S.) digital-service providers. Many DSTs are designed with revenue thresholds that effectively exempt domestic (and typically smaller) players, while capturing only the largest multinational corporations, which are predominantly American. This selective application creates an unfair competitive advantage for local firms and disincentivizes foreign investment. For example, a 2019 report highlighted how European DSTs, despite their broad rhetoric, would disproportionately affect U.S. companies due to their global scale and reliance on digital advertising and user data.[62]

Furthermore, DSTs contribute to significant economic inefficiencies and double taxation. By taxing gross revenue, rather than profits, DSTs fail to account for a given firm’s actual profitability or expenses, potentially imposing tax burdens even on firms operating at a loss. As early as 2018, the European Economic and Social Committee (EESC) expressed apprehension regarding the potential for adverse effects on smaller economies and nascent businesses, along with the heightened risk of double taxation.[63]

This departure from long-standing international tax principles creates overlapping tax claims and discourages investment in the digital sector. The lack of a harmonized international approach compels firms to navigate a complex patchwork of varying tax regimes and growing compliance costs and administrative burdens, as detailed by a PricewaterhouseCoopers analysis of the global landscape of DSTs.[64]

The unilateral implementation of DSTs also fundamentally undermines efforts toward a stable and predictable global tax framework. Despite ongoing multilateral efforts at the OECD to establish a consensus-based solution for taxing the digital economy (such as Pillars One and Two), several countries have proceeded with or maintained their own DSTs. This fragmentation risks trade retaliation (exemplified by U.S. Section 301 investigations into various DSTs), which threaten to escalate trade disputes and harm global economic cooperation.[65] As such, DSTs are not merely a revenue-raising tool but a protectionist measure that obstructs the free flow of digital services and capital, ultimately to the detriment of consumers and innovation worldwide.

VII. Pharmaceutical Pricing

ICLE has previously submitted comments to the USTR regarding foreign pharmaceutical-pricing practices that distort trade and erode U.S. firms’ incentives to innovate and shift the financial burden of pharmaceutical innovation disproportionately onto U.S. consumers.[66] This barrier may fit in the “Other Barriers” (Category 14) of the USTR’s request for comments.

Centralized-negotiation systems are a primary mechanism that foreign governments use to distort pharmaceutical pricing.[67] Nations operating national-health-care or single-payer models leverage their substantial buying power to negotiate or impose stringent price limits on medications.[68] Such centralized systems effectively establish monopsony conditions, confronting pharmaceutical companies with a single buyer that possesses overwhelming market power, and thereby eliminating competitive-pricing dynamics.

Biased health-technology assessments (HTAs) are another mechanism that suppress value-based prices abroad. In Germany, for instance, the Federal Joint Committee (G-BA) routinely refuses to recognize key surrogate or intermediate endpoints—such as progression-free survival or HbA1c—unless sponsors meet exceptionally strict criteria.[69] The United Kingdom’s National Institute for Health and Clinical Excellence (NICE) has maintained its £20k-£30k per “quality adjusted life year” threshold since 1999, despite cumulative UK inflation of approximately 90%.[70] Similarly, France’s Comité Économique des Produits de Santé routinely links new drugs to five-year volume contracts.[71] Once in-market sales reach the agreed cap, manufacturers face mandatory clawbacks that can range from 50–70% of “excess revenue.”[72] Moreover, these agencies often discount future health gains, thereby underweighting the decades-long cumulative benefits of curative or disease-modifying therapies.[73]

External-reference pricing (ERP) systems compound these distortions by systematically benchmarking pharmaceutical prices to suppress market values. These systems ensure foreign drug prices remain artificially low—significantly below what would naturally emerge under competitive market conditions.[74] For instance, Canada’s 2022 shift to the Patented Medicine Prices Review Board (PMPRB11) basket deliberately excluded the United States and Switzerland—its two highest-price peers—substituting them with six mid-priced OECD countries.[75] The Canadian Parliamentary Budget Officer estimates that adopting this slimmer benchmark would have reduced Canada’s 2018 spending on patented drugs by approximately 19%.[76]

South Korea’s “two-waiver” pathway presents an even more stark example: a drug must first be priced below the lowest figure among the A7 high-income comparators (which includes the United States). The subsequent National Health Insurance Service (NHIS) negotiation then references “OECD countries other than A7,” explicitly omitting U.S. prices and locking Korean ceilings well below other advanced-economy levels.[77] Such ERP creates a “race to the bottom” effect, where artificially suppressed prices in one jurisdiction become the ceiling for pricing in others, further entrenching below-market pricing globally

Though foreign governments may claim legitimate cost-containment objectives, pricing systems that refuse to internalize any meaningful portion of innovation costs, while free riding on the benefits of U.S.-funded medical breakthroughs, constitute a massive scheme of industrial policy and subsidization. Indeed, in effect, the entire financial burden of global pharmaceutical development is shifted to U.S. patients.

The key test for distinguishing legitimate regulation from trade distortion would be to focus on whether pricing policies create barriers to U.S. market access and fair competition that extend beyond legitimate regulatory objectives. Typically, these policies constitute ACMDs that systematically prevent U.S. pharmaceutical companies from competing on equal terms, shift competitive burdens disproportionately to foreign markets, or create artificial advantages for domestic competitors.

Addressing foreign pharmaceutical-pricing distortions requires surgical trade-policy responses that target specific discriminatory practices, while preserving the innovation ecosystem that benefits U.S. and global health outcomes. The path forward requires rejecting not only counterproductive retaliation but also counterproductive domestic policies, and to instead pursue targeted international remedies. Rejecting most-favored nation (MFN) pricing for Medicaid, for instance, represents a critical policy imperative to avoid importing foreign distortions into the U.S. market. Implementing MFN pricing that benchmarks U.S. reimbursement rates to foreign prices would significantly undermine revenue streams critical to funding ongoing innovation. This would risk replication of Europe’s historical experience, where similar policies transformed the continent from the global leader in pharmaceutical innovation in the 1970s to its current marginal role.

Instead, policymakers should target specific distortions through calibrated trade remedies, including ACMD tariffication, bilateral negotiations with binding enforcement mechanisms, and multilateral coordination that addresses documented competitive harms without disrupting beneficial trade relationships.

VIII. Draft Cybersecurity Rules

The European Union’s (EU) proposed Cybersecurity Certification Scheme for Cloud Services (EUCS) is a proposed regulatory instrument currently under development that purports to harmonize technical security standards for cloud computing across the EU’s Digital Single Market. The scheme, in development by the European Union Agency for Cybersecurity (ENISA) under the authority of the 2019 EU Cybersecurity Act,[78] has progressively incorporated non-technical, nationality-based criteria that function as significant barriers to U.S. exports of goods and services and U.S. foreign direct investment.[79] These provisions, often grouped under the political objective of achieving “digital sovereignty,” repurpose a technical certification framework into a tool of industrial policy designed to alter market outcomes in favor of domestic European firms.[80]

ICLE scholars have previously cautioned that this conflation of security with protectionism risks erecting digital barriers between the EU and its democratic allies, including the United States.[81] The requirements for data localization, EU-based corporate headquarters and ownership, and immunity from non-EU laws are overtly discriminatory. They create substantial hurdles for U.S. firms, which currently hold a dominant share of the EU cloud market, and are inconsistent with the EU’s commitments under international trade law.

The EUCS was originally conceived to replace a fragmented landscape of national certification schemes with a unified, EU-wide framework. Early drafts from 2020 and 2021 focused on establishing a baseline of technical security requirements organized around three assurance levels—“basic,” “substantial,” and “high”—which corresponded to the level of risk associated with a cloud service’s intended use.[82] This initial direction was consistent with international standards and industry best practices.

The scheme’s trajectory shifted following a push by the European Commission and a bloc of member states—including France, Italy, and Spain—to embed the political doctrine of “digital sovereignty” into its requirements. This doctrine reflects a stated European objective to reduce technological dependence on non-EU countries and insulate European data from the extraterritorial jurisdiction of foreign laws, such as the U.S. Clarifying Lawful Overseas Use of Data (CLOUD) Act.[83] Consequently, later drafts of the EUCS introduced non-technical criteria modeled on France’s highly restrictive national SecNumCloud regime.[84] These criteria include mandates that, for the highest assurance levels, data must be stored and processed exclusively within the EU; that cloud-service providers must be headquartered and owned by EU entities; and that CSPs must demonstrate immunity from non-EU legal jurisdictions.[85]

This evolution was contentious within the EU. A coalition of more trade-oriented member states—including Denmark, Estonia, Greece, Ireland, the Netherlands, Poland, and Sweden—expressed strong concerns that these requirements were political, did not enhance cybersecurity, and were inserted into a technical standard without proper debate.[86] ENISA itself reportedly did not see the need for such sovereignty requirements, viewing them as insufficiently grounded in genuine cybersecurity needs, but ultimately included them at the European Commission’s request.[87]

While the EUCS is officially designated a “voluntary” scheme,[88] this description is misleading.[89] The EU’s Network and Information Security Directive (NIS2)[90] grants member states and the European Commission authority to mandate the use of certified services for a wide range of “essential” and “important” entities.[91] These entities span critical sectors of the European economy, including finance, health care, and energy—all of which must require cloud services certified at the highest assurance levels.[92] It is at these levels that the most discriminatory sovereignty requirements are concentrated. This regulatory mechanism effectively transforms a nominally voluntary scheme into a tool for market foreclosure, creating a protected submarket from which U.S. providers will be excluded.

A. Economic Inefficiency and Protectionist Consequences

From an economic perspective, the EUCS’ sovereignty requirements would be inefficient and would impose significant costs on the European economy. The policy of data localization, which requires data to be stored and processed within a country’s borders, is fundamentally at odds with the economic model of cloud computing.[93] Cloud services derive their efficiency from economies of scale achieved by pooling computing resources and managing data across a distributed global network. Localization fragments this model, forcing the costly duplication of infrastructure like data centers and specialized personnel in multiple jurisdictions.[94] Studies show that such measures increase costs for businesses, particularly SMEs, which are then passed on to consumers.[95]

By excluding or disadvantaging the world’s leading cloud-service providers, the EUCS will reduce competition and innovation in the European market. The European cloud market is a high-growth sector, valued at $185 billion in 2024 and projected to be nearly $590 billion by 2030.[96] U.S.-based providers such as Amazon Web Services, Microsoft Azure, and Google Cloud collectively hold a market share of approximately 70%.[97] This position was achieved through technological leadership and sustained investment. Indeed, U.S. providers invest more than €10 billion each quarter in European capital expenditure.[98]

In contrast, the market share of European cloud-service provides has fallen from 29% in 2017 to 15% in 2022, where it has remained stagnant.[99] Denying European businesses full access to the most advanced and cost-effective global services limits their choices and forces them to rely on a smaller pool of less competitive domestic providers. This protectionist environment reduces the pressure for local firms to innovate and improve efficiency.

The economic damage of such exclusionary policies is quantifiable. An economic analysis by Matthias Bauer and Philipp Lamprecht calculated that, under a maximalist approach to data localization as promoted by the French government, the EU’s annual GDP could fall by as much as 3.9% within two years of implementation, accounting for lost and forgone cloud capacity and productivity growth.[100] They project annual EU GDP losses ranging from €29 billion to €610 billion, depending on the scope of sectors to which the highest assurance levels are applied.

The EUCS’ sovereignty requirements are also likely to weaken—rather than enhance—cybersecurity. Effective cybersecurity relies on the ability to detect and respond to threats in real time across a global network, sharing threat intelligence across borders and employing a 24/7 operational model. As Peter Swire and his co-authors have detailed, data localization fragments these integrated security systems, creating data silos that are more vulnerable to attack.[101] It prevents European customers from benefiting from the global threat visibility that only hyperscale providers can offer and may force them to use smaller local providers who cannot match the multi-billion-dollar annual security investments of their U.S. counterparts.[102]

B. EUCS Provisions as Specific US Trade Barriers

The sovereignty requirements in the EUCS would function as significant barriers to U.S. trade and investment, aligning with several categories of concern outlined in the USTR’s request for comments.

First, the provisions constitute “Technical Barriers to Trade” (Category 2). As currently drafted, the EUCS would impose “unnecessarily trade restrictive standards” and “technical regulations” that deviate from established international norms, such as the ISO/IEC 27000 series, to impose criteria based on nationality and geography. By mandating data localization, EU corporate headquarters, and EU ownership, the scheme would supplant global, risk-based standards with a bespoke “sovereignty” standard that, by design, only a narrow subset of EU-domiciled firms can meet. This is a misuse of the standards-setting process to achieve industrial-policy goals.

Second, the scheme would erect barriers to “Services” (Category 6). The mandate for a cloud-service provider to have its global headquarters in the EU to qualify for the highest assurance levels is a direct “local-presence requirement.” More restrictive is the requirement for “immunity from non-EU laws,” a standard that is legally impossible for any U.S. company to meet. U.S. firms are subject to U.S. laws, such as the CLOUD Act and the Foreign Intelligence Surveillance Act (FISA),[103] which establish legal processes for government authorities to request data, regardless of where that data is stored globally. A U.S. company cannot certify that it is “immune” to U.S. law without violating that law. This provision creates a legal paradox designed for the express purpose of disqualifying U.S. providers.

Third, the framework creates barriers to “Investment” (Category 7). The sovereignty provisions function as de facto “limitations on foreign equity participation” and can compel “technology transfer requirements.” To comply with the scheme’s highest assurance levels, a U.S. cloud-service provider would likely need to establish legally separate, EU-controlled joint ventures with European partners, thereby limiting foreign equity. Such arrangements often come with the requirement to share sensitive intellectual property and operational knowledge with the local partner, which is a form of forced technology transfer.

C. Inconsistency with WTO Commitments Under GATS

The EUCS’ sovereignty requirements would also place the EU in conflict with its legal commitments under the WTO’s General Agreement on Trade in Services (GATS). The measures violate GATS’ core principles of “National Treatment” and “Market Access.”

GATS Article XVII, the national-treatment obligation, requires each WTO member to accord to the services and service suppliers of any other member “treatment no less favorable than that it accords to its own like services and service suppliers” in sectors where commitments have been made. The EUCS fails this test. Cloud-computing services offered by U.S. and EU providers are “like services.” The EUCS accords “less favorable” treatment to U.S. suppliers by imposing requirements for an EU headquarters or “immunity” from non-EU laws. These criteria modify the conditions of competition to the detriment of U.S. suppliers based on their nationality and legal domicile, not on the quality or security of their service. An EU provider can qualify for the highest assurance levels while a U.S. provider offering an identical or superior service is disqualified, which is a clear violation of the national-treatment obligation.

GATS Article XVI, the market-access obligation, prohibits WTO members from maintaining certain types of market-access limitations, including “limitations on the number of service suppliers.” By making it legally and practically impossible for any non-EU firm to meet the criteria for the highest assurance levels, the EUCS effectively imposes a “zero quota” on foreign participation in that segment of the cloud market. WTO jurisprudence, as established in the U.S.—Gambling case,[104] has found that a complete prohibition on a particular mode of service supply constitutes a zero quota in violation of Article XVI. The EUCS achieves the same result through its discriminatory certification criteria.

The EU would likely be unable to justify these measures under the exceptions available in GATS Article XIV, which permit measures “necessary to protect public morals or to maintain public order.” The term “necessary” in WTO law requires that no less trade-restrictive alternative is reasonably available to achieve the same policy objective. In this case, numerous less restrictive alternatives exist to ensure an elevated level of cloud security, including a focus on robust technical controls, strong encryption standards, and rigorous third-party audits, all of which can be applied on a nondiscriminatory basis. Because these effective, nondiscriminatory alternatives exist, the EUCS’ nationality-based requirements are not “necessary.”

Furthermore, Article XIV requires that such measures not be applied in a manner that constitutes “a disguised restriction on international trade in services.” The protectionist intent and effect of the EUCS’ sovereignty requirements indicate they are a “disguised restriction on trade,” making a defense under Article XIV untenable.

The draft EUCS framework is not a legitimate, risk-based security measure. It is an economically inefficient and legally questionable policy that uses the pretext of cybersecurity to favor domestic firms at the expense of market-leading U.S. service providers. The scheme will raise costs for European consumers, reduce innovation, weaken cybersecurity, and place the EU in violation of its foundational commitments under GATS.

D. Recommendations

The USTR should engage with the European Commission immediately, before the EUCS is finalized, to advocate removing the nationality-based sovereignty requirements from the draft framework. The United States should emphasize that opposition to these provisions does not reflect opposition to rigorous cybersecurity standards but rather concern that geographic and ownership criteria are unrelated to genuine security risk and violate WTO commitments.

The primary objective should be alignment of the scheme with the ISO/IEC 27000 series standards and other established international cybersecurity frameworks that focus on technical security controls—such as encryption, access management, and audit mechanisms—rather than corporate domicile or ownership structure. The United States should propose that, where the EU maintains concerns about foreign government access to data, technical safeguards subject to objective conformity assessments provide superior security outcomes than do nationality-based restrictions. Early engagement offers the opportunity to influence the regulatory design before political commitments harden, and implementation investments are made.

The USTR should make clear that, if the EUCS is adopted with the discriminatory sovereignty requirements intact, the United States will designate the scheme as a significant foreign trade barrier in future National Trade Estimate Reports under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), and “Investment” (Category 7). Such designation would be followed by formally raising concerns in the WTO Technical Barriers to Trade and Services Committees, and potentially by dispute-settlement consultations.

The United States should coordinate with other advanced economies whose cloud-service providers would face similar barriers under the draft scheme. Japan, South Korea, Canada, Australia, and other countries with significant technology sectors share U.S. interests in preventing the adoption of sovereignty-based certification frameworks. Joint representations to EU institutions during the finalization process would carry greater weight than unilateral complaints and may provide political cover for European officials seeking to resist member-state pressure for protectionist provisions.

IX. Draft Space Act

ICLE has submitted comments^[105] to the U.S. Departments of State and Commerce in which we conclude that provisions of the proposed EU Space Act^[106] would function as non-tariff barriers under WTO principles (Appendix A to these comments):

Our analysis concludes that the EU Space Act functions as a nontariff barrier (NTB) under World Trade Organization principles. In design and effect, it selectively targets U.S. large-constellation operators, imposing compliance burdens that are not proportionate to any demonstrated safety or sustainability benefits. The regulation’s structure and procedural mechanisms—most notably its size-based “giga-constellation” threshold, dual-track registration process, and extraterritorial inspection provisions—create discriminatory market-access barriers. These provisions are likely to harm both U.S. and EU economic welfare, slow the pace of innovation in the sector, and shift market share toward geopolitical competitors whose strategic objectives may run counter to transatlantic security interests.

In light of these findings, we recommend that the U.S. government treat the EU Space Act’s discriminatory provisions as nontariff barriers in trade negotiations with the European Union and, where appropriate, pursue remedies through the WTO Technical Barriers to Trade framework. At a minimum, U.S. policy should press for alignment of the EU Space Act with established international orbital safety standards, including those developed by the International Standards Organization, the Inter-Agency Space Debris Coordination Committee, NASA, and the Federal Communications Commission. Such alignment would reduce the risk of market fragmentation, provide regulatory certainty, and ensure that safety objectives are met without imposing unnecessary and discriminatory costs on foreign operators.

ICLE comments are directly responsive to the USTR’s request, as they specifically identify the proposed EU Space Act as a “significant foreign barrier.” The comments detail how the act creates “discriminatory market-access barriers,” aligning with the USTR’s interest in “Technical Barriers to Trade” (Category 2) and “Services” (Category 6) via “discriminatory licensing requirements or regulatory standards.”

Specific examples provided by ICLE, such as the “size-based ‘giga-constellation’ threshold” designed to exempt EU systems and a “dual-track registration process” that creates conflicts of interest, are precisely the types of distortions the USTR seeks to identify for the 2026 National Trade Estimate Report.

X. Conclusion and Recommendations

Our analysis above demonstrates that a concerning pattern of non-tariff trade barriers is emerging (or worsening, if we consider some longstanding trade barriers) from the European Union’s regulatory landscape, significantly impeding U.S. exports of goods and services and deterring U.S. foreign direct investment. From the DMA’s targeted obligations on U.S. gatekeepers to the GDPR’s restrictive data-processing rules, the EU AI Act’s onerous compliance costs, the EUCS’ protectionist cybersecurity mandates, the EU Space Act’s discriminatory satellite regulations, and EU member states’ pharmaceutical-pricing schemes, these policies collectively create a formidable array of challenges for U.S. firms. The FDI Regulation—officially adopted to protect “security and public order”—has, in practice, spurred highly discretionary and costly screening mechanisms across nearly all EU member states.

Regardless of their stated intent, these measures fundamentally distort market competition, erect regulatory hurdles, weaken intellectual-property protections, and shift the burdens of innovation and compliance disproportionately onto U.S. companies and consumers.

A recurring theme across these barriers is the EU’ embrace of goals like “sovereignty” or “fairness” as justifications for policies that are, in practice, highly protectionist. This approach deliberately blurs the lines between legitimate regulatory objectives and industrial policy, using technical standards, data governance, and investment screening as tools to favor domestic champions and reduce reliance on non-EU (primarily U.S.) technology providers. This institutional bias runs counter to the principles of technological neutrality and nondiscrimination that underpin the multilateral trading system, setting a dangerous precedent that encourages other jurisdictions to adopt similar economically harmful and discriminatory regimes.

The path forward requires a firm commitment to promoting free-trade principles and evidence-based regulation, rather than resorting to retaliatory tariffs that ultimately harm U.S. consumers and the broader U.S. economy. We recommend that the USTR actively engage in bilateral and multilateral fora to challenge these discriminatory practices. This includes advocating for narrowing overly broad definitions of indeterminate legal concepts such as “security” and “public order,” pressing for transparent and predictable regulatory processes, encouraging alignment with established international standards, and promoting policies that genuinely foster innovation and competition, rather than protect incumbents.

By systematically addressing these entrenched non-tariff barriers, the USTR can defend the interests of U.S. businesses and innovators, reinforce the integrity of the global trading system, and ensure that the digital economy and other advanced sectors remain arenas for open competition, innovation, and growth, rather than becoming fragmented by protectionist regulatory empires.

The USTR should formally designate the following measures as significant foreign trade barriers in the 2026 National Trade Estimate Report:

• Digital Markets Act: List under “Services” (Category 6), “Investment” (Category 7), and “Other Non-Market Policies and Practices” (Category 11). The designation should identify specific provisions that function as barriers, including the gatekeeper-designation criteria that disproportionately capture U.S. firms, forced interoperability and data-sharing obligations that appropriate intellectual property, prohibitions on self-preferencing that restrict service design, and data-processing fragmentation that impedes cross-border delivery.
• General Data Protection Regulation: List under “Services” (Category 6), “Investment” (Category 7), and “Other Barriers” (Category 14). The designation should emphasize the chronic legal uncertainty surrounding transatlantic data transfers following the Schrems I and Schrems II decisions, the regressive compliance-cost structure that forecloses market entry for U.S. SMEs, discriminatory enforcement patterns targeting U.S. firms for record penalties, and the regulation’s demonstrated effects of raising data costs and reducing business productivity.
• Artificial Intelligence Act: List under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), “Investment” (Category 7), and “Anticompetitive Practices” (Category 9). The designation should highlight the regulation’s extraterritorial jurisdiction extending to outputs used in the EU, conformity-assessment requirements that delay market entry, prescriptive data-governance mandates that deviate from international standards, exclusion of U.S. stakeholders from European standardization processes, and penalty structure based on worldwide turnover that creates disproportionate liability for global U.S. firms.
• FDI Regulation: List under “Investment” (Category 7) and “Other Non-Market Policies and Practices” (Category 11). The designation should note the framework’s role in encouraging the proliferation of national screening mechanisms, expansion of “security” definitions to encompass broad technology and infrastructure categories and use as a tool to advance “strategic autonomy” industrial-policy objectives under a national-security pretext.
• Proposed Cybersecurity Certification Scheme: List under “Technical Barriers to Trade” (Category 2), “Services” (Category 6), and “Investment” (Category 7). The designation should identify the sovereignty requirements that mandate EU headquarters and ownership, immunity from non-EU-law provisions that create legally impossible conditions for U.S. firms, data-localization requirements that fragment cloud-computing efficiency, and mandatory certification for critical sectors that transforms a nominally voluntary framework into a market-foreclosure mechanism.
• Proposed Space Act: List under “Technical Barriers to Trade” (Category 2) and “Services” (Category 6). The designation should reference size-based constellation thresholds designed to exempt EU operators while capturing U.S. firms, dual-track registration processes creating conflicts of interest, and extraterritorial inspection provisions.

The USTR should pursue bilateral engagement through the U.S.-EU Trade and Technology Council with specific negotiating objectives for each designated barrier.

For the DMA, seek commitments that gatekeeper obligations will be applied only following case-specific findings of market power and demonstrable consumer harm, consistent with established antitrust principles. Negotiate the removal of asymmetric restrictions that compel data sharing, while prohibiting designated firms from using third-party data.

For the GDPR, establish durable transatlantic data-transfer mechanisms incorporating binding commitments that successor frameworks will not be subject to unilateral invalidation. Advocate for enforcement guidelines that establish objective criteria to limit discretion and ensure the nondiscriminatory application of penalties.

For the AI Act, negotiate mutual recognition of conformity assessments conducted according to NIST AI Risk Management Framework procedures. Secure direct voting rights for U.S. stakeholders in European standards organizations’ technical committees. Urge modification of Article 2(1)(c)’s extraterritorial jurisdiction provisions to limit application to AI systems specifically targeted at EU markets. Advocate for converting prescriptive input requirements into performance-based outcome standards.

For the EUCS, demand alignment with ISO/IEC 27000 series international standards and removal of nationality-based sovereignty criteria.

For the Space Act, press for alignment with International Standards Organization, Inter-Agency Space Debris Coordination Committee, NASA, and Federal Communications Commission (FCC) orbital-safety standards.

The USTR should raise these barriers in multilateral forums. File concerns with the Technical Barriers to Trade Committee regarding the AI Act’s conformity-assessment regime, the EUCS’ deviation from international cybersecurity standards, and the Space Act’s discriminatory constellation thresholds. Bring concerns to the Services Committee regarding GDPR data-transfer restrictions, DMA limitations on service design, and EUCS local-presence requirements. Consider requesting WTO dispute-settlement consultations on EUCS provisions that appear to violate GATS Articles XVI and XVII market-access and national-treatment obligations.

The United States should coordinate with like-minded trading partners facing similar barriers. Japan, South Korea, Singapore, Canada, and other advanced economies with significant technology sectors share U.S. interests in preventing proliferation of EU regulatory protectionism. Joint representations carry greater weight than unilateral complaints and reduce the risk that EU regulatory approaches will be adopted as de facto global standards.

The United States should not respond to these barriers through retaliatory tariffs or reciprocal regulatory restrictions. Such measures impose costs on U.S. consumers through higher prices and reduced choice, harm U.S. firms through supply-chain disruption, and undermine U.S. credibility when advocating for open markets and rules-based trade. The appropriate response combines formal trade-barrier designation, sustained bilateral and multilateral diplomatic engagement, and readiness to pursue dispute settlement where violations of international commitments are clear.

These recommendations aim to reduce trade friction and restore competitive neutrality, while respecting legitimate regulatory objectives. Where foreign governments pursue genuine public-interest goals through nondiscriminatory, proportionate, and evidence-based measures aligned with international standards, U.S. trade policy should acknowledge those objectives. Where regulatory frameworks systematically disadvantage U.S. firms through discriminatory design, vague standards that enable arbitrary enforcement, or explicit nationality-based criteria, trade policy should identify those practices as barriers and seek their removal through the appropriate channels.

[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), 2022 O.J. (L 265) 1.

[2] Gatekeepers—Digital Markets Act (DMA), Eur. Comm. (last visited Oct. 29, 2025), https://digital-markets-act.ec.europa.eu/gatekeepers_en.

[3] This has also been recognized by the USTR. See, e.g., 2025 National Trade Estimate Report on Foreign Trade Barriers, Off. U.S. Trade Rep. (Mar. 2025), at 154, available at https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf. (“The ‘gatekeepers’ designated by the DMA disproportionately capture U.S. firms compared to their EU competitors, and therefore undermine U.S. competitiveness in the European market by increasing the compliance costs on certain U.S. firms while not placing a similar burden on EU competitors. The Commission is currently investigating U.S. firms and has imposed excessive fines for violating the DMA”).

[4] For a more thorough critique of the DMA, see, e.g., Lazar Radic, Geoffrey A. Manne, & Dirk Auer, Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulations, 22 Berkeley Bus. L.J. 1 (2025).

[5] The so-called DMA workshops illustrate the opaque and one-sided dynamics of DMA enforcement, in which companies are expected to anticipate when the Commission will deem a product-design decision “fair” and sufficiently conducive to “contestability.” See DMA Stakeholders Workshops, Digital Markets Act (DMA), Eur. Comm., https://digital-markets-act.ec.europa.eu/events/workshops_en (last visited Oct. 29, 2025).

[6] Miko?aj Barczentewicz, EU DMA Workshops: Google, Amazon, Apple, Meta, and Microsoft, EUTechReg (Jul. 8, 2025), https://eutechreg.com/p/eu-dma-workshops-google-amazon-apple.

[7] See Radic et al., supra note 4, at 213-227.

[8] See Barczentewicz, supra note 7.

[9] Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, 68 Antitrust Bull. 669 (2023).

[10] See, e.g., Giuseppe Colangelo, Android Auto: The End of the Essential Facility Doctrine as We Know It, Kluwer Compet. Law Blog (Mar. 13, 2025), https://legalblogs.wolterskluwer.com/competition-blog/android-auto-the-end-of-the-essential-facility-doctrine-as-we-know-it.

[11] See Geoffrey A. Manne, Dirk Auer, Lazar Radic, & Selcukhan Ünekbas, Response of the International Center for Law & Economics: Consultation on the First Review of the Digital Markets Act, Int’l Ctr. Law & Econ. (Sep. 24, 2025), at 8-9 available at https://laweconcenter.org/wp-content/uploads/2025/09/ICLE-DMA-Consultation.pdf. (“An example is the interaction between the DMA and the Data Act, both of which contain data sharing rules. Read together, these measures contribute to what might be described as a policy of data immobility. The Data Act explicitly excludes gatekeepers from benefitting as recipients of data sharing… Even where transfers are permitted, the Data Act imposes a requirement that they be made on fair, reasonable, and non-discriminatory terms, including a prohibition on favourable treatment of affiliated enterprises. This reduces the attractiveness of intrafirm data transfers, effectively constraining data flows even within the same corporate group.”)

[12] For the argument that self-preferencing is not presumptively harmful, see Pablo Ibáñez Colomo, Self-Preferencing: Yet Another Epithet in Need of Limiting Principles, 43 World Compet. (4) 417 (2020). (arguing that self-preferencing is, in fact, a reflection of competition on the merits); see also Lazar Radic & Geoffrey A. Manne, Amazon Italy’s Efficiency Offense, Truth on the Mkt. (Jan. 11, 2022), https://truthonthemarket.com/2022/01/11/amazon-italys-efficiency-offense (arguing that there can be multiple procompetitive reasons why Amazon would choose to give preferential treatment to its own products or services).

[13] On the misguided notion—especially popular among regulators in the context of digital markets—that vertical integration should be presumed anticompetitive, see Geoffrey A. Manne, Against the Vertical Discrimination Presumption, Concurrences No. 2-2020, art. No. 94267 (May 2020), (“The problem, however, is that the claims of presumptive harm from vertical discrimination are based neither on sound economics nor evidence.”).

[14] See Radic et al., supra note 4, 243-249; see also Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth on the Mkt. (Nov. 8, 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation (“Prior to the DMA’s adoption, many leading European politicians were touting the text as a protectionist industrial-policy tool that would hinder U.S. firms to the benefit of European rivals. This logic dovetails neatly with the EU’s broader push for ‘technology sovereignty,’ a strategy intended to reduce the continent’s dependence on technologies that originate abroad (even if that means stifling the companies from its biggest ally: the United States).”).

[15] CADE and European Commission Discuss Collaboration on Digital Market Agenda, Conselho Administrativo de Defesa Econômica (Mar. 29, 2023), https://www.gov.br/cade/en/matters/news/cade-and-european-commission-discuss-collaboration-on-digital-market-agenda.

[16] These include Japan, Brazil, Turkey, Australia, India, South Africa, Vietnam, and South Korea, among others. Not all these countries, however, have adopted DMA-like rules. See Radic et al., supra note 4; see also Lazar Radic, Your Definitive End-of-Year Global Tech Regulation Wrap-Up: Who’s Doing What, Where, and What to Make of It, Truth on the Mkt. (Dec. 21, 2022), https://truthonthemarket.com/2022/12/21/your-definitive-end-of-year-global-tech-regulation-wrap-up-whos-doing-what-where-and-what-to-make-of-it.

[17] Mario Draghi, Forget the US—Europe Has Successfully Put Tariffs on Itself, Financ. Times (Feb. 14, 2025), https://www.ft.com/content/13a830ce-071a-477f-864c-e499ce9e6065.

[18] Carl J. Schramm, Costs to U.S. Companies from EU Digital Services Regulation, Comp. & Commcn’s Ind. Ass’n (Jul. 2025), available at https://ccianet.org/wp-content/uploads/2025/07/CCIA_Costs-to-US-Companies-from-EU-Digital-Services-Regulation_finalreport.pdf.

[19] Giorgio Presidente & Carl Benedikt Frey, The GDPR Effect: How Data Privacy Regulation Shaped Firm Performance Globally, VoxEU (Mar. 10, 2022), https://cepr.org/voxeu/columns/gdpr-effect-how-data-privacy-regulation-shaped-firm-performance-globally.

[20] Mert Demirer, Diego J. Jiménez Hernández, Dean Li, & Sida Peng, Data, Privacy Laws and Firm Production: Evidence from the GDPR (NBER Working Paper No. 32146, Dec. 2024), available at https://www.nber.org/system/files/working_papers/w32146/w32146.pdf.

[21] Presidente & Frey, supra note 19.

[22] Jian Jia , Ginger Zhe Jin, & Liad Wagman, The Persisting Effects of the EU General Data Protection Regulation on Technology Venture Investment, Antitrust Source (Jun. 2021), available at https://www.americanbar.org/content/dam/aba/publishing/antitrust-magazine-online/2021/june-2021/jun2021-jia.pdf.

[23] See Damien Geradin, Theano Karanikioti, & Dimitrios Katsifis, GDPR Myopia: How a Well-Intended Regulation Ended Up Favouring Large Online Platforms—the Case of Ad Tech, 17 Eur. Competition J. 47 (2020).

[24] Adam Thierer, GDPR & European Innovation Culture: What the Evidence Shows, Medium (Feb. 5, 2023), https://medium.com/@AdamThierer/gdrp-european-innovation-culture-what-the-economic-evidence-shows-b19d2309de07.

[25] Damien Geradin, Theano Karanikioti, & Dimitrios Katsifis, supra note 23, at 51 (2020) (“[L]arge online platforms are increasingly invoking the GDPR—or privacy concerns more generally—as an excuse to engage in controversial and potentially restrictive practices. This could be referred to as the “weaponization” of the GDPR and privacy.”).

[26] See John Yun, A Report Card on the Impact of Europe’s Privacy Regulation (GDPR) on Digital Markets, 31 Geo. Mason L. Rev. F. 104 (2024).

[27] See, e.g., Garrett Johnson, Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond (NBER Working Paper No. 30705, Dec. 2022), available at https://www.nber.org/system/files/working_papers/w30705/w30705.pdf.

[28] Rebecca Janßen, Reinhold Kesler, Michael E. Kummer, & Joel Waldfogel, GDPR and the Lost Generation of Innovative Apps, (NBER Working Paper No. 30028, May 2022), available at https://www.nber.org/system/files/working_papers/w30028/w30028.pdf.

[29] Miko?aj Barczentewicz, Should the GDPR Prohibit AI?, Truth on the Mkt. (Nov. 5, 2024), https://truthonthemarket.com/2024/11/05/should-the-gdpr-prohibit-ai.

[30] Id.

[31] Maximillian Schrems v. Data Prot. Comm’r, Case C-362/14, ECLI:EU:C:2015:650 (Oct. 6, 2015) (“Shrems I”); Data Prot. Comm’r v. Facebook Ireland Ltd., Case C-311/18, ECLI:EU:C:2020:559 (July 16, 2020) (“Shrems II”).

[32] Frances M. Green, Adequacy of the EU–U.S. Data Privacy Framework Survives Challenge, Epstein Becker Green (Sep. 12, 2025), https://www.workforcebulletin.com/adequacy-of-the-eu-u-s-data-privacy-framework-survives-challenge.

[33] Vanessa Zimmer, Winter Is Here: The Impossibility of Schrems II for U.S.-Based Direct-to-Consumer Companies, 42 Nw. J. Int’l L. & Bus. 75 (2021).

[34] See Sergi Batlle & Arnaud van Waeyenberge, EU-US Data Privacy Framework: A First Legal Assessment, 15 Eur. J. Risk Reg. 191 (2024).

[35] See Miko?aj Barczentewicz, Schrems III: Gauging the Validity of the GDPR Adequacy Decision for the United States, Int’l Ctr. Law & Econ. (Sep. 25, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/09/ICLE-Schrems-III_2023.09.21.pdf.

[36] Ross McKean, John Magee, & Rachel de Souza, DLA Piper GDPR Fines and Data Breach Survey: January 2025, DLA Piper (Jan. 2025), https://www.dlapiper.com/en-us/insights/publications/2025/01/dla-piper-gdpr-fines-and-data-breach-survey-january-2025.

[37] CMR, GDPR Enforcement Tracker (retrieved Oct. 29, 2025), https://www.enforcementtracker.com.

[38] Regulation (EU) 2016/679, art. 83(5), 2016 O.J. (L 119) 1, 28.

[39] Rachel De Souza, EU & Ireland: Meta’s Legal Basis for Targeted Ads Found to Breach GDPR, DLA Piper (Jan. 10,2023), https://privacymatters.dlapiper.com/2023/01/eu-ireland-metas-legal-basis-for-targeted-ads-found-to-breach-gdpr.

[40] Miko?aj Barczentewicz, The EU’s GDPR “Fix” Misses the Point Entirely, Truth on the Mkt. (Jun. 24, 2025), https://truthonthemarket.com/2025/06/24/the-eus-gdpr-fix-misses-the-point-entirely.

[41] Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024 on Artificial Intelligence and amending Regulations (EC) No. 300/2008, (EU) No. 167/2013, (EU) No. 168/2013, (EU) 2018/858, (EU) 2018/1139, and (EU) 2019/2144 and Directives 2014/90/EU, (EU) 2016/797, and (EU) 2020/1828, 2024 O.J. (L 206) 1 (EU).

[42] Schramm, supra note 18, at 39.

[43] Benjamin Mueller, How Much Will the Artificial Intelligence Act Cost Europe?, Ctr. for Data Innov. (Jul. 2021), available at https://www2.datainnovation.org/2021-aia-costs.pdf.

[44] Gideon Abako, It’s Too Hard for Small and Medium-Sized Businesses to Comply with the EU AI Act: Here’s What to Do, AI Pol’y Bull. (May 19, 2025), https://www.aipolicybulletin.org/articles/its-too-hard-for-small-and-medium-sized-businesses-to-comply-with-eu-ai-act-heres-what-to-do.

[45] Commission Staff Working Document, Impact Assessment Accompanying the Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act) and Amending Certain Union Legislative Acts, Eur. Comm., SWD (2021) 84 final, at 68 (Apr. 21, 2021), https://ec.europa.eu/newsroom/dae/redirection/document/75792 (“[G]iven that in this option high-risk applications are based on exceptional circumstances, one could estimate that no more than 5% to 15% of all applications should be concerned by the requirements.”).

[46] Andreas Liebl & Till Klein, AI Act Impact: Survey Exploring the Impact of the AI Act on Startups in Europe, Init. for Applied Int’l Intelligence (Dec. 12, 2022), available at https://aai.frb.io/assets/files/AI-Act-Impact-Survey_Report_Dec12.2022.pdf.

[47] USITC Analyzes Market Conditions and Outlook for Professional Services in Annual Services Report, U.S. Int’l Trade Comm’n (Jul. 2, 2025), https://www.usitc.gov/keywords/services-trade.

[48] Matthias Bauer, Dyuti Pandya & Oscar du Roy, Openness as Strength: The Win-Win in EU-US Digital Services Trade, Eur. Ctr. for Int’l Pol. Econ. (Mar. 2024), https://ecipe.org/wp-content/uploads/2024/03/ECI_24_PolicyBrief_05-2024_LY03.pdf.

[49] Agreement on Technical Barriers to Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, 1868 U.N.T.S. 120 (1994).

[50] Oliver Roberts, EU AI Act’s Burdensome Regulations Could Impair AI Innovation, Bloomberg Law (Feb. 21, 2025), https://news.bloomberglaw.com/us-law-week/eu-ai-acts-burdensome-regulations-could-impair-ai-innovation.

[51] See, e.g., Kenneth J. Arrow & Anthony C. Fisher, Environmental Preservation, Uncertainty, and Irreversibility, 88 Q. J. Econ. 312 (1974) (explaining that, when a decision is irreversible and future benefits and costs are uncertain, immediate action eliminates the opportunity to learn more before committing resources; by waiting, society retains an “option value,” i.e., the value of preserving flexibility to act later when uncertainty has been reduced).

[52] Anu Bradford, The Brussels Effect: How the European Union Rules the World (2019).

[53] Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, 2019 O.J. (L 79) 1.

[54] FDI Regulation, Arts. 3-4.

[55] Luis Alonso Cabezas Villagarcia, Foreign Direct Investment in the European Union: A Critical and Comparative Overview, Mondo Internazionale (Feb. 11, 2025), https://mondointernazionale.org/en/focus-allegati/foreign-direct-investment-in-the-european-union-a-critical-and-comparative-overview.

[56] Commission Staff Working Document, Third Annual Report on the Screening of Foreign Direct Investments into the Union, SWD (2024) 281 final (Sep. 11, 2024).

[57] See Investment Screening in the EU, Eur. Comm., https://policy.trade.ec.europa.eu/enforcement-and-protection/investment-screening_en (last visited Oct. 29, 2025); Framework for Screening of Foreign Direct Investment into the European Union, OECD (2022), available at https://www.oecd.org/content/dam/oecd/en/publications/reports/2022/01/framework-for-screening-foreign-direct-investment-into-the-eu_d966075e/f75ec890-en.pdf.

[58] Joint Communication to the European Parliament, the European Council and the Council, European Economic Security Strategy, JOIN (2023) 20 final (Jun. 20, 2023); see also Jorge Valero, 19 EU Countries Call for New Antitrust Rules to Create ‘European Champions’, Euractiv (Dec. 18, 2018), https://www.euractiv.com/news/19-eu-countries-call-for-new-antitrust-rules-to-create-european-champions.

[59] Commission Staff Working Document, Third Annual Report on the Screening of Foreign Direct Investments into the Union, SWD (2024) 281 final (Sep. 11, 2024).

[60] FDI Regulation, Art. 3(2).

[61] See Proposal for a Regulation of the European Parliament and of the Council Amending Regulation (EU) 2019/452, Eur. Comm. (Jul. 3, 2024), COM (2024) 395 final (recognizing “uneven implementation” among member states and proposing greater harmonization); Third Annual Report on the Screening of Foreign Direct Investments into the Union, Eur. Comm. SWD (2024) 281 final (Sep. 11, 2024).

[62] Matthias Bauer, Digital Services Taxes as Barriers to Trade: Case Study, Eur. Ctr. for Int’l Pol. Econ. (Nov. 2019), available at https://ecipe.org/wp-content/uploads/2019/11/CaseStudy_DigitalService.pdf.

[63] Proposal for a Council Directive Laying Down Rules Relating to the Corporate Taxation of a Significant Digital Presence, COM(2018) 147 final – 2018/0072 (CNS); Proposal for a Council Directive on the Common System of a Digital Services Tax on Revenues Resulting from the Provision of Certain Digital Services, Eur. Econ. & Social Commit., COM(2018) 148 final – 2018/0073 (CNS) (Jul. 30, 2018), available at https://data.consilium.europa.eu/doc/document/ST-11484-2018-INIT/en/pdf.

[64] State of Play of Digital Services Taxes (DSTs) and Other Similar Measures, PricewaterhouseCoopers (Aug. 29, 2025), available at https://www.pwc.com/gx/en/tax/newsletters/tax-policy-bulletin/assets/pwc-state-of-play-of-dsts-and-other-similar-measures.pdf.

[65] Id.

[66] Comments of the International Center for Law & Economics, Re: Request for Comments Regarding Foreign Nations Freeloading on American-Financed Innovation, Int’l Ctr. Law & Econ. (Jun. 26, 2025), https://laweconcenter.org/resources/icle-comments-to-ustr-on-pharmaceutical-pricing.

[67] Funding the Global Benefits to Biopharmaceutical Innovation, Counc. Econ. Advis. (2020), at 5, available at https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/02/Funding-the-Global-Benefits-to-Biopharmaceutical-Innovation.pdf.

[68] Id.

[69] German Benefit Assessment—White Paper: Latest Methodological Requirements in the German Benefit Assessment, Eur. Fed. Stat. Pharm. Ind. (May 2025), at 4, 39, available at https://www.efspi.org/wp-content/uploads/2025/05/GermanHTA_WhitePaper_2025.pdf (“’Key surrogate’ and ‘intermediate endpoints’ refer to measurable indicators used in clinical trials to approximate the effect of a treatment on meaningful patient outcomes. Surrogate endpoints (e.g., tumor shrinkage in cancer trials) function as substitutes for direct clinical outcomes (e.g., survival), while intermediate endpoints (e.g., blood pressure reduction or HbA1c levels in diabetes) reflect early changes that may predict long-term benefits. These markers are often used when direct outcomes take years to observe, but their validity for regulatory or reimbursement decisions depends on evidence linking them to patient-relevant effects.”).

[70] Jacoline Bouvy, Should NICE’s Cost-Effectiveness Thresholds Change?, NICE Blogs (Dec. 13, 2024), https://www.nice.org.uk/news/blogs/should-nice-s-cost-effectiveness-thresholds-change; John Appleby, Nancy Devlin, & David Parkin, NICE’s Cost-Effectiveness Threshold, 335 Br. Med. J. 358 (2007), available at https://pmc.ncbi.nlm.nih.gov/articles/PMC1952475/pdf/bmj-335-7616-edit-00358.pdf; As of June 25, 2025, £1 in 1999 is worth £1.92. Current inflation rates can be calculated on the Bank of England’s site. See Inflation and the 2% Target, Bank Eng., available at https://www.bankofengland.co.uk/monetary-policy/inflation (last visited Jun. 25, 2025).

[71] Marc A. Rodwin, What Can the United States Learn from Pharmaceutical Spending Controls in France? (Commonwealth Fund Issue Brief, Nov. 11, 2019), https://www.commonwealthfund.org/publications/issue-briefs/2019/nov/what-can-united-states-learn-drug-spending-controls-france.

[72] Id.

[73] Rick Chapman et al., Value Assessment Methods and Pricing Recommendations for Potential Cures: A Technical Brief, at 13 (Inst. Clin. Econ. Rev., Aug. 6, 2019), available at https://icer.org/wp-content/uploads/2020/10/Valuing-a-Cure-Technical-Brief.pdf.

[74] CEA, supra note 51 at 5-8.

[75] Teresa A. Reguly & Eileen M. McMahon, PMPRB Regulations: New Basket of Comparator Countries Has Arrived, Absent Guidance, Torys (Jul. 7, 2022), https://www.torys.com/en/our-latest-thinking/publications/2022/07/pmprb-regulations.

[76] Canadian Patented Drug Prices: Gauging the Change in Reference Countries, Parliam. Budg. Off. (Jun. 14, 2022), https://distribution-a617274656661637473.pbo-dpb.ca/1135d8aba4de3c35a1098e80fd5209fddb097920d354f8ac79ec3b1cf8918ff5.

[77] Seung-Rae Yu, Improving the Reimbursement Process for New Drugs: A Case Study of a Two-Waiver System in South Korea, 31 J. Evaluation Clin. Prac. e70074 (2025), https://pmc.ncbi.nlm.nih.gov/articles/PMC11959314.

[78] Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act), 2019 O.J. (L 151) 1.

[79] Miko?aj Barczentewicz & Kristian Stout, EU’s Cybersecurity Draft Shifts Toward Hard Protectionism, Truth on the Mkt. (Nov. 14, 2023), https://truthonthemarket.com/2023/11/14/eus-cybersecurity-draft-shifts-toward-hard-protectionism.

[80] Miko?aj Barczentewicz & Kristian Stout, How Not to Use Industrial Policy to Promote Europe’s Digital Sovereignty, Truth on the Mkt. (Oct. 5, 2022), https://truthonthemarket.com/2022/10/05/how-not-to-use-industrial-policy-to-promote-europes-digital-sovereignty.

[81] Id.

[82] See, e.g., John Salmon, Louise Crawford, Lavan Thasarathakumar, Daniel Lee, & Giulia Mariuz, EUCS: Controversial Sovereignty Issues Continue to Drive Debate for Cloud Services, Hogan Lovells (Jun. 12, 2024), https://www.hoganlovells.com/en/publications/eucs-controversial-data-sovereignty-issues-continue-to-drive-debate-around-the-eu-certification-scheme-for-cloud-services.

[83] Nigel Cory, Europe’s Cloud Security Regime Should Focus on Technology, Not Nationality, Info. Tech. & Innovation Found. (Mar. 27, 2023), https://itif.org/publications/2023/03/27/europes-cloud-security-regime-should-focus-on-technology-not-nationality; see also Clarifying Lawful Overseas Use of Data Act, Pub. L. No. 115-141, div. V, 132 Stat. 1213, 1213–25 (2018).

[84] Meredith Broadbent, The European Cybersecurity Certification Scheme for Cloud Services, Ctr. for Strategic & Int’l Stud. (Sep. 1, 2023), https://www.csis.org/analysis/european-cybersecurity-certification-scheme-cloud-services.

[85] Id.

[86] Barczentewicz & Stout, supra note 79.

[87] Barczentewicz & Stout, supra note 80.

[88] Press Release, ENISA Launches a Public Consultation on a New Draft Candidate Cybersecurity Certification Scheme in a Move to Enhance Trust in Cloud Services Across Europe, Eur. Union Agency for Cybersecurity ENISA (Dec. 22, 2020), https://www.enisa.europa.eu/news/enisa-news/cloud-certification-scheme.

[89] Barczentewicz & Stout, supra note 79.

[90] Directive (EU) 2022/2555 of the European Parliament and of the Council of 14 December 2022 on measures for a high common level of cybersecurity across the Union, amending Regulation (EU) No 910/2014 and Directive (EU) 2018/1972, and repealing Directive (EU) 2016/1148 (NIS 2 Directive), 2022 O.J. (L 333) 80.

[91] The EU’s Cloud Service Restrictions, Info. Tech. & Innovation Found. (Aug. 26, 2025), https://itif.org/publications/2025/05/25/eu-cloud-service-restrictions.

[92] Broadbent, supra note 84.

[93] See, e.g., Conan French, Brad Carr, & Clay Lowery, Data Localization: Costs, Tradeoffs, and Impacts Across the Economy, Inst. of Int’l Fin. (Dec. 2020), https://www.iif.com/portals/0/Files/content/Innovation/12_22_2020_data_localization.pdf.

[94] The “Real Life Harms” of Data Localization Policies (Ctr. for Info. Pol’y Leadership Discussion Paper 1, Mar. 2023), at 1, available at https://www.informationpolicycentre.com/uploads/5/7/1/0/57104281/cipl-tls_discussion_paper_paper_i_-_the_real_life_harms_of_data_localization_policies.pdf.

[95] French et al., supra note 93; see also Kruthi Venkatesh, The Data Localization Debate in International Trade Law, Ikigai Law (Jun. 22, 2020), https://www.ikigailaw.com/article/273/the-data-localization-debate-in-international-trade-law (“According to most studies, such forced localization measures create a huge burden on businesses, particularly for small and medium-sized enterprises (SMEs), increasing costs up to 30–60% for acquiring local computing facilities and data storage infrastructure. In fact, as per a study conducted by the European Centre for International Policy Economy, forced data localization norms lead to a negative impact on the GDP and considerable impact on investments.”).

[96] Europe Cloud Computing Market Size & Outlook, 2024-2030, Grand View Res. (retrieved Oct. 28, 2025), https://www.grandviewresearch.com/horizon/outlook/cloud-computing-market/europe.

[97] European Cloud Providers’ Local Market Share Now Holds Steady at 15%, Synergy Res. Grp. (Jul. 24, 2025), https://www.srgresearch.com/articles/european-cloud-providers-local-market-share-now-holds-steady-at-15.

[98] Id.

[99] Id.

[100] Matthias Bauer & Philipp Lamprecht, The Economic Impacts of the Proposed EUCS Exclusionary Requirements: Estimates for EU Member States, Eur. Ctr. for Int’l Pol. Econ. (Oct. 2023), https://ecipe.org/publications/eucs-immunity-requirements-economic-impacts.

[101] See, e.g., Peter Swire, DeBrae Kennedy-Mayo, Drew Bagley, Sven Krasser, Avani Modak, &Christoph Bausewein, Risks to Cybersecurity from Data Localization, Organized by Techniques, Tactics and Procedures, 9 J. Cyber Pol’y 20 (2024).

[102] Zach Meyers, Can the EU Afford to Drive Out American Cloud Services?, Ctr. for Eur. Reform (Mar. 2, 2023), https://www.cer.eu/insights/can-eu-afford-drive-out-american-cloud-services.

[103] 50 U.S.C. §§ 1801–1813 (2020).

[104] United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Appellate Body Report, WT/DS285/AB/R (adopted Apr. 20, 2005), summarized at https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds285sum_e.pdf.

^[105] ICLE Comments to the Department of Commerce and Department of State’s Consultation on the EU Space Act, Int’l Ctr. Law & Econ. (Aug. 13, 2025), https://laweconcenter.org/wp-content/uploads/2025/08/EU-Space-Act-Comments.pdf.

^[106] Proposal for a Regulation of the European Parliament and of the Council on the Safety, Resilience and Sustainability of Space Activities in the Union, 2025/0335 (COD) (Jun. 25, 2025).

I. Introduction and Overview

The Environmental Protection Agency (EPA) is proposing to amend the Greenhouse Gas Reporting Program (GHGRP) to remove emissions-reporting requirements for most source categories except for petroleum and natural-gas systems, and to suspend reporting requirements for those categories until 2034.[1] The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth. ICLE scholars have written on the costs of disclosure rules,[2] including how they can violate the U.S. Constitution.[3]

The current GHGRP is a failure on both fronts. The costs of the program are substantial relative to its purported benefits, and it presents serious constitutional questions, including both compelled speech and separation-of-powers issues. The EPA is right to take this important action to amend the program’s obligations to bring it in line with its statutory authority under the Clean Air Act (CAA)[4] and to promote economic efficiency.[5]

The costs of the required disclosures are likely significantly underestimated, while their benefits are simply assumed. The EPA’s current estimates of the costs to regulated businesses are considerably less than the Securities and Exchange Commission’s (SEC) estimate for compliance with a similar emissions-disclosure rule. Moreover, these estimated compliance costs fail to include other dynamic effects of the disclosure regime, including that capital may flow away from the energy sector, to the detriment of innovative U.S. firms that rely on it.

Legally, the EPA’s reliance on Section 114 of the CAA as its statutory authority for the GHGRP is currently on shaky ground. According to the statute, the EPA “may require” certain record keeping, reports, and other requirements for the purpose of “developing or assisting in the development of any implementation plan” under the agency’s authority granted elsewhere in the CAA, to include “determining whether any person is in violation of any such standard or any requirement of such a plan” or “carrying out any provision of this chapter.”[6] The GHGRP has grown significantly to include 47 source categories, for most of which the EPA has never developed any regulations, nor displayed any intent to do so. In other words, these report mandates are not for any authorized statutory purpose but are aimed instead at forcing various industries to publicly account for their contributions to climate change. Based on recent Supreme Court precedents, the current rule invites First Amendment challenges, as well as statutory authority and Major Questions Doctrine challenges.

The EPA’s proposed amendment to the GHGRP would bring the program into alignment with the Constitution and promote more efficient allocation of capital in the vital U.S. energy sector.

II. A Cost-Benefit Analysis of GHGRP Reporting Requirements

A core principle of the law & economics methodology holds that regulation should (1) correct demonstrated market failures; (2) match the regulatory tool to the nature of the market failure; and (3) do so only when the benefits of intervention exceed its costs.[7]

Disclosure rules typically are premised on the argument that regulated entities would not reveal relevant information to the public, resulting in market failures due to asymmetric information. Therefore, it is argued, mandated disclosures allow the public to adjust accordingly. The benefits of mandatory disclosure rules are often assumed to be high, but what is often not sufficiently considered are the costs.

Here, the benefits to the public of being able to ascertain the relative greenhouse-gas emissions of various industry participants have largely been assumed, without analysis. The SEC’s similar disclosure mandate rule was promulgated on grounds that it would assure investors they have a complete picture of the climate-related risks faced by publicly traded companies, which could affect the value of those companies’ securities.[8] For the GHGRP, there is instead a bare assumption that the public benefits in some unspecified way from access to similar information. The EPA notes in its proposal that the primary benefits are derived by government entities that use the information for calculating tax credits or for the terms of certain state programs.[9]

The marginal benefit of this disclosure rule is likely to be small. For instance, there are other federal surveys that could be used to estimate greenhouse-gas emissions. Moreover, the states could collect needed data under their own authorities, while taxing authorities could require other means to qualify for tax credits. There is little additional benefit from the GHGRP’s reporting requirements either to the general public’s understanding of emissions or for the purposes of effectively administering government programs or regulations.

More importantly, the costs of the current rule are likely severely undercounted. First, there are reasons to doubt the estimated compliance costs are accurate. Second, the costs in a more dynamic analysis may be significantly higher than those compliance costs suggest.

The EPA estimates that suspending the reporting requirements will save $303 million annually.[10] Divided among the roughly 8,200 regulated entities, the total comes to $36,951.22 per entity. But the SEC’s proposed rule estimated total compliance costs of $500,000 for the average regulated entity in the first year of compliance and $375,000 in subsequent years, with the compliance costs for emissions disclosures alone to be $151,000 in the first year and $67,000 annually in subsequent years.[11] While the SEC’s regulations applied to different entities than those under GHGRP, and also include additional requirements, it appears likely that industry is directionally correct in arguing the EPA’s estimated costs of compliance are too low.

Moreover, the EPA almost certainly underestimates the total costs of the GHGRP disclosure rule.[12] For instance, continuous threats of litigation against energy companies for alleged harms associated with greenhouse-gas emissions surely count as costs for the regulated entities subject to these reporting requirements. GHGRP data is a goldmine for plaintiffs’ lawyers seeking to bring action against targets that allegedly knew of alleged harms to which they allegedly contributed.

A dynamic analysis of these costs would suggest that capital would flow away from the energy-sector participants subject to the disclosure rule, as it would reduce the likely returns on investment. A safer bet would be in those industries not subject to the disclosure rules and their associated costs. Moreover, reduced investment in the energy sector could lead to harms far outside that sector, as much of the economy is fundamentally reliant on the production and distribution of low-cost energy.[13]

In sum, in conducting cost-benefit analysis of this proposed amendment to the GHGRP rule, the EPA should be sure to evaluate whether the marginal benefits of the current mandated disclosures outweigh their likely vastly underestimated costs. The proposed amendment to free most sources from the GHGRP’s disclosure requirements and to forego reporting requirements for the oil and natural-gas sector until 2034 would appear to make economic sense.

III. Constitutional Issues with the Current Rule

While the economic rationale alone would justify the EPA using its discretion to amend the GHGRP reporting requirements, intervening Supreme Court precedent on compelled speech and the limits on administrative-agency discretion since the original rule was adopted may mean the proposed amendment is legally necessary.

A. First Amendment and Compelled Speech

The current GHGRP rule may violate the First Amendment, in that it compels regulated entities to produce and publish data conveying a message that they are causing environmental harm and contributing to climate change. Supporters of the reporting requirements would argue this is mere regulation of conduct or, at most, compelled commercial speech. But the caselaw since this original rule was adopted suggests that it would likely be subject to heightened First Amendment scrutiny.

In National Institute of Family and Life Advocates v. Becerra,[14] the Supreme Court declined to apply a lower level of scrutiny to the disclosures at issue because it was not “purely factual and uncontroversial information about the terms under which… services will be available.”[15]

Here, the information is not necessarily purely factual and uncontroversial, and the theories that underlie the rule could be the basis of future litigation and regulation targeting the regulated entities.[16] Litigants both public and private have used emissions data like that collected pursuant to the GHGRP in complaints to show that energy companies knew of the harms they allegedly caused. States also use the data as part of their programs.

But just as importantly, the reporting requirements likewise aren’t simply a description of services that will be available. A given firm’s emissions levels are not part of any proposed bargain. As the Court has stated, “precedents define commercial speech as ‘speech that does no more than propose a commercial transaction.’”[17] Similar to the notice required in NIFLA, these reporting requirements are “in no way relate[d]” to the energy-sector products and services that these entities provide.[18]

What this means is that the current reporting requirements, if challenged, may have to face strict scrutiny. Under such scrutiny, the rule would have to be narrowly tailored to a compelling government interest. As noted above, the reporting requirements would fail such a cost-benefit test. The marginal benefits of the reporting requirements are almost certainly low, while the costs—including regulated firms’ potential liability in lawsuits based on the compelled speech—could very well be high.

This is not mere academic quibbling. There are two pending First Amendment lawsuits in federal courts against California’s SB 253 and SB 261 that would require similar greenhouse-gas emissions disclosures. A First Amendment challenge against the SEC climate-risk disclosure rule is also currently held in abeyance by the 8th U.S. Circuit Court of Appeals. The EPA is right to amend the GHGRP rule by limiting the entities subject to its requirements.

B. Separation of Powers

The current GHGRP rule could also violate the Constitution’s separation of powers. In ending its doctrine of Chevron deference[19] and continuing to apply the Major Questions Doctrine,[20] the Supreme Court has made clear that administrative agencies must have clear statutory authority for their rules. The current GHGRP rule appears to far exceed the statutory authority grated the EPA by the CAA. The EPA is right to amend the rule to bring it in line with its statutory authority.

The EPA is no stranger to challenges to its statutory authority. The Supreme Court has made clear in multiple cases involving their rulemakings that “something more than a merely plausible textual basis for agency action is necessary” when claiming “unheralded regulatory power over a significant portion of the economy.”[21] Regulating all the energy-related businesses subject to the GHGRP is a significant portion of the economy.

The textual basis for imposing reporting requirements on most sources currently subject to GHGRP is slim. Authority under Section 114 of the CAA limits the EPA’s ability to collect information to the purposes of developing state implementation plans, setting performance standards, or determining compliance with specific statutory programs.[22] There is no basis under the statute to create perpetual reporting obligations unrelated to those purposes, as the existing GHGRP reporting requirements do.

Moreover, when Congress enacted CAA Section 136, it directed the EPA to impose certain obligations on petroleum and natural-gas producers starting in 2034.[23] Pursuant to those obligations, the EPA is authorized to track emissions and modify the rule here.[24] This suggests that the authority to impose reporting requirements was not already present in Section 114.[25]

Accordingly, the EPA must act according to its statutory authority. Here, that means amending the GHGRP reporting requirements to be consistent with CAA Section 114. Since the EPA has not established any specific emissions regulations, nor does it have any plans to do so until 2034, when it exercises its authority pursuant to CAA Section 134 in relation to petroleum and natural-gas producers, the proposed amendment is necessary to effectuate congressional intent.

Conclusion

The best way forward for the EPA is to adopt the proposed rule in this proceeding. This would be consistent with both the underlying law and economics. The U.S. energy sector is too important to be subject to agency overreach, as exemplified in the current GHGRP rule.

[1] Proposed Rule, Reconsideration of the Greenhouse Gas Reporting Program, 90 Fed. Reg. 44591 (Sep. 16, 2025), available at https://www.govinfo.gov/content/pkg/FR-2025-09-16/pdf/2025-17923.pdf  [hereinafter “Proposed Rule”].

[2] See Geoffrey A. Manne, The Hydraulic Theory of Disclosure Regulation and Other Costs of Disclosure, 58 Ala. L. Rev. 473 (2007).

[3] Amicus Brief of the International Center for Law & Economics in Support of Plaintiff’s Motion for Second Preliminary Injunction, NetChoice, LLC v. Bonta, Case No. 5:22-cv-08861-BLF (Dec. 14, 2022), available at https://laweconcenter.org/wp-content/uploads/2024/11/ICLE-Amicus-NetChoice-v.-Bonta-Northern-District-Court.pdf.

[4] 42 U.S.C. §7414.

[5] See Exec. Order No. 14,192, Unleashing Prosperity Through Deregulation, 90 Fed. Reg. 9065 (Feb. 6, 2025).

[6] 42 U.S.C. §7414.

[7] Stephen Breyer, Regulation and Its Reform (1982) 191 (“Our examination of market defects, classical modes of regulation, and alternative regimes suggest that regulatory failure sometimes means a failure to correctly match the tool to the problem at hand.”), 184 (“It should be painfully apparent that whatever problems one has with an unregulated status quo, the regulatory alternatives will also prove difficult.”)

[8] See U.S. Securities & Exchange Commission, The Enhancement and Standardization of Climate-Related Disclosures for Investors, Release No. 33-11275 at 10-11 (May 28, 2024), https://www.sec.gov/files/rules/final/2024/33-11275.pdf.

[9] Proposed Rule at 44598-99.

[10] Id. at 44596, 44599, 44603.

[11] SEC, supra note 8, at 739-40.

[12] See Manne, supra note 2, at 11-12 (arguing that “while the direct cost” of disclosure regulation is positive, “the indirect costs of regulations may be far more substantial”).

[13] See, e.g., Clark Savage, Germany Blows Up Last Nuclear Plant Towers While Economy Collapses Under Net Zero Energy Policies, Energy News Beat (Oct. 27, 2025), https://energynewsbeat.co/germany-blows-up-last-nuclear-plant-towers-while-economy-collapses-under-net-zero-energy-policies (noting how the German economy is in crisis because of poor energy policies).

[14] 585 U.S. 755 (2018).

[15] Id. at 768 (quoting Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 651 (1985)).

[16] Cf. Janus v. Am. Fed. of State, County, & Mun. Employees, Coun. 31, 585 U.S. 878, 913-14 (2018) (identifying climate change as a “controversial” and “sensitive political” subject).

[17] Harris v. Quinn, 573 U.S. 616, 648 (2014) (quoting United States v. United Foods, Inc., 533 U.S. 405, 409 (2001)).

[18] NIFLA, 585 U.S. at 769.

[19] See Loper Bright Enterprises v. Raimondo, 603 U.S. 36 (2024).

[20] See West Virginia v. EPA, 597 U.S. 697 (2022); Utility Air Regulatory Group v. EPA, 573 U.S. 302 (2014).

[21] West Virginia, 597 U.S. at 722, 723 (quoting UARG, 573 U.S. at 324).

[22] See 42 U.S.C. §7414.

[23] See 42 U.S.C. 7436.

[24] 42 U.S.C. 7436(a)(4); (h).

[25] Cf. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 160 (2000) (“Given this history and the breadth of the authority that the FDA has asserted, we are obliged to defer not to the agency’s expansive construction of the statute, but to Congress’ consistent judgment to deny the FDA this power.”)

Executive Summary

These comments from the International Center for Law & Economics analyze the economic effects of artificial-intelligence (AI) governance and recommend a policy of strategic forbearance. Because AI is a general-purpose technology with a great degree of uncertainty about its potential future pathways, it would be preferable to apply existing, technology-neutral statutes—such as those governing fraud, discrimination, and product safety—while gathering empirical evidence, rather than to enact premature, prescriptive mandates. This approach preserves the “option value” of waiting for better information before imposing irreversible regulatory costs.

Current barriers to AI deployment stem from two primary sources: federal regulatory mismatch and state-level market fragmentation. Many existing federal regulations are structurally incompatible with AI systems because they embed human-centric assumptions. In transportation, Federal Aviation Administration (FAA) rules for pilot certification and National Highway Traffic Safety Administration (NHTSA) standards for vehicle controls assume a human operator, preventing the approval of autonomous systems. In health care, the Food and Drug Administration’s (FDA) premarket approval process is designed for static physical devices, which conflicts with continuously learning diagnostic algorithms. Similar mismatches exist in financial services under the Equal Credit Opportunity Act and in health-care reimbursement under Medicare’s telehealth rules.

At the state level, a growing patchwork of conflicting AI regulations—such as those enacted in Colorado, California, and New York City—creates substantial economic burdens with high compliance costs. This fragmentation also creates extraterritorial effects, where one state’s restrictive law may become a de facto national standard, burdening interstate commerce.

This paper proposes a two-part framework to address these barriers.

1. Federal administrative action: Agencies should use existing administrative flexibility—including waivers, pilot programs, and conditional approvals—to permit AI deployment and data gathering. The Commercial Space Launch Amendments Act of 2004 provides a successful precedent for this model. Agencies must also conduct a systematic audit to identify and modernize human-centric regulations, replacing them with performance-based standards.
2. Targeted congressional preemption: Congress should enact legislation that preempts state and local laws regulating the design, development, training, and validation of AI models. This preemption, modeled on the Airline Deregulation Act, would harmonize the national market. It would simultaneously preserve states’ authority to enforce general, technology-neutral laws (g., consumer-protection statutes) and the authority of federal agencies like the Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) to police demonstrated harms.

I. Introduction and Overview

The Office of Science and Technology Policy (OSTP) is seeking public input to identify federal laws, regulations, and administrative processes that unnecessarily restrict the development and adoption of artificial intelligence (AI) development in the United States.[1] The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth. ICLE previously submitted comments to OSTP regarding national priorities for AI[2] and the development of an AI action plan,[3] and to the National Telecommunications and Information Administration (NTIA) regarding AI accountability policies.[4]

OSTP’s request for information (RFI) asks respondents to identify federal statutes, regulations, and policies that unnecessarily hinder AI development, deployment, and adoption. The request organizes potential barriers into five categories: regulatory mismatch, structural incompatibility, lack of regulatory clarity, direct hindrance, and organizational factors.

Our analysis rests on three economic propositions. First, as was the case with the introduction of wired electric power or the commercial internet, AI is a general-purpose technology whose full economic and social applications remain uncertain.[5] Promulgating technology-specific regulations in such circumstances may foster what economists call targeting errors: rules that are simultaneously too broad (prohibiting beneficial uses) and too narrow (failing to address actual harms).[6]

Second, the compliance costs that arise from fragmented or overly prescriptive regulation function as barriers to entry, particularly for smaller firms that cannot easily absorb the fixed costs of legal review and documentation.

Third, existing legal frameworks already address most AI-related harms through technology-neutral statutes. Indeed, agencies like the Federal Trade Commission (FTC), Equal Employment Opportunity Commission (EEOC), and Food and Drug Administration (FDA) already enforce existing laws against practices such as deception, discrimination, and unsafe products, regardless of whether these issues arise from algorithmic tools or traditional methods.

These principles support several concrete recommendations:

• The federal government should conduct a systematic audit of regulations that embed human-centric assumptions incompatible with adaptive or autonomous systems, prioritizing modernization in transportation, health care, and financial services.
• Agencies should expand their use of existing administrative flexibilities—waivers, pilot programs, conditional approvals, and time-limited experimental authorities—to enable lawful AI deployment, while gathering evidence about actual risks and benefits.
• The Office of Management and Budget (OMB) should coordinate interagency guidance to clarify how existing statutes apply to AI systems, with the aim of preventing duplicative or conflicting interpretations across agencies.
• Congress should establish targeted preemption of conflicting state laws that regulate the design, development, and training of AI models in order to prevent a compliance patchwork that fragments the national market.
• Agencies should incorporate formal innovation-impact assessments into cost-benefit analysis for AI-related rulemakings, quantifying effects on market entry, competition, and U.S. technological competitiveness.
• Future AI regulations should include sunset provisions and mandatory periodic review to ensure rules adapt as the technology evolves.

II. Strategic Forbearance and the Option Value of Information

A core principle of the law & economics methodology holds that regulation should (1) correct demonstrated market failures; (2) match the regulatory tool to the nature of the market failure; and (3) do so only when intervention benefits exceed costs.[7]

Judge Richard Posner, formerly of the 7th U.S. Circuit Court of Appeals, and Cass Sunstein of Harvard Law School have each written extensively on the problem of regulating under uncertainty.[8] When regulators possess limited information about a new technology’s risks and benefits, prescriptive rules often impose costs that exceed their welfare gains.

AI presents an acute example of this uncertainty problem. AI technologies encompass everything from simple pattern recognition in manufacturing quality control to complex language models that generate text and code, as well as advanced multimodal systems capable of producing realistic images, artwork, and dynamically generated video content. Its applications span health-care diagnostics, financial underwriting, transportation logistics, agricultural monitoring, and scientific research. No single regulatory framework can efficiently govern such heterogeneity.

Adam Thierer of the R Street Institute has documented how premature and overly rigid regulation of nascent technologies can create path dependencies that persist long after the original rules become obsolete. His analysis of telecommunications regulation in the 1980s and 1990s illustrates the ways that prescriptive mandates delayed the deployment of digital networks and mobile telephony.[9]

The economic concept of option value helps to explain why regulatory forbearance can enhance consumer welfare. When regulators act prematurely, they foreclose the option to gather more information through market experimentation. By waiting, they preserve the ability to craft more precise rules based on observed outcomes, rather than speculation about hypothetical risks.[10] As ICLE’s Gus Hurwitz and Geoffrey Manne explain:

Regulation as a discovery process, in its simplest formulation, asks regulators to consider that they might be wrong. That they might be asking the wrong questions, collecting the wrong information, analyzing it the wrong way—or even that Congress has given them the wrong authority or misunderstood the problem that Congress has tasked them to address. And, in response to these concerns, regulation as a discovery process asks regulators to build them into the regulatory process itself. This is because regulation does not operate like a competitive market. If Amazon Prime had not been the successful idea that it was, consumers would not have adopted it, other firms would have obtained competitive advantage over Amazon, and the idea would have fallen into the dustbin of history. But when an agency promulgates a rule pursuant to APA processes, that rule takes on the force of law—good or bad, there is no market mechanism by which it will succeed [or] fail.[11]

The Commercial Space Launch Amendments Act of 2004 (CSLAA) provides a successful precedent for the regulation-as-a-discovery-process approach.[12] Congress recognized that applying traditional aerospace regulations, which were designed for government-operated vehicles, would prevent the development of commercial human spaceflight. The CSLAA set safety guidelines for U.S. commercial human spaceflight under the Federal Aviation Administration (FAA), requiring FAA oversight at all launches and landings but prohibiting safety regulations until 2023, unless a serious incident occurred.

Under CLSAA’s rules, space-tourism operators must inform participants of launch and reentry risks in writing, disclose vehicle safety records, and obtain participants’ informed consent. This was not deregulation, as the FAA retained authority to license launches, investigate accidents, and enforce safety standards for the general public. Operators remain liable for damages under common law tort. The CSLAA simply delayed prescriptive regulation of specific design features until there were enough flights to provide an empirical basis for requirements.

Two decades later, this forbearance policy has enabled the growth of a commercial space industry that includes reusable rockets, private space stations, and lunar landers—technologies that did not exist when the CSLAA passed.[13] The FAA now possesses sufficient flight data and operational experience to develop performance-based safety standards grounded in evidence, rather than speculation.

The CSLAA helped to establish a thriving U.S. commercial space industry by granting investors and innovators a stable and predictable regulatory environment. The law’s demonstrated success may now offer lessons for AI governance. Agencies overseeing AI-related markets should similarly monitor real-world deployments: observing how developers test systems, how deployers update models, and what failures occur in practice. Regulators can use these insights to craft targeted rules that address actual problems without limiting beneficial uses.

The CSLAA also demonstrates that the common critique of regulatory forbearance—that it amounts to “doing nothing” in the face of risk—is misplaced. Strategic forbearance is not synonymous with regulatory inaction or abdication. It is an active governance strategy focused on the gathering of information. The CSLAA sequenced the regulation rather than eliminating it. It created a legal framework for learning, data collection, and supervised experimentation. This reframes the policy debate from an either-or proposition of whether to regulate into a framework for developing evidence-based regulation under conditions of high uncertainty.

The cost of premature regulation is not speculative. In 2022, the Information Technology & Innovation Foundation calculated that, over a period of a decade, a patchwork of state privacy laws imposes costs exceeding $1 trillion on firms that operate in multiple states, with small businesses bearing at least $200 billion of this total.[14] The report documented how divergent definitions of “personal information,” “consent,” and “automated decision-making” force companies to maintain separate compliance systems for each jurisdiction.

III. Regulatory Mismatch and Modernization Priorities

The RFI identifies regulatory mismatch as occurring when existing requirements are based on assumptions about human operation that do not align with AI capabilities or operational models.[15] When regulations embed human-centric assumptions, they create not just paperwork burdens but genuine resource costs, as firms are forced to either forgo beneficial technologies or maintain parallel compliance systems.

A. Transportation: Human-Operator Assumptions

The FAA’s pilot-certification regime illustrates an example of the problem of regulatory mismatch. Title 14 of the Code of Federal Regulations, Part 61, establishes requirements for airman certificates. Section 61.3 mandates that no person may act as a required pilot-flight crewmember unless that person holds the appropriate certificate, has it in their physical possession, and presents it for inspection upon request. Section 61.23 further requires an FAA-issued medical certificate. Section 61.39 specifies prerequisites for practical tests, including ground training in topics such as the physiological factors that may affect pilot performance.

While these requirements are perfectly sensible for human pilots, they are absurd for autonomous flight systems. An AI does not have a cardiovascular system and cannot be impaired by alcohol or prescription drugs.

The National Highway Traffic Safety Administration (NHTSA) faces an analogous problem with autonomous vehicles. The existing Federal Motor Vehicle Safety Standards assume human drivers. Standard No. 114, for example, requires theft-protection devices, including a key-locking system and audible warnings.[16] Standard No. 135 requires light-vehicle brake systems to be activated by foot control.[17]

NHTSA has responded to the emergence of autonomous driving systems by allowing manufacturers to file petitions under 49 USC § 30113, which permits limited exemptions for vehicles that provide an equivalent or superior level of safety. But the petition process is resource intensive. For example, General Motors submitted a petition in January 2018 seeking exemptions for a self-driving vehicle design based on its Chevrolet Bolt platform.[18] The agency spent 15 months reviewing the GM petition before seeking public comment. The agency did not issue a final decision before GM withdrew the petition in 2020. Earlier this year, U.S. Transportation Secretary Sean Duffy confirmed that the exemption process has been “bogging developers down in unnecessary red tape that makes it impossible to keep pace with the latest technologies.”[19]

The economic solution is not to eliminate safety requirements but to refocus them on performance outcomes, rather than specific human-centered processes. Instead of requiring that a vehicle have a steering wheel operated by a licensed driver, regulations could require that the vehicle demonstrates the capability to maintain lane position, avoid obstacles, and respond to traffic-control devices.

B. Health Care: Static Device Assumptions and Continuous Learning

The FDA’s regulatory framework for medical devices presents a different form of mismatch. The premarket approval process, codified in 21 CFR Part 814, was designed for physical devices like pacemakers and artificial joints. A manufacturer demonstrates safety and effectiveness through clinical trials of a fixed device design, receives approval, and then produces identical copies. Any significant modification to the approved device requires a new submission for FDA review.

This model creates structural problems for AI-enabled medical software that learns from real-world data. Consider a diagnostic algorithm that analyzes radiology images to detect potential tumors. The system’s accuracy improves as it processes more cases and incorporates feedback from radiologist reviews. Under traditional device regulation, these improvements could constitute modifications that require FDA review, effectively freezing the algorithm at its initial, less-accurate state.

The FDA has attempted to address this problem through its Predetermined Change Control Plan guidance, finalized in December 2024 and updated in August 2025.[20] The guidance allows manufacturers to specify in advance what types of modifications they plan to make post-market, the protocols to implement and validate those changes, and the monitoring plan to ensure continued safety and effectiveness.

A more systematic solution would acknowledge that AI-enabled medical devices are fundamentally different from static physical devices. Rather than requiring upfront approval of a fixed system, the FDA could approve a manufacturer’s testing, monitoring, and validation infrastructure. If the manufacturer demonstrates robust protocols for detecting degraded performance, validating updates against clinical benchmarks, and monitoring real-world outcomes, the FDA could permit continuous improvement within defined boundaries.

C. Financial Services: Model Opacity and Explanation Requirements

The Equal Credit Opportunity Act (ECOA), implemented through Regulation B, requires creditors who deny credit or take other adverse action to provide specific reasons for that action.[21] The Consumer Financial Protection Bureau’s (CFPB) Circular 2022-03 clarifies that this requirement applies to creditors using complex algorithms, rejecting arguments that model opacity could excuse the lack of specific reasons.[22]

This creates a regulatory mismatch when lenders rely on machine-learning models that are not easily interpretable. Deep neural networks and similar algorithms do not produce transparent “reasons” for their decisions—unlike models that yield clear decision trees, regression coefficients, or ranked variable importance.[23] As a result, lenders face costly choices: they can forgo these non-interpretable models even when such models better distinguish creditworthy from uncreditworthy applicants; they could construct post-hoc explanations after decisions are made; or they could invest in developing model-agnostic explanatory tools. Yet none of these strategies directly advance the underlying policy goal: ensuring that credit-approval rates for protected classes do not significantly differ from those for similarly qualified applicants in comparison groups.

IV. State Regulatory Fragmentation and the Economics of Preemption

While federal regulatory mismatch and structural incompatibility create barriers to AI deployment, the proliferation of inconsistent state laws poses a distinct economic threat.[24] A patchwork of state requirements imposes costs that grow multiplicatively with the number of jurisdictions. The National Conference of State Legislatures (NCSL) reports that state lawmakers introduced more than 1,100 AI-related bills nationwide in the 2025 legislative sessions.[25] Dozens of states have enacted legislation or established task forces to study AI regulation. Just four—California, Illinois, New York, and New Jersey—have introduced more than 25% of all state-level AI-related bills.

The definitional inconsistency across these laws is economically significant. Colorado’s SB 24-205, which was amended to take effect June 30, 2026,[26] requires a developer of a high-risk AI system to take reasonable care to protect consumers from any known or reasonably foreseeable risks of “algorithmic discrimination.” The law defines “high-risk artificial intelligence system” as any AI system that makes or is a substantial factor in making a “consequential decision,” which it defined as decisions that have legally material or similarly significant effects on the provision of education, employment, financial services, government, health care, housing, insurance, or legal services.

California began enforcing new rules earlier this year that regulate how employers use AI and automated decisionmaking systems in hiring and employment.[27] These regulations, part of the state’s Fair Employment and Housing Act, aim to prevent discrimination by ensuring that AI tools don’t unfairly disadvantage job applicants or employees based on protected traits like race, gender, or age. Employers must keep records of their AI-related employment data for four years and are responsible for any discriminatory outcomes, even if the tools come from outside vendors.

Similarly, New York City’s Local Law 144 imposes bias-audit requirements specifically for automated employment-decision tools.[28] The law defines such tools as computational processes, derived from machine learning, statistical modeling, data analytics, or AI, that issue simplified outputs that are a substantial factor in employment decisions.

These divergent definitions force developers to maintain separate compliance systems for different jurisdictions. An employment-software provider serving clients in New York City, Colorado, and California must track three different sets of definitions, documentation requirements, audit procedures, and disclosure obligations. As more states continue to explore legislation in this area, this problem of fragmentation will only compound.

A. The Extraterritoriality Problem and Constitutional Economics

State AI regulations do not simply impose local costs on local firms. Because AI models are typically developed for national or global deployment, a restrictive state law effectively sets the standard for all states. In practice, this extraterritorial application violates the principles of federalism and creates economic inefficiency.

For its part, California has taken a piecemeal approach across multiple statutes. AB 2013 requires generative-AI providers to publish documentation about the data used to train their models.[29] SB 942 requires persons creating, coding, or otherwise producing generative-AI systems to provide a publicly accessible detection tool and to make certain disclosures for content produced with the technology.[30] AB 853 requires large online platforms to provide consumers with an easy and conspicuous way to determine if content includes provenance information indicating that it was created or altered by an AI system.[31]

These rules can have significant consequences outside of California. Consider AB 2013, which requires generative AI providers to publish documentation about the data used to train their models. The statute applies to any provider that makes a generative-AI system available to California residents. This requirement is effectively a de facto national standard because it is technically infeasible to train different models for different states.

The dormant Commerce Clause prohibits states from enacting laws that unduly burden interstate commerce, even absent federal legislation.[32] The doctrine rests on an economic rationale: when states impose costs on out-of-state economic activity, they externalize those costs, while capturing local benefits, leading to socially excessive regulation. In Pike v. Bruce Church, Inc., the U.S. Supreme Court held that a state regulation is invalid if “the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits.”[33]

While the Court did recently narrow the scope of the dormant Commerce Clause, the majority in the fractured decision National Pork Producers Council v. Ross decision[34] also upheld the Pike balancing test, which allows challenges to nondiscriminatory state laws where the burdens on interstate commerce outweigh the putative benefits to the state. The majority did not think, however, that changes in market share resulting from some companies choosing to exit the market rather than comply with the law was sufficient to establish a substantial burden on commerce. In other words, so long as out-of-state entities retained the ability to choose whether to serve the particular market, there was no dormant Commerce Clause problem.

In the AI context, this balance weighs heavily against AI-specific state regulations. For developers, avoiding states with burdensome AI laws may not even be possible. For instance, New York’s RAISE Act applies to models that are “deployed” in New York, even if the base model was created elsewhere.[35] Moreover, open-source AI models are often used by downstream users in ways unforeseeable by the original developers; in fact, that is their entire point. There is no way these developers could avoid being subject to state laws on AI if entities within states with such laws use their base model.

Unlike the pork producers in Ross, who could segregate their operations to serve the rest of the country while avoiding California, AI developers will be subject to the most stringent laws regardless of their intent to serve that market. Rather than a choice of whether to serve a particular state, developers would effectively have to choose between complying with the most burdensome state regulations or not releasing their models to the public at all.

By contrast, the local benefits of such rules are likely to be marginal. It would be exceedingly difficult for new AI-specific regulations to generate safety or consumer-protection benefits beyond those already offered by generally applicable, technology-neutral rules. Costly administrative procedures like safety protocols, disclosures, and audits have little correlation to safety.

Nonetheless, as covered in the next section, the limitations of the dormant Commerce Clause should encourage Congress to enact a statute preempting state laws that would effectively destroy a common national market.

B. A Targeted Preemption Framework

Congress should enact targeted preemption of state laws that regulate the design, development, training, and validation of AI models.[36] This preemption should be express—stated clearly in statutory text—and should be limited to avoid unnecessary displacement of state authority.

At a high level, such preemption should cover regulations that target the development of AI, per se, whether explicitly or implicitly. In other words, preemptive federal legislation should prohibit states from imposing requirements on the core processes involved in creating AI and AI-enabled products (as opposed to how users may employ AI technologies). Thus, federal preemption should cover subjects such as the data used to train AI models, the algorithms or techniques used in model development, and the testing and validation procedures applied during development.

States should, however, continue to enforce general laws against fraud, deception, discrimination, and safety violations using their existing authorities under consumer protection, civil rights, and tort law. Moreover, the federal statute should authorize federal agencies with sector-specific expertise to establish performance-based standards for AI systems in their domains.

The Airline Deregulation Act of 1978 provides a successful template. Section 41713(b)(1) of Title 49 prohibits states from enacting or enforcing laws “related to a price, route, or service of an air carrier.”[37] The Supreme Court has interpreted this language broadly to prevent states from using indirect regulation to affect airline operations.

Congress should adopt similarly broad preemption language for AI, prohibiting state laws related to the design, development, training, or validation of AI systems. This would ensure that developers face uniform national standards, rather than fragmented state requirements.

V. Technological Neutrality and the Sufficiency of Existing Law

The RFI asks whether existing policy frameworks are appropriate for AI applications. Most AI-related harms are already addressable through technology-neutral statutes governing fraud, discrimination, unfair commercial practices, and product safety.[38]

A. FTC Authority Over Deceptive and Unfair Practices

Section 5 of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.”[39] The FTC has made clear that it believes Section 5 authority extends to AI systems. For example, earlier this year, the commission finalized an order against DoNotPay, a company marketing itself as the world’s first “robot lawyer.”[40] The complaint alleged that DoNotPay deceptively claimed its AI could substitute for human lawyers in handling legal matters, when the company had not actually tested its AI’s ability to provide legal assistance and did not employ any attorneys.

In September 2024, the FTC announced Operation AI Comply, a law-enforcement initiative targeting deceptive claims about AI products.[41] The agency issued warning letters to multiple companies and filed complaints against firms that falsely claimed their products used advanced AI technology, or that exaggerated their AI systems’ capabilities.[42]

A technology-neutral framework like Section 5 is economically efficient because it focuses on outcomes (e.g., whether the consumer was deceived or injured) rather than processes (e.g., whether the company used an algorithm).

B. Civil-Rights Law and Algorithmic Discrimination

Civil-rights law provides further examples of the efficacy of technology-neutral regulations. The Civil Rights Act of 1964 (particularly Title VII, governing employment discrimination) and the Fair Housing Act both address discrimination without regard to decisionmaking methods. These statutes prohibit discriminatory outcomes, not discriminatory technologies.

The EEOC issued technical assistance in May 2023 clarifying that Title VII and the Americans with Disabilities Act both extend to employers’ use of algorithmic hiring tools.[43] In September 2023, the EEOC announced a settlement with iTutorGroup for $365,000, resolving allegations that the company programmed its recruiting software to automatically reject applicants over age 55 and certain ages under 55.[44]

The U.S. Justice Department (DOJ) has pursued similar cases under the Fair Housing Act. In 2023, the department filed a statement of interest in Louis et al. v. SafeRent et al., supporting the plaintiffs’ claim that an algorithmic tenant-screening system violated the Fair Housing Act by invoking factors such as credit history and nontenancy related debts, which disproportionately affected Black and Hispanic renters.[45]

These enforcement actions demonstrate that technology-neutral civil-rights laws already reach AI-enabled discrimination. There is no gap in legal authority that would require new AI-specific anti-discrimination statutes. Rather than new laws, what’s needed is clearer guidance on compliance expectations—specifically, what testing and documentation practices will be deemed adequate to demonstrate nondiscriminatory outcomes.

VI. Direct Responses to the RFI’s Specific Questions

A. Question (i): What AI Activities Are Currently Inhibited by Federal Statutes, Regulations, or Policies?

Section III identifies several AI use cases that are currently inhibited by federal statutes, regulations, or policies:

• The FAA’s pilot-certification regime, which assumes human pilots;
• The NHTSA’s vehicle-safety standards, which assume human drivers;
• The FDA’s premarket approval process for physical devices, which delay deployment of continuously learning diagnostic algorithms; and
• The CFPB’s guidance that Regulation B applies to creditors using complex algorithms.

In addition, there are several other AI applications that are currently inhibited by federal statutes, regulations, or policies.

1. Medicare reimbursement rules regarding telehealth

Medicare reimbursement rules regarding telehealth, particularly 42 CFR § 410.78, are structurally misaligned with the technological capabilities of modern AI in health care. The regulation was designed for an era of episodic, human-to-human telemedicine, creating a framework that substitutes a virtual visit for an in-person one. Its core tenets, such as the requirement for a “two-way, real-time interactive communication” system and geographic restrictions on the patient’s location, are based on a reactive-care model, in which a practitioner responds to a patient’s needs during a scheduled encounter. This approach is incompatible with AI-enabled systems, which operate on a paradigm of continuous, asynchronous data analysis to provide proactive, preventative care.

AI-enabled monitoring shifts the clinical model from reactive to proactive by using algorithms to analyze vast streams of physiological data from wearables and other sensors. This can enable the detection of preclinical signals that precede acute health events. Clinical evidence demonstrates the effectiveness of this approach. AI algorithms have been demonstrated to identify atrial fibrillation with the accuracy of trained cardiologists, enabling earlier intervention to prevent strokes.[46] In critical care, an AI system developed at Johns Hopkins University was found to detect sepsis nearly six hours earlier than traditional methods, reducing patient mortality by 20%.[47] Similarly, AI-powered continuous glucose monitors help prevent acute events like diabetic ketoacidosis in diabetes patients, reducing costly hospital admissions.[48] These technologies provide new capacities for constant vigilance, preventing the need for acute care, rather than simply replacing an office visit.

The specific provisions within the regulation and its associated billing codes create direct barriers to the adoption of these technologies. The regulation’s definition of an “interactive telecommunications system” has a bias toward synchronous, real-time video communication,[49] leaving no clear reimbursement pathway for the value generated by an AI’s asynchronous analysis. Furthermore, reimbursement is tied to the time of specific human practitioners, with no conceptual space to pay for an algorithmic service.

This regulatory misalignment generates significant economic friction, primarily through its interaction with Medicare’s fee-for-service (FFS) payment system. The FFS model rewards the volume of services delivered, creating a financial disincentive for providers to adopt preventative technologies that reduce hospitalizations and procedures. A provider that invests in an AI platform that successfully keeps patients out of the hospital is penalized with lost revenue from those avoided admissions. This arrangement makes the adoption of clinically superior technology economically irrational for the provider, even as it saves the payer money and improves patient outcomes. The current rules fail to provide a sufficient counterincentive to overcome this fundamental conflict.

A durable solution would require a multi-pronged policy approach. First, 42 CFR § 410.78 must be modernized to create a distinct benefit category for asynchronous, algorithm-based monitoring services, decoupling them from the outdated synchronous-communication requirements. Second, the Centers for Medicare & Medicaid Services (CMS) should develop a new reimbursement pathway, with billing codes that compensate for the clinical value of AI-generated insights, such as early risk detection, rather than for process metrics like minutes spent on a call.

2. Federal employee productivity tools

There is a disconnect between the U.S. government’s official pro-innovation stance on AI and the implementation of this policy posture at the agency level.[50] While the White House seeks to remove bureaucratic restrictions, agencies—including the Veterans Affairs Department and Energy Department—have instituted blanket prohibitions on generative-AI productivity tools, citing security concerns.[51] This contradiction stems from gaps in the guidance provided by OMB Memorandum M-24-10, issued in 2024. While the memorandum provided a detailed governance framework for “safety-impacting” and “rights-impacting” AI, it offered no clear pathway to approve low-risk productivity software. In the absence of specific guidance, some agency officials have defaulted to the most conservative position of prohibition.

The opportunity cost of this inaction is substantial. Economic research from the Federal Reserve Bank of St. Louis suggests that adoption of generative-AI tools could increase aggregate productivity by 1.1%, with the average user saving 2.2 hours per week.[52] Studies on specific tasks common in government work show that AI tools accelerate writing by 40% while improving quality by 18%, and programmers using AI assistants complete tasks 55.8% faster.[53] By forgoing these tools, federal agencies are sacrificing potential gains in government efficiency and operational effectiveness.

The current patchwork of agency-level prohibitions is a strategically incoherent application of federal policy. These bans collapse the tiered, risk-based structure intended by OMB M-24-10, whose text implies that not all AI systems warrant the same intensive governance. They also run afoul of what the Brooking Institution has observed is a bipartisan consensus that regulatory efforts should focus on high-impact systems.[54] Furthermore, these prohibitions create a “shadow AI” problem, in which motivated employees will turn to personal devices and commercial accounts to use these tools, moving the activity outside the government’s security perimeter and creating the unmonitored data-handling risks the policies were designed to prevent.

A more effective approach requires the OMB to issue supplemental guidance that formally defines and creates a separate governance track for low-risk AI-productivity tools. Clarifying that simple productivity tools are not subject to the most stringent requirements of M-24-10 would enable agencies to allocate their finite governance resources to those use cases already identified as potentially implicating safety concerns or protected rights.

The practical implementation of this policy would involve transitioning from prohibition to a system of secure application “allowlisting.” This cybersecurity best practice, endorsed by the Cybersecurity and Infrastructure Security Agency, operates on a “default deny” principle, where only explicitly vetted and approved software is permitted to run.[55] The technical feasibility of this model has already been demonstrated by successful pilot projects in secure federal environments, including the Department of Homeland Security’s (DHS) “DHSChat” tool,[56] the FDA’s “Elsa” platform,[57] and the U.S. Army’s “#CalibrateAI” program.[58] These examples illustrate that the primary barrier to adoption is a lack of policy clarity, not a lack of secure technical solutions.

By combining a default-deny architecture with a structured allowlist of pre-approved tools, agencies could safely expand access to low-risk AI applications—such as summarization, document drafting, or data-sorting assistants—without triggering the compliance overhead intended for high-impact systems. This would unlock measurable efficiency gains while maintaining a strong security posture, aligning governance with practical risk management, rather than categorical prohibition.

B. Question (ii): What Specific Federal Statutes, Regulations, or Policies Present Barriers?

Sections III and VI.A identify several specific federal statutes, regulations, or policies that present barriers:

• 49 U.S.C. § 44703 requires individuals to hold airman certificates meeting specified knowledge, physical fitness, and character standards. The statute’s definition of “airman” as an individual prevents certification of autonomous aircraft systems.
• 49 CFR § 571.114 requires theft-protection systems, including key-locking steering columns. The standard assumes a human-operated vehicle and is structurally incompatible with autonomous vehicles without steering wheels.
• 21 CFR § 814 establishes premarket-approval requirements for Class III medical devices based on a model of fixed device designs. The regulation does not accommodate continuously learning algorithms without extensive change-control submissions.
• 12 CFR § 1002.9 (Regulation B implementing ECOA) requires creditors to provide specific reasons for adverse credit actions. The CFPB has interpreted this to require more detailed explanations than some noninterpretable models can easily generate.
• Medicare reimbursement rules regarding telehealth, particularly 42 CFR § 410.78, are structurally misaligned with the technological capabilities of modern AI in health care.

C. Question (iii): Where Are Administrative Tools Available but Underutilized?

Section III identifies several administrative tools that are available but underutilized:

• FAA waivers under 14 CFR § 107.200: The regulation permits waivers of Part 107 requirements for unmanned aircraft operations if the applicant demonstrates safety, but the processing times to obtain these waivers average 90 days. Greater use of categorical waivers for low-risk operations could accelerate beneficial deployments.
• FDA expedited review pathways under 21 U.S.C. § 360e-3: The Food, Drug, and Cosmetic Act authorizes the FDA to use expedited procedures for breakthrough devices. The agency could apply these pathways more systematically to AI-enabled diagnostic and monitoring systems.
• NHTSA temporary exemptions under 49 U.S.C. § 30113: The statute permits exemptions from Federal Motor Vehicle Safety Standards for up to two years (extendable to three) for vehicles with safety levels at least equal to the standard’s level. NHTSA could use this authority more proactively for autonomous-vehicle testing.

In addition, the CFPB, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) have authority to approve pilot programs—sometimes referred to as “regulatory sandboxes”—for innovative financial products. Creating more formalized sandbox programs with published entry criteria would reduce uncertainty.

D. Question (iv): What Modifications Would Enable Lawful Deployment While Preserving Regulatory Objectives?

Sections III and VI.A identify several modifications that would enable lawful deployment while preserving regulatory objectives:

• Transportation:
  • Amend 49 U.S.C. § 40102 to define “operator in command” to include both human pilots and autonomous systems and direct the FAA to establish performance-based airworthiness standards for autonomous aircraft that focus on perception, decisionmaking, communication, and fault tolerance.
  • Amend 49 U.S.C. § 30102 to define “driver” to include automated driving systems capable of performing the entire dynamic-driving task, and direct NHTSA to establish safety-performance standards for such systems that address operational design domains, object and event detection and response, fallback mechanisms, and crashworthiness.
• Health Care:
  • Amend 21 U.S.C. § 360c to authorize the FDA to create a provisional-approval pathway for AI-enabled medical devices, permitting initial market entry based on promising (but limited) clinical data, coupled with mandatory post-market monitoring, outcome tracking, and confirmatory studies.
  • Amend 42 CFR § 410.78 to authorize Medicare reimbursement for remote patient monitoring using AI-enabled continuous-monitoring systems when clinical evidence demonstrates equal or superior outcomes relative to traditional scheduled consultations, with payment rates reflecting the monitoring’s clinical value.
• Financial services: Amend 15 U.S.C. § 1691(a) to specify that, when creditors use algorithmic models, the model as a whole constitutes a “policy or practice” for disparate-impact analysis, and establish that creditors satisfy adverse-action notice requirements by providing explanations that meet specified documentation and testing standards, even if the model is not fully interpretable.
• Federal AI use: OMB should issue clarifying guidance distinguishing between AI systems that require special governance (those making consequential decisions about individuals or affecting safety) and productivity tools that can be used with standard information-security controls. Agencies should maintain allowlists of vetted productivity tools and usage protocols, rather than categorical prohibitions.

E. Question (v): What Forms of Clarification Would Be Most Effective?

Effective forms of clarification include interagency guidance, sector-specific standards, enforcement priority statements, and conditional safe harbors. Together, these measures would give firms clearer expectations, while allowing regulators to adapt as AI evolves.

• Interagency guidance on technology-neutral enforcement: OSTP should coordinate an interagency working group that includes the FTC, DOJ, EEOC, and sector-specific regulators to develop unified guidance on how existing statutes apply to AI systems. The guidance should emphasize outcomes over process and provide safe harbors for specified testing and monitoring practices.
• Sector-specific standards for adequate documentation: Agencies should publish model documentation templates aligned with the National Institute of Standards and Technology (NIST) AI Risk Management Framework.[59] For example, the CFPB could specify what testing and monitoring for algorithmic bias would be deemed adequate to satisfy fair-lending obligations. EEOC could identify acceptable statistical tests for adverse-impact analysis.
• Enforcement priority statements: When statutory language plausibly covers AI but the application of that language remains uncertain, agencies should issue enforcement-priority statements clarifying what conduct they will and will not pursue. For example, the FTC could specify what types of AI-generated-content disclosures it considers adequate to avoid deception claims.
• Conditional safe harbors: Agencies could establish safe harbors stating that firms following specified practices will not face enforcement action for specified violations. For instance, FDA could create a safe harbor for AI-related medical-device updates that follow predetermined change-control plans, stating that such updates will not be deemed to require new premarket approval.
• Published evaluation criteria for pilots and waivers: Agencies should publish detailed criteria explaining what evidence applicants must provide to obtain pilot-program approvals or waivers. Criteria should specify acceptable forms of safety demonstration, monitoring protocols, and risk-mitigation measures.

F. Question (vi): How Might Federal Action Address Organizational Barriers?

To strengthen federal capacity for consistent and credible AI oversight, agencies need shared technical resources and evaluation practices, which would include the following actions:

• Create an OSTP-led AI-evaluation support center: OSTP should establish a center that provides agencies with technical assistance to evaluate AI pilot proposals and waiver requests. The center would maintain evaluation templates aligned with NIST frameworks and host a repository of successful pilot-project case studies.
• Establish communities of practice: OSTP should convene regular meetings of agency AI coordinators to share lessons learned, discuss evaluation challenges, and develop common approaches to recurring problems.
• Develop model pilot-program terms: OSTP should work with agencies to develop model legal terms for AI pilot programs, including entry criteria, participant obligations, data-sharing requirements, monitoring protocols, and evaluation metrics.

VII. Recommendations

Based on the foregoing analysis, ICLE respectfully recommends the following actions:

A. Immediate Administrative Actions

To ensure federal oversight keeps pace with rapid advances in AI, agencies need systematic updates to outdated rules and coordinated guidance on enforcement and evaluation. This section outlines a set of institutional reforms—ranging from a federal AI-rule audit to an OSTP-led evaluation support center and innovation-impact assessments—to modernize regulatory frameworks, while preserving accountability and promoting innovation.

• Conduct a federal AI-rule audit: OSTP should direct agencies to inventory regulations that embed assumptions about human operation, static design, or other characteristics incompatible with AI systems. The audit should prioritize high-impact sectors and identify specific regulatory provisions for modernization.
• Issue interagency guidance on technology-neutral enforcement: OSTP should convene FTC, DOJ, EEOC, CFPB, and sector regulators to develop unified guidance on how existing statutes apply to AI. The guidance should emphasize that laws prohibiting fraud, discrimination, and unfair practices apply to automated systems.
• Publish agency playbooks for pilots and waivers: OSTP should work with agencies to develop and publish detailed guidance on obtaining approval for AI pilot programs and waivers. Playbooks should include entry criteria, model application templates, required evidence and testing protocols, and monitoring requirements.
• Establish an AI-evaluation support center: OSTP should create an interagency center that provides technical assistance for evaluating AI systems, maintains repositories of successful pilots and model terms, develops training materials for agency staff, and coordinates evaluation methodologies across agencies.
• Adopt innovation impact assessment: OMB should revise Circular A-4 to require agencies conducting cost-benefit analysis for AI-related rules to systematically assess and document innovation impacts, including effects on market entry, dynamic competition, and international competitiveness.

B. Congressional Actions

Federal legislation will be essential to provide consistent, adaptive governance for AI across sectors. This section outlines key congressional actions—targeted preemption, performance-based approval pathways, and regulatory sunset provisions—to harmonize oversight, enable innovation, and ensure accountability as AI technologies evolve.

• Enact targeted AI preemption legislation: Congress should pass legislation prohibiting states from regulating the design, development, training, or validation of AI models, while preserving state authority to enforce general laws against fraud, discrimination, and safety violations.
• Authorize performance-based approval pathways: Congress should amend relevant statutes to permit agencies to approve adaptive systems through performance-based standards, as discussed in Sections III and B.
• Require regulatory sunset and review: Congress should enact legislation requiring that any new AI-specific regulation include either a sunset provision or mandatory periodic review to assess whether the regulation’s benefits continue to exceed its costs as the technologies evolve.

VIII. Conclusion

AI is a general-purpose technology whose applications and potential risks remain incompletely understood. In this circumstance of high uncertainty, regulatory forbearance—defined as maintaining technology-neutral enforcement of existing law while gathering empirical evidence—is likely to produce better welfare outcomes than premature, prescriptive mandates. Existing statutes governing fraud, product safety, discrimination, and unfair commercial practices already reach conduct enabled by AI. The primary challenge is not a legal authority gap but regulatory mismatch and market fragmentation.

Many existing federal regulations embed assumptions about human operation or static product design, creating barriers to beneficial AI deployment. In most cases, these barriers can be addressed through administrative flexibility—such as waivers, pilot programs, conditional approvals, and updated guidance—rather than requiring new statutes.

A distinct threat arises from the proliferation of conflicting state laws. A compliance patchwork imposes costs that grow multiplicatively with jurisdictional divergence; creates barriers to entry that favor incumbents; and allows restrictive states to set de facto national policy through extraterritorial effects. Federal preemption of state laws that regulate the design and development of AI models, paired with technology-neutral federal enforcement, would restore constitutional and economic coherence to the national market.

Rather than creating duplicative AI-specific mandates, agencies should clarify how these technology-neutral laws apply to novel systems. Agencies should also establish safe harbors for firms that follow specified testing and monitoring practices and build internal evaluation capacity. This regulatory approach permits responsible innovation while addressing demonstrated harms and preserves U.S. leadership in a technology central to future economic and strategic competition.

[1] Request for Information: Regulatory Reform on Artificial Intelligence, Off. of Sci. & Tech. Policy (OSTP-TECH-2025-0067, 90 FR 46422, Sep. 26, 2025), [hereafter “RFI”].

[2] Response of the International Center for Law & Economics, Request for Information, National Priorities for Artificial Intelligence, Int’l. Ctr. Law & Econ. (OSTP-TECH-2023-0007, Jul. 7, 2023) available at https://laweconcenter.org/wp-content/uploads/2023/07/OSTP-AI-Comments.pdf [hereafter “Priorities Comments”].

[3] Comments of the International Center for Law & Economics: Request for Information on the Development of an Artificial Intelligence (AI) Action Plan, Int’l. Ctr. Law & Econ. (Mar. 14, 2025) available at https://laweconcenter.org/wp-content/uploads/2025/03/OSTP-AI-2025-comments-v-1.pdf [hereafter “Action Plan Comments”].

[4] Response of the International Center for Law & Economics to the AI Accountability Policy Request for Comment: National Telecommunications and Information Administration, Int’l. Ctr. Law & Econ. (Docket No. 230407-0093, Jun. 12, 2023) available at https://laweconcenter.org/wp-content/uploads/2023/06/NTIA-AI-Comments-final.pdf [hereafter “Accountability Comments”].

[5] Accountability Comments 17.

[6] Priorities Comments 5.

[7] Stephen Breyer, Regulation and Its Reform (1982) 191 (“Our examination of market defects, classical modes of regulation, and alternative regimes suggest that regulatory failure sometimes means a failure to correctly match the tool to the problem at hand.”), 184 (“It should be painfully apparent that whatever problems one has with an unregulated status quo, the regulatory alternatives will also prove difficult.”)

[8] Richard A. Posner, Antitrust in the New Economy, 68 Antitrust L. J. 925 (2001), (“The real problem lies on the institutional side: the enforcement agencies and the courts do not have adequate technical resources, and do not move fast enough, to cope effectively with a very complex business sector that changes very rapidly.”); Isaac Ehrlich & Richard A. Posner, An Economic Analysis of Legal Rulemaking, 3 J. Legal Stud. 257, 277 (1974), (“An important cost of legal regulation by means of rules is thus the cost of altering rules to keep pace with economic and technological change.”); Cass R. Sunstein, Maximin, 37 Yale J. Reg. 940 (Jul. 29, 2020), (“Observers (including regulators) are in circumstances of Knightian uncertainty, where they cannot assign probabilities to imaginable outcomes.”).

[9] See, e.g., Adam Thierer, The Future of Innovation: Is This the End of Permissionless Innovation?, Discourse (Jan. 6, 2021), https://www.discoursemagazine.com/p/the-future-of-innovation-is-this-the-end-of-permissionless-innovation.

[10] See, e.g., Kenneth J. Arrow & Anthony C. Fisher, Environmental Preservation, Uncertainty, and Irreversibility, 88 Q. J. Econ. 312 (1974), (explaining that, when a decision is irreversible and future benefits and costs are uncertain, immediate action eliminates the opportunity to learn more before committing resources; by waiting, society retains an “option value,” i.e., the value of preserving flexibility to act later when uncertainty has been reduced; delaying regulation (forbearance) can be welfare enhancing if immediate action would lock in a costly or suboptimal rule and prevent learning from future information or market responses).

[11] Justin (Gus) Hurwitz & Geoffrey A. Manne, Regulation as a Discovery Process (Oct. 16, 2024), https://ssrn.com/abstract=4721112.

[12] Pub. L. No. 108-492, 118 Stat. 3974 (2004).

[13] See, e.g., The Space Report 2025 Q2 Highlights Record $613 Billion Global Space Economy for 2024, Driven by Strong Commercial Sector Growth, Space Found. (Jul. 22, 2025), https://www.spacefoundation.org/2025/07/22/the-space-report-2025-q2 (the global space economy reached $613 billion in 2024, and the commercial sector made up roughly 78% of that total).

[14] Daniel Castro, Luke Dascoli, & Gillian Diebold, The Looming Cost of a Patchwork of State Privacy Laws, Info. Tech. & Innovation Found. (Jan. 2022), available at https://www2.itif.org/2022-state-privacy-laws.pdf.

[15] RFI 46423 (“Most existing Federal regulatory regimes and policy mechanisms were developed before the rise of modern AI technologies. As a result, they often rest on assumptions about human-operated systems that are not appropriate for AI-enabled or AI-augmented systems.”)

[16] 49 CFR § 571.114.

[17] 49 CFR § 571.135.

[18] Cruise, GM to Seek U.S. Okay for Self-Driving Vehicle Without Pedal, Steering Wheel, Reuters (Oct. 21, 2020), https://www.reuters.com/business/autos-transportation/cruise-gm-seek-us-okay-self-driving-vehicle-without-pedal-steering-wheel-2020-10-21.

[19] David Shepardson, NHTSA Streamlining Self-Driving Car Exemption Reviews, Ins. J. (June 16, 2025), https://www.insurancejournal.com/news/national/2025/06/16/827924.htm.

[20] Marketing Submission Recommendations for a Predetermined Change Control Plan for Artificial Intelligence-Enabled Device Software Functions: Guidance for Industry and Food and Drug Administration Staff, Food & Drug Admin. (Aug. 18, 2025), https://www.fda.gov/media/166704/download.

[21] 12 CFR Part 1002.

[22] Adverse Action Notification Requirements in Connection with Credit Decisions Based on Complex Algorithms, Consumer Financial Protection Circular 2022-03, Consumer Fin. Prot. Bureau (May 26, 2022), (“ECOA and Regulation B do not permit creditors to use complex algorithms when doing so means they cannot provide the specific and accurate reasons for adverse actions”)

[23] See, e.g., Rabia Saleem, Bo Yuan, Fatih Kurugollu, Ashiq Anjum, & Lu Liu, Explaining Deep Neural Networks: A Survey on the Global Interpretation Methods, 513 Neurocomputing 165 (2022).

[24] Action Plan Comments 3 (“This definitional challenge is further complicated by the emerging patchwork of state and local AI regulations that has emerged in the absence of federal guidance. Developers and deployers of AI systems who operate across jurisdictional boundaries face substantial compliance challenges as a result of this regulatory fragmentation. The proliferation of potentially conflicting state regulations also creates significant legal uncertainty that disproportionately burdens smaller innovators and startups, as these entities often lack the resources to navigate complex regulatory environments. This has the potential to further entrench the market positions of larger incumbents.”)

[25] Artificial Intelligence 2025 Legislation, Nat’l Conf. State Legs. (Jul. 10, 2025), https://www.ncsl.org/technology-and-communication/artificial-intelligence-2025-legislation.

[26] Michael J. Laszlo, Colorado’s AI Law Delayed Until June 2026: What the Latest Setback Means for Businesses, Clark Hill (Aug. 28, 2025), https://www.clarkhill.com/news-events/news/colorados-ai-law-delayed-until-june-2026-what-the-latest-setback-means-for-businesses.

[27] Danielle Ochs, 10 FAQs About California’s New Algorithmic Discrimination Rules, Ogletree Deakins (Sep. 16, 2025), https://ogletree.com/insights-resources/blog-posts/10-faqs-about-californias-new-algorithmic-discrimination-rules.

[28] New York City, Local Law No. 144 of 2021, N.Y.C. Admin. Code § 20-870 et seq. (2021), https://www.nyc.gov/site/dca/about/automated-employment-decision-tools.page

[29] Cal. Assemb. Bill 2013 (Irwin) (2024) (to be codified at Cal. Civ. Code §§ 1798), available at https://sjud.senate.ca.gov/system/files/2024-06/ab-2013-irwin-sjud-analysis.pdf.

[30] Cal. S.B. 942, 2023-24 Sess. (Cal. 2024), https://legiscan.com/CA/text/SB942/id/3021807.

[31] Cal. Assemb. Bill 853 (Wicks) (2025) (Ch. 674, Statutes of 2025) (to be codified at Cal. Bus. & Prof. Code §§ 22757.3.1 et seq.), https://legiscan.com/CA/text/AB853/id/3245321.

[32] See Barry Friedman & Daniel T. Deacon, A Course Unbroken: The Constitutional Legitimacy of the Dormant Commerce Clause, 97 Va. L. Rev. 1877 (2011).

[33] 397 U.S. 137 (1970).

[34] 598 U.S. 356 (2023).

[35] New York 6453—A (Mar. 5, 2025).

[36] Action Plan Comments 4 (“[T]he AI Action Plan should establish clear federal guidelines that preempt contradictory state and local regulations, while setting minimum transparency standards appropriate to each category of AI application. The goal of such standards should be to protect consumers without imposing excessive compliance burdens that might stifle innovation. The aim should be to foster functional markets where customers can access the services they demand, not to initiate a new cottage industry for AI compliance lawyers.”)

[37] 49 USC § 41713.

[38] Accountability Comments 15.

[39] 15 U.S.C. § 45.

[40] Press Release, FTC Finalizes Order with DoNotPay That Prohibits Deceptive “AI Lawyer” Claims, Imposes Monetary Relief, and Requires Notice to Past Subscribers, Fed. Trade Comm’n (Feb. 11, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/02/ftc-finalizes-order-donotpay-prohibits-deceptive-ai-lawyer-claims-imposes-monetary-relief-requires.

[41] Michael D. Meuti & Andrew J. Jarzyna, One Year In, FTC’s “Operation AI Comply” Continues Under New Administration, Signaling Enduring Enforcement Focus, Benesch (Oct. 21, 2025), https://www.beneschlaw.com/resources/one-year-in-ftcs-operation-ai-comply-continues-under-new-administration-signaling-enduring-enforcement-focus.html.

[42] Press Release, FTC Announces Crackdown on Deceptive AI Claims and Schemes, Fed. Trade Comm’n (Sep. 25, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-announces-crackdown-deceptive-ai-claims-schemes.

[43] Select Issues: Assessing Adverse Impact in Software, Algorithms, and Artificial Intelligence Used in Employment Selection Procedures Under Title VII of the Civil Rights Act of 1964, Equal Emp’t. Opp. Comm’n (May 18, 2023), https://www.eeoc.gov/select-issues-assessing-adverse-impact-software-algorithms-and-artificial-intelligence-used, available at https://web.archive.org/web/20230519192227/https://www.eeoc.gov/select-issues-assessing-adverse-impact-software-algorithms-and-artificial-intelligence-used#expand.

[44] Press Release, iTutorGroup to Pay $365,000 to Settle EEOC Discriminatory Hiring Suit, Equal Emp’t. Opp. Comm’n (Sep. 11, 2023), https://www.eeoc.gov/newsroom/itutorgroup-pay-365000-settle-eeoc-discriminatory-hiring-suit.

[45] Press Release, U.S. Attorney’s Office Files Statement of Interest in Fair Housing Act Case Alleging Unlawful Algorithm-Based Tenant Screening Practices, Dep’t Just. (Jan. 9, 2023), https://www.justice.gov/usao-ma/pr/us-attorneys-office-files-statement-interest-fair-housing-act-case-alleging-unlawful.

[46] See, e.g., Delivering Advanced AI to Cardiac Monitoring, iRhythm (retrieved Oct. 22, 2025), https://www.irhythmtech.com/us/en/solutions-services/fda-cleared-ai.

[47] Laura Cech, Sepsis-Detection AI Has the Potential to Prevent Thousands of Deaths, Johns Hopkins U. (Jul. 21, 2022), https://hub.jhu.edu/2022/07/21/artificial-intelligence-sepsis-detection.

[48] See, e.g., Chenyang Ji, Tong Jiang, Luolin Liu, Jiale Zhang, & Liangzhen You, Continuous Glucose Monitoring Combined with Artificial Intelligence: Redefining the Pathway for Prediabetes Management, 16 Front. Endocrinol. 1571362 (May 26, 2025).

[49] 42 CFR § 410.78(a)(3) (“Interactive telecommunications system means… multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner.”)

[50] Frances M. Green, New Federal Agency Policies and Protocols for Artificial Intelligence Utilization and Procurement Can Provide Useful Guidance for Private Entities, Workforce Bulletin (Apr. 25, 2025), https://www.workforcebulletin.com/new-federal-agency-policies-and-protocols-for-artificial-intelligence-utilization-and-procurement-can-provide-useful-guidance-for-private-entities.

[51] Rebecca Heilweil, More Federal Agencies Join in Temporarily Blocking or Banning ChatGPT, FedScoop (Jan. 9, 2024), https://fedscoop.com/more-federal-agencies-join-in-temporarily-blocking-or-banning-chatgpt.

[52] Alexander Bick, Adam Blandin, & David Deming, The Impact of Generative AI on Work Productivity, Fed. R. Bank St. Louis (Feb. 27, 2025), https://www.stlouisfed.org/on-the-economy/2025/feb/impact-generative-ai-work-productivity.

[53] Shakked Noy & Whitney Zhang, Experimental Evidence on the Productivity Effects of Generative Artificial Intelligence, 381 Science 187 (Jul. 13, 2023).

[54] Sorelle Friedler & Andrew D. Selbst, 5 Points of Bipartisan Agreement on How to Regulate AI, Brookings Inst. (Aug. 15, 2025), https://www.brookings.edu/articles/five-points-of-bipartisan-agreement-on-how-to-regulate-ai.

[55] What the Heck Is Application Allowlisting in CMMC?, Totem.Tech (Apr. 25, 2025), https://www.totem.tech/application-allowlisting-cmmc.

[56] Michael Boyce, DHS’s Responsible Use of Generative AI Tools, Dep’t Homeland Sec. (Dec. 17, 2024), https://www.dhs.gov/archive/news/2024/12/17/dhss-responsible-use-generative-ai-tools.

[57] Press Release, FDA Launches Agency-Wide AI Tool to Optimize Performance for the American People, Food & Drug Admin. (Jun. 2, 2025), https://www.fda.gov/news-events/press-announcements/fda-launches-agency-wide-ai-tool-optimize-performance-american-people.

[58] Jennifer Swanson, #CalibrateAI/Project Athena Update, U.S. Army (Nov. 19, 2024), https://www.army.mil/article/281451/calibrateaiproject_athena_update.

[59] Artificial Intelligence Risk Management Framework (AI RMF 1.0), Nat’l Inst. Stds. & Tech. (Jan. 2023), available at https://nvlpubs.nist.gov/nistpubs/ai/NIST.AI.100-1.pdf.

I. Introduction

The International Center for Law & Economics (ICLE) thanks the European Commission for the opportunity to comment to this public consultation on the draft revised Technology Transfer Block Exemption Regulation (TTBER) and accompanying Technology Transfer Guidelines. ICLE is a nonprofit, nonpartisan research centre devoted to the study of law and economics, and our scholars have written extensively on intellectual property and competition policy. We appreciate the Commission’s efforts to refine the TTBER framework, and we offer our perspective on two key aspects of the Draft Guidelines that raise serious concerns.

A. Safe Harbour for Licensing-Negotiation Groups (LNGs)

The proposal in Section 4.5 of the Draft Guidelines to introduce a safe harbour for licensing-negotiation groups would likely do more harm than good. While intended to address perceived “patent holdup” in standard-essential-patent (SEP) licensing, this policy is based on a flawed premise and risks serious unintended consequences.

There is little empirical evidence of systemic holdup problems in SEP licensing. Studies have indeed found no indication that SEP holders are extracting supra-competitive royalties or undermining technology adoption under the status quo.[1] By contrast, the problem of “patent holdout” (implementers collectively delaying or denying fair payment for SEPs) is well-documented and poses a significant threat to innovation.[2] Indeed, creating an antitrust safe harbour for groups of implementers to jointly negotiate licenses could facilitate collective holdout.

LNGs effectively act as buyers’ cartels, empowering implementers to coordinate against patent holders’ interests. Even with the draft’s proposed safeguards (e.g., open access, transparency, and a cap on jointly negotiated fees), an LNG safe harbour would tilt the negotiating balance disproportionately toward implementers. In turn, this would undermine SEP holders’ incentives to contribute technology to standards and could invite further collusive behaviour among implementers. Notably, a senior U.S. Justice Department (DOJ) official recently criticized the Commission’s support for an automotive LNG as “unfortunate” and difficult to reconcile with sound competition-law principles, warning that such arrangements would likely be treated as a per se unlawful buyers’ cartel in the United States.[3] Endorsing LNGs in the Technology Transfer Guidelines—via the Guidelines’ safe harbour—would therefore create more problems than it solves.

B. Essentiality Checks in Patent Pools

The essentiality checks mandated by the Guidelines in the context of patent pools also raise significant issues. Properly structured patent pools can generate important pro-competitive benefits by reducing transaction costs and bundling complementary patents for one-stop licensing. The existing Technology Transfer Guidelines already provide a safe harbour for pools that include only essential and complementary technologies and abide by fair, reasonable, and non-discriminatory (FRAND) licensing terms.[4] The draft revision, however, goes further by encouraging greater transparency about essentiality verification—specifically, requiring disclosure of any methodology used to assess essentiality and the results of such assessments.[5]

While transparency is generally welcome, imposing additional essentiality-check expectations would burden innovators and pool administrators with costly and redundant procedures. Many patent pools already employ independent experts to evaluate whether submitted patents are truly essential to the relevant standard. Requiring pools to formalize and disclose these checks offers scant added benefit, while increasing administrative costs.

Importantly, any “essentiality certification” obtained through a pool’s process remains nonbinding; implementers remain free to challenge a patent’s essentiality or validity in court or to refuse a license. The net effect is that formal essentiality checks may do little to streamline or improve licensing outcomes. Instead, they could introduce new procedural hurdles and opportunities for opportunistic delay. If implementers know that every patent must undergo an extra verification step, they may use the process to stall negotiations—disputing essentiality findings or insisting on additional reviews as a tactical matter. This would simply prolong licensing discussions and defer royalty payments, to the detriment of patent holders who have already invested in R&D.

In short, the soft mandate on essentiality checks is, at best, superfluous and at worst a catalyst for holdout behaviour.

C. Undermining Europe’s Innovation Ecosystem

In sum, the draft TTBER Guidelines could inadvertently undermine Europe’s innovation ecosystem and fuel transatlantic tensions. The LNG safe harbour and the expanded essentiality-check provisions echo elements of prior SEP policy initiatives that proved controversial and were ultimately abandoned. By shifting the balance of SEP licensing further in favour of implementers, these proposals risk reducing incentives for patent-driven innovation in Europe.

We therefore urge the Commission to reconsider these aspects of the draft. A more cautious approach—one that refrains from exempting implementer cartels and avoids imposing duplicative patent-checking obligations—would better serve the twin goals of promoting technology transfer and maintaining a vibrant climate for innovation.

II. The Proposed Safe Harbour for Licensing-Negotiation Groups (LNGs)

Section 4.5 of the Draft Guidelines introduces guidance on licensing-negotiation groups (LNGs), which are arrangements whereby a group of potential licensees jointly negotiates license terms with a technology supplier (patent holder or pool). This marks the first time that EU competition guidelines would recognize a safe harbour for such collective negotiations. The Commission’s draft describes possible pro-competitive benefits of LNGs—such as reduced transaction costs, more informed negotiations, or overcoming a “first-mover” disadvantage among implementers.[6]

To qualify for the safe harbour, an LNG would need to satisfy several conditions, including open participation, transparency of rules, a narrow scope limited to joint negotiation, restrictions on information exchange, voluntary membership for both sides, no foreclosure of outside deals, and a cap on aggregate licensing fees (no more than 10% of the product price).[7] In essence, the Commission is proposing to treat LNGs as analogous to patent pools (on the buyers’ side, rather than sellers’ side) by providing a “soft” exemption from Article 101 TFEU, provided these criteria are met.

But this exemption is based on flawed premises. The underlying idea is that implementers face a collective action problem in SEP-licensing negotiations that leads to—the risk that SEP holders demand excessive royalties once implementers are locked into a holdup standard.[8] The Draft Guidelines appear to assume that empowering implementers to negotiate jointly will counteract SEP holders’ supposed bargaining advantage. This premise is unsupported by the evidence.

Both historical experience and empirical research indicate that fears of widespread patent holdup are overstated.[9] Standard-reliant industries (such as wireless communications) have flourished under the current SEP-licensing system, suggesting that the royalty stack and holdup “problem” has not materialized in a systemic way.[10] Notably, a comprehensive study commissioned by the Commission in 2023 found no discernible evidence that patent owners are systematically overcharging implementers or that FRAND disputes are undermining innovation and standard adoption.[11] On the contrary, the study concluded that SEP-licensing frictions have not led to reduced contributions to standards by patent holders, nor a shift by implementers to avoid standardized technologies.[12]

In short, the empirical record does not substantiate the notion of a market failure caused by patent holdup. It would be a dubious policy course to upend long standing licensing norms based on a theory that lacks real-world support.

But crucially, the Draft Guidelines give insufficient weight to the opposite concern of patent “holdout”. Under holdout strategies, implementers strategically avoid or delay taking licenses for SEPs, thereby devaluing those patents and shifting bargaining leverage against innovators.[13] Empowering implementers to form an LNG could exacerbate the risk of holdout. When competitors band together to negotiate, they may collectively agree to stand firm against low royalty offers or prolong negotiations, knowing that the patent holder’s enforcement options (such as injunctions) are constrained once negotiations are ongoing.

Indeed, even supporters of the LNG concept have acknowledged that such groups could be used to coordinate delaying tactics. For example, commentators from the Max Planck Institute observed that, if members of an LNG reserve the ability to pursue bilateral deals after joint talks, they might exploit the joint negotiation to gain information and then drag out individual negotiations, increasing the risk of delay and holdout.[14]

More broadly, competition scholars recognize that collective-purchasing arrangements (which an LNG effectively is) carry inherent dangers. Indeed, they create monopsony power on the buying side and can facilitate explicit or tacit collusion among buyers. An LNG of implementers could enable its members—many of whom may be direct competitors in downstream product markets—to share sensitive information and coordinate licensing strategies, all under the cloak of a nominally pro-competitive joint activity. In other words, LNGs may provide perfect cover for a buyers’ cartel. From an antitrust perspective, a buyers’ cartel is arguably just as pernicious as a sellers’ cartel: it distorts the price (royalty) by artificially suppressing it, which can lead to under-compensation of innovators and underinvestment in future technologies.[15]

Given this, U.S. antitrust authorities have taken a firm view against such collective buyer behaviour. In the context of music licensing, for example, the DOJ filed a statement in litigation explaining that strategies to negotiate rates collectively could amount to per se illegal buyers’ cartels.[16] And as mentioned, a high-ranking DOJ official publicly characterized the Commission’s support for an automotive LNG as “unfortunate”, highlighting a divergence between the EU’s approach and U.S. competition-law norms.[17]

This transatlantic disapproval underscores the gravity of the collusion concerns at stake. The upshot is that collusive behaviour by buyers can stifle competition and harm innovation incentives.

The Commission appears to view LNGs as the mirror image of patent pools, but this analogy is misleading.[18] Patent pools involve cooperation among patent holders who contribute complementary technologies and license them as a package. Because pools can integrate complementary patents and reduce transaction costs, they often produce efficiency gains and are typically pro-competitive (especially when limited to essential patents and governed by FRAND licensing).[19]

By contrast, LNGs are a coalition of technology implementers (patent licensees) coordinating their purchasing of licenses. The competitive dynamics are very different. In a pool, the risk of patent holders engaging in a holdup is mitigated by the pool’s structure (only essential patents, FRAND commitment, etc.), and any attempts to collude on prices above FRAND are checked by the availability of bilateral licensing and the oversight of competition authorities.[20] In an LNG, however, the implementers share the goal of securing lower royalties, and their coordination could simply serve to depress the price below the competitive level.[21]

The Draft Guidelines attempt to import some pool-like safeguards to LNGs (open access, limits on information exchange, etc.), but these may not be sufficient or even apt.[22] For instance, the draft safe harbour would forbid an LNG from engaging in a collective boycott or from penalizing members who enter individual deals. Such conditions, while well-meaning, could prove difficult to police in practice. Any LNG inherently has some degree of group pressure that may discourage members from “defecting” and negotiating separate deals.

Moreover, unlike a patent pool, which is constrained by the inclusion of only essential patents (ensuring the pool’s package has unique value), an LNG has no analogous built-in need for the group’s product; the implementers could always negotiate individually. Thus, an LNG’s chief purpose is to consolidate bargaining power against sellers, which is not a pro-competitive efficiency but an exercise of collective monopsony. In short, the analogy to patent pools does not justify a broad exemption for LNGs, as the economic effects and incentive structures are entirely different.

Another issue is how LNGs would interface with the existing FRAND-licensing framework, particularly as developed under the Huawei v. ZTE line of cases in Europe.[23] The European Court of Justice’s Huawei decision established a balanced negotiation protocol for SEP disputes, defining steps for both SEP holders and implementers to follow in good faith.[24] That framework, which remains the law in the EU, envisions bilateral negotiation and requires that implementers manifest their willingness to take a FRAND license as a condition to avoid injunctions.

Introducing LNGs into this equation raises several problematic legal questions. If implementers negotiate as a group, what does it mean to be a “willing licensee” under Huawei? Can an entire LNG be deemed willing (or unwilling) based on the actions of the group? There is a concern that an implementer could hide behind the group’s collective stance and later claim willingness without ever having engaged individually, as Huawei contemplates. This would make it de facto difficult to impossible for inventors to ever obtain injunctions.

The Draft Guidelines rightly note that any LNG must operate in compliance with Huawei, but it is unclear how that compliance would be ensured in practice. The presence of an LNG could complicate the timeline and exchanges envisioned by Huawei, potentially delaying offers and counteroffers as the group deliberates. In effect, the LNG mechanism might undermine the delicate balance Huawei struck between patent rights and competition law. This is especially troubling, given that the Commission’s now-withdrawn SEP Regulation proposal sought to displace the Huawei framework with new dispute-resolution mechanisms. Many stakeholders—including ICLE’s scholars—opposed this change.[25] Reviving elements of that approach via an LNG safe harbour could be seen as indirectly achieving what the abandoned regulation could not, risking legal uncertainty and renewed controversy in SEP licensing.

In short, absent clear evidence that the benefits outweigh the risks, it is premature to endorse LNGs in guidance. Scholars and industry insiders have already voiced deep reservations about the LNG concept.[26] International alignment is also an issue. Moving ahead unilaterally with an LNG safe harbour could strain relations with key trading partners and enforcement agencies that view such coordination as anticompetitive. It would be ironic and counterproductive if a policy ostensibly aimed at promoting efficient licensing ended up sparking transatlantic frictions and discouraging technology investment in Europe.

To avoid these outcomes, it would be appropriate to withdraw or substantially narrow Section 4.5 in the Draft Guidelines. The existing tools of competition law, applied on a fact-specific basis, are fully capable of assessing any joint negotiation initiatives in the market without the need for a broad safe harbour that would likely be misused.

III. Patent Pools and Essentiality Verification

“Patent pools”—that is, consortia of patent holders who offer combined licenses—can have important pro-competitive benefits. They can reduce transaction costs, prevent royalty stacking, and accelerate the dissemination of technologies—particularly for complex standards that require licensing numerous SEPs.[27] The current Guidelines recognize this by providing a safe harbour for the creation and operation of patent pools, so long as certain conditions are met.[28] Key conditions include that participation in the pool is open to all interested patent holders, that the pool aggregates only essential and complementary patents (with independent experts typically ensuring only truly essential patents are included), that pooled patents are licensed to all comers on FRAND terms, and that members remain free to develop or license competing technology.[29]

These principles have worked well over decades. We have seen several successful pools formed in the telecom, consumer-electronics, and automotive sectors, providing a one-stop licensing solution and helping implementers (especially smaller firms) access critical technologies efficiently. Importantly, the competitive safeguards in pools—FRAND commitments and the focus on complementary (non-substitute) patents—mean that properly structured pools rarely threaten competition. Indeed, the Commission’s own evaluation studies have noted the generally positive impact of pools.[30]

Against this backdrop, the revised Draft Guidelines make several adjustments to the pool safe-harbour criteria aimed at increasing transparency and preventing royalty duplication. In particular, the Draft Guidelines add new recommended requirements that pool administrators: (1) disclose the list of patents (technology rights) included in the pool, (2) disclose the methodology used to verify the essentiality of those patents (as well as the results of any essentiality assessments), and (3) ensure that licensees are not charged twice for the same patent (for example, if they already have a license via a bilateral agreement, they should not pay again through the pool for that patent).[31]

On their face, these suggestions appear designed to address concerns raised by some implementers about transparency in pools. For instance, implementers have sometimes voiced worries about pools including nonessential patents or “double-dipping” by patent owners who license both inside and outside the pool.[32] While the goals of transparency and avoiding double payments are legitimate, there is a risk the essentiality-check requirement may do more harm than good in practice.

First, imposing additional essentiality-verification requirements will increase the costs of forming and maintaining patent pools. Conducting a rigorous essentiality check is an expensive and time-consuming process. It typically involves hiring technical experts to review each patent and determine whether it is actually essential to the standard in question. This expense ultimately must be borne by patent holders (who fund the pool’s operations) and is passed on indirectly in the royalty rates. If the Commission’s guidelines create an expectation that every pool should perform and publish such checks, some patent holders may be deterred from pooling altogether—especially for standards where the number of declared SEPs is very large.

As a result, such assessments must be conducted in a reasonable and practical manner to ensure transparency and accuracy, while avoiding excessive costs that could overburden the system and discourage companies from participating in the standard-setting process. In short, the challenge for policymakers is to design an essentiality-assessment mechanism that is both efficient and effective.[33]

The marginal benefit of formally verifying each patent’s essentiality is doubtful when weighed against these costs. Indeed, many of the most successful pools already include mechanisms to ensure largely essential patents without formalistic checks on every single patent. For example, pools often rely on the patent holders’ own incentives: since non-essential patents have little licensing value (no one needs to license what they don’t infringe), patent owners have limited incentive to contribute blatantly nonessential patents to a pool.

Moreover, if a pool did license nonessential patents, implementers could simply refuse to take a license for those or negotiate a lower rate. There are, therefore, market pressures to keep pools focused on truly essential assets. In practice, some pools do go the extra mile and employ independent evaluators to vet patents (Sisvel and others have done so in certain cases), but that is a choice best left to the pool and its members, who can judge if the benefit outweighs the cost in their context.[34] Mandating or strongly encouraging it across the board, as the draft suggests, imposes a redundant burden.

It is telling that, in other contexts, the Commission has acknowledged how low the average essentiality rate is among declared SEPs; it has been estimate that just 25–40% of declared SEPs are truly essential to a given standard.[35] This means a substantial number of patents would have to be reviewed and found nonessential, a resource-intensive exercise that might not materially improve the licensing environment. The industry already understands that not all declared patents are essential; what matters is that essential ones are available on fair terms. Requiring pools to publicly document this could be seen as solving a transparency issue of which market participants are already aware and that they manage via negotiations.

Second, and perhaps more importantly, an essentiality determination made outside the context of litigation has limited legal or practical value to implementers. Even if a pool announced that its patents have been independently checked and deemed essential, this would not preclude an implementer from later challenging a patent’s essentiality (or validity or infringement) in court. The pool’s determination is not binding on anyone; it is simply a nonauthoritative opinion. Given the significant costs associated with essentiality checks, it would be both unfair and inefficient to render these assessments meaningless by allowing certain implementers to exploit the process merely to delay negotiations or evade royalty payments.[36]

Implementers who are inclined to be sceptical of pool patents will not be meaningfully swayed by the knowledge that an evaluator found them essential; such implementers can still force patent owners to prove essentiality and infringement in court if they choose to litigate. Conversely, if a pool’s evaluator were to label certain patents as not essential, those patents presumably would be left out of the pool license. The patent owner would, however, remain free to assert them outside the pool (if, for instance, they believe the evaluator was mistaken or if the patent is essential to a different implementation not considered).

In short, an essentiality check does not resolve disputes. At best, it provides information that sophisticated parties often already possess or can obtain. Implementers who negotiate licenses (whether through pools or bilaterally) typically have their own internal or external technical analyses of which patents likely read on the standard and their products. The presence of a pool’s essentiality report is unlikely to change those assessments significantly. It might even lead to confusion or false confidence. If an implementer sees a pool’s list of “essential” patents, it may incorrectly assume those are the only patents it needs—when, in fact, other patents (perhaps not in the pool) could also be asserted as essential. Thus, the marginal utility of the proposed transparency measure is questionable.

Third, and most critically from a competition standpoint, making essentiality checks a prominent feature of pooling arrangements could introduce new procedural opportunities for holdout by implementers. For example, the mere availability of a pending essentiality evaluation could be cited as a reason to postpone license negotiations or payments; “let’s wait and see what the evaluator says” becomes a convenient excuse not to sign a deal. If the guidelines strongly encourage pools to perform essentiality checks, implementers may likewise insist on waiting for those results, or challenge the adequacy of the pool’s methodology, as a tactic to defer taking a license.

Additionally, by publishing essentiality findings, pools could inadvertently invite litigation or disputes over those findings. For instance, if a pool’s evaluator deems a particular patent essential, while an implementer disagrees, the implementer might use the discrepancy to argue the pool license is overbroad or to challenge the pool’s fees (claiming they are paying for a nonessential patent). Alternatively, if a patent is deemed nonessential and excluded from the pool, a patent holder might feel aggrieved and choose to assert it separately, leading to parallel negotiations and undermining the pool’s one-stop-shop advantage. In either scenario, the essentiality check can become another locus of contention, fragmenting negotiations instead of streamlining them.

This concern echoes what many stakeholders—including ICLE—noted in response to the Commission’s earlier SEP regulatory initiative: that creating elaborate procedural mechanisms (essentiality assessments, conciliations, etc.) risked becoming a tool for delaying tactics and strategic behaviour by unwilling licensees.[37] It is therefore imperative that competition guidelines not inadvertently endorse similar mechanisms in the context of pools, which have to date functioned relatively well under simpler rules.

Finally, the push for additional essentiality transparency in pools appears to be a solution in search of a problem. The Commission’s own support study for the TTBER evaluation did not identify major competitive problems with existing pool practices.[38] On the contrary, it acknowledged pools’ pro-competitive effects and largely endorsed the current safe-harbour framework.[39] There is no indication of systemic abuse whereby pools are sneakily including large numbers of nonessential patents in order to overcharge implementers. If anything, implementers’ main complaints about pools have been that not all SEP holders join them (leaving some gaps) or that pool royalties still need to be negotiated to cover all patents.[40]

Neither of these issues is solved by forcing more transparency about essentiality. Indeed, adding new burdens could deter the formation of new pools or the expansion of existing ones (if patent owners fear more bureaucracy or potential liability around essentiality representations). That outcome would harm implementers by depriving them of efficient licensing platforms. In short, absent concrete evidence of harm from the status quo, regulators should not saddle pooling arrangements with additional procedural requirements that could upset the delicate balance that makes pools viable.

IV. Conclusion

In short, several of the changes to the TTBER guidelines risk producing adverse outcomes. Creating a safe harbour for licensee cartels (LNGs) would empower coordination that is likely to suppress royalties below competitive levels, discourage patent investment, and invite conflict with our trading partners’ competition authorities. Likewise, inserting cumbersome essentiality-check recommendations into the patent-pool framework would impose new costs and delays that could deter efficient licensing arrangements and be co-opted by implementers intent on holding out.  Rather than improving the licensing landscape, these changes may well tilt it in favour of free riding and disputes.

These initiatives may also exacerbate transatlantic tensions over SEP policy. Indeed, recent commentary from U.S. officials suggests a deep misalignment with the EU on issues like LNGs. Further, U.S. officials have underlined that implementer holdout poses a greater threat to innovation than innovator holdup, particularly because patents are not self-executing rights and a neutral court determination is always required before an injunction can be granted.[41] Moreover, the DOJ has recently emphasized that the mere possession of SEPs cannot give rise to a presumption of market power, nor is antitrust law meant to serve as an over-the-counter remedy for ordinary contract or tort disputes.[42] A prudent course would be to avoid enshrining contentious new principles in the competition guidelines without broader international consensus or clear evidence.

In conclusion, it would be prudent to reconsider the LNG safe harbour and the essentiality-check provisions in the final TTBER Guidelines. The Commission’s overarching mission is to foster innovation, competition, and consumer welfare in the internal market. These goals are best served by a policy that ensures technology creators can obtain a fair return on their investments and that implementers can access new technologies on reasonable terms. A balanced approach—one that rejects collective-holdout tactics and avoids overengineering the patent-licensing process—will encourage both innovation and dissemination.

We believe the existing TTBER framework, with minimal tweaks, largely strikes that balance. Changes that disproportionately advantage one side (implementers) at the expense of the other (innovators) risk undoing years of progress and cooperation in Europe’s standardization ecosystem.

 

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

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

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

[4] Communication from the Commission — Guidelines on the Application of Article 101 of the Treaty on the Functioning of the European Union to Technology Transfer Agreements, 2014 O.J. (C 89) 3, § 4.4.1. (hereafter: “the Guidelines”).

[5] 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) (16 September 2025)¶ 285(c). (hereafter: “Draft Guidelines”).

[6] Id. ¶ 300.

[7] Id. ¶ 326.

[8] Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. 1991 (2007).

[9] Heiden & Baron, supra note 2; Gupta & Petrov?i? supra note 2.

[10] Galetovic et al., supra note 1.

[11] Justus Baron, Pere Arqué-Castells, Amandine Léonard, Tim Pohlmann, & Eric Sergheraert, Empirical Assessment of Potential Challenges in SEP Licensing (European Commission 2023).

[12] Id. at 185.

[13] Kalyan Dasgupta & David J. Teece, Protecting Innovation in the Mobile Wireless Ecosystem: Understanding and Addressing “Hold-Out”, 38 Berkeley Tech. L.J. 313 (2023).

[14] Josef Drexl, Beatriz Conde Gallego, & Daria Kim, Position Statement of the Max Planck Institute for Innovation and Competition of 25 April 2025 in the Framework of the Revision of the Technology Transfer Block Exemption Regulation and the Accompanying Guidelines (Max Planck Inst. for Innovation & Competition Research Paper No. 25-10, 2025).

[15] For a more complete discussion of the policy issues that arise applying antitrust to monopsony market position, see, e.g., Geoffrey A. Manne, Brian Albrecht, & Dirk Auer, Labor Monopsony and Antitrust Enforcement: A Distorting Mirror, 74 DePaul L. Rev. 1119 (2025).

[16] 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).

[17] Vasant, supra note 3.

[18] Giuseppe Colangelo, Licensing Negotiation Groups: The New Antitrust Kid on the SEPs Block (2025), https://ssrn.com/abstract=5582774.

[19] Josh Lerner & Jean Tirole, Efficient Patent Pools, 94 Am. Econ. Rev. 691 (2004).

[20] Daniel F. Spulber, Antitrust and Innovation Competition, 11 J. Antitrust Enf’t 5 (2023).

[21] Ruud Peters, Igor Nikolic, & Bowman Heiden, Designing SEP Licensing Negotiation Groups to Reduce Patent Holdout in 5G/IoT Markets, in 5G and Beyond: Intellectual Property and Competition Policy in the Internet of Things 155 (Jonathan M. Barnett & Sean M. O’Connor, eds., 2023).

[22] Draft Guidelines, supra note 5, ¶ 326.

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

[24] Id. ¶ 71.

[25] Robin Jacob & Igor Nikolic, Comments Regarding the Draft Regulation on Standard Essential Patents, Int’l Ctr. for Law & Econ. (28 July 2023), available at https://laweconcenter.org/wp-content/uploads/2023/07/ICLE-Comments-to-the-SEP-Regulation.pdf.

[26] See, e.g., Igor Nikolic, Licensing Negotiation Groups for SEPs—Collusive Technology Buyers Arrangements: Pitfalls and Reasonable Alternatives, 56 Les Nouvelles 350 (Dec. 2021); Peters, Nikolic, & Heiden, supra note 21.

[27] Lerner & Tirole, supra note 19.

[28] Guidelines, supra note 4, ¶ 261.

[29] Id.

[30] See, e.g., Baron et al., supra note 11.

[31] Draft Guidelines, supra note 5, ¶ 285.

[32] European Commission, Support Study for the Evaluation of the Technology Transfer Block Exemption Regulation: Final Report 215–30 (Publications Office of the European Union 2024).

[33] Giuseppe Colangelo, Finding an Efficiency-Oriented Approach to Scrutinize the Essentiality of SEPs: A Survey, 18 J. Intell. Prop. L. & Prac. 502 (2023).

[34] Gustav Brismark, Mattia Fogliacco, Carter Eltzroth, Matteo Sabattini, & Richard Vary, Overview of SEPs, FRAND Licensing and Patent Pools, 58 Les Nouvelles 57 (Mar. 2023).

[35] Group of Experts on Licensing & Valuation of Standard Essential Patents (SEPs Expert Group), Contribution to the Debate on SEPs (Jan. 2021), https://ec.europa.eu/docsroom/documents/45217.

[36] Colangelo, supra note 33.

[37] Jacob & Nikolic, supra note 25.

[38] European Commission, supra note 32.

[39] Id.

[40] Id.

[41] Dina Kallay, Keynote at Concurrences Dinner in New York (U.S. Justice Dep’t, 2025), https://www.justice.gov/opa/speech/daag-dina-kallay-delivers-keynote-concurrences-dinner-new-york.

[42] Statement of Interest of the United States, Disney Enters., Inc. v. InterDigital, Inc., No. 1:25-cv-00996-MN (D. Del. 6 October 2025), https://www.justice.gov/atr/media/1416101/dl.

We thank the Ministry of Science and Technology of the Socialist Republic of Vietnam for this opportunity to comment on the Law on Digital Transformation and the future of innovation in Vietnam. The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research centre that applies law & economics analysis to technology governance, competition, and consumer-protection policy. Our interest is to ensure that the Law on Digital Transformation advances consumer welfare and innovation through clear, predictable, and proportionate rules grounded in evidence and sound economics.

Vietnam has emerged as one of the most dynamic economies in Southeast Asia, powered by a tech-savvy population, rapid digitalization, an openness to global capital, and a regulatory environment that offers predictability and flexibility. The Law on Digital Transformation, however, threatens to disrupt this balance by creating a chilling effect on innovation that Vietnam can ill afford.

The Law on Digital Transformation’s prescriptive approach seeks to regulate digital markets before harms materialize—ignoring the crucial economic lesson that regulation is costly and should target demonstrable market failures. Vietnam’s existing competition law already provides robust tools to address anticompetitive conduct in both traditional and digital markets, including measures against cartels, abuse of dominance, and merger control. The bill would nonetheless erect a parallel regime focused narrowly on digital companies, introducing the very legal uncertainty that investors and innovators seek to avoid.

These risks are compounded when one considers that digital markets are characterized by dynamic competition—markets defined by innovation, iterative product development, and the constant creation of new consumer value. Companies like Apple, Google, Amazon, Netflix, and OpenAI all illustrate how new entrants can disrupt incumbents by identifying unmet consumer needs. In such markets, rigid, prescriptive rules risk freezing business models in place and stifling innovation.

In this respect, the proposed law’s blanket restrictions fail to distinguish between harmful and pro-competitive behaviour, undermining both incentives for innovation and long-term consumer welfare. The prohibitions on self-preferencing and tying, and the severe limitations on the use of consumer data—all practices that often benefit consumers—illustrate this risk. Each of these measures threatens to tilt the playing field against foreign investors, discourage innovation, and slow digital transformation. Restrictions on data collection, processing, and cross-border transfers, for example, could hinder the delivery of innovative services, disrupt existing business models, and raise compliance costs—all without a clear competitive justification.

Vietnam can look to Europe’s recent experience as a cautionary tale. The European Union’s Digital Markets Act (DMA), which seeks to curb the influence of so-called “gatekeepers,” illustrates the perils of heavy-handed digital regulation. Targeting successful U.S. tech firms while largely ignoring their pro-competitive contributions, the DMA’s restrictions have proven difficult to enforce and have already prompted Apple, Google, and Meta to defer deploying new AI innovations in Europe.

Meanwhile, Europe’s broader economic performance lags that of the United States: private-sector investment is lower, productivity growth is slower, and the region has struggled to produce global technology champions. Replicating this model in Vietnam would risk importing regulatory inefficiency without delivering the promised benefits.

These concerns about the proposed law’s substance are compounded by its procedural and institutional shortcomings. The EU expects to hire as many as 200 additional staff to implement the DMA. The similar Digital Markets, Competition and Consumer Act in the United Kingdom has required quadrupling its regulatory personnel. By contrast, Vietnam’s competition authority is not a legislative body, and expanding its power to dictate broad market rules raises separation-of-powers issues. Moreover, there is currently no public-consultation period scheduled for the Law on Digital Transformation, which means affected companies could have little time to adjust to complex new obligations.

Ultimately, regulation should be a last resort—applied only where markets demonstrably fail and in a manner that preserves incentives for innovation. Vietnam has every reason to nurture its digital economy through targeted, agile measures rather than importing a regulatory experiment whose costs and unintended consequences are already evident elsewhere.

By focusing on a streamlined, evidence-based approach, Vietnam can maintain the openness and predictability that have fuelled its recent success, continue attracting foreign investment, and encourage the dynamic competition that drives innovation and long-term growth. The Law on Digital Transformation risks turning regulation into a blunt instrument, signalling that policymakers are reacting to perceived gaps rather than addressing actual harms.

In the rapidly evolving digital economy, flexibility and evidence-based enforcement of competition law will serve Vietnam far better. Preserving this approach is not only an economic imperative but also a strategic choice: innovation thrives where rules are clear, predictable, and proportionate—not where regulation chokes the very markets it seeks to protect.

I. Introduction

The International Center for Law & Economics (ICLE) appreciates this opportunity to comment on the Bureau of Industry and Security’s investigation of the national-security implications of imports of personal protective equipment (PPE), medical consumables, and medical equipment. ICLE is a nonprofit research center that applies economic analysis to questions of law and regulation.

We oppose the application of Section 232 tariffs to medical devices and related products. The United States leads the world in medical-technology innovation and manufacturing, supported by open, rules-based trade with trusted allies. Imports of devices and components complement, rather than displace, U.S. production. Moreover, they are essential to maintain an efficient, resilient, and globally competitive health-care system.

Tariffs would raise costs for hospitals and patients, suppress investment and R&D, and undermine the very innovation that underpins U.S. health-security preparedness. Consistent with Section 232’s statutory purpose, U.S. policy should reinforce the strength of allied supply chains and maintain predictable, cooperative trade relationships that support—not impair—the nation’s medical-technology base.

II. Economic and Public-Health Impacts of Tariffs

Open and competitive trade is the foundation of economic prosperity, especially in innovation-driven sectors like medical technology. When markets are open, firms face competitive pressure to become more efficient, adopt new technologies, and invest in R&D. A broad literature confirms that exposure to global markets drives productivity growth, facilitates technology transfer, and supports sustained U.S. global leadership: the United States controls roughly 40% of the medical-technology (“medtech”) market, while export volumes exceed $141 billion and industry reinvestment in product innovation remains high.^[1]

The proposed application of Section 232 tariffs would reverse this dynamic, imposing new costs and instability throughout the medical-technology ecosystem. Modern trade theory emphasizes that comparative advantage evolves dynamically.[2] Access to international markets reshapes domestic capabilities by rewarding sectors that innovate and scale globally. This dynamic interplay between openness and innovation explains why U.S. medtech firms dominate such advanced product segments as imaging, diagnostics, and surgical robotics.

Conversely, barriers like tariffs or quotas impede this evolution, isolating firms from global knowledge flows and eroding long-term competitiveness. Maintaining open, rules-based trade with trusted partners thus strengthens—not threatens—U.S. economic security by reinforcing innovation, efficiency, and resilience in critical health-related industries.

Moreover, imposing tariffs on imports of medical devices, consumables, or related components under Section 232 would increase costs throughout the U.S. health-care system, slow adoption of advanced technologies, and weaken—rather than strengthen—national resilience. Because U.S. health providers operate under fixed reimbursement schedules, any increase in device costs directly translates into higher expenditures for hospitals, insurers, and Medicare, ultimately reducing patient access to life-saving technologies.

A. Tariffs Would Raise Input Costs for Hospitals and Health Systems

Hospitals and health systems already face persistent financial pressure due to inflation, labor shortages, and static Medicare-reimbursement rates. Tariffs would compound these pressures by increasing the cost of imported components and finished products that are integral to medical care. A 2024 analysis found that 82% of health-system executives expected tariff-related import expenses to raise hospital costs by about 15% within six months.[3] Likewise, tariffs on critical supplies are expected to increase costs and reduce availability of key products for hospitals.[4] These higher input prices are not absorbed by manufacturers alone; they are passed through the supply chain and ultimately borne by hospitals, private insurers, and federal programs like Medicare and Medicaid.

During prior rounds of Section 301 tariffs on Chinese medical imports, manufacturers and distributors in the medical-device sector reported cost pressures on various device components and subassemblies—such as electronics, sensors, housings, and tubing—especially for diagnostic, monitoring, and surgical devices.[5] This experience illustrates that trade restrictions intended to promote domestic production often have the opposite effect in highly integrated industries—eroding competitiveness and diminishing capacity for innovation.

B. Tariffs Would Raise Consumer Prices and Delay Adoption of Advanced Medical Technologies

Medical devices are capital-intensive goods with long procurement cycles and complex regulatory-approval requirements. When hospitals anticipate higher import prices or uncertain supply, they may postpone or cancel equipment upgrades. Tariffs on medical products would likely further strain an already fragile health-care supply chain, driving up costs and reducing the availability of essential medical devices and equipment.[6] Similarly, medtech manufacturers anticipate a combined tariff impact of more than $2 billion across 2024-2025, forcing many firms to reduce production and defer new-product launches.[7] As device upgrades are delayed, hospitals must continue using older, less-efficient technologies—directly undermining the goal of a modern and resilient health-care infrastructure.

Moreover, while a few multinational firms maintain relatively high returns, the medical-device sector actually operates on narrow effective margins, once research, compliance, and capital costs are included. Large device companies typically have profit margins of 20-30%.[8] Yet industry data suggest that the medical equipment and supplies sector on the whole now reports net margins in the upper single digits, with operating margins near 10%.[9] Recent financial benchmarking indicates that smaller and mid-sized medical-device manufacturers—firms responsible for much of the industry’s innovation—operate with earnings before interest and taxes (EBIT) of roughly 4.6% of their revenues, reflecting the sector’s tight margins relative to larger diversified medtech companies.[10] When margins are this thin, tariff costs cannot be easily absorbed; they are inevitably passed through, in large part, to hospitals and consumers in the form of higher prices.

Reduced profitability and policy uncertainty also discourage R&D investment. Industry analysis illustrates that medtech profitability has declined globally in recent years, with average operating income falling by roughly three percentage points, as inflation, supply-chain disruptions, and regulatory costs have all increased.[11] Additional tariff-driven cost increases would intensify this compression, leaving fewer resources for R&D and compliance.

And while medtech firms often enjoy healthy gross margins, those margins are critical to funding ongoing innovation. When those margins erode, firms lose the flexibility to reinvest in R&D, slowing the pace of new-product development.[12] Tariffs will shrink both the gross margins and the net margins, driving further retrenchment and depressing institutional capacity to invest in R&D.

The combined effect of higher import prices, reduced investment, and delayed innovation would therefore be fewer new medical technologies entering the U.S. market and slower replacement of aging equipment. In the long term, these consequences would erode the resilience of the U.S. health-care system—the very objective that these Section 232 investigations seek to secure.

C. Trade-Policy Uncertainty and Investment in Medical Technology

Even before tariffs take effect, the uncertainty surrounding their potential imposition can suppress investment and innovation in the medical-technology sector. Economists have long observed that volatility in trade policy leads firms to postpone or cancel capital expenditures and R&D, a dynamic known as the “real options” effect. When future input costs or market-access rules are unclear, it becomes rational for companies to delay irreversible investments until policy direction stabilizes. The cumulative effect across the industry is lower aggregate investment, slower entry into new markets, and diminished innovation.[13]

Empirical studies of the 2018–2019 trade-tension period found that a one-standard-deviation rise in trade-policy uncertainty reduced U.S. manufacturing investment by roughly 1–2% over the following year, independent of what actual tariff levels were imposed.[14] For innovation-intensive industries like medtech—where R&D costs typically take up 8% of annual revenues[15]—policy instability can translate quickly into deferred product development and delayed regulatory submissions. Firms facing uncertainty about tariff coverage, reimbursement effects, or retaliatory measures have strong incentives to redirect resources toward short-term operations, rather than long-term innovation.

Stable and predictable trade rules therefore constitute a precondition for maintaining U.S. technological leadership in medical devices. A tariff-driven environment characterized by periodic investigations and changing duty rates not only raises costs directly, but also magnifies uncertainty, depressing forward-looking investment across the supply chain. In this sense, trade-policy volatility functions as a hidden tax on innovation. A consistent, rules-based approach to international medical-device trade, anchored in transparency and allied cooperation, would better support the long-term competitiveness and national-security resilience of the U.S. medtech industry.

D. Tariffs on PPE Are an Inappropriate Economic Tool to Promote Reshoring

Importantly, Section 232 authority was designed to address genuine national-security threats from adversarial sources, not to penalize allied trade. Historically, successful 232 actions have targeted steel, aluminum, or critical minerals dominated by non-allied producers.[16] Applying this national-security tool to medical devices imported chiefly from NATO and USMCA partners would be inconsistent with both statutory intent and economic logic.[17] As the Bureau of Industry and Security has noted, the statute’s purpose is to mitigate “whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair the national security,” not to disrupt allied cooperation essential to public health.[18]

Further, medical-device manufacturing is inherently capital intensive and heavily regulated by the U.S. Food and Drugs Administration (FDA). Under 21 C.F.R. Part 820, manufacturers must validate every production line and supplier, with significant documentation and preapproval requirements for any process change.[19]

Although a tariff shock might be intended to spur reshoring, firms must in practice incur significant sunk costs and time to requalify suppliers and production processes. In the medical-device sector, supplier requalification itself often takes months, and includes mandatory audits, capability studies, quality-agreement updates, and validation under regulatory frameworks like 21 C.F.R. § 820.[20] Because many changes may require full validation of process and materials, the short-term shift in capacity is highly constrained and may lead to disruptions or shortages before any new domestic capacity becomes viable.

In short, Section 232 tariffs on medical devices and PPE would misidentify the source of risk. They would penalize integrated trade with close allies, undermine established regulatory and manufacturing networks, and inflict economic harm on precisely the industries that anchor U.S. health-security resilience.

III. The U.S. Medical Technology Industry: A Global Leader

Given the foregoing description of the economics of the medtech industry, it is worth asking why this sector—long a cornerstone of U.S. innovation and export strength—should be viewed as a national-security vulnerability at all. The United States is the undisputed global leader in medical-technology innovation and manufacturing. Indeed, U.S. companies account for roughly 40% of worldwide medical-device production, by far the largest share of any country.[21]

The medtech sector is defined by high-value, research-intensive manufacturing. The industry consistently reinvests around 7–8% of revenues into R&D, ranking among the highest R&D intensities in manufacturing.[22] This robust innovation ecosystem—fueled by leading research universities, deep venture-capital markets, and strong intellectual-property protections—drives continual advances in imaging equipment, in-vitro diagnostics, surgical robotics, and implantable devices. For example, U.S. firms are at the forefront of MRI and CT imaging technology, next-generation glucose monitors and diagnostic assays, robotic-assisted surgical systems, and artificial joints and stents, among many other cutting-edge products.[23]

The industry’s emphasis on innovation not only saves lives but also supports a high-skill domestic workforce: approximately 500,000 workers are employed directly in the U.S. medical-device-manufacturing industry, with total direct and indirect employment approaching 2 million.[24]

U.S. medtech firms are also vigorous exporters. The United States exported more than $100 billion in medical devices and related equipment in 2023.[25] Even in key product categories where global competition is intense, American firms excel. In earlier years, the United States achieved net export surpluses in high-value device categories such as diagnostic imaging and orthopedics. [26] Although more recent trade data show changes in the balance, the United States remains a leading global exporter in those segments.[27] These high-end devices—often produced by U.S. companies at home or in close trade-partner countries—compete on quality and innovation, rather than low cost.

In sum, the U.S. medtech industry’s global leadership is built on innovation, skilled employment, and export success. These factors underscore that America’s medical-device-manufacturing base is strong and globally competitive, a foundation for national health security that open trade further reinforces.

A. Allied Trade Relationships and Balanced Flows

The U.S. medical technology industry is deeply integrated into reciprocal trade relationships with allied economies, resulting in balanced flows of devices and components. America’s major trading partners for medical devices are not adversaries, but close allies: Europe (especially Germany, Ireland, and the Netherlands), Canada, Mexico, Japan, South Korea, and Singapore are both among the top sources of U.S. medtech imports and major destinations for U.S. exports.

In 2018, for example, the United States exported more than $20 billion in medical devices to the EU, which has historically accounted for nearly 40% of U.S. device exports.[28] Import data show that the European Union is also an important supplier of U.S. medical instruments. In 2023, it contributed roughly $11.5 billion of $19.5 billion in U.S. imports in that device category (roughly 59%).[29]

Meanwhile, North American partners—especially Canada and Mexico—play significant roles as regional suppliers and exporters in complementary device segments.[30] U.S.–Mexico trade in medical devices is largely balanced and complementary. In recent years, Mexico has been the leading supplier of U.S. medical-device imports, accounting for roughly 17% of total import value—mainly lower-technology products such as disposables and surgical instruments produced through cross-border manufacturing.[31]

Canada is also both a significant market and supplier in U.S. medical-device trade. Exports of medical equipment, supplies, and control instruments from Canada to the United States exceeded $6.8 billion in 2024.[32] Meanwhile, in 2024, Canada’s medical-device imports from the United States were C$5.9 billion, representing about 42% of Canada’s total medtech imports.[33]

In Asia, Japan and South Korea both purchase high-value U.S. devices (for example, Japanese hospitals import American orthopedic implants and diagnostic instruments), even as companies in those countries supply the United States with specialized components like optical lenses and semiconductor parts for medical equipment.[34]

These trade relationships are characterized by a two-way flow of goods: U.S. companies export complex finished devices and receive in return a range of inputs, subassemblies, and some finished products from allied nations. Importantly, imports from China constitute only a relatively small fraction of U.S. medtech imports (roughly 10% in recent years) and that share has been declining as U.S. sourcing diversifies toward allied suppliers.[35]

The evidence suggests a supply-chain strategy centered on trusted partners. The reciprocity and balance in these trade flows demonstrate that imports are largely coming from friends, and U.S. firms are succeeding in selling globally. Far from one-sided dependence, U.S. medtech trade with allies strengthens all parties.

B. Imports’ Role in Meeting U.S. Health-Care Demand

The COVID-19 pandemic offered a stark illustration of the importance of global supply networks in meeting surges in health-care demand. In normal times, imports fill critical gaps in the U.S. health system’s needs for medical devices and supplies, especially for specialized or lower-volume products that are not efficient to manufacture domestically at scale.

During the height of the pandemic, the United States leveraged imports from allies to rapidly scale up life-saving equipment. A prominent example was the surge in ventilator production in 2020: even as American manufacturers like General Motors and ventilator companies retooled to assemble ventilators domestically, they depended on imported inputs (valves, sensors, oxygen concentrators, etc.) from partner countries to boost output. According to contemporary analyses, the only feasible way to meet the unprecedented 500–1,000% increase in ventilator demand was to “supercharge ventilator makers’ global production capacities” by pooling resources across borders, rather than attempting total self-reliance.[36]

For example, Medtronic’s Ireland-based ventilator manufacturing facility reportedly ramped up production, reallocating staff and expanding shift coverage to supply global demand.[37] More broadly, European manufacturers took coordinated steps to bolster ventilator-component supply chains across countries.[38] Similarly, COVID-19 diagnostic test kits were produced through transnational cooperation, with U.S. labs relying on reagents and chemicals from allies (and vice versa) to scale up testing quickly.[39]

In short, imports function as both a safety valve and a source of resilience for U.S. health care; they ensure that American patients and doctors have timely access to every medical tool needed, especially when domestic production alone cannot immediately meet a spike in demand.

C. Resilience Through Diversification, Not Isolation

Policymakers increasingly recognize that supply-chain resilience in medical technology comes from diversification across trusted partners, rather than from attempting an autarkic approach. Empirical research on the recent supply disruptions demonstrates that geographic concentration of production is the primary vulnerability—for instance, overreliance on a single country or region for a critical component can create a choke point—whereas maintaining “safe openness” through a broad network of suppliers reduces risk.[40] Resilient medical supply chains depend on broad, cross-border diversification with built-in redundancies that allow production to adjust rapidly in response to shocks or disruptions.[41] In the medical-device sector, both industry and government have moved to implement this lesson.

U.S. and European manufacturers are increasingly coordinating to establish redundant production capacity for critical products. For example, U.S. medtech OEMs maintain production sites abroad to enable geographic flexibility in manufacturing.[42] Some have explicitly expanded manufacturing operations in Singapore and Southeast Asia, enabling them to shift production among locations in response to demand or disruption.[43] Major medtech firms from the United States, EU, and Japan also frequently rely on one another’s components, creating inherent redundancies—if one source goes offline, alternative sources in another allied nation can fill the gap.[44]

Such collaborative redundancy is bolstered by reciprocal regulatory recognition initiatives among allies. A salient case is the Medical Device Single Audit Program (MDSAP), which pledges the FDA and regulators in Canada, Japan, Australia, and other jurisdictions to accept a single standardized quality audit of a device manufacturer.[45] Programs like MDSAP streamline compliance across countries, enabling companies to shift production or substitute suppliers rapidly across jurisdictions without regulatory delay. Likewise, international regulatory guidance—such as the International Medical Device Regulators Forum’s (IMDRF) medical-device cybersecurity framework—explicitly aims for convergence of cybersecurity principles and practices across jurisdictions to preserve device functionality and patient safety, thereby enabling mutual reliance on allied medical products in emergencies.[46]

Crucially, embracing imports from a diverse set of allied economies enhances U.S. preparedness. A strong consensus has emerged that attempting to localize entire supply chains domestically would undermine resilience by cutting off access to alternative sources. A 2024 OECD report, for example, found that shortages in critical medical goods were best addressed by maintaining multiple sourcing options across different countries—smoothing potential disruptions.[47] Diversified global supply networks tend to recover faster from shocks than isolated national chains.[48] Similarly, countries with more trade partners had fewer medical supply shortages during COVID-19, whereas those dependent on one foreign source or solely on domestic production faced greater scarcity.[49]

The medtech sector’s own experience confirms that open, allied trade is a strength. The U.S. medical technology base is robust, in large part, due to its global links. Diversified sourcing enables “a consistent response to external stressors” and prevents overreliance on any single market or supplier.[50] In short, maintaining and expanding imports from trusted allies is not a strategic liability but a strategic asset for the United States. It builds redundancy, ensures access to lifesaving technologies not made at home, and grants flexibility to manage crises. In the face of pandemics and other disruptions, a diverse allied supply chain is America’s first line of defense, whereas protectionism and concentration would only foment greater fragility.

IV. Conclusion

The U.S. medtech sector is a pillar of both economic strength and national health security. Its global leadership depends on openness, stability, and collaboration with trusted trade partners. Section 232 tariffs on medical devices or PPE would erode these advantages—raising costs, amplifying uncertainty, and diverting resources away from the research and innovation that safeguard public health.

Rather than broad trade restrictions, national-security policy should focus on targeted, evidence-based measures that address specific vulnerabilities, while preserving the benefits of allied integration. A predictable, rules-based trade environment is essential to maintain U.S. competitiveness, investment, and readiness in critical medical technologies.

Accordingly, ICLE urges the U.S. Commerce Department to reject the use of Section 232 tariffs in this proceeding and to reaffirm that open, cooperative trade among allies is an asset to U.S. security—not a threat to it.

[1] See Medical Technology Industry, U.S. Int’l Trade Admin. SelectUSA, https://www.trade.gov/selectusa-medical-technology-industry (last visited Oct. 15, 2025); see also Medical Technologies, U.S. Int’l Trade Admin., https://www.trade.gov/medical-technologies-0 (last visited Oct. 15, 2025).

[2] See infra Section III.

[3] Sunit Patel & Rupert Watson, The Impact of Tariffs on Healthcare Costs, Mercer (Apr. 10, 2025), https://www.mercer.com/en-us/insights/us-health-news/the-impact-of-tariffs-on-healthcare-costs.

[4] Tina Freese Decker, Tariff Implications for American Health Care, AHA News (May 19, 2025), https://www.aha.org/news/chairpersons-file/2025-05-19-tariff-implications-american-health-care.

[5] See, e.g., Analysis of Section 301 Tariff Impacts on Electromedical Devices, Wash. Int’l Trade Ass’n (2022), available at https://www.wita.org/wp-content/uploads/2022/08/CTA_Section-301-Tariff-Whitepaper.pdf; see also The Hidden Risks of Tariffs in Medical Device Supply Chains, Everstream Anal., https://www.everstream.ai/articles/hidden-risk-tariffs-medical-devices (last visited Oct. 16, 2025).

[6] Robert M. Orfaly, Tariffs May Strain the Fragile Healthcare Supply Chain, AAOS Now (May 29, 2025), https://www.aaos.org/aaosnow/2025/may/commentary/commentary01.

[7] Susan Kelly, Cost Cuts, Production Shifts: How MedTech Firms Are Managing Tariffs, MedTech Dive (May 22, 2025), https://www.medtechdive.com/news/medtech-Q1-earnings-tariffs-impact/748794.

[8] An Overview of the Medical Device Industry (Ch. 7), in Report to the Congress: Medicare and the Health Care Delivery System, Medicare Payment Advis. Comm’n (Jun. 2017), available at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun17_ch7.pdf.

[9] Medical Equipment & Supplies Industry Profitability Ratios, CSIMarket, https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=804 (last visited Oct. 15, 2025).

[10] Medical Device Manufacturing: Industry M&A Trends, Valuation, and Financial Performance, InvestmentBank.com (Jun. 22, 2025), https://investmentbank.com/insights/medical-device-industry.

[11] Global MedTech 2023 – Stem the Tide, Roland Berger (2023), available at https://content.rolandberger.com/hubfs/07_presse/Global_MedTech_2023.pdf.

[12] See id.; See also Pulse of the MedTech Industry Report 2025, EY Insights (2025), available at https://www.ey.com/content/dam/ey-unified-site/ey-com/en-gl/industries/life-sciences/documents/ey-gl-medtech-pulse-report-09-2025.pdf.

[13] See, generally, Dario Caldara et al., The Economic Effects of Trade Policy Uncertainty, 109 J. Monetary Econ. 38 (2020), available at https://www.federalreserve.gov/econres/ifdp/files/ifdp1256.pdf; see also Kyle Handley & Nuno Limão, Trade Policy Uncertainty, 14 Ann. Rev. Econ. 363 (2022), available at https://www.nber.org/papers/w29672.

[14] Id.

[15] Richard Bartlett et al., Medtech Pulse: Thriving in the Next Decade, McKinsey & Co. (Sep. 2023), available at https://www.mckinsey.com/~/media/mckinsey/industries/life%20sciences/our%20insights/medtech%20pulse%20thriving%20in%20the%20next%20decade/medtech-pulse-thriving-in-the-next-decade.pdf; Innovation — The European Medical Technology in Figures, MedTech Europe, https://www.medtecheurope.org/datahub/innovation (last visited Oct. 15, 2025).

[16] Section 232 Investigations: Overview and Issues for Congress, Cong. Res. Svc. (2021), available at https://www.congress.gov/crs_external_products/R/PDF/R45249/R45249.35.pdf; Scott Lincicome & Inu Manak, Protectionism or National Security? The Use and Abuse of Section 232, Policy Analysis No. 912, Cato Inst. (2021), https://www.cato.org/policy-analysis/protectionism-or-national-security-use-abuse-section-232.

[17]  19 U.S.C. § 1862; see also Section 232 Investigations Program, U.S. Dep’t of Commerce Bure. of Ind. & Sec., https://www.bis.doc.gov/232 (last visited Oct. 15, 2025).

[18] Id.

[19] 21 C.F.R. § 820 (2025).

[20] See Ben Bancroft, Ultimate Guide to Supplier Management for Medical Device Companies, Greenlight Guru (Nov. 8, 2023), https://www.greenlight.guru/blog/supplier-management-medical-device; Medical Device Supplier Management: Definition, Requirements, and Process, SimplerQMS (Aug. 11, 2025), https://simplerqms.com/medical-device-supplier-management; Quality System Regulation: Process Validation, U.S. Food & Drug Admin. (2015), available at https://www.fda.gov/media/94074/download.

[21] See Medical Technologies, U.S. Int’l Trade Admin., https://www.trade.gov/medical-technologies-0 (last visited Oct. 15, 2025); see also Medical Device Industry Facts, AdvaMed, https://www.advamed.org/medical-device-industry-facts (last visited Oct. 15, 2025).

[22] Facts & Figures 2024, MedTech Europe (Jul. 2024), available at https://www.medtecheurope.org/wp-content/uploads/2024/07/medtech-europe–facts-figures-2024.pdf.

[23] See, e.g., Scott Whitaker, Testimony Before the U.S. Senate Committee on Finance, AdvaMed (May 14, 2025), at 1, https://www.advamed.org/industry-updates/news/advamed-testifies-in-u-s-senate.

[24] SelectUSA: Medical Technology Industry, U.S. Int’l Trade Admin., https://www.trade.gov/selectusa-medical-technology-industry (last visited Oct. 15, 2025).

[25] Id.

[26] Medical Devices and Equipment: Competitive Conditions, U.S. Int’l Trade Comm’n (2006), at 4, available at https://www.usitc.gov/publications/332/pub3909.pdf.

[27] U.S. Medical Devices: Imports and Exports, the Role of Tariffs and the FDA, Fla. Int’l. Med. Expo (2020), available at https://www.fimeshow.com/content/dam/Informa/fimeshow/en/downloads/FIME20-US-medical-device-report-eng.pdf.

[28] Healthcare Resource Guide – European Union, U.S. Int’l Trade Admin., https://www.trade.gov/healthcare-resource-guide-european-union; Brian Daigle & Mihir Torsekar, The EU Medical Device Regulation and the U.S. Medical Device Industry, J. Int’l Commerce & Econ. (Nov. 2019), available at https://www.usitc.gov/publications/332/journals/eu_medical_device_regulation_us_medical_device_industry.pdf.

[29] Instruments and Appliances Used in Medical or Veterinary Sciences: 2023 Imports by Country (HS 901890), World Bank, https://wits.worldbank.org/trade/comtrade/en/country/ALL/year/2023/tradeflow/Imports/partner/WLD/product/901890 (last visited Oct. 15, 2025).

[30] Country Commercial Guide: Canada — Medical Devices, U.S. Int’l Trade Admin., https://www.trade.gov/country-commercial-guides/canada-medical-devices (last visited Oct. 15, 2025).

[31] See FIME, supra note 28.

[32] See Hessam Mehrabi & Rambod Behboodi, The Evolving Tariff Threat: Impact on Med-Tech and Life Science Industries, Borden Ladner Gervais LLP (Feb. 27, 2025), https://www.blg.com/en/insights/2025/02/the-evolving-tariff-threat-impact-on-med-tech-and-life-science-industries.

[33] See Medical Devices: Industry Profile, Innov., Sci. & Econ. Dev. Can., https://ised-isde.canada.ca/site/canadian-life-science-industries/en/medical-devices/industry-profile (last visited Oct. 15, 2025).

[34] See Country Commercial Guide: South Korea — Medical Equipment and Devices, U.S. Int’l Trade Admin., https://www.trade.gov/country-commercial-guides/south-korea-medical-equipment-and-devices (last visited Oct. 15, 2025).

[35] See CGlobalization of U.S. Medical Product Supply Chains, in Medical Product Access and Innovation, Nat’l Acads. Press (2021), https://www.ncbi.nlm.nih.gov/books/NBK583730.

[36] COVID-19 Ventilator Shortage: Manufacturing Solution, World Econ. Forum (2020), https://www.weforum.org/stories/2020/04/covid-19-ventilator-shortage-manufacturing-solution.

[37] Ventilator Manufacturer Ramps Up Production Amid Coronavirus Crisis, 24×7Mag (Mar. 22, 2020), https://24x7mag.com/medical-equipment/patient-care-equipment/ventilators/ventilator-manufacturer-ramps-production-coronavirus-crisis.

[38] One Crisis, Different Paths to Supply Resilience, Nat’l Lib. of Med. (2022), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9705261.

[39] Samuel M. Goodman, COVID-19 Testing Supplies One Year into the Pandemic (USITC Working Paper ID-21-076,  2021), available at https://www.usitc.gov/publications/332/working_papers/wp_id_21_076_covid-19_testing_supplies_compiled_052121-compliant.pdf.

[40] Richard Baldwin & Rebecca Freeman, Risks and Global Supply Chains: What We Know and What We Need to Know (NBER Working Paper No. 29444, 2021), available at https://www.nber.org/system/files/working_papers/w29444/w29444.pdf.

[41] Susan Lund, Building National Supply Chain Resilience, McKinsey Glob. Inst. (Jul. 11, 2021), https://www.mckinsey.com/mgi/media-center/building-national-supply-chain-resilience.

[42] See The 2024 Global Medtech Contract Manufacturing Report, Alira Health (Feb. 2024), available at https://alirahealth.com/wp-content/uploads/The-2024-Global-Medtech-Contract-Manufacturing-Report.pdf.

[43]  See Medtech CDMOs in Southeast Asia: Landscape Overview and Investment Opportunities, L.E.K. Consult. (Jun. 17, 2025), available at https://www.lek.com/sites/default/files/insights/pdf-attachments/medtech-cdmos-sea.pdf; What Makes Singapore the Best Hub in Asia for MedTech Manufacturing, Sing. Econ. Dev. Bd. (Nov. 11, 2024), https://www.edb.gov.sg/en/business-insights/insights/what-makes-singapore-the-best-hub-in-asia-for-medtech-manufacturing.html.

[44] See Decoding Tariff Volatility: How MedTech Must Remodel for Resilience, Kearney (Jul. 30. 2025), https://www.kearney.com/industry/health/article/decoding-tariff-volatility-how-medtech-must-remodel-for-resilience.

[45] See MDSAP: Purpose, Structure & Participating Authorities, Med. Dev. Sngl. Audit Program, https://www.mdsap.global (last visited Oct. 15, 2025).

[46] Principles and Practices for Medical Device Cybersecurity, Int’l. Med. Dev. Regulators Forum (Mar. 18, 2020), available at https://www.imdrf.org/sites/default/files/docs/imdrf/final/technical/imdrf-tech-200318-pp-mdc-n60.pdf.

[47] Securing Medical Supply Chains in a Post-Pandemic World, OECD (2024), https://www.oecd.org/en/publications/2024/02/securing-medical-supply-chains-in-a-post-pandemic-world_3c8cef7c.html.

[48] See, e.g., Laura Lebastard, Marco Matani, & Roberta Serafini, Understanding the Impact of COVID-19 Supply Disruptions on Exporters in Global Value Chains, CEPR/VoxEU (Mar. 24, 2023), https://cepr.org/voxeu/columns/understanding-impact-covid-19-supply-disruptions-exporters-global-value-chains.

[49] Id.

[50] Building Supply Chain Resilience: White Paper, AdvaMed (2023), available at https://www.advamed.org/wp-content/uploads/2023/06/Building-Supply-Chain-Resilience-White-Paper-final.pdf.

Introduction

We thank the European Commission for launching this call for evidence on the forthcoming Digital Omnibus to simplify EU rules on data, cybersecurity, and artificial intelligence. ICLE is a nonprofit, nonpartisan research centre that applies law & economics analysis to technology governance, competition, and consumer-protection policy. Our interest is to ensure that the EU’s digital rulebook advances consumer welfare and innovation through clear, predictable, and proportionate rules grounded in evidence and sound economics.

In this submission, we highlight the aspects of the Digital Omnibus proposal that we consider particularly worthy of support (Section I).

In Section II, we comment on the General Data Protection Regulation (GDPR), the key element of the EU digital acquis in need for reform, but which is not mentioned in the consultation document.

Given our mission to apply law & economics analysis, in Section III, we comment on the methodology to identify simplification priorities. As an example, we focus on the importance of taking seriously the impacts of policy choices on business users. Reform initiatives that fail to do so are likely to fall short in addressing numerous significant barriers to innovation and economic growth posed by EU law.

I. Executive Summary

A. Supported Digital Omnibus Proposals

• ePrivacy Directive Reform: Remove Article 5(3) cookie provisions and rely on the GDPR’s more flexible framework, eliminating duplicative requirements and the overly restrictive binary-consent model that lacks “legitimate interest” provisions.
• Cybersecurity Reporting: Streamline overlapping incident-reporting obligations across the AI Act, GDPR, NIS2 Directive and other frameworks in order to reduce redundant reporting burdens.
• AI Act Implementation: Ensure proportionate enforcement that balances innovation needs with compliance, particularly for startups whose resources may be diverted from development.

B. GDPR Simplification

• The consultation omits GDPR reform, despite the Commission’s commitment to assess the digital acquis; this represents a missed opportunity for meaningful simplification.
• The core problem is not the GDPR’s text, but its enforcement structure, which fosters privacy absolutism by enabling data-protection authorities (DPAs) to act as both prosecutor and judge with near-limitless discretion.
• Current enforcement treats privacy as supreme over all other EU objectives, contradicting both the GDPR’s own proportionality principles and broader EU economic goals.
• Proposed solutions include embedding proportionality in the main GDPR text and establishing multidisciplinary tribunals not entirely composed of privacy lawyers, in order to balance competing rights and economic realities.

C. Methodological Concerns About Identifying Simplification Targets

• Simplification efforts must consider significant indirect effects, including how restrictions on digital platforms harm their business users.
• Examples of overlooked impacts:
  • DMA enforcement against Meta degrading advertising tools without analysing damage to EU business advertisers.
  • Political advertising shutdown by major platforms due to unclear EU rules.
  • 30% traffic drop for EU hotels after DMA enforcement on Google, benefiting large U.S. travel agencies instead.
• Current impact assessments fail to capture these significant indirect barriers to EU innovation and economic growth.
• This should lead to careful analysis of indirect negative effects of the EU digital acquis, including asymmetric regulations (DMA, DSA).

II. The Digital Omnibus Proposals

A. ‘Rules on cookies and other tracking technologies laid down by the ePrivacy Directive’

We agree with the Commission that the provisions of the ePrivacy Directive on cookies and technologies used for similar purposes are outdated. A pragmatic solution would be to remove those provisions (in particular, Article 5(3) of the ePrivacy Directive) and rely on the more flexible data-protection framework from the GDPR.

The current interpretation of Article 5(3) has evolved far beyond its original scope, as evidenced by recent European Data Protection Board (EDPB) guidelines that would require consent for URL and pixel tracking, IP-based tracking, certain forms of “local processing” once information (or its derivatives) leaves the device, and other mechanisms such as headers or authentication tokens.[1] This expansive interpretation effectively treats any information exchange between a user device and a server as requiring prior consent, with only two extremely narrow exceptions: transmission of communications and services “strictly necessary” for explicitly requested functions.

Unlike the GDPR, the ePrivacy Directive offers no “legitimate interest” basis for processing, forcing businesses into a binary choice between obtaining consent or fitting within increasingly narrowly interpreted technical-necessity exceptions. This rigid framework fails to recognize that certain processing activities—such as basic analytics or funding mechanisms for free services—may be essential for sustainable service provision, even if they do not fit a very narrow interpretation of technical necessity.

The disconnect between the restrictive approach embodied by many DPAs’ interpretation of the ePrivacy Directive and the GDPR’s more nuanced framework creates legal uncertainty and compliance burdens, without clear privacy benefits.

When authorities interpret “necessity” to exclude economic or business necessities, such as revenue generation, they effectively undermine sustainable business models upon which European consumers may rely. This is particularly problematic for SMEs and startups that depend on standard web analytics and advertising technologies to compete effectively in digital markets.

Rather than attempt to implement further patchwork fixes to these outdated provisions, the Commission should recognize that the GDPR already provides comprehensive data-protection rules with appropriate balancing mechanisms. Removing Article 5(3) and related provisions would eliminate duplicative requirements, while maintaining strong privacy protections through the GDPR’s more sophisticated and flexible framework.

If full repeal is not feasible, the Omnibus could nonetheless narrow the gap by codifying clear exemptions for analytics, security/fraud prevention, and basic service-quality measurement. Moreover, it would be advisable to align “necessity” under the ePrivacy Directive with the GDPR’s proportional, risk-based view of necessity. But the principled solution remains to remove Article 5(3) and govern these practices under the GDPR.

B. ‘Cybersecurity related incident reporting obligations’

We welcome the proposal to streamline overlapping horizontal and sector-specific obligations and reporting tools in order to minimise reporting burden. Under the AI Act, the GDPR, the NIS2 Directive, and multiple other legal frameworks, businesses and other institutions may face separate duties to report the same incident in differing ways.

C. ‘The smooth application of the AI Act rules’

The rush to regulate artificial intelligence in the EU—combined with last-minute changes to the legislative proposals made in response to ChatGPT’s emerging market success—resulted in legislation (the AI Act) that may significantly hamper the EU’s adoption of these pivotal technologies. As we noted in our work on tech startups, compliance with the AI Act may divert significant resources from startups and stifle their development.^[2]

It is thus important to ensure that the AI Act’s provisions are enforced proportionately. This must include a careful evaluation of any guidelines and other documents meant to implement the law. AI Act implementation efforts to date, including drafting of the General Purpose AI Code of Practice, have not treated AI’s potential to improve European economic welfare with sufficient seriousness.

III. GDPR Simplification

In the communication on “A Simpler and Faster Europe”, the Commission refers to “the broader assessment, during the first year of the mandate, of whether the expanded digital acquis adequately reflects the needs and constraints of businesses such as SMEs and small midcaps, going beyond necessary guidance and standards that facilitate compliance”.[3] While the Commission listed the GDPR among the digital acquis that would be subject to assessment, the Digital Omnibus proposal’s published outline does not include any improvements to the GDPR.

This omission represents a critical missed opportunity. While the GDPR’s substantive provisions aren’t necessarily the core problem—as the regulation was intended to protect personal data while acknowledging the need to balance privacy with other fundamental rights and societal goals—the law’s enforcement structure has produced a disproportionate, absolutist interpretation of privacy law. The real challenge facing European businesses is not merely this administrative burden but fundamental uncertainty about compliance boundaries, driven by an enforcement framework that systematically privileges privacy over all other objectives of EU law.

The current regime empowers DPAs as both prosecutor and judge, wielding enormous power to impose crippling fines in service of a privacy-maximalist agenda. DPAs appear driven by the belief that their sole responsibility is to maximize privacy and data protection, requiring regulated businesses to demonstrate—against an extremely high standard of proof—that any other interests might justify deviating from the most privacy-focused approach. While regulators acknowledge GDPR’s Recital 4, which explicitly addresses proportionality and the non-absolute nature of privacy rights, this principle remains subordinated to enforcement practices that treat privacy as supreme.

The recent EDPB Opinion on AI models exemplifies this structural failure: It provides a lengthy list of compliance measures, while offering no guarantees that following such measures will satisfy enforcement authorities. It therefore effectively grants regulators near-limitless discretion, while providing minimal practical guidance to those trying to innovate responsibly.[4]

This fundamental disconnect from economic realities means EU businesses cannot rely on any consistent interpretation of compliance—even those ostensibly tested in enforcement proceedings. Even the threat of discretionary regulatory enforcement, combined with the risk of heavy fines, can chill investment decisions significantly, as well as innovation at the margins.

The approach adopted by CNIL, the French DPA, in its guidance on AI and the GDPR contrasts favourably with the EDPB document.[5] While CNIL demonstrated that proportionate and pragmatic guidance is possible under the GDPR is possible, it is clear that the EDPB is currently institutionally incapable of following CNIL’s lead.

The enforcement framework’s institutional bias toward privacy absolutism contradicts not only the GDPR’s text but also the EU’s broader ambitions, as outlined in the Draghi report and the Commission’s stated goals. This model fails to adequately represent the non-privacy rights and interests of individuals—particularly vital interests like economic security that fall within the purview of political authorities whose involvement is currently seen as anathema under the interpretation of DPA “independence”.

The Commission’s proposed GDPR Procedural Regulation fails to address these fundamental issues, merely tinkering at the margins while leaving the privacy-absolutist enforcement structure intact. Rather than focusing on recordkeeping requirements for SMEs—a performative exercise that would waste this opportunity—Europe needs a proportionate data-protection framework that avoids absolutist zealotry and recognizes privacy as one vital interest among many, including economic security and freedom of expression.

Without credible guarantees that the GDPR will be interpreted through the lens of proportionality and in harmony with the full spectrum of EU law objectives—from the Digital Single Market to fundamental freedoms—any simplification efforts will remain superficial. The Commission should recognize that meaningful GDPR simplification requires addressing this structural imbalance in enforcement.

How can this be addressed?

First, the main text of the GDPR could be amended with explicit references to the principle of proportionality, the risk-based approach, and the need to balance privacy and data protection with other rights and values (e.g., amending and moving the content of Recital 4). This would constitute an important declaration but would likely be insufficient, given the DPAs’ entrenched attitudes.

Second, the principle of proportionality could be embedded institutionally, ensuring that data protection serves its intended purpose without undermining Europe’s economic competitiveness and other fundamental values. One way to move in this direction would be to involve an independent, multidisciplinary tribunal to decide on enforcement actions and guidance documents—a body not stacked with privacy lawyers but that would include economists, business experts, and generalist judges who could weigh privacy alongside other fundamental rights and Europe’s need for innovation and growth.^[6] Such a tribunal’s legal framework could require it to articulate how each decision balances data protection against other fundamental rights and economic realities, ensuring that privacy isn’t automatically placed above freedoms such as conducting business, research, or expression.

IV. How to Identify Simplification Goals: Significant Indirect Effects

Given our mission to apply law & economics analysis, we also wish to comment on the methodology for identifying simplification priorities. We will do so in this section using the example of the importance of taking impacts on business users seriously in policy choices. By focusing on removing some administrative barriers directly imposed on some businesses, the Commission may lose sight of more serious barriers created by imposing restrictions on suppliers (e.g., online marketplaces, platforms) upon which EU SMEs and mid-caps rely. This example demonstrates that the current process of impact assessment and policy design risks failing to notice some of the very significant barriers to innovation and economic growth posed by EU law.

In the already-cited communication on “A Simpler and Faster Europe”, the Commission highlighted that “improving how we make rules” will be a priority, and that this will include “reinforced SME and competitiveness checks”.[7]

In that spirit, we stress that legal restrictions on digital-business activities are likely to constitute more significant barriers for EU businesses than mere “red tape” obligations. Moreover, such significant barriers can arise from legal duties imposed on other businesses. Impact assessments of the kind currently conducted by the Commission can easily overlook this reality.

To illustrate, consider how EU businesses and other organisations that rely on large online platforms to reach their audiences are under risk from legal restrictions imposed on those platforms.

EU data-protection authorities have demonstrated growing hostility to personalised advertising, refusing to recognise the economic nature of the relationship among online platforms, their users, and business users (advertisers).

This regulatory hostility has tended to lack serious reflection on how restrictions on ad targeting will affect business users. Many EU businesses—particularly SMEs—simply could not function without cost-effective ways to target relatively niche audiences. A niche artisanal producer or a startup launching an innovative product will often depend on the ability to reach specific audiences without the massive budgets required for broad brand advertising.

In its DMA-enforcement decision against Meta, the Commission acknowledged that Meta’s advertising platform provides unparalleled scale and personalisation capabilities. Yet the Commission’s approach would be to degrade these tools without any analysis of the collateral damage to Meta’s business users. This is an example of enforcement practice that dangerously disregards the consequences for EU businesses other than the direct addressee of the decision.

Ironically, this kind of regulatory assault on personalised advertising may prevent the emergence of the very EU digital champions that policymakers claim to want. Consider that TikTok—one of the biggest challengers to established online platforms in recent years—was to a considerable extent promoted through effective advertising on existing platforms like Facebook and Instagram. If we hope for future EU challengers to emerge and scale, closing off the most effective ways to reach EU audiences will be profoundly counterproductive.

New entrants and challengers depend on targeted advertising both to acquire users cost-effectively and to generate revenue. By making personalised advertising increasingly difficult or impossible, EU regulations risk creating a moat around incumbent positions—the opposite of the stated goal of promoting contestability.

Analogous downstream consequences of regulations that target platforms are already visible in the political-advertising sphere. Google, Meta, and Microsoft have turned off political advertising in the EU rather than risk falling afoul of unclear rules around political ads.[8] As reported in the press, this has significant implications for political and issue messaging in the EU, limiting the ability of political parties, civil-society organisations, and advocacy groups to reach citizens effectively. This shutdown should serve as a cautionary tale. If personalised advertising is significantly restricted for standard commercial ads, the impact on EU businesses would be far more disruptive.

Another example of the consequences of ignoring business-user impacts is the DMA’s demonstrated effect on hotels. When the DMA was enforced against Google’s hotel-search features, European hotels experienced a 30% drop in direct booking traffic and a 36% decline in direct bookings.^[9]

Moreover, among the primary beneficiaries were large American online travel agencies like Booking.com and Expedia, which captured the market share that EU hotels lost. HOTREC, representing more than two million European hospitality businesses, described this outcome as “paradoxical”: an EU law intended to promote competition that ended up harming EU small businesses, while benefiting large U.S. corporations.[10]

The lesson from this example is that the EU digital acquis—including the GDPR, but also asymmetric regulations like the DMA and the DSA—need to be subjected to careful analysis of their negative indirect effects. The impact assessment behind the DMA can serve as a case study of poor analysis of indirect effects, where positive indirect effects were assumed without robust analysis, while negative indirect effects were ignored.

[1] European Data Protection Board, Guidelines 2/2023 on Technical Scope of Article 5(3) of the ePrivacy Directive (7 October 2024), https://www.edpb.europa.eu/our-work-tools/our-documents/guidelines/guidelines-22023-technical-scope-art-53-eprivacy-directive_en.

^[2] Dir Auer & Lazar Radic, A Europe Fit for the Age of Startups: Rhetoric and Reality in the EU’s Digital Package, Int’l Ctr. L & Econ. (August 2025), https://laweconcenter.org/resources/a-europe-fit-for-the-age-of-startups-rhetoric-and-reality-in-the-eus-digital-package.

[3] European Commission, A Simpler and Faster Europe: Communication on Implementation and Simplification (1 February 2025), available at https://commission.europa.eu/document/download/8556fc33-48a3-4a96-94e8-8ecacef1ea18_en?filename=250201_Simplification_Communication_en.pdf.

[4] European Data Protection Board, Opinion 28/2024 on Certain Data Protection Aspects (Art. 64) (2024), https://www.edpb.europa.eu/our-work-tools/our-documents/opinion-board-art-64/opinion-282024-certain-data-protection-aspects_en.

[5] Commission Nationale de l’Informatique et des Libertés (CNIL), IA et RGPD : la CNIL Publie ses Nouvelles Recommandations Pour Accompagner une Innovation Responsable (7 February 2025), available at https://www.cnil.fr/fr/ia-et-rgpd-la-cnil-publie-ses-nouvelles-recommandations-pour-accompagner-une-innovation-responsable.

^[6] See Miko?aj Barczentewicz, A Serious Target for Improving EU Regulation: GDPR Enforcement, EUTechReg (27 February 2025) https://eutechreg.com/p/a-serious-target-for-improving-eu.

[7] European Commission, supra note 3.

[8] Ellen O’Regan & Eliza Gkritsi, EU Political-Ad Rules Kick In for Google, Meta, Microsoft, Politico (May 2025), https://www.politico.eu/article/eu-political-ad-rules-google-meta-microsoft-big-tech-kick-in.

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

[10] HOTREC, Joint Industry Statement on Google Search and Article 6.5 of the Digital Markets Act (6 March 2024), https://www.hotrec.eu/en/policies/joint_industry_statement_on_google_search_and_article_6-5_of_the_digital_markets_act.html.

Executive Summary

We are pleased to offer comments to the Intellectual Property Office (IPO) regarding its consultation on standard-essential patents (SEPs).[1] The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth.

The IPO is considering new regulations for SEPs—patents necessary to implement technical standards, such as those used in smartphones. The IPO claims “systemic issues” require government intervention, but this assertion contradicts substantial evidence and repeats mistakes recently made by the European Union.

The IPO’s premise of market failure lacks empirical support. A comprehensive 2023 European Commission study found no evidence that current SEP-licensing practices deter innovation or cause companies to avoid standardized technologies. SEP litigation rates are low and falling relative to other patent disputes. The European Commission recently withdrew its own similar regulation after it failed to gain support, largely because it could not demonstrate a problem requiring intervention.

The consultation focuses exclusively on “patent holdup”—the theoretical risk that patent owners might overcharge implementers. It ignores, however, the well-documented problem of “patent holdout”, where companies deliberately delay or refuse licensing, forcing patent owners into costly litigation. A 2024 study estimated patent owners lost $7-28 billion in 2021 alone due to holdout behaviour. Proceeding with interventions shaped by this one-sided perspective is likely to foster proposals that systematically favour infringers over innovators.

There are serious problems with each of the main interventions the IPO has thus far proposed. The so-called Rate Determination Track is a government price-setting mechanism that would function as a price-control mechanism, replacing efficient market negotiations with bureaucratic decisions. It would encourage companies to avoid good-faith negotiations and would ultimately diminish the incentives to innovate. A second potential intervention would establish mandatory databases and essentiality checks, which impose costly burdens on innovators while providing questionable value. Given that only an estimated 25-40% of declared SEPs are truly essential, creating databases with poor signal-to-noise ratios could enable strategic delay tactics. Finally, weakening inventors’ ability to obtain injunctions would do more harm than good. Limiting injunctions to prevent unauthorized use would remove the primary deterrent against infringement. This would, in turn, encourage “efficient infringement” strategies, where companies simply use technology without permission and treat eventual royalties as business costs.

These proposals would reduce patents’ value and enforceability, directly contradicting the IPO’s mission to promote innovation and economic growth. They would particularly harm small companies and startups that rely on strong patents to attract investment. By weakening patent protection, the UK would inadvertently subsidize foreign manufacturers, while undermining its own innovators.

The UK already possesses excellent courts capable of resolving these disputes. Rather than create new regulations to more stringently police a non-existent problem, the IPO should maintain strong property rights and allow market-based solutions to develop naturally.

I. Introduction and Overview

The IPO’s consultation proceeds from the assertion that “available evidence indicates there are systemic issues in the SEPs ecosystem around transparency and dispute resolution that may require government intervention”.[2] This premise, which suggests a dysfunctional market in need of correction, animates the series of regulatory proposals that follow.

This narrative, however, is not new. It closely mirrors the one that underpinned the European Commission’s proposed SEP regulation, an initiative that was ultimately withdrawn.[3] As the Research Network for Digital Ecosystem, Economic Policy, and Innovation (Deep-In) observed in its comments to this consultation, the concerns about systemic inefficiencies “lack robust support from empirical evidence”.[4] The central criticism levelled against the EU initiative was its weak economic justification, as there was “no discernible evidence of a market failure that needs to be addressed”.[5]

The empirical record directly contradicts the premise of a systemic market failure. A comprehensive 2023 study commissioned by the European Commission and authored by Justus Baron, Pere Arque-Castells, and others examined the SEP-licensing landscape in detail.[6] The study concluded that existing empirical evidence on the causal effects of current SEP-licensing conditions is “largely inconclusive”.[7] Specifically, the study found no evidence that frictions in licensing under fair, reasonable, and non-discriminatory (FRAND) terms deter patent holders from contributing to standards development or cause technology implementers to choose alternative, non-standardized technologies.[8] Furthermore, the study found that the prevalence of SEP litigation is low when compared to patent litigation involving non-SEPs and that it is not increasing over time.[9] In fact, the share of declared SEPs subject to litigation has recently decreased.[10]

The IPO’s consultation proceeds as if this body of evidence does not exist, and makes only a passing reference to Baron et al.’s research published by the European Commission.[11] By adopting a narrative of market failure that has already been empirically tested and found wanting in a neighbouring jurisdiction, the IPO appears to engage in a form of regulatory cascade. This process, where a policy idea is perpetuated despite a lack of evidentiary support, suggests a policymaking process driven by theoretical concerns or stakeholder lobbying, rather than robust, independent data.

Given this fundamental disconnect between the consultation’s premise and the available evidence, the IPO’s proposed interventions are solutions in search of a problem. This analysis will demonstrate that the IPO’s diagnosis of “systemic issues” is not supported by the data, and that the proposed remedies are therefore unwarranted and likely to cause significant unintended economic harm.

II. Lessons from the EU’s Failed SEP Regulation

In April 2023, the European Commission unveiled a sweeping proposal to regulate SEPs. The regulation aimed to increase transparency and efficiency by creating a new centralized bureaucracy within the EU Intellectual Property Office (EUIPO). This new “Competence Centre” would have administered a mandatory SEP register, conducted “essentiality checks”, and most controversially, overseen a mandatory, prelitigation FRAND-determination process that would have delayed a patent holder’s right to seek redress in court.

ICLE explained at the time that the proposal was a solution in search of a problem.[12] The regulation was an unnecessary and dangerous intervention that lacked sound economic justification. The Commission’s own impact assessment failed to provide evidence of a systemic market failure. Instead, data showed that SEP litigation in Europe was stable or even falling.

The proposal’s core mechanism—a mandatory nine-month conciliation process before a patent holder could go to court—would have dismantled the existing judicial framework and tilted the playing field decisively in favor of implementers. By removing the immediate threat of an injunction, it would have created a “safe harbour” for infringement and exacerbated the problem of patent holdout.

The proposal triggered a fierce battle. Implementer groups—such as the Fair Standards Alliance—praised it as a necessary check on patent holdup. Major European innovators like Ericsson and Nokia, however, condemned it as an unbalanced intervention that would undermine Europe’s technological leadership and jeopardize the global standardization ecosystem.

Ultimately, the regulation failed to gain sufficient political support, and the Commission announced its withdrawal in early 2025. The demise of the EU SEP regulation is a powerful, real-world validation of the law & economics critique of prescriptive, top-down regulation. It demonstrates that, when they are based on flawed economic logic and a lack of empirical evidence, such interventions can and should be rejected by the market and political processes.

III.    The Consultation’s Pronounced Bias Against Patent Holders

The IPO consultation states its ambition to shape a “balanced ecosystem” that ensures “SEP holders can protect and enforce their rights and licensees can develop standard compliant products”.[13] Yet the document’s explicit objective is to “help implementers, especially SMEs, navigate and better understand the SEPs ecosystem”.[14] This framing reveals an analytical asymmetry that pervades the entire consultation.

The document’s focus reflects a pronounced “holdup bias” that assumes SEP holders can leverage their position to demand supra-FRAND royalties after a standard is adopted, and that implementers have made sunk investments that lock them into using the standard.[15] The IPO’s concern about licensing offers that have “exceeded court adjudicated rates by 4-500 times”[16] and the “threat of injunctions” being used to extract high rates is a clear manifestation of this bias.[17]

While focusing on this theoretical risk, the consultation entirely disregards the countervailing and empirically more significant problem of patent “holdout”, also known as “efficient infringement”.[18] Holdout occurs when technology implementers strategically delay or refuse to take a license for the patents they are using, forcing innovators into costly and protracted litigation to enforce their property rights. This is not a trivial omission. As Deep-In reports, UK courts have recognized holdup and holdout are “two sides of the same coin”, and the FRAND commitment is designed to address both forms of opportunistic behaviour simultaneously.[19]

The economic impact of patent holdout is substantial and well-documented. A 2024 study by Bowman Heiden and Justus Baron estimates that patent owners in the cellular SEP sector lost between $7 billion and $28 billion in 2021 alone due to holdout strategies.[20] This “royalty gap”—the difference between the reasonable value of a license and the royalties that patent holders are actually able to recoup—represents a large uncompensated transfer of value from the firms that invest in foundational research and development to firms that infringe their intellectual property.

The policy options presented by the IPO reflect this analytical imbalance. The proposals uniformly target SEP holders, imposing new obligations such as mandatory information disclosure and creating new constraints through a government-administered rate-setting process. Simultaneously, they offer no corresponding mechanism to ensure the timely and effective enforcement of patent holders’ rights against recalcitrant infringers. This one-sided approach creates a system of asymmetric rules that favours infringers over innovators. This regulatory framework would systematically disadvantage the party that invested in creating the technology in favour of the party using it without permission. The long-term consequences of such a policy include a reduction in the expected return on innovation, leading to less investment in the foundational technologies that drive economic growth.

IV. The Proposals’ Unintended Consequences and Economic Costs

While presented as measures to improve “efficiency” and “transparency”, the IPO’s proposals are likely to introduce significant economic distortions, increase costs, and ultimately harm the very innovation they intend to support.

A. The Rate-Determination Track: The Perils of Price Regulation

The proposal to create a Rate Determination Track (RDT) within the Intellectual Property Enterprise Court (IPEC) to provide a “binding rate determination” is, to be blunt, a price-control mechanism.[21] It substitutes the judgment of an administrative or judicial body for the market’s price-discovery function, which is best carried out through private negotiations among parties with the most complete information.

Regulators inherently lack the specific knowledge of value, risk, and commercial context that negotiating parties possess. Scholars such as Douglas H. Ginsburg, former head of the U.S. Justice Department’s (DOJ) Antitrust Division, have argued that government price setting is inefficient and interferes with free-market competition.[22] A government-set rate is highly unlikely to reflect the efficient, market-clearing price. Recognizing this danger, U.S. antitrust agencies do not regulate prices, correctly allowing firms to unilaterally set or privately negotiate them.

The existence of a low-cost RDT would also distort the incentives for both parties in a licensing negotiation. It would encourage holdout, as an implementer could refuse to negotiate in good faith, knowing it can force the matter into a subsidized administrative process with limited downside risk. It also creates incentives for parties to present extreme positions, anticipating that a decisionmaker will simply “split the difference”, a well-documented problem in damages litigation that leads to unreasonable and unpredictable outcomes.[23] The proposed publication of RDT-determined rates would further harm the market by creating artificial price anchors, chilling private negotiations, and leading to inflexible, one-size-fits-all outcomes, rather than tailored and efficient agreements.

The most damaging unintended consequence of such price regulation is its effect on innovation. By artificially suppressing the potential return on investment for successful technologies, price controls blunt the incentive to innovate in the first place.[24] This outcome directly contradicts the IPO’s stated mission “to help grow the economy by developing an IP system that encourages investment in innovation and creativity”.[25]

B. Mandatory Information Disclosure and Essentiality Services

The proposal to mandate the provision of standard-related patent information and create a searchable database imposes direct compliance costs on innovators.[26] This administrative burden functions as a tax on the very innovative activity the government seeks to foster.

The utility of such a database is highly questionable. The IPO’s own consultation document acknowledges that “only about 25-40% of all declared SEPs are truly essential to a given standard”.[27] Igor Nikolic explains that, because standards-development organizations (SDOs) prioritize comprehensiveness to avoid undeclared patents, “there are far more disclosed patents that are potentially essential than there are patents that end up truly being essential”, with empirical studies showing true essentiality rates as low as 10-40%.[28]

More importantly, Nikolic highlights that essentiality is only one piece of a complex legal puzzle. For a licensee, the critical questions also include infringement and validity. A patent may theoretically be essential to a standard but not infringed by a specific product, or it may be invalid. For example, a U.S. study found that, in litigation, SEPs were held to be infringed in only 30.7% of cases.[29] Therefore, a government service that provides only an “essentiality check” offers a false and incomplete sense of certainty. Moreover, a mandatory database would be overwhelmingly populated with nonessential patents, creating a low signal-to-noise ratio. For licensees, navigating this data to determine their actual obligations would remain a complex task, for which an unreliable database would certainly increase the complexity.

Rather than facilitating efficient licensing, such a database—along with a potential government essentiality-checking service—could become a new tool for strategic delay. Implementers could leverage the high rate of “over-declaration” to challenge entire patent portfolios and bog down negotiations, a tactic that benefits the infringer at the expense of the innovator. Furthermore, a government-run or accredited service risks crowding out existing and emerging private-sector solutions, such as commercial essentiality services and patent pools, which are more likely to be efficient and responsive to market needs.

C. Remedies and Pre-Action Protocols

The consultation’s framing of injunctions as a “threat” used to “extract ‘supra-FRAND’ licence rates” fundamentally misrepresents their economic function.[30] An injunction is not a threat—it is the legal remedy that gives effect to a property owner’s core right to exclude others from using their property without permission. It is a foundational element of the patent system.[31]

Indeed, the credible threat of an injunction is the primary mechanism that deters patent holdout. Without it, an implementer’s rational strategy is often to infringe, continue to profit from the technology, and treat any eventual royalty payment as a mere cost of doing business—a practice we note above is sometimes known as “efficient infringement”. This dynamic systematically undercompensates innovators and reduces the value of their patents. Geoffrey Manne explains:

[T]he credible threat of an injunction deters infringement in the first place. This results from the serious consequences of an injunction for an infringer, including the loss of sunk investment. [A] predictable injunction threat will promote licensing by the parties. Private contracting is generally preferable to a compulsory licensing regime because the parties will have better information about the appropriate terms of a license than would a court, and more flexibility in fashioning efficient agreements. But denying an injunction every time an infringer’s switching costs exceed the economic value of the invention would dramatically undermine the ability of a patent to deter infringement and encourage innovation. For this reason, courts should grant injunctions in the majority of cases.[32]

Weakening SEP enforcement has direct geopolitical and strategic implications. Policies that limit injunctive relief inadvertently support the industrial strategies of nations like China, which are net implementers of Western technology.[33] A policy that weakens SEP protection for UK-based innovators amounts to a subsidy for foreign manufacturers, undermining the UK’s stated goal of securing technological leadership.[34] This is particularly concerning given that the framework established by the Court of Justice of the European Union (CJEU) in Huawei v. ZTE already provides a balance, making injunctive relief unavailable against a “willing licensee”.[35] The IPO’s consultation appears to seek a further weakening of patent-holder rights beyond this established, balanced standard.

The IPO’s proposals are thus in direct conflict with its own stated goal of promoting economic growth and innovation. The IPO’s primary mission is “to enable economic growth” by encouraging “investment in innovation and creativity”.[36] Economic growth in technology sectors is driven by investment in research and development undertaken in expectation of a return secured through enforceable intellectual-property rights. The IPO’s proposals—price controls via the RDT, increased administrative burdens, and weakened injunctive relief—all serve to reduce a patent’s expected value and enforceability. By reducing the value of the primary asset that underpins technology investment, these policies will necessarily reduce the incentive to invest in R&D in the UK.

This is particularly harmful to the SMEs and startups the IPO claims to help, as these entities rely on strong patents to attract venture capital and defend themselves against infringement by larger established firms. Therefore, the IPO’s policy initiative is internally incoherent, proposing measures that will actively undermine its foundational mission.

V. Conclusion

The proposals outlined in the IPO’s consultation are based on a flawed premise not supported by the available empirical evidence. Rather than correcting “systemic issues”, they are likely to create new ones—distorting markets, increasing costs for innovators, and chilling the investment that drives the UK’s technology sector. A more constructive path forward would be based on a clear-eyed assessment of the evidence and a renewed commitment to the principles of property rights and private ordering.

The fundamental premise of the consultation—that the SEP ecosystem suffers from a market failure that requires government intervention—should be rejected. The IPO should withdraw the proposals, which are solutions to a problem that the evidence shows does not exist in any systemic way.

Instead of weakening patent rights, UK policy should focus on reinforcing them. This would mean preserving the availability of injunctive relief as the primary remedy against infringement, consistent with the balanced approach in existing jurisprudence. A strong property-rights regime is the most effective way to combat the real and costly problem of patent holdout.

Complex commercial disputes over FRAND licensing are best resolved through private negotiation between sophisticated parties, backstopped by the existing court system. Contract law—not administrative regulation or antitrust—is the proper domain for these issues.[37] The UK’s own judicial system has proven exceptionally capable in this regard. For example, the landmark decision in InterDigital v. Lenovo demonstrates a sophisticated, economically grounded framework that relies on market-based evidence and directly confronts the problem of patent holdout.[38] The UK already possesses a world-class, market-respecting judicial path to resolve these disputes, making the IPO’s proposed top-down regulatory path both unnecessary and inferior.

Finally, the government should allow market-led solutions to evolve. The consultation itself notes the emergence of patent pools in mature markets. These voluntary, private-sector arrangements are far more efficient and adaptable than top-down government regulation. The government should foster an environment where these solutions can develop, not crowd them out with unnecessary and harmful interventions. A policy of regulatory restraint is the best way to support a dynamic and innovative technology sector in the UK.

[1] Standard Essential Patents Consultation – CP 1357, Intell. Prop. Off. (July 2025), available at https://assets.publishing.service.gov.uk/media/6874dea293d52d8659e4653b/Standard_Essential_Patents_Consultation__Print-ready_PDF_.pdf [hereafter “Consultation”].

[2] Consultation, ¶ 2.

[3] Proposal for a Regulation of the European Parliament and of the Council on Standard Essential Patents and Amending Regulation (EU) 2017/1001, Eur. Comm’n, COM(2023)232; see also Commission Work Programme 2025—Moving Forward Together: A Bolder, Simpler, Faster Union, Eur. Comm’n, COM(2025) 45 final, Annex IV, No. 17.

[4] Giuseppe Colangelo & Antonio Manganelli, Deep-In Comments (2025), at 1 [hereafter “Deep-In”]

[5] Id.

[6] Justus Baron, Pere Arque-Castells, Amandine Leonard, Tim Pohlmann, & Eric Sergheraert, Empirical Assessment of Potential Challenges in SEP Licensing, Study for the European Commission (2023), available at https://www.lexisnexisip.com/wp-content/uploads/2023/09/Empirical-Assessment-of-Potential-Challenges-in-SEP-Licensing.pdf.

[7] Id. at 185.

[8] Id. at 175, 179.

[9] Id. at 108-11.

[10] Id.

[11] Consultation, Annex 2, Supporting evidence.

[12] Geoffrey A. Manne, Dirk Auer, Kristian Stout, & Ben Sperry, Comments of the International Center for Law & Economics in Response to EU Commission Call for Evidence Concerning a New Framework for Standard-Essential Patents, Int’l Ctr. for L. & Econ. (8 May 2022), available at https://laweconcenter.org/wp-content/uploads/2022/05/ICLE-Response-to-EU-Commission-Call-for-Evidence-on-SEPs.pdf; Giuseppe Colangelo & Geoffrey A. Manne, If Necessity Is the Mother of Invention, New EU SEP Rules Are Decidedly Unnecessary, Truth on the Mkt. (12 April 2023), https://truthonthemarket.com/2023/04/25/if-necessity-is-the-mother-of-invention-new-eu-sep-rules-are-decidedly-unnecessary.

[13] Consultation ¶ 48.

[14] Id. ¶ 46.

[15] Id. ¶ 73 (“Licensees hold less information than licensors on which patents are truly essential, which makes it difficult for licensees to determine with confidence if a license is required. This in turn can lengthen licensing negotiations and potentially lead to payment of supra-FRAND license terms, or even court litigation”.), see also ¶¶ 43, 53, 59.

[16] Id. ¶ 36.

[17] Id. ¶ 59.

[18] Richard A. Epstein & Kayvan B. Noroozi, Why Incentives for “Patent Holdout” Threaten to Dismantle FRAND, and Why It Matters, 32 Berkeley Tech. L.J. (2017) 1381, 1384 (“We use the terms ‘patent holdup’ and ‘patent holdout’ as they have been used in the extensive patent literature, and in the general economics literature on holdup and holdout problems. In general, by ‘patent holdup’ we mean the theoretical claim that innovators of standard-essential patents attempt to extract excessively large royalties from implementers after those implementers have committed to a particular technological standard that requires the use of the patent(s) in question—that is, a standard that renders the patent(s) ‘essential.’ Under the ‘patent holdup’ theory, the royalties in question are excessively large because they exceed the ‘true’ value of the invention(s) in question, and are derived, so the theory goes, because the innovator can leverage the implementer’s sunk cost in committing to the standard to extract more than a fair royalty. By ‘patent holdout’ we mean the converse problem—that an implementer refuses to negotiate in good faith with an innovator for a license to valid patent(s) that the implementer infringes, and instead forces the innovator to either undertake significant litigation costs and time delays to extract a licensing payment through a court order, or else to simply drop the matter because the licensing game is no longer worth the candle. We also use the term ‘efficient infringement’ synonymously with ‘patent holdout’ here”.)

[19] Deep-In at 3.

[20] Bowman Heiden & Justus Baron, The Economic Impact of Patent Holdout, 38 Harv. J. L. Tech. 637, 668 (2024).

[21] Consultation, ¶¶ 61-71.

[22] See, e.g., Douglas H. Ginsburg, Bruce H. Kobayashi, Koren W. Wong-Ervin, & Joshua D. Wright, “Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate, CPI Antitrust Chron. (March 2016), available at https://www.competitionpolicyinternational.com/wp-content/uploads/2016/03/Excessive-Royalty-Prohibitions.pdf.

[23] Dan McManus, Incentives Must Change: Addressing the Unpredictability of Reasonable Royalty Damages, 5 Am. Univ. Intell. Prop. Brief 1 (2013), (“If a litigating party knows that the decision-maker is simply going to split the difference, then that party has the incentive to argue for damages as far away from their opposing party as possible. This tactic allows the party to skew the midpoint of the resulting split to their side as much as possible. This misaligned incentive is the root cause of the unpredictability in reasonable royalty damages and other proposals have failed to address it”.)

[24] Ginsburg et al., supra note 22.

[25] Consultation ¶ 21.

[26] Consultation ¶¶ 72-81, 87-88.

[27] Consultation ¶ 38.

[28] Igor Nikolic, European Commission’s Leaked SEP Regulation Would Increase Costs for Innovators, Hurt EU Competitiveness, and Fail to Reduce Litigation, Truth on the Mkt. (7 April 2023), https://truthonthemarket.com/2023/04/07/european-commissions-leaked-sep-regulation-would-increase-costs-for-innovators-hurt-eu-competitiveness-and-fail-to-reduce-litigation.

[29] Mark A. Lemley & Timothy Simcoe, How Essential Are Essential Patents? 104 Cornell L. Rev. 607 (2019) (“SEPs are no more likely to be found infringed than non-SEPs. Of the 215 infringement decisions in our study, 127 involved SEPs and 88 did not. The SEP infringement win rate was 30.7%, not appreciably (or statistically) different than the non-SEP infringement win rate of 29.5%”.)

[30] Consultation ¶ 59.

[31] See, e.g., Smith International, Inc. v. Hughes Tool Co. 718 F.2d 1573, 1577–78 (Fed. Cir. 1983) (“Without this injunctive power of the courts, the right to exclude granted by the patent would be diminished, and the express purpose of the Constitution and Congress, to promote the progress of the useful arts, would be seriously undermined. The patent owner would lack much of the ‘leverage,’ afforded by the right to exclude, to enjoy the full value of his invention in the market place. Without the right to obtain an injunction, the right to exclude granted to the patentee would have only a fraction of the value it was intended to have, and would no longer be as great an incentive to engage in the toils of scientific and technological research”.); see also Geoffrey A. Manne, Kristian Stout, Julian Morris, & Dirk Auer, The Deterioration of Appropriate Remedies in Patent Disputes, 21 Federalist Soc. Rev. 158, 161 (2020) (“[Patent] laws would be meaningless, however, without the ability to enforce them and remedy breaches. And one of the most important remedies is the injunction”.).

[32] Geoffrey A. Manne, The Final Order in the FTC’s Google Standard-Essential Patents Case and the Continuing Danger to Standard-Setting, Truth on the Mkt. (31 July 2013), https://truthonthemarket.com/2013/07/31/the-final-order-in-the-ftcs-google-standard-essential-patents-case-and-the-continuing-danger-to-standard-setting.

[33] Geoffrey A. Manne, Unpacking the Flawed 2021 Draft USPTO, NIST, & DOJ Policy Statement on Standard-Essential Patents (SEPs), Truth on the Mkt. (8 February 2022), https://truthonthemarket.com/2022/02/08/unpacking-the-flawed-2021-draft-uspto-nist-doj-policy-statement-on-standard-essential-patents-seps.

[34] Department for Science, Innovation & Technology and Foreign, Commonwealth & Development Office, The UK’s International Technology Strategy, CP 810 (March 2023), https://www.gov.uk/government/publications/uk-international-technology-strategy/the-uks-international-technology-strategy.

[35] Giuseppe Colangelo, FRAND Determinations Under the EU SEP Proposal: Discarding the Huawei Framework, Int’l Ctr. for L. & Econ. (15 November 2023), available at https://laweconcenter.org/wp-content/uploads/2023/11/SEP-wp-28.9.pdf.

[36] Consultation, ¶ 20-21.

[37] Ginsburg et al., supra note 22; see also, Alden Abbott, A Comprehensive Overview (and Sound Analysis) of the Law and Economics of FRAND Litigation, Here and Abroad, Truth on the Mkt. (15 June 2017), https://truthonthemarket.com/2017/06/15/a-comprehensive-overview-and-sound-analysis-of-the-law-and-economics-of-frand-litigation-here-and-abroad.

[38] See Valéria Silva, FRAND-Licensing Litigation Across the Atlantic: A Comparative Assessment of US and UK Jurisprudence on Telecom Disputes, Int’l Ctr. for L. & Econ. (8 April 2025) (“Similarly, in InterDigital v. Lenovo, where InterDigital sued Lenovo for patent infringement in the UK, the UK court further cemented its position as a forum for global FRAND determinations. Justice James Mellor set a global FRAND rate for InterDigital’s 3G, 4G, and 5G SEP portfolio and the court rejected Lenovo’s arguments for country-by-country licensing. These cases illustrate the UK courts’ consistent willingness to set global FRAND terms in such situations, their evolving methodologies to determine rates, and how they seek to balance the interests of SEP holders and implementers—further solidifying the principles established in Unwired Planet”.)

BRUSSELS (2 October 2025) — Hastening competition-enforcement measures in dynamic digital markets risks creating irreversible remedies based on weak evidence, scholars from the International Center for Law & Economics (ICLE) warned the European Commission in comments submitted to the Commission’s consultation on revising Regulation 1/2003.

The comments argue that the Commission’s proposed procedural shortcuts could accelerate intervention at the expense of sound economic analysis, ultimately harming consumer welfare. They focus on three areas of reform:

• Error-Cost Framework for Intervention: Lowering the procedural or legal threshold for interim measures or imposing deadlines for commitments would significantly raise the risk of “Type I” false-positive error.

• Abolish Strategic Complaining: The current system of granting complainants the right to formal rejection decisions generates moral hazard, whereby the minimal cost of filing a complaint encourages self-interested parties to strategically exploit the system.

• End Internal Market Fragmentation: The Commission should undertake a fundamental reassessment of the asymmetrical pre-emption rules that allow EU member states to adopt stricter national laws on unilateral conduct. The proliferation of these national rules has led to market fragmentation, multiplied compliance costs, and created risks of double and triple jeopardy. 

ICLE Director of Competition Policy Dirk Auer had the following comment:

The EU is right to adapt its competition toolkit to the digital age, but speed should not be confused with efficiency. Europe should preserve the existing strict safeguards that require strong evidence of ‘serious and irreparable harm’ and sound effects analysis to avoid imposing concessions that decrease consumer welfare. Rushing complex cases, especially in rapidly changing markets, will inevitably lead to poorly calibrated remedies that deter innovation. The goal must be evidence-based enforcement that prioritizes minimizing error costs, protecting consumer welfare, and restoring internal market coherence.

The full comments can be downloaded here. To interview Dirk, contact Jim Fellinger at [email protected]. 

About ICLE  

The International Center for Law & Economics is a nonprofit, nonpartisan research center working with a roster of more than one-hundred academic affiliates and research centers from around the globe. ICLE scholars promote the use of law and economics methodologies to inform public policy debates.

Introduction

We thank the European Commission for this opportunity to respond to the request for information on the revision of Regulation 1/2003, the flagship legislation on the implementation of competition law at the European level. The Call for Evidence correctly identifies that legal and economic developments brought about significant challenges for competition enforcement in Europe. While Regulation 1/2003 has been largely effective, it could also benefit from certain improvements, especially considering the digitalization of business over recent decades.

The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research organization whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth. ICLE previously submitted comments to the Commission regarding the first consultation on the Digital Markets Act (DMA), as well as the revision of the regulatory framework on merger control. These comments concentrate on three questions raised in the Call for Evidence: interim measures and commitments, rights of complainants, and legal fragmentation.

First, the consultation proposes making interim measures and commitment procedures under Regulation 1/2003 faster and easier. While attractive in theory, lowering the legal or procedural thresholds for Article 8 interim measures or compressing Article 9 commitment negotiations would heighten the risk of false positives. Such interventions may chill procompetitive conduct before any infringement has been proven. EU law has long cautioned against this danger. The Court of Justice of the European Union’s (CJEU) case law requires a strict test of urgency, serious and irreparable harm, and a prima facie finding before interim measures can be imposed, precisely to avoid irreversible remedies that later prove unjustified. Similarly, Article 9 commitments already provide for broad Commission discretion. Imposing deadlines or procedural shortcuts could pressure firms into overly broad concessions that are not calibrated to actual harm, thereby locking in industry structures and deterring innovation.

These risks are particularly acute in dynamic markets, where rapid change makes it difficult to distinguish in real time examples of competition on the merits from exclusionary conduct. Interim measures providing access to inputs or redesigns may be operationally irreversible. Rushed commitments may entrench inefficient outcomes. The better path would be to preserve and reinforce existing safeguards: interim measures should remain exceptional and grounded in strong evidence of irreparable harm (without themselves creating such irreparable harm), while commitments should remain voluntary, flexible, and proportionate. Speed is valuable, but only if it comes with reliable evidence and sober effects analysis; otherwise, consumer welfare may be reduced, rather than enhanced.

Second, the Commission is considering whether to simplify the participation of complainants and third parties in competition investigations, including by abolishing the right to a formal rejection decision. We support this option. Under the current framework, complainants face minimal costs to file, but the Commission bears significant procedural burdens in responding, which include the duty to issue detailed, reasoned rejection decisions within tight deadlines. This asymmetric allocation of rights and obligations creates moral hazard: rivals and self-interested parties have strong incentives to exploit the system for strategic gain, while the Commission is forced to expend scarce resources on marginal complaints.

Abolishing the obligation to issue formal rejection decisions would help to correct this imbalance, reduce procedural costs, free up enforcement resources, and allow the Commission to focus on cases with genuine anticompetitive harm. This does not mean complainants’ input should be discouraged: useful information should still be welcomed and can help to detect real infringements. But forcing the Commission to issue detailed dismissal decisions in every case magnifies enforcement costs without improving outcomes. In line with error-cost reasoning, complaints that are clearly inconsistent with protecting competition—for example, those aimed at protecting competitors from lower prices—should be deprioritised. Streamlining complainants’ rights in this way would enhance procedural economy, while safeguarding the Commission’s ability to act where it truly matters.

Finally, the Commission is right to revisit Article 3(2) of Regulation 1/2003, which permits member states to adopt stricter national rules on unilateral conduct. While such flexibility was intentional, its recent proliferation—from Belgium’s abuse of economic dependence law to Germany’s regime for firms of “paramount significance”—risks serious fragmentation of the internal market. Parallel national enforcement not only multiplies compliance costs for firms but also raises ne bis in idem concerns when layered on top of EU competition law and the DMA. Cases such as the Bundeskartellamt’s investigations into Meta, Amazon, and Booking.com illustrate how national and EU rules can converge on similar conduct—blurring substantive differences, while multiplying burdens.

Strengthening coordination is therefore not an “option” but a necessity. The ECN+ Directive already envisages information exchange, but its practical use remains limited. A more robust framework is needed to ensure complementarity, rather than duplication, consistent with the CJEU’s insistence on uniform interpretation and coherence of enforcement. More fundamentally, the Commission should reassess whether the asymmetric pre-emption logic of Regulation 1/2003, strong for Article 101 but loose for Article 102, remains justified. If the original rationale has lost its force, reform should aim to rebalance towards greater harmonisation, while carefully weighing the trade-off between uniformity and Member State autonomy.

I. Interim Measures and Commitments

The Commission asks whether it should amend Article 8 of Regulation 1/2003 to enable swifter interim interventions, including by revising the substantive legal test and/or streamlining procedural requirements so that measures can be adopted even in cases of extreme urgency. It also asks whether it should adapt Article 9 by imposing deadlines for parties to submit binding-commitment offers to speed up commitment decisions:

Option 1: amend the Commission’s power under Article 8 of Regulation 1/2003 to allow for faster interventions when necessary. Sub-option 1: Change the legal test for imposing interim measures to allow for the effective use of interim measures. and/or Sub-option 2: Change the procedural requirements for imposing interim measures to allow for faster proceedings. and/or

Option 2: adapt the Commission’s power to make commitments binding under Article 9 of Regulation 1/2003 by imposing a deadline for the submission of binding commitment offers on the investigated parties to ensure faster.[1]

Unfortunately, simply making it easier for the Commission to impose interim measures or to extract commitments is unlikely to benefit consumers. This is particularly the case in markets characterized by rapid innovation and network effects, where premature intervention risks imposing irreversible constraints on firms not yet proven to be infringing. This would raise the likelihood and cost of false positives.

Indeed, the central insight of the error-cost framework is that, when (competition) enforcers act under significant uncertainty, the expected welfare loss from deterring procompetitive conduct can exceed the harm from delayed intervention against actual violations.[2] EU competition law has long recognized this danger, which why it establishes demanding substantive and procedural requirements before any kind of remedy is imposed—not least when this is done prior to a full infringement decision.

From a procedural standpoint, both Regulation 1/2003 and the CJEU’s case law require genuine urgency and a real risk of serious and irreparable harm (as well as a prime facie finding of liability) before interim measures can be imposed pending a merits outcome:

In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures.[3]

These requirements are echoed by the CJEU. For instance, in NDC Health Corp. v. IMS Health, the CJEU’s president refused to order interim measures because, among other things, the defendant’s conduct was not unambiguously illegal:

[W]here the abusive nature of the applicant’s conduct is not unambiguous having regard to the relevant case-law and where there is a tangible risk that it will suffer serious and irreparable harm if forced, in the meantime, to license its competitors, the balance of interests favours the unimpaired preservation of its copyright until judgment in the main action.[4]

In that same case, the CJEU also cautioned against interim measures when their effect would be hard to reverse:

[M]any of the market developments to which immediate execution of the decision is likely to give rise would be very difficult, if not impossible, later to reverse if the application in the main action were to be upheld.[5]

Arguing further that:

[I]t cannot be excluded that implementation of the contested decision will restrict the applicant’s freedom to define its business policy.[6]

These procedural rules echo European competition law’s broader concern with false positives. After all, on the substance, the CJEU has fleshed out numerous legal tests that aim to avoid wrongly punishing innocent firms. For instance, the court in Bronner and IMS Health (concerned about interferences with parties’ property rights) confined duty-to-deal theories to “exceptional circumstances”, requiring indispensability, elimination of competition, and (in intellectual-property cases) the prevention of a new product for which there is consumer demand, absent objective justification.[7] Likewise, in Post Danmark, the court held that exclusionary “effects” must be assessed with care, so as to avoid chilling procompetitive conduct:

Not every exclusionary effect is necessarily detrimental to competition… Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.…[8]

Finally, the Intel court made clear that, where the dominant firm adduces evidence that its conduct is incapable of restricting competition, the Commission must undertake an effects-based assessment—examining dominance, market coverage, conditions, duration, amounts, and any strategy to exclude equally efficient rivals.[9] This reflects clear concern about Commission decisions being made without a sufficiently robust evidentiary basis.

Importantly for the matter at hand, all these substantive guardrails would be rendered ineffective if enforcers had free rein to mandate interim measures before a case is decided. Lowering those standards, whether by softening the legal test or compressing procedural safeguards, would shift error-cost risk onto consumers and defendants by making Type I errors of overenforcement more likely, along with their chilling effect on investment and rivalry. Interim measures are thus rightly circumscribed to exceptional situations where the balance of interests warrants their imposition.

Commitment decisions raise a distinct-but-related risk. Article 9 decisions are expressly designed to trade a formal infringement finding for speed and procedural economy. The CJEU has emphasized that the Commission enjoys broad discretion in accepting commitments and that proportionality review is correspondingly limited—i.e., whether the commitments address the stated concerns and whether less onerous commitments would do so.[10] Given these already limited guardrails surrounding the application of this proportionality test, Article 9 can readily undershoot or overshoot what would be necessary under Article 7 after full fact-finding, especially if deadlines or procedural shortcuts pressure firms into overly broad concessions. That dynamic can lock in industry structures, deter entry, or curb product changes that would benefit consumers. Further eroding the limited requirements of Article 9 to tilt the bargaining scales in the Commission’s favor of would thus likely do more harm than good.

Against this legal backdrop, the consultation’s Option 1 (changing Article 8’s legal or procedural tests to accelerate interim measures) and Option 2 (imposing deadlines that pressure Article 9 commitments) would predictably increase the incidence and cost of false positives. Interim orders are often operationally irreversible (e.g., forced access, product redesigns, long-term supply or interoperability obligations) and could chill procompetitive experimentation. Commitment deadlines risk extracting overly broad, innovation-reducing concessions that are not calibrated to proven harm.

These error-cost risks are particularly acute in dynamic digital markets, where short-run structure is a poor proxy for long-run consumer welfare, and where rapid data-driven iteration can make intense platform competition look like anticompetitive foreclosure. Several scholars have therefore cautioned against hastening to intervene, absent robust evidence of anticompetitive effects.[11]

Concrete examples illustrate the point. As ICLE scholars discussed in an amicus brief submitted to the Epic Games litigation in the United States, overly hasty platform remedies risk degrading product quality, security, privacy, and multisided pricing models before a record proves competitive harm (a risk at odds with Post Danmark’s warning not to protect less-efficient rivals at consumers’ expense):

The Order would effectively obviate various of Apple’s legal business practices, including steps Apple might take to protect the integrity and security of its platform and IAP, the privacy and data security of consumers who use the Apple ecosystem, and the value of its intellectual property, all of which were previously identified by this Court as legitimate. [12]

Accordingly, if reforms are pursued, they should preserve (and, where needed, reinforce) the evidentiary and proportionality safeguards that EU law has developed precisely to mitigate error costs. For interim measures, that means retaining a stringent merits-and-urgency filter keyed to serious and irreparable harm and to sound effects evidence. For commitments, it counsels against rigid deadlines or presumptions that would shift bargaining power in ways likely to produce overly inclusive, innovation-reducing remedies. Speed can be valuable, but only when paired with procedures that ensure decisions rest on a reliable factual foundation and a sober assessment of competitive effects.

II. Rights of Complainants

With respect to the participation of complainants and third parties in competition investigations, the Commission asks whether it should simplify the procedure to reduce complexity and resource intensity. Under Regulation 1/2003, natural or legal persons with a ‘legitimate interest’ may lodge a formal complaint. But the evaluation of Regulation 1/2003 revealed the current system is burdensome for both complainants and the Commission, and that the existing categories of third-party rights may undermine effectiveness and add procedural complexity. The following options are under consideration:

Option 1: abolish formal complainants’ right to a rejection decision. and/or

Option 2: streamline or clarify the rights of third parties in competition investigations to reduce complexity and improve effectiveness.[13]

Abolishing complainants’ rights to a rejection decision would free a substantial share of the Commission’s resources, reduce overall procedural costs under Articles 101 and 102 TFEU, and streamline enforcement by eliminating a cumbersome three-step procedure that requires complainants’ active participation—disproportionately burdensome for the Commission. By contrast, option two would likely only add pressure to resources that are already overstretched. We therefore support option one, for reasons set out below.

In competition law, disgruntled rivals and self-interested parties often have a strong incentive to lodge complaints. These grievances may or may not coincide with the public interest—that is, the protection of competition for the ultimate benefit of consumers—and indeed, they very often do not. As U.S. Judge Frank Easterbrook observed in 1984:

Courts cannot review old decrees on their own motion, but they should be careful not to create new restraints. They therefore should treat suits by horizontal competitors with the utmost suspicion. They should dismiss outright some categories of litigation between rivals and subject all such suits to additional scrutiny.[14]

Easterbrook’s advice was addressed to U.S. courts, where antitrust litigation is predominantly private and driven by plaintiffs. There is, however, no reason the same guidance should not also inform the Commission’s approach under the EU’s public-enforcement system. Indeed, much of Easterbrook’s reasoning stems from a deeper ambiguity that underlies both U.S. antitrust and EU competition law alike: the fine distinction between protecting competition and protecting competitors.

That enduring dilemma ensures that rivals and other self-interested parties will always have strong incentives to exploit enforcement for private gain. In the EU, this dynamic is reinforced by the Commission and the European Courts’ recognition of a broad range of actors as having a “legitimate interest” in lodging complaints under Articles 101 and 102 TFEU. These include, among others, competitors,[15] undertakings excluded from a distribution system,[16] traders unable to penetrate a market because customers are allegedly tied to another supplier,[17] and suppliers paid “low” prices by large purchasers.[18]

The incentive to employ the mechanism of competition law for private interest is further compounded by certain procedural rules that make the benefits of filing a complaint—even if potential—vastly outweigh its costs.

Indeed, lodging a complaint with the Commission entails only modest costs for complainants, at least at the initial phase. There is no filing fee and no sanction for submitting a meritless claim. Completing Form C of the Commission’s complaint notice may entail minor costs—such as gathering information on the parties involved or submitting relevant documents (texts, minutes, terms of transactions, etc.)—but the form itself is concise, high-level, and limited to a single page.

At the same time, the potential rewards of a successful complaint can be substantial, and likely to far outweigh any filing costs incurred. A strategically framed complaint may weaken a rival’s competitive position by imposing fines, remedies, or the financial burden of compliance with an investigation under Regulation 1/2003. This can allow a third party to secure access to another firm’s infrastructure at little or no cost, or by create grounds for follow-on private litigation (follow-on litigation constitutes the lion’s share of EU private enforcement). Meanwhile, the bulk of investigative costs falls on the Commission.

While the Commission is under no obligation to investigate every complaint, it does not have unlimited discretion on how it handles complaints. On receipt of a complaint, the Commission must consider whether, if confirmed, the facts would constitute an infringement and whether there is an EU interest in pursuing the matter;[19] carry out an assessment on the basis of matters of fact and law;[20] and undertake a diligent and impartial examination of the complaint in accordance with the principle of sound administration.[21][22] It must also, in each case, assess the seriousness and duration of any interferences with competition and the persistence of their consequences,[23] and take into account the existence of other similar complaints. If the reason given by the Commission for rejecting a complaint is inconsistent with its previous treatment of such conduct, the decision rejecting the complaint may be challenged on the grounds of lack of reasoning under Art. 296 TFEU.[24]

It is unclear how much time and staff the Commission must devote to meeting these procedural requirements, but the burden is unlikely to be negligible. For reference, the Commission has committed to responding to all complaints within four months.[25] As of the late 1990s, Advocate General Giuseppe Tesauro considered a period of three to six months a “reasonable” timeframe for issuing a decision.[26] Such compressed deadlines place additional strain on the Commission’s already-limited resources. In 2024, the Directorate-General for Competition employed 851 staff members, 70% of which are dedicated to enforcement activities.[27] These resources are now spread even thinner due to the enforcement needs of the DMA.

To be sure, complainants also bear some costs when a rejection decision is at stake under Article 7 of Regulation 73/2004—e.g., engaging in exchanges with the Commission or submitting additional written observations. [28] Yet the bulk of the burden still falls on the Commission, which must adopt a detailed decision rejecting the complaint within a reasonable period or risk legal challenge: either for failure to act under Article 265 TFEU, for insufficient reasoning under Article 296 TFEU, or for annulment under Article 263 TFEU. Conferring these review rights onto interested parties therefore means the Commission must act diligently and within a tight deadline or risk litigation, which would require additional operational and reputational costs.

This lopsided allocation of rights and obligations generates moral hazard. Complainants face limited downside but potentially significant upside, which systematically encourages an oversupply of complaints and thereby increases the system’s total procedural costs, of which they bear only a fraction. Complainants therefore have incentives to over-report, while the Commission bears almost the full cost of monitoring and enforcement. Critically, because the law requires the Commission to respond even to frivolous complaints with a reasoned decision, the procedural rules amplify the inefficiency. Complaints are almost costless to lodge, but never costless to process. Even those that pass the initial threshold, yet ultimately prove unfounded, consume substantial administrative and investigative resources.

Viewed economically, this is a suboptimal outcome. The procedural system’s objective is to minimize the combined costs of erroneous judicial decisions and the operation of the system itself.[29] Given many substantive and procedural factors—including the inherent complexity of competition law, its susceptibility to be used both to stifle competitors and to free ride on their investments, and the relatively low cost of filing a complaint—parties have strong incentives to lodge more complaints than is socially optimal. Abolishing the duty to respond to every complaint will not fix this, but relieving the Commission of the obligation to issue a formal rejection in every case would mitigate at least some of the procedural costs of enforcing Arts. 101 and 102 TFEU.

Legal decisionmaking and enforcement are always difficult and potentially costly.[30] In competition law, those costs are especially high, because competition decisions are rarely straightforward. Most conduct falls into a grey zone where effects are ambiguous and possibly forward-looking,[31] knowledge is incomplete, and enforcement operates under conditions of genuine ignorance and uncertainty.[32]

Granted, some of these costs are mitigated by the valuable information provided by complainants. Indeed, to the extent that they contribute useful insights and evidence, complaints should be encouraged.[33] But forcing the Commission to devote scarce time and expertise to explaining the dismissal of marginal or strategic complaints only magnifies the already high operating costs of enforcing EU competition law and diverts attention from genuinely anticompetitive practices—where those limited resources would be better deployed.

Which suits the Commission should dismiss automatically is a different question altogether. But, once again, one can look to the error-cost framework for guidance. As Easterbrook explains:

Some of these suits explicitly request the court to order a business rival to raise price, and they may be dismissed quickly.[34]

And:

One category of complaints that should not be entertained at all concerns lower prices … dismissal should be automatic.[35]

In other words, complaints that, on their face, challenge competitive rather than anticompetitive conduct should be summarily dismissed. Admittedly, distinguishing between the two is rarely straightforward, and much—if not virtually all—of competition law is devoted to precisely that task.[36] As a result, only a fraction of complaints may fall into the “dismiss outright” category. Yet where a complaint is clearly at odds with the overarching purpose of the law, principles of procedural economy and the error-cost framework counsel that it be treated with minimal attention. Such complaints, in particular, should not trigger any obligation to issue a formal rejection decision.

III. Legal Fragmentation in Unilateral-Conduct Cases

Finally, the Commission asks whether the system of pre-emption under Article 3 should be amended. This is especially pertinent as regards unilateral conduct, on which member states are empowered to adopt stricter national laws under the second sentence of Article 3 (2).

The Commission notes that numerous member states have recently introduced stricter laws on unilateral conduct, such as abuse-of-economic-dependence rules and targeted measures on digital markets. Such instruments may pose challenges from an internal-market perspective, as multiplying regulatory regimes may cause fragmentation and administrative inefficiency.

In response, the Commission proposes two potential solutions:

Option 1: Adapt the existing coordination and information exchange mechanisms between competition authorities under Regulation 1/2003 so that these cover the application of stricter national laws on unilateral conduct in order to ensure the coherent, effective and complementary enforcement of available competition law instruments.

Option 2: Discontinue the current system as described here under section B.[37]

In addition, the Commission wishes to adapt relevant notices to provide additional guidance where necessary. The Commission also intends to incorporate recent CJEU case law into the regulations. Finally, it notes the possibility of simplifying and clarifying the rules where possible, including in areas where the evaluation identified a need for clarification.

We welcome the Commission’s questions as timely and warranted. In particular, we note that strengthening the coordination of enforcement constitutes not merely an option but a necessity in contemporary competition policy. Furthermore, we invite the Commission to reconsider the pre-emption procedure under Article 3(2) and to consider seriously whether the conditions for the special treatment of unilateral-conduct rules continue to be relevant.

Given member states’ growing reliance on stricter national rules on unilateral conduct, the Commission’s proposal to enhance coordination under Regulation 1/2003 is, in principle, difficult to contest. Stronger coordination can bring clear benefits: improving the effectiveness and deterrence of enforcement, safeguarding firms’ rights of defence, ensuring complementarity between overlapping regimes, and promoting efficient use of administrative resources.[38]

With that said, presenting this as merely an “option” is somewhat misleading. The current system already permits member states to maintain “stricter national laws” that pursue objectives similar to Article 102 TFEU.[39] These include, for instance, rules on abuse of economic dependence, resale below cost, termination of supply, or sector-specific competition laws that apply more stringent rules. When applied in parallel with EU rules, such laws allow undertakings to be investigated and potentially sanctioned twice for the same conduct. This raises issues under the fundamental right to ne bis in idem. According to the CJEU, exceptions to this principle are permissible only if enshrined in law, respect the essence of the right, and are proportionate.[40] Proportionality, in turn, requires an “appropriate legal framework” of coordination—not just on paper, but in practice.

The ECN+ Directive already provides for information exchange between the Commission and national competition authorities. But the Commission’s consultation suggests that existing mechanisms are not functioning effectively. Indeed, recent enforcement actions, particularly in the digital sector, demonstrate that stricter national laws have been applied in ways that risk fragmenting the internal market. Against this backdrop, strengthening coordination looks less like an “option” and more like a “necessity” if the current system is to remain compatible with both the internal-market objective and the protection of fundamental rights.

Article 3(2) Regulation 1/2003 permits member states to maintain stricter national competition rules on unilateral conduct. Over time, many have done so. Belgium’s abuse-of-economic-dependence rules and France’s “petit droit de la concurrence” are notable examples. With growing regulatory interest in digital platforms, these national laws have multiplied.

The most prominent case is Germany’s amendment to its competition law that empowers the Bundeskartellamt to designate firms as being of “paramount significance for competition across markets” and to impose special obligations on them. This framework has already underpinned investigations against Apple, Meta, and Amazon. In Meta’s case, the Bundeskartellamt relied on its “stricter” powers under Article 3(2), which resulted in a long-running case that has reached the German federal courts and the CJEU.[41] Other member states, such as Italy and Spain, have also enacted or contemplated similar rules.

Such enforcement actions raise two kinds of concerns. First, they risk engaging the principle of ne bis in idem, especially when layered on top of parallel enforcement under EU competition law and the DMA. Second, even if double (or triple) jeopardy is avoided, businesses still face double (or triple) the compliance costs.[42]

A recent Bundeskartellamt case illustrates the point. In June, the German authority announced an investigation of Amazon and Booking’s “price control mechanisms” under national law.[43] To be sure, the Bundeskartellamt is targeting pricing practices in Amazon’s own platform, while the price-parity clauses regulated under the DMA limit Amazon’s reach into prices set by sellers on alternative platforms. That difference, nonetheless, may be exaggerated. Both mechanisms serve a similar purpose of making Amazon’s marketplace more attractive, while the rules targeting them (under the DMA, as well as competition law) seek to ensure sellers’ freedom to set prices.

Hence, the substantive differences may be marginal. If sellers’ freedom to set prices is the core concern, then the DMA is the natural instrument through which such practices should be addressed—not divergent national rules. The Commission should therefore weigh carefully whether the benefits of parallel enforcement (if any) justify the costs. Fragmentation of the internal market and rising compliance burdens may ultimately hinder innovation and harm consumer welfare.

The Commission has signalled its intent to incorporate recent CJEU case law into the regulations. In its latest judgments, the court has underlined the importance of a consistent and uniform interpretation of competition rules within the EU legal order.[44] This principle extends not only to substantive interpretation, but also to the overall coherence of the enforcement architecture established by Regulation 1/2003.

That insight raises a structural question. Under the current framework, Regulation 1/2003 adopts different pre-emption logics for Articles 101 and 102 TFEU.[45] Article 101 is subject to strong pre-emption, preventing member states from adopting stricter rules on interfirm agreements. By contrast, Article 102 allows member states to apply stricter rules on unilateral conduct. This asymmetry was deliberate when Regulation 1/2003 was adopted, but it is legitimate to ask whether the rationale for differentiated treatment still holds today.[46]

If the legislative reasons for looser pre-emption under Article 102 have lost their force, the Commission—as the initiator of legislative reform—has both the opportunity and the responsibility to steer the debate toward a new approach. Any shift would, of course, need to weigh the benefits of uniformity against the costs of reducing member state autonomy. But a reassessment now seems warranted, considering both recent case law and the evident risks of fragmentation.

[1] See Call for Evidence for an Impact Assessment: EU Antitrust Procedural Rules (Revision), Eur. Comm’n (10 July 2025), https://competition-policy.ec.europa.eu/public-consultations/eu-antitrust-revision-procedural-rules-revision_en.

[2] See Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984); see also Keith N. Hylton & Michael Salinger, Tying Law and Policy: A Decision-Theoretic Approach, 69 Antitrust L.J. 469 (2001); Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405 (2013).

[3] Regulation 1/2003, Art. 8.

[4] See Order of the President, Case C-481/01 P(R), NDC Health Corp. v. IMS Health Inc., 2002 E.C.R. I-3401, ¶144.

[5] Id. ¶ 129.

[6] Id. ¶ 130.

[7] See Case C-7/97, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG, 1998 E.C.R. I-7791; Case C-418/01, IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG, 2004 E.C.R. I-5039.

[8] See Case C-209/10, Post Danmark A/S v. Konkurrencerådet, EU:C:2012:172, ¶ 22,

[9] See Case C-413/14 P, Intel Corp. v. Commission, EU:C:2017:632.

[10] See Case C-441/07 P, Commission v. Alrosa Co. Ltd., 2010 E.C.R. I-5949, ¶ 50.

[11] See, e.g., Daniel F. Spulber, Unlocking Technology: Antitrust and Innovation, 4 J. Competition L. & Econ. 915 (2008).

[12] See Brief of Amicus Curiae Int’l Ctr. for Law & Econ., Epic Games, Inc. v. Apple Inc., No. 21-16506 (9th Cir. 2022), at 2; see also Brief of Amicus Curiae Int’l Ctr. for Law & Econ., Epic Games, Inc. v. Google LLC, No. 25-70072 (9th Cir. 2025) (emergency-stay filings).

[13] Commission Call for Evidence, supra note 1, at 3.

[14] Easterbrook, supra note 2, at 35.

[15] See, e.g., Joined Cases 142 & 156/82, British Am. Tobacco Co. & R.J. Reynolds Indus., Inc. v. Commission, 1987 E.C.R. 4487

[16] Case 26/76, Metro SB-Großmärkte GmbH & Co. KG v. Commission, 1977 E.C.R. 1875.

[17] Commission Decision 79/86/EEC, Vaessen/Moris, 1979 O.J. (L 19) 32.

[18] Case 298/83, CICCE v. Commission, 1985 E.C.R. 1105.

[19] Case T-24/90, Automec Srl v. Commission, 1992 E.C.R. II-2223.

[20] Case T-306/05, Scippacercola & Terezakis v. Commission, ECLI:EU:T:2008:9.

[21] Case T-54/99, max.mobil Telekommunikation Service GmbH v. Commission, 2002 E.C.R. II-313.

[22] The three criteria outlined above are codified in Article 7 of Regulation Council Regulation 773/2004. See Commission Regulation (EC) No 773/2004 of 7 April 2004, 2004 O.J. (L 123) 18, art. 7 (“Regulation 773/2004”).

[23] Case C-119/97 P, Ufex & Others v. Commission, 1999 E.C.R. I-1341.

[24] Case T-206/99, Métropole Télévision v. Commission, 2001 E.C.R. II-1057.

[25] Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 & 102 TFEU, 2011 O.J. (C 308) 6, ¶ 16 (“Best Practices”).

[26] Case C-282/95 P, Guérin Automobiles v. Commission, 1997 E.C.R. I-1503.

[27] European Commission, Directorate-General for Competition, Annual Activity Report 2024, Ref. Ares (2025) 2900758 (Apr. 9, 2025), at 851.

[28] Commission Notice on the Handling of Complaints by the Commission Under Articles 81 and 82 of the EC Treaty, 2004 O.J. (C 101) 65, ¶ 69 (“Complaints Notice”).

[29] Richard A. Posner, Economic Analysis of Law 773 (9^th ed., 2014).

[30] Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 Yale L.J. 213 (1979).

[31] Posner, supra note 27, at 4. (“Information is costly, and often the costs are prohibitive, especially when the information one would like to have concerns the future”.).

[32] Geoffrey A. Manne, Error Costs in Digital Markets, in The Global Antitrust Institute Report on the Digital Economy 33, 34–41 (Joshua D. Wright & Douglas H. Ginsburg eds., 2020).

[33] Complaint Notice, paras. 2–3

[34] Easterbrook, supra note 2, at 36.

[35] Id., at 35.

[36] Dirk Auer & Lazar Radic, The Growing Legacy of Intel, 14 J. Eur. Comp. L. & Prac. 1, 15 (2022).

[37] Commission Call for Evidence, supra note 1, at 3.

[38] Claudia Massa, Sincere Cooperation and Antitrust Enforcement: Insights from the Damages and ECN+ Directives, 16 Eur. Compet. J. 126 (2020).

[39] Directive (EU) 2019/1 of the European Parliament and of the Council of 11 Dec. 2018, 2019 O.J. (L 11) 3, art. 2(1)(3).

[40] Marco Cappai & Giuseppe Colangelo, Applying ne bis in idem in the Aftermath of bpost and Nordzucker: The Case of EU Competition Policy in Digital Markets, 60 Common Mkt. L. Rev. 431 (2023)

[41] Giuseppe Colangelo & Mariateresa Maggiolino, Antitrust Über Alles: Whither Competition Law After Facebook?, 42 World Compet. 372 (2019).

[42] Mikolaj Barczentewicz, The Digital Markets Act as an EU Digital Tax: When Compliance Costs Dwarf Regulatory Estimates, Truth on the Market (8 July 2025), https://truthonthemarket.com/2025/07/08/the-digital-markets-act-as-an-eu-digital-tax-when-compliance-costs-dwarf-regulatory-estimates.

[43] Giuseppe Colangelo, Still Haven’t Found What the Bundeskartellamt Is Looking For: Thoughts on the German Amazon Case, Truth on the Market (11 June 2025), https://truthonthemarket.com/2025/06/11/still-havent-found-what-the-bundeskartellamt-is-looking-for-thoughts-on-the-german-amazon-case.

[44] Case C-606/23, AS “Tallinna Kaubamaja Grupp” & AS “KIA Auto” v. Konkurences padome, ECLI:EU:C:2024:1004.

[45] Miguel Mota Delgado & Nicolas Petit, Article 3 of Regulation 1/2003 and the Doctrine of Pre-emption, in The Transformation of EU Competition Law: Next Generation Issues 113 (Anca D. Claici, Assimakis P. Komninos & Denis Waelbroeck eds., 2023).

[46] Koen Lenaerts & Damien Gerard, Decentralisation of EC Competition Law Enforcement: Judges in the Frontline, 27 World Compet. 313 (2004).

Abstract

Recent research connects rising measured market power to other macroeconomic trends in the U.S., including decades-long declines in measures of “business dynamism,” such as business entry and job reallocation. Intuitively, factors that raise market power may also reduce entry, and firms with more market power are less responsive to shocks. Such theories predict a negative correlation between markups and business dynamism. We use industry-level data to study long-run trends and annual patterns of markups and dynamism. Using multiple measures of each, we find no systematic industry-level negative correlation between changes in markups and changes in dynamism from the 1980s through the 2010s. In fact, we are more likely to observe the opposite relationship.

Over the past decade, the intersection of privacy and antitrust has become a central focus in discussions on the role of data in digital markets.[1] As data are the key input for many digital services, platforms strive to collect and process as much user information as possible. In addition to harvesting their own data, they increasingly rely on external sources through data-sharing agreements to enhance their offerings. This is particularly critical for platforms whose business models depend on monetising user information through targeted advertising and personalised content. In such cases, personal data become the most valuable asset, enabling platforms to secure privileged access to consumer attention and offer sellers a competitive edge.

As a result, privacy has moved to the forefront of regulatory concerns, with policymakers increasingly examining whether data accumulation strategies both compromise individual privacy and reinforce platform dominance. This has led to calls for integrating privacy considerations into antitrust enforcement and fostering closer collaboration between competition and data protection authorities. According to this view, strong network effects may reduce platforms’ incentives to compete on privacy, whereas increased competition in digital markets could enhance privacy outcomes for users. Further, while privacy concerns may be essential to assessing data accumulation strategies that fall outside the scope of traditional antitrust provisions, antitrust authorities could play a more effective role in safeguarding data protection.

However, critics of such an integrationist approach argue that conflating privacy infringements with antitrust violations risks blurring the distinct goals and tools of the two regimes. They warn that such convergence could undermine enforcement coherence, especially given the subjective nature of privacy preferences and the privacy paradox. More broadly, treating privacy breaches as competitive harms may lead to regulatory overreach, turning antitrust authorities into general-purpose enforcers.

Against this background, while U.S. antitrust cases have begun to emphasize privacy [2], Europe remains the primary testing ground for an integrated privacy–antitrust approach due to two main factors. First, the General Data Protection Regulation (GDPR) marked the start of the European regulatory agenda for digital markets. Second, on the antitrust front [3], the German Facebook case stands out as a landmark example of using competition law to address privacy concerns by applying antitrust tools beyond their traditional scope to fill perceived gaps in privacy enforcement.[4]

Read the full piece here.

[1] For a recent overview, see Giuseppe Colangelo, ‘The privacy/antitrust curse: insights from GDPR application in competition law proceedings’, 70 Antitrust Bulletin 113 (2025).

[2] See, e.g., U.S. v. Apple, Case No. 24-cv-04055 (D.N.J. 2024), see also Julie Grangeon, United States: The Department of Justice and sixteen states sue big tech player for illegal monopoly (Apple), 22 March 2024, Concurrences N° 2-2024, Art. N° 118694, pp. 220-222; Christopher Casey, Sarah O’Laughlin Kulik, Sean P. McConnell, Andrew John (AJ) Rudowitz, The US DoJ and 16 State Attorneys General file a suit alleging the monopolization of smartphone markets and degrading of user experiences (Apple), 21 March 2024, e-Competitions March 2024, Art. N° 117925; and US Department of Justice Antitrust Division, The US DoJ alongside 16 other State and District AGs files a civil antitrust lawsuit against a Big Tech company for monopolizing smartphone markets (Apple), 21 March 2024, e-Competitions March 2024, Art. N° 117801; Federal Trade Commission v. Facebook, Case No. 1:20-cv-03590 (D.D.C. 2021), see US Federal Trade Commission, The US FTC files an amended complaint against a social media company alleging it resorted to an illegal buy-or-bury scheme to crush competition after a string of failed attempts to innovate (Facebook), 19 August 2021, e-Competitions August 2021, Art. N° 102162; U.S. et al. v. Google, Case No. 1:20-cv-03010 (D.D.C. 2020), Thomas A. Lambert, The US DoJ and eleven States with Republican attorneys general sued a Big Tech company for monopolizing the markets for general internet search services, search advertising, and “general search text” advertising (Google), 20 October 2020, e-Competitions October 2020, Art. N° 98540; Lesley Hannah, Stella Gartagani, The US DoJ files a complaint against a search engine for its unlawful monopolization of the search and the search advertising markets (Google), 20 October 2020, e-Competitions October 2020, Art. N° 97836; and Andrew Cook, Robert McKenna, The US DOJ files an antitrust complaint against a search engine for abuse of dominance (Google), 20 October 2020, e-Competitions October 2020, Art. N° 97371.

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

[4] Bundeskartellamt, 7 February 2019, Case B6-22/16. See Clement Hoff Munk, The German Competition Authority holds that a social media company abused its dominant position by making the collection of data on its users from third parties a condition for access to its social network (Facebook), 7 February 2019, e-Competitions February 2019, Art. N° 116987; Kyriakos Fountoukakos, Marcel Nuys, Peter Rowland, Juliana Penz-Evren, The German Competition Authority forces a social network company to change its data collection policy (Facebook), 7 February 2019, e-Competitions February 2019, Art. N° 101432; and Alexandre G. Verheyden, Philipp Werner, Jörg Hladjk, Undine Von Diemar, The German Competition Authority considers that a social network company’s data processing terms, enabling the collection, merger, and use of user data without valid consent, constitutes an abuse of a dominant position (Facebook), 7 February 2019, e-Competitions February 2019, Art. N° 101443.

The European Commission’s ongoing review of its merger guidelines attempts to reconcile the seemingly heterogeneous objectives of competitiveness, resilience, innovation, and legal certainty within a single framework. This naturally raises a key question: can the commission square the circle?

The International Center for Law & Economics (ICLE) and the University of Liège Institute for EU Legal Studies sought to address this critical issue during an Oct. 15 conference in Brussels. Across two insightful panels, leading competition-policy experts addressed the most pressing questions in European competition policy today: How should new guidelines reconcile expanded enforcement goals with existing EU law, court rulings, and standards of evidence? And how can merger control remain coherent and predictable while addressing emerging theories of harm and fast-moving markets?

ICLE Chief Economist Brian Albrecht joined David Beckworth of the Mercatus Center for a Substack discussion of the winners of the 2025 Nobel Memorial Prize in Economic Sciences. Video of the full discussion is embedded below.

ICLE President Geoffrey A. Manne gave a presentation to the Amsterdam Law & Technology Institute on “The Rationale and Goals of Digital Competition Regulations,” detailing the global spread of such rules, largely modeled on the European Union’s Digital Markets Act (DMA). Video of the full presentation is embedded below.

I. Introduction

The Promoting Responsible and Open Codes Act (PRO Codes Act), introduced in June by U.S. Reps. Darrell Issa (R-Calif.) and Deborah Ross (D-N.C.),[1] has exposed a long-simmering tension within the world of standards development. On its face, the bill offers a straightforward promise: if a private standard is incorporated by reference into law, that standard must be made freely available to the public. Beneath that promise, however, is a complex set of questions about the economics of standards setting, the role of copyright in sustaining that system, the risks of sweeping statutory reforms that fail to account for the breadth of business models under consideration, and the further attendant risks when Congress wades into a complicated area of litigation.

In contrast to the bold claims made both by the bill’s sponsors[2] and supporters [3] and its critics,[4] the real promise and danger raised by the PRO Codes Act is not that it entrenches copyright, but that it hollows it out—transforming a property right into a conditional license revocable at the government’s whim. Worse, it risks normalizing broad “public-spirited” exceptions to copyright that are untethered from the careful doctrines courts have developed over decades. Properly understood, the PRO Codes Act is not a reinforcement of copyright but a distortion that would weaken it for the very organizations that depend on it most.

Standards are indispensable to the modern economy. They form the hidden architecture of markets and regulation, governing everything from boilers and electrical wiring to aircraft design, medical devices, and nuclear facilities. Their creation requires deep technical expertise and countless hours of volunteer effort, and their adoption by governments has long been praised as a means to harness expert knowledge without the expense and politicization of agency-drafted codes. Copyright revenues can be essential to sustaining this enterprise, ensuring that standards organizations can recover the costs of developing works that—once produced—can be copied at almost no cost.

The current debate over the PRO Codes Act, however, highlights that not all standards-development organizations (SDO) operate in the same way. Two distinct business models have emerged. On one side are voluntary-adoption SDOs, which rely on volunteer engineers and technical experts to produce consensus standards and sustain their work through private, generally commercial sales. On the other side are lobbying-oriented SDOs, which supplement technical work with lobbying campaigns to secure wholesale statutory adoption; they then typically invoke copyright to meter access to the law text.

Both models depend on copyright, and both are legally entitled to enforce it. But the lobbying model raises sharper questions because of the way it couples lobbying with property rights, creating the appearance—if not the reality—of something like “unclean hands.”[5] It is this dynamic, not copyright itself, that has drawn legislative attention, and that fuels the push for legislation like the PRO Codes Act.

The danger is that, by targeting copyright across the board, rather than tailoring its response to one business model, Congress could destabilize the entire ecosystem of standards development. The PRO Codes Act risks collapsing the distinction between the voluntary-adoption and lobbying approaches, and introducing a de facto compulsory-licensing regime that would undercut the very property rights on which standards creation depends.

This issue brief examines these models, demonstrating how each interacts with copyright. It also considers the law & economics implications of the PRO Codes Act’s attempt to redraw the line between public access and private incentives.

II. The PRO Codes Act Doesn’t Mean What You Think It Means

Reps. Issa and Ross have cast their bill as a measure that will “protect public access to federal rules,” while also recognizing the role of private standards in the regulatory process.[6] The sponsors’ stated goal is to assure citizens enjoy free online access to incorporated standards, while preserving the copyright protection that funds those standards’ development. The ensuring debate, however, has split the interested parties into two sharply opposed camps, each of which has framed the proposal in ways that obscure its real long-term effects.

Opponents of the bill have described it as a giveaway to standards bodies. UpCodes, a startup that has litigated against SDOs to force publication of model building codes online, argues that the bill “locks up the law” and empowers private organizations to monetize access to rules that bind the public.[7] Others have warned that the bill would “attempt to copyright the law” and may itself be unconstitutional,[8] arguing that it constitutes a privatization of law that undermines public access.[9]

Supporters of the bill, by contrast, characterize the PRO Codes Act as essential copyright protection, arguing that it would preserve the incentive structure for standards development while ensuring transparency.[10] Not surprisingly, the measure has been championed by the International Code Council (ICC) and the National Fire Protection Association (NFPA), the two SDOs whose lobbying activity, as discussed below, may have been an important factor in forcing Congress to consider this “fix.”

That this cross-cutting lineup of interested parties argues the positions they do is not without irony. Among the bill’s opponents are copyright skeptics, who see the measure as a copyright giveaway, but they are joined in opposition by voluntary-adoption SDOs, who fear the bill will undermine their business model. Meanwhile, while the bill’s supporters are typically pro-copyright institutions, the measure they are defending could transform copyright into a contingent right that would evaporate if incorporated into law unless certain access conditions are met. Put differently, while popular rhetoric treats the PRO Codes Act as strengthening copyright, a careful examination of the economic incentives of copyright in the SDO context suggests that it may fact weaken copyright by subjecting the development and promulgation of codes to a form of compulsory licensing.

The real issue in this debate is not whether citizens should have access to the law—no one disputes that principle—but how to achieve that goal without destabilizing the intellectual-property foundation on which standards development rests. The next sections examine two frequently employed business models of standards development—the voluntary-adoption model and the lobbying model—before returning to the PRO Codes Act to assess how it would affect each and why it risks undermining, rather than reinforcing, copyright.

III. Two Business Models of Standards-Setting Organization

The PRO Codes Act debate, though focused on a relatively narrow segment of the standards ecosystem, brings to the surface broader issues of incentive design, the structure of the standards marketplace, and the stability of copyright policy. To understand the potential downstream effects of any legislative intervention, it is useful to examine two popular models for the commercialization of standards development implicated by the proposed legislation.

A. The Voluntary-Adoption Standards Model

Voluntary-adoption SDOs emerged largely in the late 19th and early 20th centuries, often in response to public-safety crises or industrial inconsistencies. The American Society of Mechanical Engineers (ASME) turned to standardization in the 1880s following a series of deadly boiler explosions and soon published its boiler code to prevent further accidents.[11] Underwriters Laboratories (UL) was founded in 1894 by insurance companies to address rampant fire hazards from unsafe consumer products.[12] The American Society for Testing and Materials (now known as ASTM International), founded in 1898, arose from concerns about the inconsistent quality of steel rails used in the railroad industry.[13]

A common characteristic of these organizations is their reliance on volunteer technical committees composed of engineers, academics, government officials, and industry participants. Decisions are reached through consensus ballots and public review, which—under ANSI’s accreditation regime—must reflect a balance of interests to prevent domination by any single stakeholder.[14]

Voluntary-adoption SDOs—such as ASME, ASTM International, or the Institute of Electrical and Electronics Engineers (IEEE)—do not typically engage in extensive lobbying campaigns to secure wholesale statutory enactment of their codes. This is not to say these organizations never participate in the political process, but their business models do not generally depend on the lobbying process to secure statutory enactment the way the ICC and NFPA models do (as discussed below). ASME, for example, emphasizes that its codes are developed by volunteer committees and are “frequently referenced in regulations worldwide,” attributing such adoption to their technical credibility, rather than political advocacy.[15] Similarly, ASTM International attributes the widespread citation of its standards in law to “technical excellence and global consensus,” rather than lobbying.[16]

This reliance on expertise makes voluntary standards something of a “default” status for standards adoption, which is further supported by federal policy. Under the National Technology Transfer and Advancement Act[17] and OMB Circular A-119, federal agencies are directed to use voluntary-consensus standards wherever possible. At the margins, this reduces SDOs’ need to rely on lobbying campaigns to develop a sustainable business model.[18]

Examples of this model abound. ASME’s volunteer committees, for example, maintain the Boiler and Pressure Vessel Code, a core set of safety standards that federal regulators—including the Occupational Safety and Health Administration (OSHA) and the Nuclear Regulatory Commission (NRC)—incorporate by reference routinely.[19] ASTM International now maintains roughly 12,000 voluntary-consensus standards, widely used in construction, petroleum, environmental regulation, and manufacturing. Federal agencies such as the Environmental Protection Agency (EPA) and the Consumer Product Safety Commission (CPSC) incorporate ASTM International standards by reference into regulations governing emissions testing and product safety.[20] IEEE produces hundreds of standards for electrical and computer engineering, including the well-known IEEE 802 Wi-Fi protocols.[21] Founded 1905, the Society of Automotive Engineers (now known as SAE International) continues to supply aviation and automotive standards referenced by the Federal Aviation Administration (FAA) and U.S. Transportation Department (DOT).[22] The American Concrete Institute (ACI) produces the ACI 318 structural code, which is widely referenced in building regulations.[23]

1. The economics of the voluntary-adoption model

Voluntary-adoption SDOs typically do not rely heavily on dues or public appropriations. Instead, their primary source of revenue is the sale of standards documents. ASTM International, for example, derives roughly 85% of its funding from publication sales, with only about 15% from membership fees.[24]

Thus, such SDOs have generally argued that their ability to continue producing technical standards depends on revenue from the sale of copyrighted materials. Because developing consensus standards requires expert committees, extensive consultation, and periodic revision, SDOs maintain that the ability to earn copyright revenues is essential to their work.[25] Courts have acknowledged this claim, even as other courts have questioned whether industry and regulatory incentives might suffice without copyright protection.[26]

But what must be acknowledged is the uneven economics of standards setting: only some standards are incorporated widely into law or command significant market demand, while many others serve narrower or specialized purposes. While there has been, to date, no broadly available quantification of sales distribution across standards, it is reasonable to infer—drawing on patterns in other creative markets—that revenues are likely concentrated in just a handful of broadly adopted or “blockbuster” standards, which in turn help to sustain the development of more specialized standards with more limited commercial appeal.[27]

Given this reality, the voluntary-adoption model is uniquely vulnerable to shifts in copyright doctrine. Incorporation by reference (IBR) allows regulators to require compliance with an external standard by citing it directly in law, rather than reproducing the text. Moreover, IBR allows updates to the standards to be reflected in the law without the need to promulgate new regulations or pass new legislation. Regulators have generally held that incorporation does not place the standard into the public domain.[28] OSHA, for instance, has repeatedly confirmed that “copyright laws protect national consensus standards,” even when incorporated into OSHA rules.[29]

From an economic perspective, the voluntary-adoption model represents a unique solution to the public-goods problem. Standards have high fixed development costs but, once created, can be reproduced (or incorporated by reference) at negligible marginal cost. Absent some exclusion mechanism, there would be chronic underinvestment. Copyright creates a limited exclusion that allows SDOs to recoup costs, while volunteer labor minimizes the need for large financial outlays.

The voluntary-adoption model’s efficiency stems from its ability to pool technical expertise that governments could not feasibly replicate at scale. Agencies would face significant opportunity costs, both financial and political, if forced to draft thousands of engineering standards internally. Volunteer-consensus processes also produce broader stakeholder buy-in, which enhances compliance and legitimacy.[30] At the same time, the backdrop of copyright ensures that SDOs will be able to fund ongoing work, even for standards that do not generate large market demand.

B.  The Lobbying Model of Standards Development

In contrast to the voluntary-adoption model of standards development is what we can call the “lobbying model.” While it is true that this SDO business model similarly relies on engineering expertise and consensus-building activities, it is distinct in that it seeks to leverage copyright to encourage promulgation of standards-reliant codes. For example, the ICC advertises that an important part of its government-relations team’s mission is to “advocate for the adoption, implementation and enforcement of current building safety codes, standards and policies.”[31] The NFPA notes that its staff “engage[] with policymakers at all levels of government to support adoption and use of NFPA codes and standards.”[32] And at least one account of the relationship between these two organizations detailed the intense lobbying battle between ICC and NFPA in the early 2000s, when each group deployed “lobbyists, political ads, and grassroots campaigns” to persuade states and cities to adopt their specific codes.[33]

The evidence suggests it is likely this business model that has generated many of the conflicts that have inspired legislation like the PRO Codes Act.

1. Mechanics of the lobbying model of standards development

In contrast to the voluntary-adoption approach, the commercialization portion of the lobbying model centers on two sequential moves. First, a private body like the ICC or the NFPA drafts a comprehensive code and lobbies legislatures and agencies to adopt this code wholesale (often with minimal amendments). Second, once legal force is attached, the organization asserts copyright in the text of the law and sells access to the code via print, PDFs, and subscriptions, while offering only constrained read-only portals as a free option.

This two-stage maneuver—leveraging the political process to create a legal obligation and then invoking copyright to control the text—structures a business model in which legal adoption helps to create a captive market for the publisher’s editions.[34] This can generate significant revenue for the relevant standards bodies:

To understand the battle between NFPA and ICC, it is useful to avoid thinking of the two groups as associations of code geeks. Rather, think of them as two publishing houses engaged in a war for book sales. Codebooks are a big business in the United States and abroad. When a city or a state adopts one model code or the other, it means that thousands of code officials, architects, engineers and others must purchase new copies to keep on their desks. In 2004, NFPA pulled in $58 million from publication sales, while ICC earned $25 million.[35]

The ICC, which emerged through consolidation of various regional model-code bodies, most notably publishes the International Codes (“I-Codes”), which serve as the baseline building regulations for most U.S. jurisdictions.[36] The NFPA, founded in 1896, develops hundreds of safety standards, including NFPA 70 (National Electrical Code) and NFPA 101 (Life Safety Code), which are widely adopted by reference.[37] Once enacted, the ICC’s I-Codes and the NFPA codes are sold at textbook-level price points and supplemented by paid digital subscriptions that offer broader functionality.[38]

The lobbying model can create tension because it sits at the fault line between private copyright enforcement and the public’s right to know the law. As we discuss in the next section, courts have been forced to confront the economic and legal consequences of allowing private SDOs to both press for their texts to become legally binding and then restrict access to those same texts once enacted.

C. Relevant Case Law

The overlap between voluntary-adoption and lobbying-oriented SDOs becomes most visible in the courts. Whatever differences exist in their business models, both types of SDO ultimately confront the same question: what becomes of copyright once private standards are incorporated into binding law? Judicial treatment of this issue has been uneven across circuits and contexts, but it reflects a common baseline principle—citizens must be able to access the laws that govern them, even when those laws originate as privately authored texts.

Early decisions reflected a strong inclination to preserve copyright protection, notwithstanding incorporation. In Practice Management v. AMA, the 9th U.S. Circuit Court of Appeals upheld copyright in the American Medical Association’s (AMA) Current Procedural Terminology (CPT) coding system, despite its incorporation into Medicare regulations, as the court reasoned that government reference did not divest the AMA of authorship or originality.[39] Similarly, in CCC Information Services v. Maclean Hunter, the 2nd U.S. Circuit Court of Appeals confirmed copyright protection for an automobile-valuation guide, even though state law required insurers to use it.[40] These cases underscored the view that mere legal reliance on a work did not erase the statutory protections conferred by the Copyright Act—a view congenial to SDOs that depend on copyright revenues to sustain costly consensus-driven technical work.

The 5th U.S. Circuit Court of Appeals, however, took a different approach in Veeck v. SBCCI, where a citizen posted online the building codes of two Texas towns that had adopted a model code verbatim.[41] Sitting en banc, the court held that, once a model code is enacted as municipal law, it loses copyright protection under both the government-edicts doctrine and the merger doctrine.[42] The court reasoned that “public ownership of the law means precisely that ‘the law’ is in the ‘public domain’ for whatever use the citizens choose to make of it,” emphasizing that citizens must have free access to the rules that bind them.[43] The circuit court’s decision was rooted in the idea that, once enactment renders a standard a non-substitutable public good, exclusionary rights function as a toll on compliance, rather than as an incentive for creation.

Importantly, the Veeck court was careful to limit its holding to the wholesale adoption of model codes as law, noting that the case did not involve extrinsic technical standards. This distinguishes that opinion from cases that uphold copyright protection for incorporated technical works.[44] Veeck thus struck most directly at lobbying-oriented SDOs, whose revenue model depends on wholesale enactment of their codes. When enactment itself triggers loss of copyright, it undercuts the very mechanism on which they rely to convert technical documents into guaranteed markets. By contrast, voluntary-adoption SDOs generally see their standards incorporated by reference, rather than enacted wholesale, and thus remain better positioned to preserve copyright protection under prevailing doctrine.

This difference is not merely procedural: when a standard is incorporated by reference, it remains a privately authored work that is used by law but not transformed into law, allowing copyright to persist under, for example, the “reasonable availability” regime established by OMB Circular A-119. Wholesale adoption, however, turns the text into the law itself, triggering the “law is public domain” problem at the heart of Veeck. As discussed below, the PRO Codes Act threatens to collapse this distinction, treating both models as functionally equivalent and thereby extending statutory protection to the lobbying-oriented model, while destabilizing the voluntary-adoption one.

Subsequent cases have, however, shifted away from the government-edicts doctrine and instead relied on fair use to reconcile public access with copyright. In American Society for Testing & Materials v. Public.Resource.Org, the U.S. Circuit Court for the D.C. Circuit upheld nonprofit republication of standards incorporated by reference into law, reasoning that such dissemination was transformative: while SDOs published standards for commercial sale, Public.Resource.Org republished them to educate the public about legal obligations.[45] The court also found the “reading rooms” that SDOs maintained to be inadequate, noting they often barred printing, downloading, or robust searching.[46] Doctrinally, this fair-use holding applied across the board—sweeping in both lobbying-oriented and voluntary-adoption SDOs alike.

The ICC’s litigation against UpCodes, a startup offering searchable online building codes, pushed these tensions into the commercial realm. The district court echoed Veeck in holding that private entities cannot wield copyright to bar access to enacted law, while leaving unresolved questions about non-enacted provisions and advertising claims. The case highlights the remaining gray area: nonprofit republication for educational purposes has been immunized, while commercial republication is still subject to closer scrutiny, with courts weighing the public benefits of wider access against potential market substitution.

These cases did not emerge in a vacuum. The most acute disputes, such as Veeck and UpCodes, arose from the distinctive incentives of lobbying-oriented SDOs, which campaign for wholesale enactment of their codes and then invoke copyright to meter access once those codes have become law. That strategy created the scarcity dynamic that brought these conflicts into the courts. Voluntary-adoption SDOs like ASTM International have been swept into the same doctrinal current—most notably in Public.Resource.Org, where fair use applied to their standards incorporated by reference—but their exposure reflects the breadth of the doctrine, rather than the business model they pursued. The underlying political pressure for legislation such as the PRO Codes Act seems to stem far more from the lobbying-oriented posture of ICC and NFPA.

Moreover, this jurisprudence is critical to understanding the stakes of the PRO Codes Act. Courts have already developed tools to balance access and incentives, allowing standards to remain protected as intellectual property, while ensuring that the public is not priced out of compliance. The PRO Codes Act, by contrast, threatens to displace these doctrines with a blunt statutory rule that collapses distinctions among SDOs and risks destabilizing copyright protections across the board. The next section turns to that legislation, analyzing its likely effects on both voluntary-adoption and lobbying-driven models of standards development.

IV. The Law & Economics of the PRO Codes Act

Into this complicated case law, Congress is considering injecting the PRO Codes Act. Framed as a transparency measure, its core provision declares that, once a private standard is incorporated by reference into law, it must be posted online for free.[47] If the standards body fails to provide that access, it will lose its copyright in the work.[48]

Supporters argue that this rule addresses a basic democratic concern: citizens should not have to pay, or navigate paywalled reading rooms, to learn the rules that govern them.[49] For proponents, the problem is straightforward—codes that function as law are often accessible only through expensive books or restricted digital portals. By forcing free posting, the bill purports to guarantee that binding legal obligations are accessible to all.

At first glance, the policy appeal is strong. Courts in cases like Veeck and Public.Resource.Org have reasoned that, once private standards become law, restricting access through paywalls or high-friction portals imposes deadweight losses by charging tolls for access to a non-substitutable public good.

Yet the PRO Codes Act addresses this problem in a way that risks undermining copyright more broadly. By conditioning copyright protection on whether a standard has been incorporated by reference, the bill effectively converts government adoption into a trigger for compulsory licensing at zero price. This approach does not simply guarantee access; it extinguishes property rights whenever the state adopts a private work. That is to say, a third party gets to exercise veto power over an SDO’s property rights.

Critically, entities like ICC and NFPA are just as entitled as any other standards body to enforce their copyrights. This approach to funding their operations is not per se objectionable, even as litigation has challenged whether incorporated statutes should or should not qualify for a fair-use exception. What is relevant here is how the lobbying-oriented model appears to foment many of the legal crises to which the PRO Codes Act seeks to respond. To the extent there is a problem the courts have not addressed, the fix is not to create a major exception to copyright. It should be to examine the activity that generates such problems and tailor any appropriate responses to that activity. Here, it is likely the combination of political adoption and subsequent reliance on exclusivity that makes the lobbying-oriented model uniquely open to criticism.

Further, the design of the PRO Codes Act could disproportionately harm voluntary-adoption standards bodies, which do not lobby for their codes to be adopted wholesale, but whose works are frequently referenced in federal and state regulations—access to which is very likely already covered under fair use. Unlike lobbying-oriented SDOs, who seek enactment as part of their business model, voluntary-adoption SDOs have little control over whether their codes are cited by regulatory bodies. Under the PRO Codes Act, such adoption would effectively eliminate the SDOs’ copyrights, erasing the very revenue stream that sustains the cross-subsidized development of technical safety standards.

The economic consequences of such a shift are significant. If SDOs cannot rely on publication revenues, many would likely have to scale back or abandon development of standards that lack commercial scale. Government bodies could, in theory, step in with funding, but doing so would require major new appropriations and would risk politicizing technical work now performed through professional consensus.

The U.S. advantage in global standards setting has long rested on a decentralized ecosystem of private SDOs, drawing on volunteer expertise and sustained by intellectual property. Weakening the property rights that support this ecosystem would risk slowing code updates, reducing technical quality, and further risk ceding international leadership to rivals. China’s “Standards 2035” plan, for example, explicitly aims to supplant U.S. and European standards as global benchmarks.[50] A policy that destabilizes U.S. SDOs could inadvertently accelerate that shift.

The PRO Codes Act also raises a more general property-rights concern. Once Congress sets the precedent that state action extinguishes copyright, the principle could spread beyond standards. If textbooks, software, or other works used by government (or, indeed, other “deserving” third parties) were deemed incorporated into a work of “public concern,” would they also lose protection?

The PRO Codes Act’s narrow focus on civil-engineering codes masks the breadth of its doctrinal innovation. It would collapse the distinction between using a work in governance and expropriating it into the public domain. This is a distortion ultimately caused by using one particular business model as the spark to restructure copyright itself.

The PRO Codes Act would fundamentally alter the current balance of law and directly undermine the business models of the voluntary-adoption SDOs. Under existing doctrine, when a voluntary-consensus standard is incorporated by reference, it does not automatically fall into the public domain. Courts have occasionally curtailed copyright (for example, by recognizing nonprofit republication as fair use), but these rulings have been case-by-case and have left intact the broader rights of standards bodies outside those narrow contexts. Agencies guided by OMB Circular A-119 must ensure “reasonable availability,” a requirement that can be satisfied through limited reading rooms or online portals. This approach permits SDOs to continue selling full copies—which are searchable, printable, and portable—while meeting their public-access obligations.

The PRO Codes Act would replace that flexible system with a rigid statutory rule and would, in essence, codify the lobbying-oriented SDOs’ business model. Once a standard is incorporated by reference, it would have to be posted online for free. If the SDO failed to do so, it would lose its copyright altogether. This turns copyright from a stable property right into a contingent interest revocable by government action.

Even compliance would bring risks. By mandating open online posting, the bill strips SDOs of control over how their works are made available and threatens to erode revenue streams that depend on users purchasing official editions. In short, the bill destabilizes SDOs’ rights, undermines their ability to sustain their business model, and exposes them to uncompensated forfeiture of the intellectual property on which their work depends.

A more balanced policy response would start from the premise that copyright is worth preserving as the foundation of creative and technical enterprise. The problem with the lobbying-oriented model is not copyright per se, but the way it is coupled with lobbying for wholesale statutory adoption. The PRO Codes Act mistakenly attacks copyright across the board, rather than targeting the lobbying-driven dynamics that generate actual problems in public access. In doing so, it threatens voluntary-adoption organizations that exemplify the public-interest rationale for copyright protection.

It is likely that the best approach to this issue is to do nothing, leaving courts to continue calibrating the balance through doctrines like fair use and the government-edicts rule. That approach already ensures nonprofit republication and public-domain status where texts are enacted verbatim, while leaving SDOs’ revenue streams intact. In short, Congress should reject statutory “fair use” expansion in the form proposed by the PRO Codes Act. Codifying a blanket rule that incorporation extinguishes copyright unless the rightsholder gives away his property would put at odds two distinct issues: ensuring access to the law and preserving the economic incentives that sustain the private development of standards.

V. Conclusion

Copyright undergirds the distinct but fragile business models that sustain standards development. For voluntary-adoption SDOs, copyright revenues provide the cross-subsidies needed to maintain a vast portfolio of technical rules, most of which would never be commercially viable on their own. For lobbying-oriented SDOs, copyright plays a different role, functioning as part of a two-stage maneuver, alongside lobbying to secure wholesale adoption. Both models illustrate how property rights serve as the backbone of the standards ecosystem, even as they invite scrutiny from courts and policymakers.

The PRO Codes Act threatens to upend this balance by introducing compulsory licensing by stealth. By tying copyright to government incorporation, the bill does not merely guarantee access but distorts the structure of property rights, creating a precedent that could undermine innovation, erode U.S. competitiveness, and unsettle the careful balance between public access and private incentive. Framed as a transparency measure, it risks entrenching one contested business model, while destabilizing the broader ecosystem of standards development.

The economic stakes are clear. SDOs provide technical infrastructure on a scale and at a level of expertise that government bodies could not replicate without extraordinary cost. Their continued viability depends on predictable intellectual property protections. Undermining those rights in the name of transparency would erode the capacity for innovation and distort the broader architecture of property law.

In short, the PRO Codes Act is a miscalibrated response. It overcorrects problems created by lobbying-driven SDOs and, in doing so, threatens the sustainability of voluntary-adoption SDOs. The better path is not to abandon copyright, but to preserve and refine the flexible tools already available in law—fair use, licensing, and targeted judicial scrutiny. Those mechanisms have long balanced access with incentives, and they remain far better suited to the complexities of standards development than the blunt instrument of statutory compulsory licensing.

[1] Pro Codes Act, H.R. 4009, 119th Cong. (2025), https://www.congress.gov/bill/119th-congress/house-bill/4009.

[2] Press Release, Issa, Ross Introduce Legislation to Protect Public Access to Federal Rules, Regulations, Off. Rep. Darrell Issa (Jun. 23, 2025), available at https://issa.house.gov/media/press-releases/issa-ross-introduce-legislation-protect-public-access-federal-rules.

[3] See Copyright Alliance Issues Statement Supporting HJC Markup of Pro Codes Act, Copyright All. (Apr. 17, 2024), https://copyrightalliance.org/press-releases/pro-codes-act.

[4] See Pro Codes Act, UpCodes https://up.codes/pro-codes-act (last visited Oct. 2025); The Real Truth About the “Pro Codes” Act, Ass’n Res. Libs. (Mar. 22, 2024), available at https://www.arl.org/wp-content/uploads/2024/03/The-Real-Truth-about-the-Pro-Codes-Act.pdf.

[5] The equitable doctrine of “unclean hands” prevents a party from obtaining judicial relief when its own conduct has been unethical or in bad faith in relation to the matter at issue. See, e.g., Restatement (Second) of Torts § 940 (1979). This is not to suggest that enforcing copyrights constitutes an improper manipulation of legal process, but rather that invoking property rights as part of a strategy that leverages public authority to create a captive market raises analogous concerns.

[6] Issa, supra note 2.

[7] UpCodes, supra note 4.

[8] Canyon Brimhall, The Pro Codes Act Attempts to Copyright the Law – But Is It Constitutional?, R Street Inst. (Mar. 2024), https://www.rstreet.org/commentary/the-pro-codes-act-attempts-to-copyright-the-law-but-is-it-constitutional.

[9] ARL, supra note 4.

[10] Copyright Alliance Applauds Introduction of the Pro Codes Act, Copyright All. (Mar. 2022), https://copyrightalliance.org/press-releases/pro-codes-act.

[11] FAA, Voluntary Industry Standards and their Relationship to Government, Fed. Av. Admin. (1996), at 27, available at http://www.faa.gov/about/office_org/headquarters_offices/ast/media/vol_std.pdf.

[12] Id.

[13] Id. at 28.

[14] See, e.g., Frequently Asked Questions, ASTM Int’l, https://www.astm.org/faq (last visited Oct. 2025).

[15] Codes & Standards Development, Amer. Soc. Mech. Eng’rs., https://www.asme.org/codes-standards (last visited Oct. 2025).

[16] About ASTM International, ASTM Int’l, https://www.astm.org/about (last visited Oct. 2025).

[17] National Technology Transfer and Advancement Act of 1995, Public Law 104-113 (1995), https://www.nist.gov/standardsgov/national-technology-transfer-and-advancement-act-1995.

[18] OMB Circular A-119, Off. Mgmt. Bdgt. (2016), available at https://share.ansi.org/Shared%20Documents/About%20ANSI/Why-Voluntary-Consensus-Standards-Incorporated-by-Reference-into-Federal%20Government%20-Regulations-Are-Copyright-Protected.pdf

[19] Voluntary Industry Standards and Their Relationship to Government, Fed. Av. Admin. Off. Com. Space Transp. (FAA/AST) (1996) at 27, 42, available at http://www.faa.gov/about/office_org/headquarters_offices/ast/media/vol_std.pdf.

[20] S. Michael Gentine & Kelsie Sicinski, D.C. Circuit: “Fair Use” Means Sharing Safety Standards Incorporated by CPSC Is Fair Game, Arnold & Porter Kaye Scholer LLP (Oct. 30, 2023, https://www.arnoldporter.com/en/perspectives/blogs/consumer-products-and-retail-navigator/2023/10/dc-circuit-fair-use-means-sharing-safety-standards.

[21] IEEE 802 LAN/MAN Standards Committee (LMSC), Inst. Elec. Electronics Eng’rs., https://www.ieee802.org (last visited Oct. 9, 2025); The Evolution of Wi-Fi Technology and Standards, IEEE Standards Ass’n., https://standards.ieee.org/beyond-standards/the-evolution-of-wi-fi-technology-and-standards (last visited Oct. 9, 2025).

[22] Order 8110.116, Fed. Av. Admin. (Sep. 23, 2011), available at https://www.faa.gov/documentLibrary/media/Order/8110.116.pdf.

[23] 2022 ACI 318-19 Building Code Requirements for Structural Concrete and Commentary on Building Code Requirements for Structural Concrete (ACI 318R-19), Int’l Code Council, https://codes.iccsafe.org/content/ACI31819R2022P2 (last visited Oct. 9, 2025); Jack Moehle, Introducing ACI 318-19: Building Code Requirements for Structural Concrete, B. Safety J. (Aug. 26, 2019), https://www.iccsafe.org/building-safety-journal/bsj-technical/introducing-aci-318-19-building-code-requirements-for-structural-concrete.

[24] FAA/AST, supra note 19, at 42.

[25] Copyright in Standards Incorporated by Reference into Law and the Pro Codes Act, CRS Product No. R47656, Cong. Res. Svcs. (Aug. 8, 2025); Am. Soc’y for Testing & Materials v. Public.Resource.Org, Inc.., 896 F.3d 437 (D.C. Cir. 2018).

[26] Veeck v. Southern Building Code Congress Int’l, Inc., 293 F.3d 791 (5th Cir. 2002).

[27] See generally John Burroughs, Incorporated Standards and Fair Use: Remaining Uncertainties Set the Stage for Further Litigation, Univ. Chi. Bus. L. Rev. Online Edition (2024), https://businesslawreview.uchicago.edu/online-archive/incorporated-standards-and-fair-use-remaining-uncertainties-set-stage-further.

[28] Why Voluntary Consensus Standards Incorporated by Reference into Federal Government Regulations Are Copyright Protected, Amer. Nat’l. Standards Inst. (n.d.) at 13, available at https://share.ansi.org/Shared%20Documents/About%20ANSI/Why-Voluntary-Consensus-Standards-Incorporated-by-Reference-into-Federal%20Government%20-Regulations-Are-Copyright-Protected.pdf.

[29] Updating OSHA Standards Based on National Consensus Standards; Personal Protective Equipment, 74 Fed. Reg. 46,350 (Sep. 9, 2009), https://www.osha.gov/laws-regs/federalregister/2009-09-09.

[30] See discussion supra notes 15-20 and accompanying text.

[31] Advocacy – Government Relations, Int’l Code Council, https://www.iccsafe.org/advocacy (last visited Oct. 2025).

[32] Public Policy and Advocacy, Nat’l. Fire Prot. Ass’n., https://www.nfpa.org/advocacy (last visited Oct. 2025).

[33] Sarah Harney, The Code War, Governing (Aug. 11, 2010), https://www.governing.com/archive/Code-War.html.

[34] Id.; Protect Safety Codes by Supporting Advancement of the Pro Codes Act, Int’l Code Council (2024), https://www.iccsafe.org/building-safety-journal/bsj-news/protect-safety-codes-by-supporting-advancement-of-the-pro-codes-act-2; Free Access to NFPA Codes and Standards, Int’l Ass’n Fire Chiefs, https://www.iafc.org/topics-and-tools/resources/resource/free-access-to-nfpa-codes-and-standards (last visited Oct. 2025).

[35] See Harney, supra note 25.

[36] Id.

[37] James Peterkin & Scott Mason, Navigating IBC and NFPA Differences, Health Facilities Mgmt. (Jul. 14, 2022), https://www.hfmmagazine.com/articles/4500-navigating-ibc-and-nfpa-differences.

[38] International Building Code®, Int’l Code Council https://shop.iccsafe.org/2021-international-building-coder.html (as of October 2025, ICC’s 2021 IBC listed at $203 in softcover, with a $112 license for digital content); NFPA LiNK, Nat’l. Fire Prot. Ass’n., https://www.nfpa.org/product/nfpa-70-national-electrical-code-nec/p0070code/nfpa-70-national-electrical-code-nec-2023/7023sb (as of October 2025, NFPA 70 (2023) was listed at about $161 in softcover, with an approximately a $168 annual subscription fee for a license).

[39] Practice Mgt. Info. Corp. v. American Med. Ass’n, 121 F.3d 516 (9th Cir. 1997), opinion amended by (9th Cir. 1998) 133 F3d 1140.

[40] CCC Info. Servs. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61, 74 (2nd Cir. 1994).

[41] Veeck v. SBCI, supra note 26.

[42] See id. at 801, 795.

[43] Id. at 799.

[44] Id. at 804.

[45] Am. Soc’y for Testing & Materials v. Public.Resource.Org, Inc., 82 F.4th 1262, 1265 (D.C. Cir. 2023).

[46] Id. at 1270.

[47] Pro Codes Act, supra note 1, at § 123(b).

[48] Id.

[49] See, e.g., Copyright Alliance, supra note 3.

[50] Yi Wu, China Standards 2035 Strategy: Recent Developments and Implications for Foreign Companies, China Br. (Jul. 26, 2022), https://www.china-briefing.com/news/china-standards-2035-strategy-recent-developments-and-their-implications-foreign-companies.

A recent Truth on the Market blog post by contributor Selcukhan Ünekbas examining the theory of “killer acquisitions” has been republished by Competition Policy International (CPI). In the piece, Ünekbas argues that while the theory in which an incumbent firm acquires a rival to eliminate future competition has gained significant traction among policymakers, it is supported by surprisingly little empirical evidence, particularly in digital markets.

Read the CPI piece here.

Read Selcukhan’s original Truth on the Market post here.

Ben Sperry, ICLE Senior Scholar for Innovation Policy, was cited in a new report from the American Enterprise Institute (AEI). The report explores First Amendment challenges to using antitrust law to regulate the content-moderation decisions of social media platforms. Sperry’s work is cited to explain that, while many conservatives allege collusion, the similarity of platforms’ content-moderation standards may simply represent common responses to similar market demands.

“Antitrust concerns expressed in the Technology Platform Censorship RFI didn’t come out of left field. The RFI simply brought into high relief “a years-long, escalating series of claims that digital platforms systematically censor conservative political speech.” As Ben Sperry of the International Center for Law & Economics (ICL&E) wrote in 2021, “Many conservatives . . . see multiple platforms all engaging in very similar content-moderation policies when it comes to certain touchpoint issues, and thus allege widespread anti-conservative bias and collusion.” Sperry points out, however, that “those claims [don’t] have much factual support, but more importantly, the similarity of content-moderation standards may simply be common responses to similar demand structures—not some nefarious and conspiratorial plot.” Nonetheless, the theory that platforms collude to stifle conservative opinions gained traction among Republicans, including those at the FTC.”

Read the full report here.

Ben Sperry, ICLE Senior Scholar for Innovation Policy, was cited in a new report from the American Enterprise Institute (AEI). The report explores First Amendment challenges to using antitrust law to regulate the content-moderation decisions of social media platforms. Sperry’s work is cited to explain that, while many conservatives allege collusion, the similarity of platforms’ content-moderation standards may simply represent common responses to similar market demands.

“Antitrust concerns expressed in the Technology Platform Censorship RFI didn’t come out of left field. The RFI simply brought into high relief “a years-long, escalating series of claims that digital platforms systematically censor conservative political speech.” As Ben Sperry of the International Center for Law & Economics (ICL&E) wrote in 2021, “Many conservatives . . . see multiple platforms all engaging in very similar content-moderation policies when it comes to certain touchpoint issues, and thus allege widespread anti-conservative bias and collusion.” Sperry points out, however, that “those claims [don’t] have much factual support, but more importantly, the similarity of content-moderation standards may simply be common responses to similar demand structures—not some nefarious and conspiratorial plot.” Nonetheless, the theory that platforms collude to stifle conservative opinions gained traction among Republicans, including those at the FTC.”

Read the report here.

In a recent article, Law360 spotlights a Truth on the Market post by ICLE Senior Scholar, Innovation Policy, Ben Sperry. The piece explains why two landmark Supreme Court cases that grant the Federal Communications Commission authority over broadcast speech, Red Lion and Pacifica, are based on outdated technological reasoning and should be overturned.

An International Center for Law & Economics scholar, in a blog post earlier this week, described the two landmark cases — Red Lion Broadcasting Co. v. FCC and FCC v. Pacifica Foundation — as “indefensible and economically nonsensical” in the media market of 2025.

[…]

Red Lion and Pacifica were crucial to upholding the public interest standard, but ICLE says the cases handed the FCC the power to regulate broadcast speech “in ways that would never be tolerated” in other forms of media today.

“This bizarre notion that radio and television broadcasters deserve fewer First Amendment protections than newspapers, websites or cable networks is a vestige of mid-20th-century technological reasoning that has long overstayed its constitutional welcome,” wrote Ben Sperry, ICLE senior scholar.

The full article can be read here.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in a Communications Daily article discussing the likelihood that the Federal Communications Commission (FCC) will not enforce certain Biden-era data privacy rules, despite the rules recently being upheld in court.

Other industry officials agreed that the FCC likely won’t cite anyone for violating the rules, though they remain in effect. “I haven’t seen anything so far to suggest that Chairman Carr plans to start rolling out enforcement actions in this context,” emailed Kristian Stout, innovation policy director for the International Center for Law & Economics.

Read the full article here.

Brian Albrecht, ICLE Chief Economist, was quoted in the New York Times’s DealBook newsletter, where he explained the concept of “creative destruction” in the context of the 2025 Nobel Prize in Economics.

“Aghion and Howitt explained the role of “creative destruction,” an endless process in which new products displace older products. Aghion and Howitt, who split the second half of the award, argue that “competition for profit is what causes you to put in the effort to make a better product,” Brian Albrecht, the chief economist for the International Center for Law & Economics, told DealBook. “That in turn drives economic growth,” he added. For example, the release of the iPhone decimated BlackBerry’s market share.”

Read the full article here.

ICLE Chief Economist, Brian Albrecht’s X post was mentioned by The Guardian in their story about reactions to the Nobel economics prize.

2025 Nobel Prize in Economics goes to Mokyr, Aghion and Howitt

“for having explained innovation-driven economic growht”

The best prize in years!

See the mention at 14.05 CEST in the story roundup here.

See Brian’s post on X here.

ICLE Senior Scholar Eric Fruits was featured in a Radio Ink story about the FCC’s outdated public-interest standards for broadcasters. The article highlights Fruits’ argument that these mandates are a “relic of scarcity” from a bygone technological era and create a regulatory imbalance that harms broadcasters in today’s competitive media market.

Read the full story here.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in Politico‘s “Morning Money” newsletter.

“The quintessential American garage startup founders will definitely see some of their margins shrink,” said Kristian Stout, Director of Innovation Policy at the International Center for Law & Economics. “There’s a good likelihood that it’ll drive some talent offshore.”

Read the full article here.

ICLE Senior Scholar Eric Fruits was featured by Communications Daily in a story covering his Truth on the Market blog post on the FCC’s outdated broadcast-ownership rules.

The regulatory structure that governs broadcasting “is an anachronism” and wouldn’t exist if it were a new technology introduced today, wrote Eric Fruits, a senior scholar for the International Center for Law & Economics, in a post Thursday for Truth on the Market. An emerging technology today wouldn’t be subject to rules like retransmission consent, ownership caps and the public interest standard, he said. “The idea that a panel of three to five presidentially appointed FCC commissioners in Washington can better determine the ‘public interest’ than the public itself — through its viewing choices in a competitive market — is a relic of progressive-era central planning,” Fruits said. “In reality, the vague standard invites regulatory capture and rent seeking, where politically connected groups lobby the FCC to define the public interest in ways that benefit them, rather than the public at-large.”

Read the full story here.

ICLE Senior Scholar Eric Fruits was featured in a Law360 article covering his analysis of the Federal Communications Commission’s (FCC) outdated media-ownership regulations. Drawing from his Truth on the Market blog post, Fruits argues that the current rules are an anachronism and that, were broadcasting invented today, it would be governed by general competition principles rather than by the current complex and restrictive framework.

“The thought experiment of inventing broadcasting today leads to a clear conclusion: the regulatory structure that governs the industry is an anachronism,” wrote Eric Fruits, ICLE senior scholar. “We would not allocate vast amounts of high-value spectrum to broadcasting at no charge. We would not impose arbitrary ownership caps or vague public-interest obligations.”

Fruits also argued that in such a scenario, “we would not create a complex and coercive carriage regime like must carry and retransmission consent,” referring to program carriage rules that require cable and satellite providers to carry local broadcasters’ TV channels. “Instead, we would treat broadcasting like any other technology for content distribution.”

Read the full article here.

Threads from ICLE scholars on trending issues for the month of October 2025.

Two macro trends over 40 years:

– Rising markups
– Falling business dynamism

Are these related? Many economists say so.@UpdatedPriors and I have an updated paper where we take an IO approach and look sector by sector.

Spoiler: The industry data tells a different story ? pic.twitter.com/aNCVfMu3Im

— Brian Albrecht (@BrianCAlbrecht) October 22, 2025

Looking at AWS's outage yesterday and the predictable "break them up!" chorus.

Is it better to have a bunch of small servers that go down more but are uncorrelated? Not quite sure what the argument is, even.

But the data suggests healthy competition. pic.twitter.com/BRJclXRfZV

— Brian Albrecht (@BrianCAlbrecht) October 21, 2025

1/ Yet another “digital levy” on large platforms framed as fairness. In reality, it reflects a classic public choice pattern: politically connected incumbents using the political process to shield themselves after failing in the marketplace. ? pic.twitter.com/cxzkZxOO1i

— Lazar Radic (@laz_radic) October 16, 2025

Declining population is a problem for growth for multiple reasons pic.twitter.com/q0613BFZCv

— Brian Albrecht (@BrianCAlbrecht) October 15, 2025

Anthropic just released policy proposals.

There are actively bad ideas, generally good but unrelated to AI, and others that miss the forest for the trees.

I read the overarching framing as "how do we minimize harm?" not "how do we harness benefits and navigate trade-offs?" https://t.co/19GkCyV9nW

— Brian Albrecht (@BrianCAlbrecht) October 15, 2025

? 2025 Nobel Prize in Economics goes to Mokyr, Aghion and Howitt ?

"for having explained innovation-driven economic growht"

The best prize in years! pic.twitter.com/BNiw5VOq8N

— Brian Albrecht (@BrianCAlbrecht) October 13, 2025

Matthew Lynn's WaPo piece claims economists were wrong about tariffs. Economists are a diverse group so you can definitely find mistakes.

But overall it's a bad piece.

Cherry-picking data, timeline confusion, and misunderstanding basic tax data and incidence. https://t.co/5bjRqoviyM pic.twitter.com/o7NLEQPbEl

— Brian Albrecht (@BrianCAlbrecht) October 10, 2025

?? Muito obrigado, São Paulo! After the "Ibracao", I joined a fantastic panel on the competitive challenges posed by generative AI. There was, I think, broad agreement that it would be premature to regulate or apply any kind of “preemptive enforcement” in "AI markets".

?… pic.twitter.com/7yPSyCbxnM

— Mario Zúñiga (@MZunigaP) October 9, 2025

NEW OP-ED. L’IA évolue chaque semaine. Nos régulations européennes, en plusieurs années. Résultat : un décalage grandissant entre la vitesse de l’innovation et la lenteur législative.
Dans ma tribune pour Les Échos, j’explique pourquoi le mythe d’une régulation « à l’épreuve du… pic.twitter.com/j53vj8QgPI

— Thibault Schrepel (@ProfSchrepel) September 30, 2025