Spotlight

ICLE President Geoffrey A. Manne was a guest on a recent episode of the AdExchanger Talks podcast to discuss how Judge Leonie Brinkema might approach remedies phase of the antitrust trial the U.S. Justice Department (DOJ) brought alleging monopolization in Google’s adtech business. Video of the full interview is embedded below.

List of Core Platform Services and Designation of Gatekeepers

Do you have any comments or observations on the current list of core platform services?

We would like to take this opportunity to focus on the question of whether artificial intelligence (AI) should be designated as a core platform service (CPS). Our view is that such a designation would be inappropriate and counterproductive. The reason is simple: AI is not a single, unitary technology or service. Treating it as though it would produce flawed regulatory outcomes, confuse enforcement, and risk stifling innovation.

AI is not a monolith but a heterogeneous collection of technologies, methods, and applications (Radic & Stout, 2024). There is no such thing as a clearly defined “AI market”. Instead, AI is better understood as a loosely connected bundle of technologies, each with its own characteristics, players, and business models. This becomes clear when looking at the different layers of what is sometimes called the “AI stack”. At the foundational level are semiconductors, computing hardware, and cloud or XaaS providers that make raw processing power available. On top of this comes data collection and preparation—an entire industry devoted to cleaning, labelling, and managing data. Model training follows, with quite different approaches—such as supervised, unsupervised, reinforcement, and transfer learning—each serving distinct purposes. Finally, trained models are deployed in different contexts: some in the cloud, others at the “edge” on local devices, others still on-premises—each tied to different firms and business strategies.

This technological diversity is mirrored in the sheer variety of AI applications. It makes little analytical sense to treat large language models (LLMs) for text generation as if they were part of the same service as computer vision systems for medical imaging, or to lump autonomous drones together with self-driving cars simply because both rely on AI. Radiology tools that analyse X-rays do not compete with protein-folding models used in medical research. These technologies serve different users, address different needs, and are not substitutable. Collapsing them all under the label “AI” is no more helpful than speaking of “food markets” or “technology markets”—a generality that obscures more than it clarifies.

It would be similarly misguided—and premature—to include a narrower group of generative-AI services (essentially seeking to capture offerings like ChatGPT, Claude, and Gemini) in the list of core platform services. The generative-AI space remains in its infancy and does not appear to have reached what Teece (1986) refers to as the paradigmatic stage of development. In other words, it is still unclear what the primary types of AI-based services will be in the years ahead. By arbitrarily capturing  today’s most successful generative-AI services—and potentially applying the DMA’s rigid rules to them—policymakers risk significantly impeding the development of these services by preventing their developers from exploring different features and platform architectures.

Designating AI as a single core platform service would therefore be a mistake. It risks generating inaccurate assessments of market power by either underestimating or overestimating concentration. If the relevant market is artificially broadened to include non-substitutable products, a firm’s dominance in a particular niche may be underestimated. Conversely, the narrative that AI is simultaneously vast and yet dangerously concentrated often rests more on technological anxiety and enforcement bias than on sound economic analysis.

Worse still, lumping diverse AI systems into one regulatory framework could distort innovation by implicitly favouring some technologies over others. Rules that are easier to apply to deterministic, “controllable” systems might inadvertently disadvantage more open-ended and creative forms of AI. And because this monolithic view obscures the real competitive dynamics of these nascent markets, it risks making authorities blind to emerging threats, new entry, or potential consumer benefits.

It must also be noted that competition, new entry, and technological advance are the hallmarks of every level of the AI stack. And the market leaders, such as they are, can hardly be characterized as “gatekeepers”. Moreover, it is startups, rather than incumbents, that have taken an early lead in generative AI (and in Web 2.0 before it).

A better approach would be to avoid blanket designations altogether and instead pursue a principled, case-by-case analysis of competition in the AI ecosystem through EU competition law. This means consistently asking basic but indispensable questions: who are the consumers?; what exactly is the product or service?; and to what extent is the AI in question substitutable either for human intelligence or for non-AI technologies? Only by working through these questions can enforcers arrive at meaningful market definitions and avoid abstract generalizations that mislead more than they help.

Designating “AI” as a core platform service would amount to an erroneous abstraction. AI is not one thing but a constantly evolving bundle of technologies with many uses and many implications. A more granular, evidence-based approach is essential if the Commission wishes to safeguard competition, protect consumers, and promote innovation without causing unnecessary harm.

Do you have any comments or observations on the designation process?

The DMA’s designation process exhibits procedural problems that may raise concerns under EU administrative-law principles, potentially including: an asymmetric application of evidentiary standards, inconsistencies in the application of qualitative criteria across different designation decisions, and insufficient procedural safeguards.

First, Art. 3(5) provides that undertakings may present “sufficiently substantiated arguments” to demonstrate that a core platform service should not be designated despite meeting quantitative thresholds. But it also appears to impose a heightened standard on evaluation of these arguments, allowing the Commission to reject them as insufficiently substantiated “because they do not manifestly call into question the presumptions under Article 3(2)”. This standard appears to create different evidentiary burdens for deviating from the presumptions in 3(2).

For Commission-initiated investigations under Article 3(8):

• The Commission may consider qualitative factors such as potential network effects, switching costs, and ecosystem integration;
• The standard appears to be whether there is sufficient indication of gatekeeper characteristics, regardless of the 3(2) criteria; and
• Recital 23 suggests that a forward-looking assessment is appropriate.

Yet for rebuttals under Article 3(5):

• Companies must meet the “manifestly call into question” threshold;
• The same qualitative factors that support Commission designation may be insufficient for rebuttal; and
• It is unclear whether forward-looking assessments could ever “manifestly call into question” the presumptions, which are based on backward-looking determinations.

The Commission’s approach to iPadOS and iMessage illustrates the potential inconsistencies in applying such qualitative criteria. In the iPadOS designation decision, despite falling below certain quantitative thresholds, the Commission initiated proceedings to assess whether iPadOS should be designated based on qualitative factors, including ecosystem effects and business-user importance. But in iMessage, the Commission decided not to designate the service, considering factors such as the relative number of users compared to competing services and the limited importance to business users. These contrasting outcomes raise questions regarding when qualitative factors override quantitative thresholds, what constitutes sufficient evidence to “manifestly call into question” presumptions, and whether similar analytical frameworks apply to Commission investigations and company rebuttals.

Unpredictable designation criteria create several inefficiencies. To start, they create compliance uncertainty. Companies must prepare for potential designation without clear guidance on likelihood, leading to potentially wasteful overcompliance or risky underpreparation. Second, they could harm innovation, with companies seeking to avoid features or growth that might trigger unclear thresholds. Finally, arbitrary designation decisions may advantage some competitors over others without any competitive justification, creating undesirable market distortions.

Perhaps more importantly, the principle of legal certainty, established in cases such as Case C-776/23 P Spain v. Commission, “requires that rules of law be clear and precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law and take steps accordingly”. The current interpretation of Article 3(5) raises concerns regarding the precision and predictability requirements of the Court of Justice’s case law on legal certainty. The “manifestly call into question” standard lacks detailed guidance; the interaction between qualitative and quantitative criteria remains unclear; and companies are often unable to predict with reasonable certainty how their arguments will be evaluated.

Furthermore, the DMA establishes a presumption-based system in which quantitative thresholds create rebuttable presumptions of gatekeeper status. But the application of these reveals tensions. In particular, the same factors (network effects, switching costs, ecosystem integration) appear to be sufficient for the Commission to initiate designation proceedings, yet insufficient for companies to rebut designation presumptions. This asymmetry may violate the general EU principle of equal treatment, which requires that comparable situations not be treated differently and different situations not be treated the same, unless objectively justified. It may also violate the principle of equality of arms and due process laid down in Art. 6 of the European Convention of Human Rights, which requires that each party has a reasonable opportunity to present its case and influence the outcome of a decision without a substantial disadvantage.

The processes by which these determinations are made may also violate the requirements under Art. 41 of the Charter of Fundamental Rights. Art. 41 CFR guarantees the right to good administration, including the right to be heard before adverse measures, the right of access to one’s file, and the obligation of administration to give reasons for decisions. Current DMA procedures raise potential concerns about each element. On the right to be heard, response windows can be too short for complex economic work, opportunities for oral presentation are limited, and there is no clear ability to reply to third-party submissions. On access to the file, the scope of access to the Commission’s economic analysis is uncertain, confidentiality claims can constrain meaningful review, and there is no established procedure comparable to merger control. Finally, as to the duty to give reasons, the detail provided in designation decisions varies, replies to company arguments can be cursory, and the underlying economic reasoning is not always fully articulated.

By contrast, Regulation 139/2004 on the control of concentrations provides for pre-notification meetings (Art. 4), multiple state-of-play meetings (Art. 18), access to file procedures (Art. 18), and the right to an oral hearing (Art. 14 of the Implementing Regulation). Likewise, antitrust proceedings (under Regulation 1/2003) include a detailed statement of objections, full access to the file, minus confidential information (Art. 27), oral hearing before an independent hearing officer, and peer-review procedures (Art. 14).

Despite entailing more severe economic consequences, the DMA’s procedures are, at the very least, less developed than these established frameworks, and may fall short on several dimensions. This is particularly true given the DMA’s penalties of up to 20% of worldwide turnover and potential breakups. Under CJEU jurisprudence (e.g., Intel v Commission, Case C-413/14 P), sanctions of this magnitude arguably require procedural safeguards proportionate to their severity. Likewise, the European Court of Human Rights’ Engel criteria suggest that administrative proceedings with such severe penalties may require criminal-law-level protections.

Obligations

Do you have any comments or observations on the current list of obligations that gatekeepers have to respect?

The DMA is now the cornerstone of the EU’s regulatory framework for digital platforms, imposing a detailed list of obligations on designated gatekeepers under Articles 5 to 7, 11, 14, and 15. These obligations were promoted as clear, self-executing “dos and don’ts”, capable of ensuring fairness and contestability in a fast-moving digital economy. But two structural problems immediately stand out. First, the obligations are badly drafted: their language is often vague and cumbersome. This produces legal uncertainty, raises compliance costs, and undermines the very promise of swift and effective enforcement. Second, the obligations are uncarefully drafted: rather than seamlessly complementing the EU’s broader regulatory architecture, they risk clashing with existing instruments, such as data protection, fundamental rights, and competition law. The drafting problems relate to the overall architecture of DMA obligations, as well as to individual duties and responsibilities.

General

The problem of poor drafting becomes immediately visible in Recital 65 DMA, which stresses that the obligations’ effectiveness depends on them being clearly defined and circumscribed “whilst fully complying with applicable law”. That said, the recital then limits this clarity requirement to obligations that are “susceptible of being further specified” and, in the event of circumvention, to all obligations. In practice, this means that only the obligations under Article 6 are open to specification by the Commission, while those under Article 5 and Article 7 are assumed to be sufficiently clear and self-executing.

This distinction is highly questionable. The obligations under both Articles 5 and 6 are drafted in cumbersome language that raises complex compliance questions. The relative clarity of Article 5 obligations cannot plausibly be explained by the text of the law. Nor can it be explained by enforcement experience. To be sure, some Article 5 obligations have close antecedents in competition law (e.g., Article 5(4) on most-favoured-nation clauses). Others, such as Article 5(2) on the cross-use of data, are informed by a more nuanced and evolving body of case law, with the CJEU taking a cautious approach to data sharing across services. Still others, such as Article 5(7) on disintermediation in payment systems and browsers, have little precedent. By contrast, some Article 6 obligations, notably Article 6(5) on self-preferencing, are more grounded in enforcement practice, the merits of such practice notwithstanding.

Against this background, there is no coherent reason to allow the further specification of Article 6 obligations while treating Article 5 obligations as self-executing. In fact, this asymmetry creates perverse incentives. Because Article 5 obligations may only be clarified in the event of circumvention, a gatekeeper uncertain of its compliance obligations may be tempted to “test the limits” of the law, effectively triggering Commission clarification through violation. This is wasteful from the perspective of administrative efficiency and detrimental to legal certainty. A more consistent approach would be to recognise that both Articles 5 and 6 obligations may need further specification, and to require the Commission to provide clarity—within the confines of the law—proactively rather than reactively.

Individual obligations

A central problem with the DMA’s obligations is that they have been drafted without sufficient regard for the tradeoffs they may create. One striking illustration is Article 6(7), which requires gatekeepers to provide business users with interoperability for the software and hardware features of their core platform services. Crucially, such access must be granted on an equal footing with the interoperability that exists internally among the gatekeeper’s own services.

Interoperability has long been promoted as a “super tool” to promote contestability in markets prone to tipping (Scott Morton et al., 2023). But it is also well known that interoperability is not costless. It can entail a tradeoff between competition and noncompetition values—most notably system integrity and security. In the digital space, opening access for one actor often means opening access for all actors; selective interoperability is practically impossible. Thus, obligations to interoperate may generate vulnerabilities that extend far beyond the narrow competition question at hand (Kerber & Schweitzer, 2017).

Recent enforcement practice illustrates the magnitude of this problem. In a public communication, the Commission revealed that business users have invoked Article 6(7) to request access to Apple’s Just-In-Time Compiler (JIT) engine in iOS, which is a core component of all major browser engines. Allowing third parties to inject and execute arbitrary code in such a sensitive area has been described by the cybersecurity community as a “major security vulnerability” (Kohlenberger, 2025). Such concerns cannot be dismissed as self-serving rhetoric from gatekeepers. They raise real risks of exploitation at scale, with implications for consumer protection, data security, and even national security.

The problem is not that interoperability is uniformly undesirable; rather, it is that the DMA’s obligation is drafted without recognising the tradeoffs involved. A rule that purports to promote contestability may, if enforced without regard for security, generate systemic harm. This is a textbook example of uncareful drafting: an obligation that may be well meaning in competition terms, but that fails to account for the broader legal and policy ecosystem into which it must fit.

In fact, some of the DMA’s interoperability obligations may fail even from a competition perspective. A case in point is Article 7, where gatekeeper providers of “number-independent interpersonal communications services” must interoperate their products with those of non-gatekeepers. This obligation may enable consumers using gatekeeper services to communicate with consumers using non-gatekeeper services. In that case, it is questionable why consumers of gatekeeper services would want to actually switch to other services, considering that a basic level of communication is enabled (Hovenkamp, 2023).

Interoperability obligations are but one example of the DMA’s uncareful drafting. Under Article 14, the DMA introduces an extended merger-reporting obligation for gatekeepers. This obligation appears to require notification where the “merging entities or the target of concentration provide core platform services or any other services in the digital sector or enable the collection of data”. Does the term “merging parties” not already incorporate the target of an acquisition, as the merging parties comprise the buyer and the target? Furthermore, why separate “core platform services” from “any other services in the digital sector”—considering it is virtually impossible for a core platform service to be unrelated to the digital sector (the regulation is called the “Digital” Markets Act, after all)? Also, how should one interpret whether a target “enables the collection of data”? Given that nearly all businesses in the digital economy operate with data, this provision risks becoming excessively broad.

This matters because badly written rules not only impair legal certainty, but also waste valuable enforcement resources.

Clashes with EU law

The DMA’s obligations have been drafted without sufficient attention to their interaction with the wider body of EU law. Formally, the regulation insists that it applies “without prejudice” to other instruments. In practice, however, this clause is something of a myth (Bania, 2023). The DMA is likely to generate frictions across multiple domains: potential double (or even triple) jeopardy under competition law (Robertson, 2024), tensions with guarantees of fundamental rights (Barczentewicz, 2022), and broader inconsistencies with parallel EU legislation. Even when head-on conflict does not arise, unintended consequences abound.

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 (Unekbas, 2023). The Data Act explicitly excludes gatekeepers from benefitting as recipients of data sharing. It is thus unclear whether a gatekeeper could ever benefit from data portability under Article 6 DMA. The Commission, exercising its power of specification, might conclude that transfers of data among large gatekeepers are inconsistent with the legislation’s objectives, particularly since the Data Act explicitly states that gatekeepers do not need further data access. 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.

Furthermore, the DMA itself restricts data use through Article 5(2), which prohibits gatekeepers from combining personal data across services without GDPR-compliant consent. Yet as gatekeepers are typically dominant undertakings, questions arise as to whether such consent can ever be regarded as “genuine”, given the CJEU’s view on the imbalance of power between users and gatekeepers. Recent developments suggest that even contractual relationships may no longer constitute a reliable lawful basis for data processing in such contexts.

Taken together, these overlapping rules mean that large technology firms face increasingly narrow and unpredictable avenues for lawful data acquisition. They cannot rely with certainty on data sharing, intrafirm data relocation, contractual ties, or even user consent. The DMA was meant to provide clarity and certainty; instead, it risks producing the opposite by entangling gatekeepers in a web of conflicting obligations that may undermine legal certainty across the EU’s digital policy framework.

Do you have any other comments in relation to the DMA obligations?

DMA obligations warrant two additional points of consideration that relate to enforcement and flexibility.

Enforcing the DMA obligations

The DMA was conceived as a pragmatic response to the perceived failures of traditional competition enforcement in digital markets. The rationale was clear: competition law was too slow, too resource intensive, and too ineffective to address entrenched gatekeeper power (Monti, 2021). The DMA was presented as a superior alternative. It consisted of a set of ex-ante obligations that would cut through procedural delays and deliver quick, effective remedies.

In practice, however, this promise has not materialised. The Commission’s first enforcement actions reveal lengthy proceedings, protracted compliance discussions, and frequent recourse to parallel competition-law investigations. Rather than largely replacing competition enforcement in the digital arena, the DMA currently functions as a weak complement, far from the “sector-specific competition law” it was supposed to embody (Petit, 2021).

A central reason lies in the non-self-executing nature of the obligations. Contrary to the legislative narrative, Articles 5–7, 11, 14, and 15 do not provide clearcut, automatic rules. Their language is often difficult to interpret. The recitals sometimes clarify, but at other times inject additional uncertainty. This undermines the very clarity and speed that justified the DMA in the first place. A legislative simplification of the obligations would therefore be welcome (Boscheck, 2024).

The challenge is compounded by the fact that many obligations require continuous specification in light of dynamic market realities. Digital markets evolve rapidly, and static “dos and don’ts” are inevitably ambiguous in practice. Specification proceedings, such as those launched against Apple regarding its App Store rules, demonstrate the value of an iterative process (Commission, 2024). These procedures not only help gatekeepers understand what is required of them but also enable the Commission to tailor obligations to real-world business models. Their systematic use should be encouraged.

Finally, enforcement is hampered by the DMA’s uneasy relationship with economic analysis. Legislators deliberately tried to sideline economics in the DMA’s design, excluding efficiency defences and relying on crude quantitative thresholds for designation. But as Fletcher and others remind us, economic insights remain indispensable (Fletcher et al., 2024). The obligations may look formalistic, but their effects are deeply economic: they reshape incentives, alter business models, and interact with network effects and data feedback loops. Ignoring these realities risks blunt, even counterproductive, enforcement. Economic analysis can and should play a constructive role, especially in diagnosing outcomes, monitoring effects, and informing specification proceedings. It is only by reintegrating economics into enforcement that the DMA can deliver on its initial promise of effective intervention.

Flexibility in the DMA obligations

A second promise of the DMA obligations was their supposed flexibility. Many emphasised that—unlike competition law, whose enforcement often arrived after the market had already “moved on”—the DMA would be nimble, capable of addressing fast-moving dynamics in digital markets. The regulation was presented as a “future-proof” tool, a law that could adapt quickly to new forms of gatekeeper conduct.

It is unclear whether the DMA truly meets the ambition. The fundamental dilemma of all technology regulation applies here: the law must aspire to regulate the future, but it can only be drafted with reference to the past. The DMA’s obligations draw heavily from prior antitrust cases (Vezzoso, 2024). In practice, the law “runs forward by looking backward”.

This is problematic in at least two respects. First, conduct prohibited by reference to past case law is not necessarily economically unsound today (exclusive dealing comes to mind). Gatekeepers may need to engage in similar practices to maintain ecosystem value or to support complementary innovation. Second, digital markets evolve rapidly. A practice that appeared abusive yesterday may be competitively irrelevant today, while novel sources of market power may not be captured at all. In this sense, the DMA risks being rigid and, over time, obsolete.

The regulation does contain mechanisms designed to provide flexibility (Witt, 2023). Article 12 allows the Commission to expand or update obligations via delegated acts following a market investigation. Article 13 introduces an “anti-circumvention” rule to prevent gatekeepers from exploiting loopholes. The Commission can also recommend new core platform services for designation. These are important tools, but they are not costless.

Market investigations preceding delegated acts require substantial resources and time, undermining the promised speed of intervention. Anti-circumvention risks degenerating into a “whack-a-mole challenge”: every time one gatekeeper strategy is prohibited, another may emerge, especially considering the sheer volume of complaints from business users (Uwe-Franck & Peitz, 2024). For an already-overstretched (some say “grossly understaffed”) authority charged with enforcing the DMA alongside antitrust and foreign-subsidy rules, such demands are daunting (Comte, 2025).

The real test is whether the Commission can deploy these tools pragmatically and prioritise interventions that safeguard contestability without stifling innovation. Flexibility is not just about having legal mechanisms to adapt; it is about using them judiciously, recognising when certain practices may enhance rather than hinder welfare, and ensuring that scarce enforcement resources are targeted where they matter most. Only then can the DMA avoid the fate of becoming yet another slow, rigid, backward-looking instrument in a forward-moving digital economy.

Enforcement

Do you have any comments or observations on the tools available to the Commission for enforcing the DMA?

The DMA was presented as a harmonising regulation grounded on Article 114 TFEU. Both the co-legislators and the Commission stressed that the alternative to a uniform EU framework was not “no regulation”, but rather the proliferation of 27 divergent national regimes. The DMA’s value proposition thus rests on its promise of legal certainty and a level regulatory playing field across the European Union.

Whether the DMA can deliver on this promise is open to question. The harmonisation clause in Article 1(6) DMA makes clear that the regulation does not pre-empt all national measures. It allows member states to apply national competition rules to prohibit unilateral conduct insofar as they are applied to undertakings other than gatekeepers, or to impose further obligations on gatekeepers within the meaning of the DMA.

This formulation creates two clear avenues for fragmentation. A narrow reading suggests that, so long as national rules are formally directed at undertakings other than designated gatekeepers, they remain untouched by the DMA. A broader reading permits member states to impose additional obligations on gatekeepers, so long as they do not directly contradict the DMA’s own obligations (Lamadrid & Fernandez, 2021). The implications are profound. The effect may be to preserve a wide margin for national authorities to regulate conduct that overlaps substantially with the DMA. In practice, this risks differential treatment of similar behaviour across the EU, undermining the DMA’s central harmonising function (van den Boom, 2023).

The German Act Against Restraints on Competition, with its amendments targeting undertakings of “paramount significance across markets”, is a case in point. Both the amendment’s aims and its list of prohibited practices are functionally equivalent to the DMA. The primary differences are that the German rule regards the list of prohibited practices as exhaustive, and the rule does not consider the practices at stake to be per-se prohibited; rather, it introduces a reversal of the burden of proof, allowing firms to provide objective justifications for their conduct, which is not possible under the DMA. But fundamentally, the German regime targets gatekeepers in all but name, raising the prospect of parallel enforcement with different standards (Colangelo, 2022).

Practice confirms that this is not a hypothetical concern. The Bundeskartellamt has initiated proceedings against Google and Meta concerning data collection and processing, and against Apple for alleged self-preferencing. These are issues already regulated under the DMA. The coexistence of national and EU enforcement in such cases risks precisely the fragmentation that the DMA was supposed to prevent (Barczentewicz, 2023).

A further concern is that careless enforcement of the DMA may elevate the risk of double or even triple jeopardy, in violation of the ne bis in idem principle (Cappai & Colangelo, 2021). The DMA is, in essence, a form of sector-specific competition law, targeted at large digital platforms. As such, it overlaps with traditional antitrust enforcement and, in some contexts, with parallel regulatory regimes. Unless carefully coordinated, this overlap can lead to multiple proceedings and multiple fines for the same conduct.

The Court of Justice has recently clarified the scope of ne bis in idem in bpost and Nordzucker. The Court held that the principle is a fundamental right that must be respected, although not in absolute terms. Restrictions may be permissible where they meet the requirements of legality, proportionality, and effectiveness: they must be grounded in law, not go beyond what is necessary, and be sufficiently coordinated to achieve legitimate regulatory aims. In practice, this means that the same conduct may fall under different regimes, but only if enforcement is properly structured and coordinated.

The DMA and the ECN+ Regulation contain provisions for cooperation between the Commission and national authorities. But whether these mechanisms are sufficiently effective in practice remains an empirical question. If coordination fails, the risk is that gatekeepers will be punished multiple times for the same underlying conduct, raising not just concerns of fairness but potential breaches of fundamental rights—thus elevating the problem into a matter of constitutional significance under EU law.

Do you have any comments in relation to the enforcement to the DMA?

This question is beset by a broader conceptual problem; it is unclear what the success metrics of DMA enforcement even are. In theory, the DMA is not outcome-driven: it does not prescribe a specific market structure or design. Instead, it claims to create opportunities for competitors and complementors on gatekeeper platforms by making markets “fair and contestable”.

This, however, raises the question of how fairness and contestability should be measured, or what they even mean. When is a core platform service truly “fair and contestable”? If the answer is simply that it is so once a gatekeeper complies with the DMA, then fairness and contestability collapse into tautologies. They become self-referential concepts, offering no real benchmarks. This is problematic because (i) the DMA’s obligations are often ambiguous, (ii) a gatekeeper might satisfy the letter of the law while sidestepping its intended “spirit”, and (iii) without clear goals and measurable benchmarks for success, it may be impossible—or, at least, exceedingly difficult—for either the Commission or the gatekeepers to know whether DMA compliance has been achieved. The result is likely to be confusion, costly litigation, and diminished effectiveness of the law.

Clear and objective metrics are therefore indispensable. They are needed not only to give concrete meaning to the DMA’s “spirit”, but also to determine whether the regulation meets its stated objectives. The Commission initially sought to place this burden on gatekeepers, requiring them to explain how and why changes to their core platform services complied with the DMA (Colangelo & Ribera, 2025). The volume of infringement decisions issued since the law’s entry into force suggests that this approach has failed. A more thoughtful and detailed framework is evidently needed.

The first step must be to unpack what “fairness and contestability” actually mean in the DMA. This should help to clarify both the objectives they are meant to serve and the criteria by which success or failure of enforcement can be assessed.

“Contestability” in the DMA seems to be defined as promoting “potential competition” by eliminating barriers to entry and expansion, thereby promoting existing rivals and fostering new market entries. For example, Article 6(4) DMA seeks to boost potential entries at the downstream and upstream level regarding app distribution by compelling gatekeepers to allow and technically enable third-party app stores and apps to interoperate with their operating systems.

“Fairness” is primarily linked to addressing “conflicts of interest” between gatekeepers and business users, particularly concerning value appropriation and conditions of access and competition. The fairness objective is likely redistributive in nature: Because gatekeepers have “unfairly” appropriated monopoly rents from the value that business users create on their platforms, the DMA aims to correct this by redistributing those rents to business users or competitors (Colangelo and Ribera, 2025). The assumption is that a severe power imbalance exists between gatekeepers, on the one hand, and businesses, competitors, and consumers, on the other, which has misaligned each actor’s contribution to the core platform service with the benefits they derive from it (Radic, Manne, & Auer, 2025).

The problem is that, even if we accept that “fairness” and “contestability” can be defined in theory, that does not tell us whether they have been advanced in practice. As vague and malleable standards, they provide no clear benchmark against which success can be measured.

For example, Art. 6(4)—on interoperability with and the installation of third-party applications—appears aimed at promoting potential competition. In theory, compliance with the provision could be measured by assessing the persistence of barriers to entry and expansion. But assessing compliance in this way would be problematic, as some barriers to entry—such as the screening of apps and app stores—protect the platform’s integrity and overall quality (Barczentewicz, 2022, July), and could therefore undermine other goals pursued by the DMA. In other words: success by one yardstick could mean failure by another.

Moreover, such an assessment lacks limiting principles. If there is no cost associated with seeking entry into the gatekeepers’ platform, self-interested business users—i.e., all business users—can always claim that entry is not sufficiently free, easy, or that there is not enough potential competition. Consumers’ revealed preferences—e.g., continued use of curated app stores with strong safeguards—risk being dismissed as evidence of platform obstruction or consumer inertia.

This makes Art. 6(4), and similar provisions aimed at boosting potential competition—such as Art. 6(9) on data portability or Art. 6(7) on interoperability with gatekeepers’ hardware and software—particularly ill-suited for interpretation by reference to their overarching objective. The mere fact that third-party app stores or sideloaded apps exist does not reveal whether they exert meaningful competitive pressure, nor whether their absence reflects gatekeeper obstruction, or simply a lack of consumer demand.

By the same token, if data portability or interoperability fail to boost rivals’ market position, the Commission or disappointed competitors can always claim that the gatekeeper did not provide “effective” access (Arts 6(7) and 6(9) require effective interoperability and data portability, respectively). But what does “effectiveness” mean in this context? Is interoperability “effective” if it is merely possible, or only if it actually produces increased entry? The former could be dismissed as falling short of the spirit of the law; the latter would require the Commission to continually redefine that spirit in line with its shifting expectations of what constitutes an acceptable level of potential competition. In either case, compliance becomes a moving target: the gatekeeper can never demonstrate success conclusively, while rivals can always claim that the regulatory experiment has not gone far enough.

Then there is the question of assessing the counterfactual. How is the Commission to determine whether competition is more vigorous than it would have been absent these provisions, or whether observed changes in competitive pressure are the product of gatekeepers’ conduct, rather than occurring despite it? As ICLE scholars have written elsewhere, regulations that pursue “potential competition” (or “contestability”) as an end in itself risk collapsing into tautology: every disappointed entrant can point to unrealized opportunities and blame the platform, while regulators are left to adjudicate inherently subjective claims (Radic, Manne, & Auer, 2025).

If third-party app stores fail to gain traction, gatekeepers may be accused of subtle obstruction; if they succeed, critics can argue that the DMA merely ratified an inevitability or that the gatekeeper could have done more. The same could be said of other provisions aimed at boosting contestability or potential competition. Either way, policymakers and firms are deprived of a clear benchmark for successful compliance. Worse still, the rule may impose real costs—such as by forcing platforms to dilute security and curation practices that consumers value—without producing any offsetting, measurable gains in competition.

Similar concerns arise with regard to DMA provisions aimed at addressing conflicts of interest. In the cases of, e.g., Arts. 5(4), 5(5), 5(6), 5(9), 5(10), 6(2), 6(10), & 6(13), success could  theoretically be measured by the extent to which a conflict of interest has been assuaged or eliminated. But here, again, determining what constitutes successful enforcement is elusive.

First, if a competitor or the Commission concludes that too few users have been steered to a rival site or payment system under, e.g., Art. 5(4), it can always allege that the gatekeeper obstructed steering or failed to promote it sufficiently. The Epic v. Apple litigation in the United States illustrates how such disputes can devolve into endless quarrels over degrees of access and facilitation (see Epic Games, Inc. v. Apple Inc., 2025).

Second, there is no objective standard for what counts as a “satisfactory” increase in traffic to competitors. Suppose a hypothetical gatekeeper provided flawless channels of communication between business users and customers, yet no users concluded contracts outside the platform. Would this constitute compliance with Art. 5(4)? On a formal reading, yes—but it is difficult to imagine the Commission accepting such an outcome as successful enforcement.

The deeper problem is that, despite the claim that the DMA is not outcome-driven, “perfect” compliance can rarely be judged without reference to outcomes. And because the law supplies no limiting principles or alternative benchmarks, the definition of compliance risks collapsing into whatever regulators—and, indirectly, rivals—want it to be. Simply put, conflicts of interest will be deemed resolved only when competitors are satisfied, an equilibrium that is inherently short lived, destined to be relitigated, and disconnected from consumers’ interests.

Third, and more generally, so-called “conflicts of interest” (i.e., when a company both operates and participates in a platform) are not inherently anticompetitive; in multisided markets, vertical integration and self-preferencing often reduce transaction costs, increase the incentives for investment, and improve the user experience (Manne & Radic, 2022; Manne, 2020; Manne & Bowman, 2021). Measuring success in terms of the “elimination” of such conflicts risks assuming the problem, rather than demonstrating it. Arguably, in the case of the DMA, this ship has already sailed. Thus, the fact that developers make greater use of steering or promotional links does not show that consumers are better off, nor that competition has intensified: it may just indicate that developers are shifting marketing costs onto gatekeepers’ ecosystems.

Moreover, “conflict of interest” provisions invite a one-way ratchet: if developers exercise their new rights aggressively, regulators will count this as success; if they do not, it can be portrayed as evidence that gatekeepers continue to undermine them in some more subtle way. As with Article 6(4), there is no falsifiable benchmark of success. Any outcome can be interpreted as proof that the DMA is necessary (and thus a “success” in the broadest terms), while the costs imposed on platforms and consumers—ranging from degraded user experience to higher prices—are downplayed or ignored. In this sense, the DMA risks becoming less a framework for evidence-based competition policy than a perpetual grievance mechanism for rivals who would prefer to compete through regulation, rather than in the marketplace.

Although we tentatively divide the DMA’s provisions into those aimed at fostering potential competition and those aimed at eliminating conflicts of interest, this taxonomy is more theoretical than practical. In reality, most provisions simultaneously affect both existing and potential competition, while also addressing conflicts of interest. This reflects the Commission’s view that contestability and fairness are “intertwined”, such that a single provision can be said to advance both objectives (Colangelo & Ribera, 2025).

The broader point is that, apart from the most straightforward provisions (e.g., Article 6(8)’s obligation to share advertising performance data or Article 6(2)’s prohibition on using third-party data to compete against business users), the metrics for judging the success of enforcement are ultimately circular. Because of the DMA’s self-referential nature—i.e., the absence of clear external benchmarks for assessing “fairness” and “contestability” (Radic, Manne & Auer, 2025)—the question will always remain whether more could have been done to eliminate conflicts of interest and lower barriers to entry. When are barriers sufficiently low, or conflicts of interest adequately mitigated? When have gatekeepers’ advantages been sufficiently dissipated? And what counts as an acceptable balance of bargaining power between gatekeepers and business users?

In this sense, both compliance and success become moving targets. Any of the tens of thousands of business users and competitors that are (by the DMA’s own admission) meant to benefit from it can always argue that they do not, or do not benefit enough. After all, the DMA’s built-in assumption of permanent imbalances of power between gatekeepers and all other stakeholders (Radic, Manne, & Auer, 2025) virtually guarantees an endless supply of such claims, precisely because there is little or no cost to making them—and because this, and other presumptions underlying the DMA, are essentially irrefutable.

A second step is therefore needed to determine whether enforcement of the DMA is succeeding and, ironically, it requires looking beyond the letter of the DMA. The Commission must clearly and unambiguously articulate the implicit objectives that underpin the regulation, which have thus far been obscured behind the rhetorical veil of “fairness and contestability”. The DMA must spell out its true aims, because meaningful assessment of compliance requires more than circular references to abstract principles. Without identifiable long-term policy goals embedded in each provision, enforcement risks devolving into an exercise in discretion without due process—where success is measured not against objective standards, but against regulatory expectations and the demands of the loudest rivals. This would produce an unstable and perpetually contested regime.

Scholars have attempted to distil these tacit objectives of the DMA in the broader pursuit of legal certainty. Colangelo & Ribera (2025) interpret the regulation as implicitly seeking to shape market structures by promoting consumer choice, platform openness, transparency, and the neutralization of competitive advantages. Radic, Manne, & Auer (2025) likewise underscore its redistributive thrust, emphasizing the levelling down of gatekeepers, the transfer of rents to complementors and competitors, and the facilitation of rivals.

The issue is that these implied metrics of “success” are likewise misguided and risk producing enforcement that merely levels down gatekeepers, distorts product design, and ultimately leaves consumers worse off. To be clear, it’s not that structure or process never matter, but the DMA elevates them into ends in themselves. “Openness”, “neutralization”, and “design transparency” are treated as proxies for regulatory success, even when they undermine scale and scope economies, degrade relevance and security (e.g., through weaker default protections or forced interoperability), or substitute one set of frictions (fragmentation, higher developer costs, lower ad effectiveness) for another.

When compliance is evidenced by more app stores, more toggles, or less personalization—rather than by better outcomes for users—enforcement drifts into undefined industrial policy. It equalizes rivals and standardizes designs, while leaving prices, quality, innovation, privacy, and security as afterthoughts. The effect resembles a “Harrison Bergeron” world of forced symmetry, where advantages are deliberately suppressed, rather than harnessed. That tilt increases false positives (blocking or reshaping efficiency-enhancing conduct) and chills investment in features that most users actually value.

In this way, the DMA’s tacit measures of success fall into the same trap as its explicit ones, chasing circular, abstract goals that risk harming consumers and distorting markets.

First, the DMA favours certain business models and product designs. Where multiple compliance options exist, it effectively prescribes outcomes, narrowing gatekeepers’ ability to choose solutions that might satisfy the rule at lower cost or with better consumer performance. For example, Article 5(2) prohibits combining data across CPSs, implicitly disfavouring behavioural advertising. In response to Meta’s program, the Commission indicated that gatekeepers must offer a less-personalized alternative (e.g., contextual ads). If that interpretation stands, the Commission should explain why this particular design mandate improves consumer welfare, rather than merely reshaping business models.

Second, “openness” is too often tallied by counting access points, rather than benefits to users. Article 6(4) aims to enable alternative app stores and apps on gatekeeper OSs. True success, however, should entail entry that yields lower prices, higher quality, or greater innovation for end users without degrading security or privacy. Treating “more app stores” as a sufficient metric mistakes means for ends.

Third, “neutralizing competitive advantages” risks penalizing competition on the merits. Article 6(2) bars gatekeepers from using non-public business-user data to compete with those users—even where the resulting products benefit consumers. Article 6(5) prohibits self-preferencing. The relevant question should, instead, be whether the conduct harms consumers (through higher prices, lower quality, or reduced innovation), not whether it disadvantages rivals. Success should therefore require evidence that intervention prevents consumer harm, not merely that it levels down a gatekeeper.

These structural/process metrics also suffer from deeper methodological flaws. Causality is hard to establish: more business users or new entries could reflect unrelated dynamics or simply the weakening of gatekeeper offerings, rather than welfare-enhancing competition (Radic, Manne & Auer, 2025). Conversely, if entry lags, a gatekeeper expands into adjacent markets, or maintains market share, it does not follow that enforcement failed. Unless the Commission equates “foul play” with growth or expansion—an interpretation it has not claimed—rival-focused indicators will routinely misfire.

Further, enforcement will often rely on gatekeeper-provided data (e.g., for personalized advertising), thereby compounding asymmetry. The DMA’s one-size-fits-all approach papers over differences across CPSs: switching costs, baseline contestability, and security/privacy tradeoffs vary widely (e.g., browsers vs. online social networking). Any serious assessment must account for these heterogeneities—and, ultimately, for consumer outcomes—rather than whether a checklist of structural changes has been ticked.

Regulation—no matter how ambitious—cannot remake underlying economic realities. To the extent the DMA’s implicit metrics prioritize market reconfiguration over actual consumer outcomes, they risk costly, distortionary, and self-defeating enforcement. In short, interventions should be justified by net benefits to consumers, not by rival-centric or design-prescriptive targets.

Effectiveness and Impact on Business Users and End Users of the DMA

Do you have any comments or observations on how the gatekeepers are demonstrating their effective compliance with the DMA?

There are several observations to be made based on gatekeeper’s compliance reports, dedicated websites, and workshops.

Compliance costs

First, the DMA involves high compliance costs, as well as resources diverted from other, potentially more productive endeavours. These costs cannot be ignored, as sound policymaking requires weighing the costs and the benefits of regulation, including the costs of administering the system and potential error costs (i.e., the costs of false positives and false negatives).

As pointed out by Barczentewicz (2025a, 2025b), the costs of DMA compliance for gatekeepers are substantial. The Commission initially projected compliance costs of roughly €10 million annually for all gatekeepers combined. In its compliance workshop earlier this year, however, Amazon reported its costs are “multiple orders of magnitude beyond that predicted amount”, while a Meta representative stated their costs are “a long way north of” third-party estimates of $10-20 million per year.

The allocation of gatekeeper personnel to DMA compliance is also considerable. According to Meta, the company has involved more than 11,000 employees and invested nearly 600,000 engineering hours. In its compliance workshop, Apple claimed its engineers have spent “hundreds of thousands of hours”, with thousands of employees involved in the effort to comply within highly “compressed timelines”. Similarly, Google assigned approximately 3,000 people to work full-time for two years on compliance for a single article of the DMA.

These expenses involve tradeoffs and opportunity costs. Indeed, gatekeepers have argued this massive expenditure is a “hidden tax” that diverts resources from innovation. As Amazon’s representatives explained during its workshop, money spent on compliance “takes away that work from other areas that you could be innovating and providing benefits to customers in Europe”.

Undefined concepts and conflicting interpretations

Second, compliance reports and dedicated websites consistently highlight a frustration with the DMA’s ambiguity. A significant part of gatekeepers’ communication is dedicated to the challenges of complying with a regulation they describe as ambiguous and lacking clear guidance from the Commission. Gatekeepers have consistently argued that DMA is characterized by undefined key concepts and conflicting interpretations. Apple pointedly observed during its workshop that when “no two people agree on what the DMA’s substantive obligations mean”, the resulting ambiguity undermines the rule of law.

In line with this, gatekeepers have repeatedly pleaded for clearer compliance guidance from the Commission. These requests have, however, largely been met with silence under the misguided philosophy that the entire burden of DMA compliance—including interpreting the terse statute—should be on the gatekeepers. This forces companies to navigate a “Kafkaesque regulatory environment”, where they can be fined for noncompliance without clear standards (Barczentewicz (2025a).

These costs are exacerbated by legal fragmentation. The DMA’s promise of a “single European rulebook” does not appear to have materialized. Companies like Amazon and Google reported facing parallel national enforcement actions, such as from Germany’s Federal Cartel Office, on matters squarely covered by the DMA, such as price filters (Colangelo, 2025). This fragmentation multiplies compliance costs and uncertainty.

Harms to EU users and businesses

Third, gatekeepers have argued in their workshops that the Commission’s DMA enforcement is “decontextualized from impact” and is causing tangible harm to European users and businesses. The Commission might view these arguments as self-interested, rather than as genuine concern for the public interest. Yet the two are not necessarily incompatible. Because gatekeepers have a personal stake in keeping their platforms competitive—through low prices, better user experience, and innovative products—their self-interest may, in fact, align with consumer welfare.

Accordingly, gatekeepers claim the DMA’s enforcement leads to “inferior digital services” for European consumers. In its workshop, for instance, Google mentioned “withholding of innovations from Europe” as a direct consequence of the DMA. Apple warned that being forced to rush compliance creates the risk of “premature solutions with bugs” and could force companies to “hit the pause button” on European innovation.

It is possible—even likely—that some of these claims are true. For example, Apple delayed the launch of Apple Intelligence in Europe for six months, and is now reportedly withholding new features, such as live translation, from the AirPods 3.

Significant privacy and security concerns

Fourth, another central theme of the compliance workshops is the Commission’s systematic dismissal of privacy and security concerns.

Apple stated that cybersecurity agencies were “nowhere to be found” in key decisions and that some third parties are exploiting interoperability requirements for data harvesting, requesting the ability to “read the contents from each and every message and email on the user’s device”. Amazon’s vetting process for data access found that more than 75% of applicants were from outside the EU, many appearing to be “data aggregators with opaque privacy policies”. Google presented data showing users are 50 times more likely to encounter malware off the Google Play Store, underscoring the real-world risks of sideloading mandates (Barczentewicz, 2025a; 2025b).

Technical difficulties

Fifth, Gatekeepers have also highlighted the technical difficulties of compliance. For example, Google explained that its use of frequency thresholding as a “state of the art” anonymization method for sharing search-query data is required by law, pushing back against competitors who claimed the method rendered the data useless. The Commission acknowledged the legal requirement for anonymization but stated it should not significantly reduce data quality, which might be a contradictory proposition.

In its workshop, Meta explained the limited data used for its “less personalised ads” (LPA) option, but noted that the Commission’s strict interpretation of “no data combination” risks imposes an “unviable business model” that is also largely useless to SMEs. In other words: complying with the Commission’s rigid reading of an already rigid regulation risks destroying precisely what makes the regulated companies successful—and what draws business users to them in the first place.

Similarly, Microsoft explained that its controversial “Recall” feature processes data entirely locally on a user’s PC for security. Despite this, the Commission is exploring data portability mandates for the feature, which Microsoft suggests raises serious security concerns.

Conclusion

While the specific technical challenges detailed by Google, Apple, Meta, and Microsoft in their respective compliance workshops demonstrate their efforts to balance compliance with core responsibilities like user security and business viability, they also reveal a fundamental impasse in the DMA’s implementation. The core issue is not simply technical difficulty, but a deep-seated risk that the Commission will systematically dismiss these efforts as self-serving attempts to undermine the regulation.

There is an uncomfortable truth at the heart of the DMA: Measures that enhance user privacy and security often align with the gatekeepers’ economic interests in maintaining a controlled “walled garden” ecosystem. An enforcement approach that remains blind to this duality of interest is likely to see only the self-interest and dismiss the genuine user benefits of such actions. The workshops suggest this is already happening, with the Commission engaging in a systematic dismissal of privacy and security concerns (Barczentewicz, 2025a; 2025b).

Do you have any concrete examples on how the DMA has positively and/or negatively affected you/your organisation?

We have observed a range of significant negative impacts across various digital services, affecting companies’ operational efficiency and users’ experiences. While the DMA aimed to foster competition, innovation, and consumer choice, our impression, supported by recent reports (Cennamo et al., 2025; Jebelli & Ledford, 2024), suggests that the implementation of its provisions has, in many instances, led to degraded services, substantial economic losses, increased security risks, and a noticeable slowdown in the rollout of new innovations within the European Union.

Degraded user experiences and service functionality

The DMA’s prohibitions on integrated services have created a more fragmented digital landscape, directly impacting the seamlessness of user experiences. For instance, the changes mandated by Article 6(5) of the DMA, which prohibits “non-discriminatory conditions”, have significantly altered online search services.

Google, as a designated gatekeeper, has removed the smooth integration of products such as Google Maps into search results. Previously, a search for a local business or restaurant would display results plotted on Google Maps, often with a dedicated “Maps” tab, allowing for immediate booking or directions. Users are now often forced to navigate multiple websites and apps for tasks that were once streamlined, increasing friction and requiring additional steps to access basic information. A study found that this specific change led to a 21% increase in searches for mapping services in the EU (Pape & Rossi, 2024). Meanwhile, competing map services have not experienced a notable uptick in traffic (Ibid), suggesting that users continue to prefer Google Maps—even if it takes them longer to get there.

In the accommodation sector, Google’s changes under Article 6(5) have made hotel offers less organized, clear, and intuitive. Beyond the evident qualitative impact on the consumer experience, the change has also reduced hotels’ ability to reach customers directly and diverted traffic toward intermediaries (Delgado, 2024). The DMA has therefore produced clear winners and losers—with potential beneficiaries such as Booking.com, itself a Gatekeeper, among those gaining from the shift.

Finally, the new regulatory framework has also introduced increased consumer confusion and complex choices. For example, Article 5(2) of the DMA requires users to navigate extensive pop-ups to confirm their preferences for service integration versus separate functionality. This change complicates previously simple tasks, such as setting default apps or browsers on devices, and forces users to scroll lengthy lists of options (Jebelli & Ledford, 2024).

Substantial economic losses for businesses

The DMA’s adverse effects could translate into measurable economic losses for businesses across the EU—not just gatekeepers (Cennamo et al., 2025). For example, potential revenue losses up to €114 billion are projected for firms in service sectors across the EU, corresponding to a loss of up to 0.64% of total turnover in the relevant sectors. This also translates to an estimated drop in revenue per worker across these service sectors by up to €1,122 per year.

According to Cennamo and coauthors, a major contributor to these losses stems from the impact on online-advertising services. Article 5(2) prohibits gatekeepers from combining and using personal data across core platform services for advertising without explicit user consent, overriding other legal justifications like legitimate interest. This restriction significantly lowers the effectiveness of personalized and targeted advertising due to the loss of valuable information signals. Studies indicate that personalized marketing can reduce customer acquisition costs by up to 50%, and personalized ads can be three times more valuable than non-personalized ones.

The shift from personalized to generic marketing can also reduce clickthrough rates, with some field experiments showing a drop from 25% to 12%. Following GDPR compliance, which is less stringent than the DMA’s requirements, web publishers experienced a 5.7% decrease in revenue per click and a 2% reduction in online sales revenues, alongside an 8% reduction in profits due to compliance costs. Marketing experts predict that smaller firms, in particular, will face higher customer acquisition costs because they lack the resources to efficiently target audiences without the platforms’ data-aggregation capabilities. This has also led to a potential forced pivot toward more intrusive, less personalized ads or subscription-based models for platforms.

Additionally, new compliance and cybersecurity costs arise from managing explicit user consents and potentially collecting first-party data, with some small businesses reporting spending between €1,000 and €50,000 on GDPR compliance alone, increasing their regulatory costs by 20-30%.

The retail sector also faces substantial impacts, with estimated losses of between €4.4 billion and €59 billion, or up to 1.1% of the sector’s total turnover. These losses stem from reduced ad-targeting efficiency, a decline in organic traffic due to the stronger presence of intermediaries in search results, less-efficient recommender systems on marketplaces, and the loss of useful integrations like maps and review systems.

The accommodation sector has been particularly hard hit due to its heavy reliance on digital-platform services. Changes in Google Search results to comply with the DMA have led to a 36% drop in direct bookings for hotels through Google Hotel Ads for hotels (Delgado, 2024). Reduced visibility of Free Business Listing, which previously offered a costless and efficient discovery tool, has further diminished booking opportunities. These changes have inadvertently increased the prominence of Online Travel Agencies (e.g., Booking.com), leading to higher distribution costs and greater dependency on third-party platforms for hotels.

Stifled innovation and delayed services

Most concerning is the way the DMA has begun to stifle innovation in Europe. Some have referred to this as a “digital curtain” that separates European citizens from innovative digital services available elsewhere (Jebelli & Ledford, 2024). Indeed, regulatory uncertainty caused by the DMA has led companies to delay launching new products and features in the EU, or even bypass the European market altogether (Auer, 2024).

Concrete examples include delays in the rollout of advanced AI products and new social-media platforms. Google Gemini (an advanced AI for enhanced search) and Meta’s Threads (a new social-media platform) faced months-long delays in Europe, with some users waiting half a year for access. Google’s Gemini-powered AI Overviews—which offers multi-step reasoning capabilities in search results and has benefited more than a billion global users—were not immediately available in Europe.

Similarly, Meta announced in July 2024 that its new multimodal AI capabilities, which can interpret combinations of video, audio, images, and text for products like smartphones and smart glasses, would not be launched in the European Union due to regulatory uncertainties, despite being available in the UK and Brazil.

Apple, for reasons tied to Article 6(7)—which mandates interoperability with rival services—has also announced it will not roll out new AI features like Phone Mirroring, SharePlay Screen Sharing enhancements, and Apple Intelligence for its devices in the EU. These features, designed to enhance productivity and personalization, will leave EU consumers behind their global counterparts, affecting daily activities and EU’s users familiarity with cutting-edge technologies.

Conclusion

While the DMA was envisioned to promote a more competitive and fair digital market, its current implementation has imposed significant costs and functional disruptions on gatekeepers’ core platform services and, by extension, on businesses and consumers across the EU. We observe a clear tradeoff where the pursuit of market contestability has come at the expense of platform efficiency, user experience, economic vitality, and technological innovation. The evidence points to a critical need for a more nuanced and adaptable regulatory framework that carefully weighs these costs against the promised benefits, ensuring that European citizens and businesses are not disadvantaged in the global digital economy.

Do you have any comments in relation to the impact and effectiveness of the DMA?

Effectiveness is not the same as “success”. If a regulation is poorly designed, “effective compliance” or “effectiveness” may look more like failure than achievement. An act can be “effective” in a narrow sense, while still causing harm. With the DMA, compliance does not erase the significant costs and unintended consequences that cloud its supposed success. Similarly, “impact” can be positive or negative, intended or unintended, and either aligned with the DMA’s objectives or entirely external to them.

With that said, the Commission’s recently published second annual enforcement report on the DMA focused, as expected, on what has been achieved. The report celebrates concrete and measurable steps the Commission has taken to rein in “gatekeeper” platforms: investigations launched, compliance workshops held, and remedies imposed.

This is a selection of the seen effects: the visible indicators of action and the metrics that suggest movement (although not necessarily progress). A holistic analysis of the DMA’s impact and effectiveness must, however, also consider the “unseen” effects: the costs, tradeoffs, and unintended consequences that do not show up in press releases or enforcement statistics, but which may matter just as much.

The DMA’s achievements, according to the Commission

According to the Commission’s reports, the DMA’s visible achievements fall into three categories: designating new core platform services as “gatekeepers”; monitoring the implementation of substantive obligations; and addressing noncompliance with enforcement actions.

In its first year, six firms’ core platform services were designated as “gatekeepers” under the DMA’s terms—five American (Alphabet, Amazon, Apple, Meta, and Microsoft) and one Chinese (ByteDance). Last year saw two gatekeepers added to the list: the online-reservation platform Booking.com and Apple’s iPad OS.

On the monitoring front, the Commission initiated proceedings against Apple, alleging that it had not enabled “genuine” consumer choice (through choice screens) for selecting web browsers on iOS. It also scrutinized the integration and connectivity of Apple’s ecosystem (e.g., Apple Watch and iPhone) and initiated “specification proceedings” to demonstrate how Apple could remedy alleged deficits in interoperability. Regarding Alphabet and Microsoft, the Commission “corrected” the firms’ compliance with default settings and preinstalled apps on Android and Windows devices.

The Commission also initiated further enforcement action in some cases. For example, it took issue with Meta’s “pay-or-consent” model, whereby Facebook users could continue using the social-media platform for free in exchange for agreeing to be served ads, or they could pay a monthly fee for an ad-free experience. In April 2025, the Commission found Meta in violation of the DMA for not giving users a third choice: one that uses less personal data for targeted advertising.

But these enforcement statistics are relevant largely for regulators’ end-of-year reports and periodic evaluations. The cases brought may or may not be misguided. They may or may not pass a cost-benefit analysis. In other words: the fact that an infringement decision was issued or that a compliance workshop was held says nothing about whether the DMA benefits the public. For this, one must look under the hood.

Unseen effects

Details of the DMA’s implementation paint a rosy picture of accomplishment. But there are at least four kinds of other less obvious effects that deserve closer scrutiny:

• The DMA has thus far had mixed effects for consumers and businesses;
• The DMA competes with competition law for scarce enforcement resources;
• The DMA may divert attention from matters that have a greater impact on the “fairness and contestability” of European digital markets; and
• The DMA may exacerbate problems in an already-inflamed transatlantic trade relationship.

Effects on consumers and businesses

Among the dubious effects that can be attributed to the DMA are that mandatory third-party app stores and sideloading mandates have enabled the proliferation of pornography apps on iOS. Moreover, features like Apple Intelligence and the AI Suite were delayed in the EU due to concerns about DMA compliance. Others like advanced screen mirroring and SharePlay have not been released at all for much the same reason.

To avoid “self-preferencing” accusations, Google has removed or degraded popular features from its search engine, such as quick flight lookups in search results. This came after rivals complained that the one-box Google Flights search widget was unfair. The change caused some to initially witness traffic drops of up to 30% after Google’s first tweaks. Google was not displaying direct links to flights and hotels, as this would presumably be “unfair” to hotel and flight intermediaries (Delgado, 2024). Like Apple, Google also reportedly held back certain AI features or products in Europe pending regulatory clarity. For example, AI overviews were launched in only eight EU member states, and after nine months of delay.

A recent report by the Chamber of Progress (Jebelli & Ledford, 2025) provides a more detailed qualitative overview of the degradation of services due to the DMA, concluding that “[all] consumers have to show for [the DMA] are second-class digital services lagging behind the rest of the world”. The report identified increased user friction, reduced search efficiency, confusing and tedious choices, more irrelevant ads, less private and secure services, and delayed or unavailable innovations.

These consequences, as well as the follow-on effect of higher costs imposed on mostly U.S. firms, will be felt by European companies. According to one study based on industry interviews (Suominen, 2022), increased regulatory costs could lead EU firms to spend an additional 5% on technology services. “The DMA and DSA alone could imply an immediate cost increase of €71 billion ($71 billion) on European companies, equivalent to 0.3 percent of EU GDP”. (Ibid). Of special note, much of this would be incurred by European SMEs—an amount “equivalent to some 40,000 European jobs (measured as revenue over employment)”, according to the report.

Another report (Cennamo et al., 2025) found potential revenue losses of up to €114 billion “for firms in service sectors across the EU from the loss of efficiency of the most widely used digital services platforms. This corresponds to a loss up to 0.64% of the total turnover of the sectors considered”. Especially hard hit would be the accommodation sector (revenue losses of between €1 billion and €14 billion, with annual lost revenue per-worker of up to €3,579) and the retail sector (which could lose between €4.4 billion and €59 billion in revenues, with annual lost revenue per-worker of up to €1,122).

More generally, a recent study found that the market perceives a 10-20% negative impact on businesses from ex-ante regulation (Arai, 2025). Indeed, “over 60 percent of micro and small European firms stated that a 5 percent technology cost increase would be much worse or worse than inflation, slowing demand, or supply chain backlogs”. (Suominen, 2022).

None of this was noted in the Commission’s annual enforcement report.

Competition for enforcement resources

One must also consider the cost—not in Euros, but in institutional bandwidth—of enforcement itself. The DMA is enforced primarily by the European Commission’s Directorate-General for Competition (DG COMP), the same body responsible for applying the EU’s competition-law framework. This matters because the resources poured into DMA monitoring and enforcement—technical teams, legal experts, data scientists, policy analysts—are resources not available to investigate potential abuses of dominance, cartels, or anticompetitive mergers. Enforcement doesn’t scale effortlessly and regulatory capacity is finite, especially for understaffed public authorities.

The irony here is striking: DG COMP has already made digital markets a top enforcement priority for traditional competition law. The 2024 Competition Policy Report stated that the Commission is pursuing “several cases in digital markets against large digital companies”. These include cases that completely overlap with the “achievements” claimed under the DMA.

The glaring example here is Apple’s App Store practices, which faced a €1.8 billion fine for “preventing [developers] from informing iOS users about alternative and cheaper subscription services”. This demonstrates that the Commission is deeply engaged with the digital space through competition enforcement, regardless of the DMA.

The point is not to present competition and DMA enforcement as substitutes; the legislative history and text clearly present the two mechanisms as complementary. It is also true, however, that the DMA was originally pitched by invoking an imaginary consensus (Radic, 2025) that traditional competition tools are too slow or unwieldy for fast-moving digital markets.

That may be true in some cases. But if it is the DMA’s primary justification, we should ask whether the DMA actually fixes a flaw in the system, or simply displaces it with a different, possibly less accountable model. If traditional enforcement is “unworkable” (and the Commission’s own enforcement record raises doubts), then perhaps the answer is to reform how competition law is applied, rather than building a parallel regime that consumes the same limited resources. The risk here is one of duplication with little additional value. Indeed, application of both the DMA and competition law could result in legal fragmentation by treating the same conduct differently.

Diversion from core issues and enforcement opportunity costs

The prevailing sense that the DMA constitutes a significant institutional accomplishment may also distort policy priorities. It is no secret that the Commission sees itself not just as a market regulator, but as a standard setter for the world. The DMA has been presented as a model for proactive tech regulation in action. There is satisfaction, perhaps even pride, in being the global frontrunner in digital rulemaking.

But this attention and energy may come at the expense of less headline-grabbing tasks. One such task is the completion and enforcement of the single common market—a project that remains unfinished decades after its launch. Despite harmonization efforts, many European firms still struggle to scale across borders. Barriers in taxation, licensing, procurement, and logistics persist. Funding ecosystems remain fragmented, particularly for startups and small and medium-sized enterprises (SMEs). When asked by the European Investment Bank what makes scaling so hard for European firms, SMEs answered: availability of skilled staff, fragmented business regulations, and access to funding (EIB, 2023). Perhaps the answers to the fairness, contestability, and competitiveness of European digital markets should be sought here.

Indeed, in the current climate, the DMA risks becoming a source of regulatory displacement. It channels focus onto “gatekeepers” like Google and Apple—powerful and photogenic targets—while deflecting attention from structural problems that make life harder for European entrepreneurs. To put it more bluntly, most European startups are not failing because of platform dominance. They are failing because of fragmented markets and shallow capital pools (Garicano, 2025; see also Draghi, 2024). Yet these root causes are harder to tackle, less media-friendly, and more politically complex.

Harming the transatlantic trade relationship

The DMA’s early enforcement unfolds against an unusually incendiary transatlantic backdrop. In Washington, EU digital rules are increasingly framed as trade-salient measures that disproportionately burden U.S. firms. The Office of the U.S. Trade Representative’s 2025 national trade estimate flags EU digital measures as barriers, and administration statements and aligned advocacy portray the DMA as an “anti-American” regime that could warrant tariff or Section 301 responses. That perception—whether it is right or wrong—matters for stability, and it has plainly entered the U.S. policy conversation.

In parallel, commentary from various observers has underscored that tariff threats are already being brandished as leverage in response to European digital regulation, with the DMA repeatedly cited. These signals elevate the risk that individual DMA actions will be read in Washington through a trade lens, not one of competition policy.

Recent Commission decisions amplify those optics. The Commission has stressed nationality-neutral application and has, in fact, designated non-U.S. firms (e.g., ByteDance and Booking.com) and declined designation where warranted (e.g., iMessage). Yet the most visible enforcement milestones to date—the first noncompliance decisions and fines—have centred on U.S. firms, which inevitably reverberates in the U.S. trade debate. In a charged trade environment, these headlines can be—and routinely are—read to support retaliatory measures.

Against this backdrop, it would be prudent to accompany enforcement with a calibrated de-escalation and transparency package that safeguards the regulation’s objectives while lowering the temperature on the trade front.

First, a time-limited pause on launching new noncompliance proceedings on novel or highly contestable issues—framed as a window for clarifying standards—would create space to publish administrable guidance on the respective roles of Articles 3(5) and 3(8) (including what “manifestly call into question” means in practice and how forward-looking qualitative factors are weighed). This pause could also be used to commit to prompt, detailed, and nonconfidential versions of designation and noncompliance decisions.

Second, sequencing remedies to minimize trade salience—prioritizing proportionate, behaviour-based fixes and supervisory commitments, reserving structural measures only for egregious and repeated noncompliance and, absent urgency, only after judicial review—would reduce the scope for mischaracterization of the act as industrial policy, while remaining squarely within the DMA’s remedial toolbox.

Third, a communications and transparency track—regular plain-language case notes on evidentiary reasoning, and a simple “neutrality dashboard” showing the origin and mix of designated and non-designated services—would make the regime’s even-handedness legible to trade audiences. Taken together, these steps could help convey a sense of nationality-neutral enforcement.

Conclusion

In conclusion, whether right or wrong, the DMA is now the law of the land. As the European Commission celebrates the second year of DMA enforcement, Europe should not lose sight of what is often unseen (especially in official reports): the effects on consumers and businesses, the opportunity costs within DG COMP, the distraction from deeper single-market integration, and the risks to transatlantic alignment.

Additional Comments and Attachments

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Consultation on AI in the Context of DMA Review

Question 6: What are the main obstacles to developing AI models and commercialising AI-based products and services?

The discussion about competition in the AI realm and the alleged main obstacles to developing AI models and commercialising AI-based products and services is often framed in pessimistic terms, assuming that digital markets are prone to converge on “entrenched monopolies”; and, therefore, often ending with proposals of “pre-emptive enforcement” or to enact specific sectoral regulation (Barnett, 2024).

A more balanced assessment, however, reveals a market that is nonetheless vibrant, competitive, and dynamic at multiple layers of the value chain—even if there are some reasonable concerns about possible input foreclosure at some points. At the level of consumer-facing applications and services, such as large language models (LLMs) and other AI-powered tools, competition is especially intense. New entrants are proliferating, with novel products being launched at a rapid pace and often gaining millions of users within weeks.

The possibility of multi-homing—where consumers use two or more services simultaneously—further amplifies these dynamics. For instance, users can easily switch between or combine services like ChatGPT, Claude, and Gemini. This creates a fluid environment where no single provider can rely on entrenched dominance, since users face low switching costs and often experiment with competing offerings. The result is a high degree of rivalry on both features and performance, which benefits consumers and pushes firms to innovate continuously. As commentators have noted, these competitive pressures are visible in the constant cycle of upgrades and feature releases across providers of LLM-based applications (Auer & Zúñiga, 2025; Chilson, 2025).

At the model-development layer, the picture is more nuanced, but still more competitive than is sometimes assumed. It is true that the costs of developing frontier foundation models are substantial, involving millions of dollars in compute and data expenses. Yet the narrative that only a handful of incumbents can realistically operate in this space is overstated. Several competing players—such as OpenAI, Anthropic, Google DeepMind, Meta, Mistral, Cohere, xAI and Stability AI—are actively building and releasing new models. Moreover, the rise of open-source models has significantly lowered barriers to entry for new firms and research groups. Open-source projects like Meta’s LLaMA, Google’s Gemma, Mistral AI, and Falcon, among others, have made it possible for smaller organisations to adapt and deploy competitive models without incurring prohibitive training costs.

The case of DeepSeek is illustrative: by leveraging open-source foundations and focusing on fine-tuning and optimisation, it was able to produce a model that rivalled much larger efforts, demonstrating that creativity and efficient resource use can substitute, to some extent, for sheer scale. This open-source dynamic injects competitive tension into the model-development layer, ensuring that innovation is not monopolised by the largest players (Auer & Zúñiga, 2025; Chilson, 2025).

At the infrastructural layer, there are more credible risks of bottlenecks, particularly concerning access to specialised chips and to cloud-computing services. Nvidia currently maintains a commanding lead in the market for GPUs used to train and deploy AI models. Its CUDA ecosystem and advanced chips have made it the default choice for most developers. Nevertheless, this position should not be misinterpreted as uncontested dominance.

There is active competition from hyper-scalers developing their own chips: Google’s Tensor Processing Units (TPUs), Amazon’s Trainium and Inferentia processors, and Microsoft’s ongoing investments all represent attempts to reduce dependence on Nvidia and to diversify the supply of high-performance compute (although Microsoft has postponed that investment). In addition, startups such as Cerebras and SambaNova are pursuing alternative architectures that, while still niche, could prove disruptive if technological breakthroughs enable them to scale. Policymakers, therefore, should be cautious in treating the chip market as if it were inherently monopolistic.

A similar dynamic is observable in cloud computing. It is correct that a small number of providers—Amazon Web Services (AWS), Microsoft Azure, and Google Cloud—currently dominate AI workloads. This dominance is, however, checked by both competitive churn and new entry. Cloud customers frequently switch providers in response to pricing, service, and performance differences, and firms are increasingly adopting multi-cloud strategies to avoid lock-in (Chilson, 2025).

Furthermore, Oracle—once considered a marginal player—has invested heavily in expanding its cloud infrastructure and has begun to win significant AI-related contracts. This demonstrates that even markets with a concentrated structure are subject to competitive forces when customers retain credible alternatives. In short, while cloud computing represents a possible chokepoint for AI development, competition in this area is currently active and evolving.

Critically, many of the perceived bottlenecks in AI reflect not a lack of competition but the reality of high fixed costs, technological uncertainty, and economies of scale inherent to cutting-edge innovation. These are structural features of the industry, rather than evidence of anticompetitive conduct. Over time, as technologies mature, costs decrease, and knowledge diffuses, barriers to entry typically diminish, as has been observed in prior waves of general-purpose technologies.

Considering these dynamics, the main obstacles to AI development and commercialisation are best understood as challenges of scale and technological sophistication, rather than structural foreclosure imposed by dominant firms. Access to compute, chips, and data are genuine hurdles, but they are not insurmountable, and they are being actively mitigated by competitive entry, open-source innovation, and user multihoming. Policymakers should be cautious about adopting interventionist measures that assume a static, monopolistic landscape, as such measures could inadvertently stifle the very dynamism that has characterised AI markets thus far.

This review of the DMA provides an opportunity to reflect on how best to balance vigilance against genuine risks of input foreclosure, while also recognizing the robust competitive forces already at play. Overstating the risks of concentration could lead to regulatory overreach, undermining incentives for investment in infrastructure and innovation. A more prudent approach is to monitor potential chokepoints closely while allowing competitive dynamics—including those spurred by open-source models, cloud churn, and custom chip development—to continue shaping the market. This would ensure that regulation supports, rather than impedes, the competitive vibrancy essential for AI innovation.

Do you have any further comments or observations on the DMA’s role to ensure fairness and contestability in the AI sector?

In line with the above, it would be premature and potentially counterproductive to include AI services or products (such as LLMs or generative AI) to the list of core platform services (CPS) under the DMA.

First, it is important to recognize that AI is a general-purpose technology that is already embedded in several of the services expressly listed as CPS under the DMA, such as search engines and social-networking services (Art. 2(2) DMA). In these contexts, AI’s functionality is already covered by existing CPS designations, making the creation of a separate AI-specific category redundant. Moreover, introducing an additional category would risk regulatory duplication and legal uncertainty, since embedded AI services within existing CPS are already subject to gatekeeper obligations, and any standalone treatment would overlap with parallel frameworks such as the AI Act.

If the Commission were nonetheless to pursue inclusion of a specific category of AI service or product (for example, LLMs or foundational models) within the CPS list, this should follow a proper regulatory process. Such a process must begin by establishing a solid evidentiary basis that demonstrates relevant markets have tipped in favour of a few entrenched providers, due to the presence of strong network effects, the services’ multisided nature, a significant degree of dependence on both business and end users, lock-in effects, or vertical integration, as contemplated in Recital 2 of the DMA.

Any such regulatory process should subsequently include a thorough cost–benefit analysis of the proposed inclusion. In particular, it must be acknowledged that the obligations and prohibitions triggered by CPS and gatekeeper designation under the DMA are substantial, both in terms of compliance costs and in their effects on firms’ ability to monetize platforms. Extending these obligations to AI could undermine the very dynamism that currently defines these markets. As noted above, the AI ecosystem is characterised by rapid entry, robust open-source alternatives, and significant multihoming by users. In such a competitive environment, imposing gatekeeper obligations risks freezing a static conception of market power that fails to reflect the fluid and evolving nature of technological progress.

Finally, overlap with other regulatory initiatives—most prominently the EU Artificial Intelligence Act—raises a further concern. The AI Act already establishes horizontal rules governing transparency, safety, and risk management in AI systems. Adding a CPS category under the DMA would create duplicative, and potentially inconsistent, obligations. Rather than expanding the DMA’s scope, a more prudent approach is to rely on the AI Act to address systemic risks associated with AI, and to use the DMA only insofar as AI functionalities are already captured through existing CPS categories. This would preserve regulatory coherence, while avoiding unnecessary burdens on a still-developing and highly competitive sector.

Robust competition in the AI sector is manifest; there is no basis for incorporating AI services or products into the DMA.

In order to assist the Commission in understanding the competitiveness of this sector, we attach to this submission the following writings by the authors of these comments:

1. Stout & Hemphill, A Framework for Understanding and Evaluating AI Commercialization Strategies
2. Auer & Zuniga, AI Partnerships and Competition: Damned if You Buy, Damned if You Don’t
3. Manne, Albrecht, Auer, Radic, & Zúñiga, ICLE Comments on the CMA’s Provisional Findings on the Cloud Services Market
4. Manne, Auer, Stout, Radic, & Zúñiga, ICLE Comments on JFTC Request for Information and Comments Concerning Generative AI and Competition
5. Radic & Stout, What Is the Relevant Product Market in AI?
6. Manne, Auer, Stout, Radic, & Zúñiga, ICLE Comments to DOJ on Promoting Competition in Artificial Intelligence
7. Manne, Auer, Wudrick, & Zúñiga, ICLE and Macdonald-Laurier Institute Comments to Competition Bureau Canada Consultation on AI and Competition
8. Manne, Auer, & Zúñiga, ICLE Comments to UK Competition and Markets Authority on AI Partnerships
9. Manne & Auer, ICLE Comments to European Commission on AI Competition
10. Manne & Auer, From Data Myths to Data Reality: What Generative AI Can Tell Us About Competition Policy (and Vice Versa)

How is the DMA affecting AI rollout in the EU?

Perhaps most concerning is the way the DMA has begun to stifle innovation in Europe. Some have referred to this as a “digital curtain” that separates European citizens from cutting-edge digital services available elsewhere (Jebelli & Ledford, 2024). Indeed, regulatory uncertainty caused by the DMA has led companies to delay launching new products and features in the EU, or even to bypass the European market altogether (Auer, 2024). This is particularly true in the realm of generative AI.

Concrete examples include delays to Apple Intelligence and related capabilities: Apple publicly said in 2024 that it would hold back Apple Intelligence, iPhone Mirroring, and enhanced SharePlay Screen Sharing in the EU due to DMA interoperability requirements and the risk of compromising privacy and security. These features all were rolled out in the United States on schedule, even as they were explicitly withheld in Europe pending clarity.

Google’s rollout of AI services has likewise been staggered. When Google launched the Gemini mobile apps in May 2024 and made them ostensibly available “globally”, they were withheld in the EU and UK, with Google saying it would expand only where consistent with local rules. Moreover, while Google’s AI Overviews debuted in the United States in May 2024 and later expanded to many markets, EU availability remained limited amid heightened regulatory scrutiny. Indeed, several outlets reported EU holds or limited availability well into 2025. The upshot for European users was months of delayed access compared to peers in other regions.

Meta offers a parallel illustration of the broader regulatory chill around launching AI assistants in Europe. In June 2024, it paused the EU launch of Meta AI after Ireland’s Data Protection Commission (DPC) requested a delay over training-data issues. While that pause was seemingly driven more by the GDPR than the DMA, it underscores how overlapping EU regimes have combined to make firms sequence AI launches outside Europe first—precisely the pattern the DMA’s uncertainty exacerbates.

Taken together, these time-lags map onto the “digital curtain” that critics describe. Europeans get powerful AI capabilities later, or not at all, while the same products proceed elsewhere. That is the very dynamic many warned the DMA would catalyse when layered atop existing EU rules.

Executive Summary

This issue brief analyzes the antitrust implications of the proposed $34.5 billion merger between Charter Communications Inc. and Cox Communications Inc. from a law & economics perspective. We examine the proposed transaction under both a traditional consumer-welfare analysis, as well as the more recent “America First” flavor of analysis. The transaction would combine two major cable operators to create the largest broadband provider in the United States, with approximately 35.9 million residential and business broadband subscribers, and 69.5 million “passings” across 46 states.

The communications market is undergoing significant transformation, characterized by dynamic multi-platform competition from fixed-wireless access, satellite broadband, and streaming services, which exert considerable pressure on traditional wireline providers. The proposed merger is primarily a geographic expansion, rather than a horizontal consolidation within overlapping markets—a distinction critical for antitrust analysis.

From an antitrust standpoint, the parties project to achieve approximately $500 million in annual cost synergies within three years. These efficiencies are anticipated to translate into consumer benefits through potentially lower prices, enhanced service quality, and increased investment in advanced technologies and product innovation, particularly in mobile offerings.

Regulatory bodies, including the U.S. Justice Department (DOJ) and the Federal Communications Commission (FCC), will review the merger. The DOJ will apply the Clayton Act’s “substantial lessening of competition” standard, while the FCC will use its “public interest” framework. Given the minimal geographic overlap and robust multi-modal competition, the deal should not expect major regulatory obstacles on competition grounds. But concerns arising from broader policy agendas—such as diversity, equity, and inclusion (DEI), and the potential for regulatory overreach unrelated to demonstrable competitive harms—may arise.

This brief concludes that, whether evaluated under the traditional consumer-welfare standard or under the emerging “America First” framework, the Charter/Cox merger should be approved. Under either framework, the transaction reflects a strategic adaptation to market pressures, rather than an attempt to monopolize. Under conventional antitrust principles, the absence of significant geographic overlap and the presence of verifiable, merger-specific efficiencies weigh heavily in favor of clearance. Under the newer approach, the deal’s alignment with infrastructure-investment goals, enhanced competitiveness against dominant rivals, and commitments to expand broadband access all further strengthen the case for approval.

Policymakers should focus on demonstrable, transaction-specific competitive effects and adopt a technology-neutral approach to avoid hindering beneficial innovation and investment.

I. Introduction

Charter Communications Inc. and Cox Communications announced a proposed $34.5 billion agreement to combine in May 2025.[1] The combined company would surpass Comcast to become the largest broadband provider in the United States, with approximately 35.9 million residential and business broadband subscribers and 69.5 million passings across 46 states.[2] The company would also be the largest pay-TV provider in the United States, with approximately 14.6 million subscribers.[3] The merged company will be named Cox Communications, but Charter’s Spectrum brand will be retained for consumer services.[4]

This issue brief employs a law & economics approach to evaluate the antitrust and public-policy implications of the proposed merger.

• Section II examines the ongoing transformation of the U.S. communications marketplace, emphasizing the shift from legacy, technology-specific competition to a dynamic environment shaped by platform convergence, emerging technologies, and evolving consumer preferences.
• Section III outlines the analytical frameworks used by both the U.S. Justice Department (DOJ) and the Federal Communications Commission (FCC) in merger review, highlighting the distinct legal standards and policy priorities each agency would bring to its assessment of the Charter/Cox transaction.
• Section IV provides a detailed evaluation of the specific competition issues raised by the proposed merger, including analysis of geographic overlap, product-market definition, and claims of merger-related efficiencies.
• Section V reviews the outcomes and lessons from recent major communications and media merger cases, situating the Charter/Cox transaction within a broader historical and regulatory context.
• Section VI concludes by assessing the likely competitive effects of the merger and offering policy recommendations, with particular attention to the appropriate application of antitrust principles and the need for consistent, technology-neutral regulatory treatment across the sector.

II. The Evolving Communications Marketplace

The communications industry has undergone—and continues to undergo—substantial transformation, marked by technological convergence and erosion of the boundaries that once defined separate markets for television, internet, and telephone services. Consumers now move fluidly among platforms, accessing a growing array of services through broadband, mobile networks, satellite connections, and streaming applications. These shifts have redefined both the structure of competition and the criteria by which market power is assessed. To understand the implications of the Charter/Cox merger, it is essential to examine how these industry changes have altered the competitive landscape and diminished the relevance of legacy regulatory frameworks.

A. Beyond ‘Cable Operator’: The Multi-Platform Reality

To understand this merger’s competitive significance, it should be noted that the term “cable operator” has increasingly been rendered meaningless. The communications landscape of 2025 bears little resemblance to the era when most regulatory frameworks governing the sector were established. In the 1990s, broadcast television, cable TV, landline telephone, mobile telephone, and information services (e.g., internet access) were all distinct technologies with distinct economic markets. Over time, those distinctions have blurred and overlapped to the point where many consumers today do not care—or don’t even know—what technology underlies their access to the internet, video programming, and voice communications.

Around the time the Telecommunications Act of 1996 was passed, cable TV was considered a “bottleneck monopoly.”[5] Cable operators had local monopolies over cable service to households, as only “one percent of communities [were] served by more than one cable system.”[6] In 2013, then-Judge Brett Kavanaugh noted the dramatic increase in competition over the intervening years:

But in the 16 years since the last of those cases was decided, the video programming distribution market has changed dramatically, especially with the rapid growth of satellite and Internet providers. This Court has previously described the massive transformation, explaining that cable operators “no longer have the bottleneck power over programming that concerned the Congress in 1992.” Comcast Corp. v. FCC, 579 F.3d 1, 8 (D.C.Cir.2009); see also Cablevision Systems Corp. v. FCC, 597 F.3d 1306, 1324 (D.C.Cir.2010) (Kavanaugh, J., dissenting) (“This radically changed and highly competitive marketplace — where no cable operator exercises market power in the downstream or upstream markets and no national video programming network is so powerful as to dominate the programming market — completely eviscerates the justification we relied on in Time Warner for the ban on exclusive contracts.”)… In today’s highly competitive market, neither Comcast nor any other video programming distributor possesses market power in the national video programming distribution market.[7]

In a 2015 report and order, the FCC adopted a presumption that cable systems were no longer monopolies and are subject to effective competition.[8] The agency cited increased competition from satellite providers (e.g., DirecTV and DISH) and telephone companies (e.g., Verizon FiOS and AT&T U-verse) as evidence that most cable operators face effective competition. Under the adopted presumption, local authorities could no longer regulate basic-cable rates unless they successfully rebutted the presumption by proving a lack of effective competition.

In 1996, cable TV had 63.5 million subscribers (about two-thirds of TV households)[9] and the fastest home-internet connection was less than 56 Kbs.[10] Direct broadcast satellite was less than two years old[11] and video streaming was virtually unheard of, with RealPlayer being released less than a year earlier.[12] Netflix would launch its DVD-rental service in 1997 and YouTube was nearly a decade away.

Today, the average fixed-internet connection has download speeds of 288 Mbps.[13] Fewer than 50 million households have a “traditional” (e.g., cable or satellite) pay-TV subscription[14] (36% of households) and 55% are “streaming only.”[15] More than 200 streaming platforms are available[16] and 17.2 million homes subscribe to a virtual multichannel video programming distributor (vMVPDs, such as YouTube TV, Hulu+Live, SlingTV, and Fubo).[17] Streaming services account for 46% of household viewing time, with YouTube and Netflix together accounting for a little less than half of that total.[18]

B. Dynamic Competition in Broadband and Mobile

The broadband marketplace has undergone a rapid evolution in recent years.[19] New technologies like fixed wireless access (FWA) and low-earth-orbit (LEO) satellite services have significantly expanded internet access and fostered intermodal competition among providers.[20] For example, 5G FWA has grown into a disruptive competitor, with 77% of operator locations now having 5G, and the North American market for 5G FWA is projected to expand significantly by 2030.[21] Similarly, satellite broadband, offered through networks like Starlink, doubled its subscriber base in 2024, becoming a more viable option, especially for rural consumers.[22] This emergence of diverse platforms means traditional wireline providers—including cable operators—no longer compete in isolation but instead face multifaceted pressures from these new forms of connectivity.[23]

This dynamic competitive environment has yielded tangible benefits for consumers. Broadband speeds have risen consistently across the industry, while prices have generally fallen.[24] The FCC, for instance, last year upgraded its fixed-speed benchmark to 100/20 Mbps and set an “aspirational goal” of 1 Gbps/500 Mbps, reflecting the advancements in available speeds.[25] Furthermore, a growing number of households are now served by multiple broadband providers, enhancing consumer choice and competitive intensity.[26] Despite some critics’ claims of limited competition, statistics indicate that a vast majority of U.S. homes have access to at least three fixed, mobile, or satellite broadband services.[27]

Beyond these emerging technologies, competition from other established wireline providers remains significant. For instance, AT&T has been aggressively expanding its fiber footprint, with plans to pass over 30 million premises with fiber by the end of 2025, and potentially 60 million by 2030 through new partnerships and acquisitions.[28] Verizon also continues to be a major competitor with its fiber buildout plans.[29] These extensive fiber rollouts directly compete with cable broadband services, especially for high-speed connectivity, thus necessitating strategic responses from cable operators to maintain their market position.

The mobile market also already presents a critical dimension of competition, as well as a significant growth opportunity for broadband providers. Cable-wireless services, such as Charter’s Spectrum Mobile and Comcast’s Xfinity Mobile, have rapidly evolved into significant competitive forces in the mobile-telecommunications market, leveraging existing cable infrastructure and bundled service offerings to attract customers, often at lower prices. This exerts considerable competitive pressure on traditional wireless carriers like AT&T, Verizon, and T-Mobile.[30]

The proposed Charter/Cox merger aims to capitalize on these mobile opportunities. Cox, which launched its mobile service nationally in early 2023, is relatively “underpenetrated” in this market, with an estimated 200,000 mobile lines, compared to Charter’s 10.4 million.[31] The combined entity would have the opportunity to extend Charter’s more favorable mobile virtual network operator (MVNO) terms with Verizon to Cox’s customer base, offering lower-priced converged fixed and mobile offerings that tend to increase customer retention and improve economics.[32] This strategic move would bolster mobile competition within Cox’s legacy footprint, directly benefiting consumers with more competitive options.

C. The Imperative of Scale in Capital-Intensive Industries

The modern communications industry, encompassing broadband and mobile services, is characterized by its inherent capital intensity, demanding substantial and ongoing investments for technology deployment and network upgrades, as ICLE reported in a 2024 white paper:

Investment and innovation do not solely come from new entrants, as incumbents often are important sources of innovation while they try to stay competitive and avoid disruption. In this way, providers compete through new product introductions and disruption, not just on price. Because of these dynamics, mergers and increased concentration can sometimes be associated with increased investment, in that they may allow firms to achieve greater economies of scale and scope.[33]

Providers must continually invest in infrastructure, such as fiber and the latest Data Over Cable Service Interface Specification (DOCSIS) standards, to deliver ever-increasing broadband speeds and capabilities, as well as to expand and enhance mobile networks. These capital requirements mean that achieving greater scale is an economic imperative to enable more efficient investment and sustain competitiveness in a rapidly evolving landscape.

This need for scale is amplified by the dynamic nature of competition across various platforms and technologies. Cable operators like Charter and Cox no longer operate in a siloed market. They face significant pressure from diverse competitors, including expanding fiber footprints from AT&T and Verizon, disruptive FWA services from T-Mobile and Verizon, and LEO satellite-broadband providers like Starlink. In this multi-platform reality, achieving greater scale allows companies to allocate resources more effectively across various regions and technologies, ensuring they can keep pace with innovation and consumer demand.

A crucial area where increased scale offers tangible economic benefits is in MVNO agreements. Cable companies typically offer mobile services by leveraging existing wireless infrastructure through MVNO deals with national carriers like Verizon.[34] Charter, with its substantial mobile presence of 10.4 million wireless lines, has demonstrated that it can compete effectively in this space. By combining with Cox, whose mobile service is relatively underpenetrated with only 200,000 customers, the merged entity can extend Charter’s more advantageous MVNO terms with Verizon to Cox’s customer base.[35] This not only would offer lower-priced converged fixed and mobile offerings to Cox customers, but also bolster overall mobile competition within Cox’s existing footprint by providing a stronger alternative to traditional wireless carriers.

Beyond favorable MVNO terms, increased scale also contributes to improved marketing and branding capabilities. The combined company, with 69.5 million passings and 37.6 million customers, would become the largest broadband provider in the country, surpassing Comcast. This expanded footprint and customer base would enhance the combined company’s ability to compete against national competitors through more effective branding and sales efforts. The planned rollout of Spectrum-branded products across Cox’s service area, including Advanced Wi-Fi and Spectrum Mobile with Mobile Speed Boost, aims to leverage this expanded scale to drive sales and reduce customer churn.[36]

Crucially, the Charter/Cox merger is largely considered a geographic expansion, rather than a consolidation that eliminates head-to-head competition. Charter and Cox do not significantly overlap within their service footprints. This distinction is vital for antitrust analysis under Section 7 of the Clayton Act, which prohibits mergers that may substantially lessen competition. In this case, the transaction aims to achieve greater scale across different regions without directly reducing the number of competitors in any given local market. This approach is distinct from more problematic recent mergers, such as Comcast’s attempted acquisition of Time Warner Cable (discussed below), which faced significant antitrust opposition due to overlapping concerns.

III. Competitive Review Frameworks: DOJ and FCC

The review of the proposed Charter/Cox transaction requires navigating two distinct regulatory frameworks, each grounded in unique statutory mandates and institutional priorities. The DOJ evaluates mergers primarily through the lens of antitrust law, focusing narrowly on whether a transaction may substantially lessen competition or create a monopoly, as set forth in the Clayton Act. In contrast, the FCC undertakes a broader inquiry guided by the Communications Act’s “public interest” standard, which allows consideration of an array of economic, social, and policy factors beyond pure competition.

This dual-track review not only shapes the substantive analysis of competitive effects but also influences the inquiry’s procedures, evidentiary burdens, and types of conditions or remedies that may be imposed on the merging parties. The following sections describe the distinct standards and practices applied by each agency as they assess major communications-industry transactions.

A. The Clayton Act (DOJ) and the ‘Substantial Lessening of Competition’ Standard

Section 7 of the Clayton Act reflects congressional intent to arrest anticompetitive conduct before it reaches full monopolization by forbidding mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly.”[37] The U.S. Supreme Court has characterized this language as creating “a relatively expansive definition of antitrust liability.”[38]

The DOJ’s merger-review process operates through a burden-shifting framework established in cases like Philadelphia National Bank.[39] When the government establishes a prima facie case showing a substantial lessening of competition through structural presumptions or other evidence, defendants bear the burden of rebutting this showing with evidence demonstrating that the merger will not harm competition.[40] The structural presumption creates a rebuttable inference of illegality when mergers significantly increase concentration in highly concentrated markets, as measured by tools like the Herfindahl-Hirschman Index (HHI). The DOJ’s 2023 Merger Guidelines establish presumptions for mergers creating firms with market shares exceeding 30%, or HHI increases of more than 100 points in markets with post-merger HHI levels above 1,800.[41]

Economic analysis plays a central role in modern merger review. Its application, however, remains “surprisingly elusive,” as it is constrained by legal precedent and statutory interpretation.[42] While agencies employ sophisticated analytical techniques—including merger simulation, diversion analysis, and natural experiments to assess competitive effects—these economic tools are constrained by the legal framework established by Section 7’s text and judicial interpretation. The Clayton Act does not require certainty of harm but rather assessment of risk based on the totality of available evidence.

The distinction between different merger types proves crucial for understanding DOJ enforcement patterns. Geographic expansion mergers, where companies operate in different markets, typically receive more favorable treatment than horizontal mergers that eliminate head-to-head competition. For example, the DOJ recently approved T-Mobile’s transaction with UScellular, which had a significant geographic-extension element.[43] Such transactions do not eliminate existing competition between merging parties, reducing the immediate competitive concerns that trigger structural presumptions. Geographic expansion allows firms to extend their market reach and increase scale economies without directly consolidating market share in existing territories, distinguishing these transactions from mergers that combine direct competitors in the same geographic markets.[44]

B. The ‘Public Interest’ Standard (FCC)

The FCC’s review of the proposed merger will proceed on a separate and fundamentally different track from the antitrust analysis conducted by the DOJ. While both agencies scrutinize the transaction’s competitive effects, the FCC operates under the Communications Act’s broad and ill-defined “public interest, convenience, and necessity” standard, as explained in ICLE’s comments in the FCC’s “Delete, Delete, Delete” proceeding:

The FCC’s transaction-review process, rooted in the Communications Act of 1934, has evolved into a complex, time-consuming, and often unpredictable system that frequently duplicates efforts already undertaken by antitrust authorities. The current dual-review system imposes substantial costs on merging parties without clear commensurate benefits. While the FTC and U.S. Justice Department (DOJ) focus narrowly on demonstrable competitive harms, the FCC employs a broader and more ambiguous “public interest” standard that allows for wide-ranging inquiries, and often demands conditions that extend beyond competition concerns. This expansive approach not only creates regulatory uncertainty but also significantly increases transaction costs and extends timelines for business combinations that might otherwise benefit consumers through enhanced efficiencies and innovation.[45]

The FCC’s authority is triggered by the companies’ need to transfer control of their various FCC licenses—a procedural hook the agency has long used to conduct comprehensive merger reviews. The process is managed by a dedicated FCC transaction team that establishes a public docket, inviting comments and petitions to deny from third parties.[46] The FCC established its public docket in the Charter/Cox proceeding Sept. 5, 2025, with a public comment period set to close Oct. 5, 2025.[47]

This public phase is critical, as it allows competitors, consumer advocates, and other stakeholders to introduce arguments and evidence that shape the scope of the commission’s inquiry, often extending it far beyond the transaction’s direct competitive effects. The commission’s initial analytical step will be to define the relevant product and geographic markets to assess competitive harm.

It is likely the FCC will determine that the transaction is not a conventional horizontal merger, as the firms’ cable and broadband service territories have almost no geographic overlap. For example, when the commission recently approved Verizon’s acquisition of Frontier, the competitive analysis focused on whether the transacting parties “currently provide, or are likely to provide, products or services that consumers view as substitutes within the same relevant geographic market.”[48] In addition, where there is no geographic overlap, the commission has indicated that no analysis of horizontal effects is necessary.[49]

This finding of almost no geographical overlap is significant, not because it exonerates the merger, but because it dictates the subsequent analytical pivot. With minimal direct horizontal harm to analyze at the local retail level, the commission could shift focus to national-level, nonhorizontal theories of harm. This dynamic was central to the reviews of prior major cable mergers, such as the abandoned Comcast/Time Warner Cable transaction and the approved Charter/Time Warner Cable deal, where concerns about national scale—not local overlaps—dominated the proceedings.

It is this focus on national harms unrelated to competition issues where the FCC’s unique public-interest standard becomes most potent, and potentially capricious. Unlike the Clayton Act standard used by the DOJ, the FCC’s framework effectively reverses the burden of proof. The merging parties must affirmatively demonstrate that their combination will produce tangible public-interest benefits that outweigh any potential harms.[50] The term “public interest” is capacious, allowing the commission to consider a wide array of policy goals beyond economic efficiency, including the promotion of localism, programming diversity, and the deployment of advanced services. This means a transaction that is competitively neutral, or even one with harms that fall short of being “substantial,” could be blocked or conditioned if the parties fail to make a sufficiently compelling affirmative case.

The FCC’s approach is not a sterile application of economic theory, but a process heavily influenced by precedent and political pressure. The conditions imposed in the Comcast/NBCUniversal and Charter/Time Warner Cable mergers—as well as the T-Mobile/UScellular transaction and Skydance’s recent acquisition of Paramount—serve as precedent, and hint at the FCC’s approach to the Charter/Cox deal.

Arguments and demands submitted to the public docket by influential third parties will also play a crucial role in defining the scope of perceived harms, and shaping the ultimate remedy. The commission will weigh the potential harms—both those identified by its staff and those advanced by outside parties—against the procompetitive justifications offered by Charter and Cox.

History suggests that the FCC is unlikely to block the merger outright. Instead, the agency can “slow walk” the process or identify potential harm to the “public interest” as leverage to extract a set of “voluntary” conditions that the companies must accept to win approval. This practice of “regulation by adjudication” allows the FCC to impose its policy preferences on the merging parties without undergoing a formal rulemaking process. Moreover, such conditions are not subject to the same cost-benefit analysis or judicial scrutiny as formal rules,[51] giving the agency immense discretionary power.

The FCC’s typical regulatory approach has become even more strategically important for the commission in the current legal environment. The Supreme Court’s recent decision in Loper Bright to overturn the Chevron doctrine has weakened the legal foundation for broad agency rulemakings by eliminating judicial deference to an agency’s interpretation of its governing statutes.[52] With its general rulemaking authority now more vulnerable to legal challenge, the FCC has a powerful incentive to use the merger-review process as its preferred vehicle for regulation.

C. The Trump Administration’s Approach to Mergers

The Trump administration’s approach to merger review represents a departure from the approach of past Republican administrations, embodying what officials have variously christened “America First Antitrust,” “MAGA Antitrust,” and “Hillbilly Antitrust.”[53] The framework combines populist skepticism of corporate concentration with nationalist economic priorities, creating a more interventionist enforcement posture than previous Republican administrations.

The DOJ’s antitrust review would be conducted under Assistant U.S. Attorney General Gail Slater’s “America First Antitrust” doctrine, which prioritizes protecting “America’s forgotten consumers” through targeted litigation, rather than broad regulatory schemes.[54] This approach views antitrust enforcement as a tool that uses courts as a “scalpel” to excise monopolistic behavior without burdening entire industries with preemptive rules.[55] The DOJ has retained the Biden administration’s aggressive 2023 Merger Guidelines, which establish lower concentration thresholds and expanded theories of harm beyond traditional price effects, including labor-market impacts and potential competition concerns.

The administration’s enforcement philosophy explicitly rejects what it sees as the consumer-welfare standard’s narrow focus on price.[56] Federal Trade Commissioner Mark Meador, for example, argues that antitrust enforcement should focus on the welfare of consumers as buyers, not corporate efficiency gains, effectively excluding most merger-generated cost savings from competitive analysis unless directly passed to consumers.[57] This doctrinal shift enables challenges based on broader theories of harm, including monopsony power over suppliers, elimination of potential competition, and labor-market-concentration effects.

FCC Chair Brendan Carr’s “Build America Agenda” prioritizes infrastructure deployment, spectrum efficiency, and national technological leadership over traditional competition concerns.[58] This framework views telecommunications mergers through the lens of enhancing American competitiveness against foreign rivals and accelerating next-generation network deployment.

Carr has also introduced an unprecedented element to FCC merger review by threatening to block transactions involving companies that maintain what he terms “invidious” diversity, equity, and inclusion (DEI) programs.[59] This represents a novel use of the commission’s public-interest authority to advance broader administration policy objectives beyond traditional communications regulation. The FCC has already demonstrated this approach’s practical impact: T-Mobile was required to modify its DEI policies to secure approval for its Lumos Fiber acquisition,[60] as well as its transaction with UScellular.[61] Verizon received approval for its $20 billion Frontier purchase shortly after announcing the elimination of its DEI initiatives.[62] This creates a new category of merger condition, where companies must align their employment and corporate-governance practices with administration priorities to obtain FCC clearance.

The DEI enforcement mechanism expands the FCC’s leverage in merger negotiations beyond traditional public-interest considerations such as service quality, network investment, and competitive effects. Companies seeking merger approval must now evaluate whether their corporate policies on workplace diversity could trigger regulatory opposition, with the FCC effectively using the merger-review process as a vehicle to reshape private-sector employment practices. This approach transforms telecommunications merger review into a broader policy-enforcement tool that extends well beyond the communications sector’s traditional regulatory boundaries.

The precedent set by the T-Mobile/Sprint merger approval demonstrates how Trump administration officials resolve tensions between anti-concentration principles and national policy objectives. That transaction combined two of the four national wireless carriers, creating presumptive competitive harm, yet received approval based on complementary spectrum assets that would accelerate nationwide 5G deployment.[63] The agencies imposed strict build-out commitments and engineered complex structural remedies to preserve market structure while achieving infrastructure-policy goals.[64]

For the Charter/Cox transaction, the DOJ could focus on potential monopsony effects in content-purchasing markets or labor-market-concentration concerns. The combined entity would become the largest buyer of video programming, potentially enabling it to extract lower rates from content creators. But it should be noted that the companies’ “no overlap” defense—that they operate in distinct geographic markets—significantly complicates horizontal-merger analysis. The administration’s retained 2023 Merger Guidelines provide tools to challenge the merger on national-concentration theories, but litigation risks remain substantial, given the lack of direct competitive overlap.

Critically, the enforcement agencies would likely pursue a negotiated settlement rather, than outright challenge. This reflects some of the recent agreements noted above, where the administration was not interested in blocking deals, per se, but instead in using potential deals as leverage to extract concessions that advance broader policy objectives. For example, Slater’s pragmatic approach—demonstrated in approving the Capital One/Discover merger that the Biden administration reportedly planned to block—suggests a willingness to accept deals with appropriate conditions.[65] The Charter/Cox merger’s alignment with infrastructure-investment goals and its potential to create a stronger competitor to dominant players like Comcast and vertically integrated platforms like Amazon and Apple provide pro-competitive justifications that may reduce the attractiveness of litigation, even if other ancillary demands are pursued.

Further, the FCC review should present few obstacles, as the companies’ goal for the merger is to advance a plan that is highly consistent with the “Build America Agenda” through promised infrastructure investments and expanded broadband access.[66] The companies have strategically emphasized commitments to accelerate fiber deployment, enhance rural-broadband service, and repatriate customer-service jobs to the United States. These promises align with Carr’s public-interest priorities.

Following the T-Mobile-Sprint template of extracting enforceable commitments in exchange for merger clearance, conditional approval represents the most probable outcome. Likely conditions could include aggressive build-out timelines with penalty provisions, price-protection commitments for existing customers, enhanced mobile-competition requirements, and elimination of company DEI policies.

The administration’s merger-review process reflects its broader philosophy of using government power strategically, rather than reflexively opposing corporate consolidation. Even under the populist “America First” framework, the Charter/Cox merger’s geographic complementarity, infrastructure-investment commitments, and alignment with national-competitiveness goals position it favorably for approval with conditions that transform potential competitive concerns into vehicles to achieve the administration’s policy priorities.

D. Regulatory Asymmetry

The modern communications marketplace suffers from fundamental regulatory inconsistencies. Traditional cable operators pursuing horizontal mergers, such as Charter and Cox, face intensive scrutiny from both the DOJ under Section 7 of the Clayton Act and the FCC under its “public interest” standard. Meanwhile, technology giants have vertically integrated across similar competitive spaces with minimal oversight.[67] This asymmetry distorts market outcomes by imposing differential regulatory burdens, rather than allowing economic efficiency and consumer preference to determine competitive success.

The regulatory burden imposed on traditional cable operators creates substantial transaction costs and uncertainty. The dual-review process requires significant legal fees, economic-consulting expenses, and executive attention diverted from core operations.[68] The FCC’s “public interest” standard proves particularly problematic because it lacks clear boundaries. Unlike DOJ analysis focused on demonstrable competitive harms, the FCC may extract concessions on matters unrelated to competitive effects. This transforms merger review into de-facto rulemaking, creating a permission-based system that chills pro-competitive transactions and investment.

Technology platforms have assembled vertically integrated ecosystems without equivalent regulatory oversight. For example, Google distributes programming via YouTube and YouTube TV and operates fiber infrastructure in select markets. Amazon has become a major content producer through acquisitions like MGM and the company’s extensive investment in original programming. This content reaches consumers through Prime Video, which accounts for nearly 4% of household viewing time,[69] some of which is consumed on Amazon’s Fire TV devices. Netflix transformed from a content aggregator into a dominant production studio with an annual content budget of $18 billion, rivaling traditional media companies.[70] This vertical integration fundamentally altered video-programming-market dynamics, creating a powerful content buyer and direct competitor to programmers and distributors.

The disparate treatment across technologies lacks coherent consumer-welfare justification. Subjecting one set of firms to intensive and costly review while allowing others to integrate with minimal oversight does not protect competition, but skews it. The result creates structural disadvantages for traditional providers based on legacy regulations, rather than competitive merit. This asymmetry distorts competition, discourages investment where it is most needed, and fails to address the competition posed by vertically integrated technology platforms.

A coherent regulatory framework would move beyond historical technology-driven distinctions to apply technology-neutral principles that reflect consumer behavior. Without such modernization, antitrust enforcement becomes arbitrary, penalizing incumbents for attempting to achieve scale and scope that unregulated rivals have already attained. Sound economic policy requires consistent treatment of similar competitive behaviors regardless of corporate heritage or regulatory classification.

IV. Potential Competition Issues in the Charter/Cox Merger

The competitive effects of the proposed Charter/Cox merger are best understood within the broader context of today’s rapidly evolving communications market. Effective analysis requires a careful examination of how the merger might affect competition across both fixed broadband and video services, considering the intersection of overlapping and non-overlapping geographic footprints, emerging technologies, and shifting consumer-demand patterns. This section assesses potential competition concerns by focusing first on the fixed and mobile broadband markets, where intermodal rivalry and expanded provider choice have redefined competitive dynamics, and then on the implications for video distribution in light of changing market definitions and increasing cross-platform convergence.

A. Fixed and Mobile-Wireless Broadband

Antitrust analysis of this transaction will likely focus on the fixed broadband market, as the deal would create the largest broadband provider in the United States. Even so, there is extraordinarily little geographic overlap between the areas served by Charter and Cox. Less than 0.1% of broadband serviceable locations in the combined footprints are served by both companies.[71] In addition, more than half of Charter locations and about half of Cox locations already are served by competing fiber providers.[72]

ICLE reported in 2024 that broadband competition is intense and dynamic.[73] Since the COVID-19 pandemic, more households are connected to the internet; broadband speeds have increased, while prices have fallen; more households are served by multiple providers; and newer technologies like satellite and 5G have expanded internet access and intermodal competition among providers. For example, from the end of 2019 through June 2025, while the overall Consumer Price Index increased by 24.3%, the index for internet services and electronic-information providers rose by just 9.0%.[74]

The International Technology & Innovation Foundation (ITIF) similarly reports that cable companies face increasing competition, such that “cable’s long-time dominance [in broadband] is fading due to new alternatives entering the market or existing companies expanding their footprint and capacity.”[75] For example, in the second quarter of 2025, Spectrum’s tally of internet customers fell by 117,000.[76]

From 2019 to 2024, the total number of subscribers to fixed wireless-access products from AT&T, T-Mobile, Verizon, and UScellular grew from less than 1 million to nearly 12 million, amounting to a 68% cumulative annual growth rate.[77] In the first quarter of 2025, 12.7 million subscribed to FWA.[78] At a March 2025 event, FCC Chairman Brendan Carr noted that “the evidence shows that when we get a new fixed wireless provider that comes in… prices decrease.”[79] In addition, Starlink’s satellite-broadband service has more than 2 million “active” U.S. subscribers,[80] while reaching 99.8% of broadband-serviceable locations in the United States. Another satellite service, Amazon’s Project Kuiper, plans to offer internet service with speeds of 100 Mbps to 1 Gbps by the end of 2025.[81]

An ICLE issue brief on T-Mobile’s transaction with UScellular reported that mobile-wireless services have been a growing segment of the mobile broadband market, with cable companies like Comcast and Charter exerting competitive pressure:

In less than a decade, cable-wireless providers have rapidly evolved from nascent entrants to significant competitive forces in the mobile-telecommunications market. Their market share has grown substantially, with recent estimates indicating they’ve captured more than half of new subscribers. This growth demonstrates that consumers view cable-wireless offerings as viable substitutes for traditional wireless services. Moreover, cable-wireless providers now cover a significant portion of the population, including within UScellular’s footprint. This indicates that their services are widely available, and they compete directly with traditional carriers in many local markets.[82]

Despite the growth of cable wireless, however, the largest providers combined still likely account for less than 5% of U.S. mobile subscribers.[83]

B. Video Services

For video services, a market definition narrowly confined to traditional MVPDs, such as cable and satellite providers, is economically indefensible and detached from current market realities. Consumers have demonstrated that they view traditional MVPDs as competitive substitutes with the vast array of over-the-top (OTT) services, including subscription video-on-demand (SVOD), advertising-supported video-on-demand (AVOD), and virtual MVPDs (vMVPDs).[84] “Cord-cutting,” the persistent, large-scale consumer migration from traditional pay-TV to these internet-delivered alternatives provides evidence of high demand-side substitutability and cross-elasticity of demand, the foundational criteria for market definition under established legal and economic principles.

Moreover, as noted above, the service footprints of the two cable operators are geographically distinct and do not overlap. A consumer in a Charter territory cannot choose Cox for cable service, and vice versa. Consequently, the transaction does not eliminate head-to-head competition between the two firms in the provision of their primary video offerings. This fact alone distinguishes the transaction from mergers that consolidate rivals within the same geographic area and immediately lessens the potential for the kinds of unilateral or coordinated anticompetitive effects that typically animate antitrust concern. The merger is a combination of two sets of non-competing local assets.

The U.S. video market is a fragmented and fiercely competitive space dominated by numerous well-capitalized global and national firms. For example, based on total television viewing time, YouTube and Netflix combined account for almost the same amount of household viewing time (21.1%) as all cable operators combined (23.4%).[85] Even in a narrowly defined “pay TV” market comprised of cable, satellite, and vMVPD providers, the merged company would have a market share of 23% of subscribers. This results in an HHI of 1,502, well below the 2023 Merger Guidelines thresholds for a highly concentrated market.[86]

The competitive discipline in the modern video market is further amplified by exceptionally low consumer-switching costs. Unlike the legacy cable model, which often involved annual contracts, professional installation, and equipment rental, consumers can subscribe to or cancel most OTT services in minutes with no long-term commitment. This consumer empowerment creates significant market fluidity, evidenced by high churn rates for SVOD services, which have grown substantially since 2019. The constant threat that a subscriber will switch to a rival service in response to a price increase or degradation in quality or content selection imposes a powerful constraint on the behavior of all market participants, including a post-merger Charter/Cox.

The transaction is thus best understood not as an anticompetitive move to consolidate market power, but as a pro-competitive response to growing competition from vertically integrated media conglomerates and global technology platforms. Companies like Disney, Warner Bros. Discovery, Google (YouTube), and Amazon leverage immense scale in both content production and global distribution, creating competitive challenges for regional distributors. By combining assets, Charter and Cox can achieve the necessary scale to negotiate for programming on more favorable terms, creating efficiencies that can be passed on to consumers. This rationale mirrors the logic accepted in prior vertical media mergers, such as AT&T’s acquisition of Time Warner, which was positioned as necessary to compete with the rising power of large technology firms in content distribution.

Consumer group Public Knowledge has expressed concerns that a larger combined distributor might use its position to foreclose independent programmers or limit content diversity.[87] Such concerns are misplaced in the current video-distribution market. To compete effectively against the vast and exclusive content libraries of services like Netflix, Disney+, and HBO Max, video distributors have a powerful commercial incentive to cost-effectively offer the most compelling and diverse array of programming possible in order to attract and retain subscribers.

Any attempts to limit choice would be self-defeating, as consumers would quickly migrate to other platforms. Moreover, programmers today have more routes to market than at any point in history. They are no longer dependent on a handful of cable and satellite operators for distribution and can reach audiences directly through their own apps or via partnerships with numerous national and global OTT services.

C. Efficiencies and Consumer Benefits

Unlike previous failed consolidation attempts in the cable industry—most notably, Comcast’s 2015 bid for Time Warner Cable—the Charter/Cox proposal combines largely non-overlapping geographic footprints. This distinction is crucial for antitrust analysis. As noted above, rather than eliminating head-to-head competition in local markets, this transaction resembles a geographic expansion that allows the combined company to achieve greater scale across different regions.

This scale matters for reasons beyond market share. The communications industry requires enormous capital investments to deploy advanced technologies. USTelecom estimates broadband investments have averaged $100 billion a year (inflation adjusted) over the past decade.[88] Charter and Cox project approximately $500 million in annualized cost savings within three years of the deal.[89] If realized, these savings could be invested in network upgrades (e.g., expanding gigabit and multi-gigabit capabilities, and accelerating deployment of the DOCSIS 4.0 internet-communications standard); product-offering innovations (such as converged mobile and broadband bundles, where a larger entity might secure better MVNO terms); and improved customer service.

In addition, the companies claim the merged firm’s increased scale will result in lower costs per passing or per customer.[90] Their consultants also claim the merger will result in lower programming-acquisition costs, but have not provided sufficient information to the public to evaluate the claim.[91]

Offloading is the practice of routing mobile-data traffic over Wi-Fi networks instead of traditional cellular networks. Charter claims that 87% of its Spectrum Mobile traffic flows over Wi-Fi access points.[92] The merger will increase the number of Wi-Fi access points available to support the company’s mobile services, increasing the availability to offload mobile traffic on to Wi-Fi and thereby reducing the amount of network access purchased through MVNO agreements.[93]

Charter and Cox claim the merger would create cost savings by eliminating Cox’s current syndication agreements regarding consumer premises equipment (CPE) and video services. Currently, Cox has a syndication agreement with a third party (reportedly Comcast) to provide equipment.[94] Charter has developed its own customer equipment for modems and routers. After the merger, Cox customers will transition to Charter’s equipment platform, removing the syndication fees Cox currently pays. The parties argue that these savings could then be passed on to customers through lower prices or better service quality.[95] These characteristics not only mitigate concerns under the traditional Clayton Act analysis, but also match the priorities emphasized by the “America First Antitrust” approach, which favors transactions that expand infrastructure, increase competitiveness, and deliver direct consumer benefits.

LightReading reports that Cox has currently uses the X1 and Xumo video platform through a syndication deal.[96] Charter and Cox’s consultants conclude this results in “double marginalization” in which the upstream technology provider sets syndication fees above its own marginal costs, and Cox, in turn, prices its video service above these syndicated input costs to earn a return.[97] Charter plans to move Cox customers to its own video platform, which bundles traditional TV with free ad-supported versions of popular streaming services like Disney+, HBO Max, and Paramount+.[98] This platform also includes a digital store where customers can easily add streaming apps and upgrade to ad-free versions if they want.

Charter argues that its larger scale after acquiring Cox will reduce equipment and service costs significantly. The company says it will reinvest these savings into network improvements and new services for customers. By bringing Cox’s operations in-house instead of relying on third-party syndication agreements, the merged company expects to operate more efficiently and offer customers better value through improved bundling options and lower operational costs.

V. Lessons from Past Merger Reviews

The regulatory and competitive landscape surrounding large-scale communications mergers has evolved significantly over the past decade, shaped both by shifting market dynamics and by changing enforcement priorities. To understand the likely trajectory and evaluation of the proposed Charter/Cox transaction more fully, it is instructive to examine recent precedent in U.S. telecommunications and media mergers. This section examines the Comcast/Time Warner Cable and AT&T/Time Warner merger reviews and draws out key analytical lessons from their outcomes and implications for future merger reviews.

A. Comcast/Time Warner Cable (2015)

In 2015, Comcast abandoned its plans to acquire Time Warner Cable Inc. (TWC) for approximately $45.2 billion.[99] The deal was scuttled following formal notification from both the DOJ and the FCC that their staffs intended to oppose the deal. The regulators argued that the combined entity’s national scale would make it an “unavoidable gatekeeper” with the ability and incentive to harm the then-nascent online video distributor (OVD) market to protect the companies’ legacy pay-TV business.[100] These theories of harm focused on the potential for the merged firm to leverage its market power in broadband distribution to raise costs for OVDs through interconnection fees and to restrict their access to programming content.

Today, the factual premises underlying these theories have been fundamentally altered. The OVD market is no longer nascent. Instead, the OVD business is a mature, dominant force in media, with streaming’s share of television viewership now eclipsing that of broadcast and cable combined. Concurrently, the broadband market has become more competitive, with fiber, fixed wireless, and satellite services providing increasingly viable alternatives to cable. Moreover, a merged Charter/Cox entity would lack the significant vertical integration into content production that was a key aggravating factor in the Comcast/TWC review.

Similar to the proposed Charter/Cox deal, the proposed Comcast/TWC transaction lacked direct, head-to-head competition between the two companies.[101] Comcast and TWC operated in almost entirely separate geographic territories, a common feature of the U.S. cable industry. Therefore, consumers in any given local market would not see the number of available cable or broadband providers reduced as a direct result of the merger. This absence of horizontal overlap meant that traditional antitrust metrics, such as local market concentration as measured by HHI, were largely irrelevant to the consumer-facing retail markets.

As a result, regulators shifted their analysis away from traditional theories of harm based on the elimination of a direct competitor. Instead, the DOJ and FCC focused on potential anticompetitive effects stemming from the combined entity’s substantial increase in national scale. The agencies advanced a “gatekeeper” theory, contending that the merger would make a combined Comcast/TWC an “unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.”[102]

Thus, rather than focusing on competition in the market for broadband service, the agencies turned their attention to competition on the broadband platform itself. The concern was not that the merged firm would raise prices for its own subscribers, but that it would use its control over access to those subscribers to harm other companies operating in upstream and downstream markets, particularly in the emerging online-video space.

In particular, the government’s case against the merger centered on the perceived threat to the then-nascent OVD services, such as Netflix and Hulu.[103] Regulators theorized that a larger, more powerful cable operator, seeing OVDs as a threat to its profitable legacy pay-TV business, would possess both an increased ability and a heightened incentive to disadvantage these emerging online competitors. Government reviewers articulated three specific economic theories of harm to substantiate this concern.[104]

1. Increased bargaining power in interconnection, in which it was argued that a larger internet service provider (ISP) could leverage its control over a greater number of broadband subscribers to demand higher fees from OVDs for interconnection (e., the physical exchange of traffic required to deliver video streams to consumers).[105] These higher costs would either be passed on to consumers through higher OVD subscription prices or would reduce OVDs’ margins, thereby stifling their ability to invest in content and innovation and ultimately limiting their growth and competitive viability.²
2. Increased bargaining power in programming negotiations, in which the merged firm would represent a much larger share of the national market for video distribution. The increased buyer power—or monopsony power—could be used to force television programmers like Disney, Viacom, or Discovery to accept restrictive contract terms.[106] Specifically, regulators feared the merged entity would demand alternate-distribution means (ADM) clauses that would prohibit or penalize programmers for licensing their content to OVDs. In this way, they could starve online rivals of the programming needed to compete effectively with the traditional cable bundle.[107]
3. Internalization of externalities. This more complex economic argument focused on the merged firm’s anticipated incentives. Under this theory, it was argued that, when a single cable operator takes an action that harms an OVD (g., by degrading its video quality or imposing a restrictive data cap),[108] it creates a positive externality for other cable operators, as the OVD is now a weaker competitor for all of them. The individual operator, however, only considers the benefit to its own business. A merger between two large operators would cause the new, larger firm to internalize these externalities and would account for the benefits that its anticompetitive actions confer on its newly acquired territories.[109] This internalization, in turn, would increase the firm’s overall incentive to engage in conduct harmful to OVDs, as it would now capture a larger share of the industrywide gains from such a strategy.

These theories of anticompetitive harm were advanced while the FCC was in the midst of drafting its 2015 Open Internet Order, also known as “net neutrality,” which mandated policies involving interconnection, blocking, throttling, paid priority, and data caps that were identified as necessary (or desired) to preserve a so-called “open” internet.[110]

An aggravating factor in the merger review was Comcast’s vertical integration into content through its ownership of NBCUniversal (NBCU).[111] This ownership distinguished the proposed merger from a pure horizontal combination of distribution assets. Time Warner Cable, having been spun off from Time Warner Inc. in 2009, did not own significant programming assets of its own. Comcast’s ownership of a major content studio created what regulators saw as a powerful, two-sided incentive to foreclose rivals. The merged firm could potentially harm OVDs, not only to protect its legacy cable-distribution business, but also to advantage its own content business.[112] This vertical integration amplified concerns raised by the programming-negotiation theory of harm, making the threat of anticompetitive foreclosure appear more concrete and credible to regulators.

The decade since the scuttled Comcast/TWC merger has been a period of substantial transformation in the media and communications landscape. The competitive dynamics and market structures of 2025 bear little resemblance to those of 2015.

• In 2015, regulators characterized OVDs as “nascent,” with entrants requiring protection from entrenched incumbents. By 2025, this narrative has been inverted. Today, streaming’s share of total television usage (46%) surpasses the combined share of broadcast and cable television (42%).[113] In 2015, around 50% of U.S. households held subscriptions to streaming services; in 2023, 83% of households subscribed to one or more of the major streaming providers.[114]
• The competitive landscape for broadband-internet access has also become significantly more dynamic. In 2015, 16% of households had no access to download speeds of 25 Mbps or higher and 45% only had access from a single provider. Today, a large majority of U.S. homes have access to at least three fixed, mobile, or satellite broadband services with speeds of 100 Mbps or higher.[115]
• Several net-neutrality orders have come and gone. Most recently, the 6^thS. Court of Appeals struck down the FCC’s 2024 effort to regulate broadband-internet providers as common carriers under the guise of net neutrality.

This evolution renders meaningless the main competitive concerns raised in the Comcast-TWC merger 10 years ago.

B. AT&T/Time Warner (2018)

The DOJ’s challenge to the AT&T/Time Warner merger in 2018 was the first fully litigated vertical-merger case in four decades.[116] The government’s ultimate failure to block that deal established a clear and demanding evidentiary standard for future challenges to a nonhorizontal merger, favoring evidence-based economic analysis over speculative theories of competitive harm.

The DOJ’s case rested on a vertical-foreclosure theory, arguing that the combined firm would have both the incentive and ability to leverage Time Warner’s seemingly indispensable Turner networks to raise programming costs for its distribution rivals, such as cable and satellite companies.[117] This argument was grounded in economic principles—chiefly the Nash Bargaining Theory—that posited that AT&T’s ownership of its own distributor (DirecTV) would reduce its downside risk from a programming blackout with a rival, thereby increasing its bargaining leverage in carriage negotiations.[118]

The U.S. District Court for the District of Columbia, in an opinion[119] that was unanimously affirmed by the U.S. Circuit Court of Appeals for the D.C. Circuit,[120] rejected the government’s theory. The court’s decision turned on the government’s failure to demonstrate a “reasonable probability” that the alleged theoretical harms would manifest in the real world.[121] Judge Richard Leon found the DOJ’s quantitative economic model to be unreliable and factually detached from marketplace realities, citing flawed inputs and a critical failure to account for the constraining effects of existing long-term contracts. The court concluded that the government’s case was built on a chain of assumptions and predictions that were ultimately contradicted by the factual evidence.

In contrast to the government’s theory, the court found the merging parties’ evidence more persuasive because it was rooted in empirical data and real-world experience.[122] AT&T presented a detailed econometric analysis of prior vertical mergers in the same industry, which demonstrated no statistically significant effect on content prices.[123] This historical data provided a counter-narrative to the government’s forward-looking, theoretical model. The court also credited testimony from industry executives, who affirmed that threatening or initiating content blackouts was a mutually destructive strategy that would remain an unattractive option even after the merger.[124] The testimony of the merging parties’ rivals, upon which the government heavily relied, was largely discounted by the court as self-interested and speculative.[125]

One factor guiding the court’s skepticism of the DOJ’s theory of harm was Time Warner’s voluntary, post-litigation commitment to submit to binding “no-blackout” arbitration to resolve any future carriage disputes with distributors.[126] This irrevocable offer was a practical, market-based solution that directly neutralized the government’s central theory of harm regarding the threat of programming blackouts. By providing a concrete mechanism to prevent the anticompetitive conduct the DOJ anticipated, the merging parties stifled one of the government’s chief concerns.

The D.C. Circuit’s affirmation of Judge Leon’s decision laid down a marker for future vertical-merger challenges. The appellate court reiterated that, because vertical mergers do not produce an immediate change in market concentration, the government cannot rely on structural presumptions of harm as it can in horizontal cases.[127] Instead, the government must make a “fact-specific” showing that the merger is likely to be anticompetitive.[128]

A key lesson of the AT&T-Time Warner merger is that enjoining a nonhorizontal merger requires more than economic theories or complaints from competitors. A successful challenge to a nonhorizontal merger demands concrete, credible, and compelling evidence that the transaction will likely cause substantial harm to competition in the actual marketplace.

VI. Conclusion and Policy Implications

The proposed Charter/Cox merger is best understood as a strategic response to sweeping changes in the U.S. communications market. Across fixed broadband, pay TV, and mobile, service providers now operate amid increasing platform diversity, rapid technological change, and more demanding consumer expectations.

Charter and Cox face significant and growing competition from fixed-wireless access, LEO satellites, and the growing fiber footprints of AT&T and Verizon, as well as from more than 200 streaming platforms. The market landscape bears little resemblance to the highly segmented, technology-specific markets of the past. With minimal geographic overlap, the merger does not remove a competitor from any local market—a fact with direct implications for how competitive risks should be weighed.

The evidence shows that the combined Charter/Cox entity largely represents a geographic expansion, rather than a horizontal consolidation. Fewer than 0.1% of broadband-serviceable locations are currently overlapped by both providers. Review of past mergers underscores that, in such cases, traditional antitrust concerns about increased local market concentration are substantially reduced or inapplicable. Instead, the key analytical question shifts to whether the transaction creates the capacity or incentives for anticompetitive behavior at a national level, especially in areas like programming acquisition or interconnection. These concerns have diminished, however, as the competitive balance has tilted toward multiplatform, vertically integrated giants, many of whom are not subject to the same regulatory scrutiny as legacy cable operators.

The efficiencies claimed by Charter and Cox rest primarily on scale: approximately $500 million in annual targeted cost savings within three years. These savings are expected to arise from reduced equipment costs, more favorable mobile-network access, programming-acquisition efficiencies, and the elimination of duplicative syndication agreements. The merged company projects that these savings will support faster deployment of advanced broadband and mobile technologies, lower average costs per customer, and improvements in service quality—outcomes consistent with the consumer-welfare standard. The ability to offload mobile traffic onto expanded Wi-Fi networks, in particular, could lower operational costs and deliver more competitive mobile offerings within Cox’s footprint.

Regulatory review of the Comcast/Time Warner Cable and AT&T/Time Warner mergers provides several lessons. First, while the agencies were focused a decade ago on the risk that national-level consolidation might create “gatekeeper” power over nascent online-video platforms, the market has since shifted. Online video is now the dominant modality, and vertical integration by technology platforms (e.g., Apple, Google, Amazon) has eclipsed that of most traditional providers. Regulatory asymmetry remains, in that cable operators navigating mergers undergo multi-agency review and bear the costs of legacy regulation, even as their principal competitors operate under few or no comparable obstacles.

For policymakers, the Charter/Cox transaction presents an opportunity to realign regulatory practice with economic reality. The consumer-welfare standard—focused on demonstrable, transaction-specific harms and efficiencies—remains the most reliable guide. Even under an “America First” antitrust approach, regulatory responses should be rooted in factual market effects, not abstract concerns about scale or size. Where claimed efficiencies are both merger-specific and verifiable, the burden should be on the agencies to demonstrate substantial, tangible harms to competition, rather than rely on speculative or politically motivated theories of harm.

The evolving role of the FCC, especially under recent “public interest” reinterpretations, deserves careful consideration. Conditions unrelated to competition—such as those advancing specific employment or corporate-governance policies—risk introducing regulatory unpredictability and could dampen incentives for investment and innovation. Such interventions, particularly when applied inconsistently across industry segments, threaten to bias market outcomes and discourage the very adaptation that consumers and the U.S. economy require.

Ultimately, a coherent regulatory framework should aim to treat functionally equivalent services the same, regardless of historical provider classification. As the communications marketplace continues to converge, policy must shift toward technological neutrality and consistent application of antitrust principles to all market players. By focusing on demonstrable effects and resisting the urge to intervene on grounds unrelated to competition, policymakers will best promote investment, innovation, and consumer benefit—a result well aligned with the economic evidence presented in this review. Importantly, that conclusion holds whether the transaction is examined under the traditional consumer-welfare standard or under the newer “Hillbilly Antitrust” framework: in both cases, the facts support approval.

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

[1] Press Release, Charter Communications and Cox Communications Announce Definitive Agreement to Combine Companies, Charter Commcn’s (May 16, 2025), https://corporate.charter.com/newsroom/charter-communications-and-cox-communications-announce-definitive-agreement-to-combine-companies; see also Charter Communications and Cox Communications Agree to Transformative Combination, Charter Commcn’s & Cox Commcn’s (May 16, 2025), https://ir.charter.com/static-files/17f74638-d569-448c-be88-76d00f9c6fff [hereafter “Charter/Cox presentation”].

[2] Jake Neenan, Charter-Cox Merger Provides Convergence Runway, Broadband Breakfast (May 16, 2025), https://broadbandbreakfast.com/charter-cox-merger-provides-convergence-runway.

[3] Pay TV Providers Ranked by the Number of Subscribers in the United States as of 1st Quarter 2025, Statista (May 2025), https://www.statista.com/statistics/251793/pay-tv-providers-with-the-largest-number-of-subscribers-in-the-us.

[4] Charter, supra note 1.

[5] Turner Broadcasting System v. FCC, 512 U.S. 622, 661 (1994) (“Turner I”) (the “cable medium” has “special characteristics” of “bottleneck monopoly power”).

[6] Turner Broadcasting System v. FCC, 520 U.S. 180, 197 (1997) (“Turner II”).

[7] Comcast Cable Commcn’s v. FCC, 717 F.3d 982, 993-94 (2013) (J. Kavanaugh, concurring).

[8] Report and Order, In the Matter of Amendment to the Commission’s Rules Concerning Effective Competition, Implementation of Section 111 of the STELA Reauthorization Act (MB Docket No. 15-53, FCC 15-62, Jun. 3, 2015), available at https://docs.fcc.gov/public/attachments/FCC-15-62A1.pdf.

[9] Eighth Annual Report, In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, CS Docket No. 01-129, Table B-1 (Dec. 27, 2001), available at https://docs.fcc.gov/public/attachments/FCC-01-389A1.pdf.

[10] Philip Graves, How System Requirements for Browsing the Internet Have Changed: Part 1: Internet Connection Speeds, GWS Media (Nov. 23, 2021), https://www.gwsmedia.com/articles/how-internet-system-requirements-have-changed (“In early 1993, the fastest available modem was capable of transferring data at a maximum speed of 14.4 kilobits per second (kbps), equivalent to 864kb per minute, or 51.84Mb per hour. The launch of the 28.8k modem in 1994 doubled this theoretical maximum. 33.6k modems followed in 1996, and eventually 56k ones arrived in 1998. …  However, in practice the maximum advertised speeds were never attained for any dial-up modems as a result of latencies in the infrastructure serving data to end-users.”); see also Eric Fruits, Kristian Stout, & Geoffrey A. Manne, The Economics of Broadband Data Caps and Usage-Based Pricing, Int’l Ctr. L. & Econ. (Oct. 23, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/10/Data-Caps-2024.pdf (“In the early days of the commercial internet in the 1990s, most consumers accessed the internet via dial-up connections. These connections were slow—averaging around 56 Kbps—and content was limited. It could take a minute or more for a single image file to load.”).

[11] About Us, DirecTV, https://www.directv.com/insider/corporate/company (last visited Jul. 22, 2025).

[12] Joni Blecher, The History of RealPlayer, RealPlayer Blog (Aug. 17, 2016), https://blog.real.com/realplayer-history.

[13] Speedtest Global Index: Median Country Speeds Updated June 2025, Speedtest, https://www.speedtest.net/global-index (last visited Jul. 22, 2025).

[14] US Trad Pay TV & vMVPDs, nScreen Media, https://nscreenmedia.com/us-pay-tv (last visited Jul. 24, 2025).

[15] Eugenie Park & Colleen McClain, 83% of U.S. Adults Use Streaming Services, Far Fewer Subscribe to Cable Or Satellite TV, Pew Research Center (Jul. 1, 2025), https://www.pewresearch.org/short-reads/2025/07/01/83-of-us-adults-use-streaming-services-far-fewer-subscribe-to-cable-or-satellite-tv; see also Eric Fruits, Video Competition in 2025: It’s Literally on Heebee, Truth on Mkt. (Feb. 14, 2025), https://truthonthemarket.com/2025/02/14/video-competition-in-2025-its-literally-on-heebee (“In the face of so many streaming options, millions of consumers have ‘cut the cord’ and switched from cable and DBS satellite to streaming services over the internet. Cable subscribership peaked in 2010. Since then, the number of subscribers dropped by more than 35%. The Washington Post reports that barely half of American homes pay for live TV service from a cable, satellite TV, or an internet-delivered vMVPD (virtual multichannel video programming distributor) like YouTube TV.”).

[16] 2025 Media & Entertainment Industry Predictions Report, Alix Partners (Dec. 2024), available at https://www.alixpartners.com/media/ow1n5vey/2025-media-entertainment-industry-predictions-report.pdf.

[17] Colin Dixon, TV for the Rest of Us: How Streaming Unleashed Specialty Audiences, nScreenMedia (Jun. 3, 2025), https://nscreenmedia.com/how-streaming-unleashed-specialty-audiences.

[18] The Gauge, The Nielsen Co., https://www.nielsen.com/data-center/the-gauge (last visited Jul. 22, 2025).

[19] Eric Fruits, Geoffrey A. Manne, Ben Sperry, & Kristian Stout, Dynamic Competition in Broadband Markets: A 2024 Update, Int’l Ctr. L. & Econ. (Jun. 4, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/06/Broadband-Competition-2024-Update.pdf.

[20] Andrew Long, The Proposed Charter-Cox Merger: A Pro-Consumer Response to Today’s Competitive Communications Marketplace, Free State Found. (Jun. 10, 2025), available at https://freestatefoundation.org/wp-content/uploads/2025/06/The-Proposed-Charter-Cox-Merger-061025.pdf.

[21] Eric Fruits, Ben Sperry, & Kristian Stout, The Competitive Effects of the Proposed T-Mobile/UScellular Transaction, Int’l Ctr. L. & Econ. (Dec. 16, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/12/T-Mobile-USCellular.pdf.

[22] Id.

[23] See, e.g., Drew FitzGerald & Patience Haggin, Charter, Cox Merge in Megadeal Amid Escalating War With Wireless, Wall St. J. (May 16, 2025), https://www.wsj.com/business/deals/charter-communications-to-merge-with-rival-cox-in-21-9-billion-deal-c70dcff9?st=6rQTPa&reflink=desktopwebshare_permalink (“Cellphone carriers like Verizon and T-Mobile have heightened the threat with home broadband service beamed over the air. Wireless companies have racked up millions of customers with the offerings, which use 5G technology to provide internet speeds that are competitive with fixed cable lines at lower prices.”).

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

[25] 2024 Section 706 Report, In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion (GN Docket No. 22-270, Mar. 14, 2024), available at https://docs.fcc.gov/public/attachments/DOC-400675A1.pdf.

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

[27] Id.

[28] United States Telecommunications Market Overview, Business Monitor Online (Jun. 23, 2025).

[29] Jeff Baumgartner, Verizon Doubles Down on FWA, Accelerates Fiber Buildout Plan, Light Reading (Oct. 22, 2024), https://www.lightreading.com/broadband/verizon-doubles-down-on-fwa-accelerates-fiber-buildout-plan.

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

[31] Bevin Fletcher, Charter to Acquire Cox in Deal Worth $34.5B, StreamTV Insider (May 16, 2025), https://www.streamtvinsider.com/video/charter-acquire-cox-deal-worth-345b.

[32] Id.; see also Long, supra note 20.

[33] Fruits et al., supra note 19, citing Eric Fruits, Justin (Gus) Hurwitz, Geoffrey A. Manne, Julian Morris, & Alec Stapp, Static and Dynamic Effects of Mergers: A Review of the Empirical Evidence in the Wireless Telecommunications Industry, (OECD Directorate for Financial and Enterprise Affairs Competition Committee, Global Forum on Competition, DAF/COMP/GF(2019)13, Dec. 6, 2019), available at https://one.oecd.org/document/DAF/COMP/GF(2019)13/en/pdf.

[34] Long, supra note 20.

[35] Neenan, supra note 2.

[36] Fletcher, supra note 31.

[37] 15 U.S. Code § 18 [emphasis added].

[38] California v. Am. Stores Co., 495 U.S. 271, 284 (1990), (quoting 15 U.S.C. § 18 with emphasis) (citing Brown Shoe, 370 U.S. at 323).

[39] United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963).

[40] The Use of Structural Presumptions in Antitrust (OECD Roundtables on Competition Policy Papers No. 317, 2024), available at https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/11/the-use-of-structural-presumptions-in-antitrust_27777e33/3b8c6885-en.pdf.

[41] Horizontal Merger Guidelines, Dep’t of Justice & Fed. Trade Comm’n, (2023), available at https://www.justice.gov/d9/2023-12/2023%20Merger%20Guidelines.pdf.

[42] Eric Posner, What Is the Role of Economics in Merger Review?, ProMarket (Mar. 28, 2024), https://www.promarket.org/2024/03/28/what-is-the-role-of-economics-in-merger-review.

[43] Natalie Weger, Justice Department Won’t Seek Injunction for T-Mobile Acquisition of U.S. Cellular, Wall St. J. (Jul. 10, 2025), https://www.wsj.com/business/telecom/justice-department-wont-seek-injunction-for-t-mobile-acquisition-of-u-s-cellular-b9e7abac?st=81wr98&reflink=desktopwebshare_permalink; see also Fruits et al., supra note 21 (“Despite T-Mobile’s nationwide coverage, some spots served by UScellular are not well served by T-Mobile… These are areas in which the transaction would not reduce the number of competing firms, as T-Mobile would simply replace UScellular in areas where T-Mobile lacks coverage or combine assets to create even more effective competition against other providers.”)

[44] See, e.g., G. E. Hale & Rosemary D. Hale, Expanding Enterprise: Geographical Curbs on Mergers, 51 Minn. L. R. 857, 867 (1967) (“[I]t is clear that such an acquisition may result in cost savings to the combined firm. Indeed, the merger in question would presumably never have been negotiated unless some such spreading of overhead costs were envisaged. Observers have found that there are such savings in the operation of chain stores in the grocery field. In numerous other industries similar cost reduction can be achieved through nationwide promotion and distribution of goods.”).

[45] Eric Fruits, Kristian Stout, Ben Sperry & Geoffrey A. Manne, Comments of the International Center for Law & Economics Re: Delete, Delete, Delete, GN Docket No. 25-13352, Int’l Ctr. L. & Econ. (Apr. 11, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/04/2025-Delete-Delete-Delete-Comments-r3.pdf.

[46] Jon Sallett, FCC Transaction Review: Competition and the Public Interest, FCC Blog (Apr. 14, 2014), https://www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-review-competition-and-public-interest.

[47] Applications Filed for the Transfer of Control of Cox Communications, Inc. to Charter Communications, Inc., Fed. Commcn’s Comm’n (Sep. 5, 2025), available at https://docs.fcc.gov/public/attachments/DA-25-810A1.pdf.

[48] Frontier Communications Parent, Inc. and Verizon Communications, Inc. Application for Consent to Transfer Control, Memorandum Opinion and Order, DA 25-421 ¶ 16 (WCB/OIA/WTB rel. May 16, 2025).

[49] Applications of AT&T Inc. and Centennial Communications Corp., Memorandum Opinion and Order, 24 FCC Rcd 13915, 13931 ¶ 34 (2009).

[50] Sallet, supra note 46 (“Fundamental is the fact that applicants have the burden of demonstrating on the public record that their proposed transaction is in the public interest.”)

[51] Though the D.C. Circuit has suggested in dicta that conditions must be “transaction-specific” and that “non-germane conditions” are “an out-and-out plan of extortion.” See Competitive Enterprise Institute v. FCC, 970 F.3d 372, 388 (D.C. Cir. 2020) (quoting Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987)).

[52] Loper Bright Enterprises v. Raimondo, 603 US ___ (2024); see also Ben Sperry & Eric Fruits, How This Supreme Court Term Might Affect the FCC’s Digital-Discrimination Rule, Truth on Mkt. (Jul. 3, 2024), https://truthonthemarket.com/2024/07/03/how-this-supreme-court-term-might-affect-the-fccs-digital-discrimination-rule.

[53] Eric Fruits, A Hillbilly and a Hipster Walk Into a Bar, Truth on Mkt. (May 30, 2025), https://truthonthemarket.com/2025/05/30/a-hipster-and-a-hillbilly-walk-into-a-bar.

[54] Gail Slater, The Conservative Roots of America First Antitrust Enforcement, Address to University of Notre Dame Law School (Apr. 28, 2025), https://www.justice.gov/opa/speech/assistant-attorney-general-gail-slater-delivers-first-antitrust-address-university-notre.

[55] Andrew Ferguson, Keynote Speech, International Competition Network Annual Conference 2025, YouTube (May 8, 2025), https://youtu.be/yOp5__oNZ8k?si=pSitKJ3QrEvR4zsB (“My friend and colleague, Gail Slater at the U.S. Justice Department, has likened ex ante regulation to a sledgehammer, whereas ex post antitrust enforcement is a scalpel.”)

[56] Fireside with Abigail Slater, Little Tech Competition Summit, YouTube (Apr. 28, 2025), https://youtu.be/Hk6A1WcJtPs?si=EJrRe7R6v5oDTvel (“[T]he consumer welfare standard is decently broad… the variables including quality, price as a dimension of competition, innovation, things of that nature. As a matter of agency practice, often it’s been narrowed down to price… The narrow focus on price, I think, is something that is not even compatible with the consumer welfare standard construct as it exists in current precedent, and I think we need to be open… to think about it more broadly than just price.”).

[57] Mark R. Meador, Antitrust Policy for the Conservative, Fed. Trade Comm’n (May 1, 2025), available at https://www.ftc.gov/system/files/ftc_gov/pdf/antitrust-policy-for-the-conservative-meador.pdf (“Conservatives should insist that antitrust analysis credit only efficiencies that: (1) are realized in the same market as the harms they offset; (2) can only reasonably be achieved through the conduct or transaction at issue; (3) are nonspeculative (i.e., measurable in some way and likely to be realized); and (4) will directly and predominantly accrue to consumers.”)

[58] Brendan Carr, A Build Agenda for America, Fed. Commcn’s Comm’n (Jul. 2, 2025), available at https://docs.fcc.gov/public/attachments/DOC-412663A1.pdf.

[59] Jeff Green, FCC’s Carr Threatens to Block M&A for Companies With DEI, Bloomberg Law (Mar. 21, 2025), https://news.bloomberglaw.com/ip-law/fccs-carr-threatens-to-block-m-a-for-companies-with-dei-plans.

[60] Masha Abarinova, T-Mobile Updates DEI to Get Its Lumos Fiber Deal Approved, Fierce Network (Apr. 3, 2025), https://www.fierce-network.com/broadband/t-mobile-aims-high-fiber-now-lumos-bag.

[61] US FCC Approves Two T-Mobile Deals After Wireless Carrier Drops DEI Programs, Reuters (Jul. 11, 2025), https://www.reuters.com/sustainability/society-equity/fcc-approves-two-t-mobile-deals-after-wireless-carrier-drops-dei-programs-2025-07-11.

[62] Jericho Casper, Verizon Ends DEI Programs as FCC Reviews $9.6B Frontier Deal, Broadband Breakfast (May 16, 2025), https://broadbandbreakfast.com/verizon-ends-dei-programs-as-fcc-reviews-9-6b-frontier-deal.

[63] Memorandum Opinion and Order, Declaratory Ruling, and Order of Proposed Modification, In the Matter of Applications of T-Mobile US, Inc., and Sprint Corporation for Consent to Transfer Control of Licenses and Authorizations, WT Docket No. 18-197, FCC 19-103 (Oct. 19, 2019), available at https://docs.fcc.gov/public/attachments/FCC-19-103A1.pdf.

[64] Id.

[65] Robert C. Azarow, David F. Freeman, Jr., Amber A. Hay, Michael A. Mancusi, Kevin M. Toomey, & Paul Lim, Bank Regulator’s Approval of Capital One and Discover Deal Shows Path Forward for Bank M&A Deals, Arnold & Porter (Jun. 5, 2025), https://www.arnoldporter.com/en/perspectives/advisories/2025/06/bank-regulators-approval-of-capital-one-and-discover-deal.

[66] See, e.g., Public Interest Statement, In the Matter of Cox Enterprises, Inc. and Charter Communications, WC 25-233 (July 14, 2025), https://www.fcc.gov/ecfs/document/10715141122783/2 [hereafter “Public interest statement”]. See, Section IV.B. (“The Transaction Will Put America First”).

[67] Eric Fruits, Media-Ownership Regulations in a Streaming World: Time to Change the Channel, Truth on Mkt. (Mar. 5, 2025), https://truthonthemarket.com/2025/03/05/media-ownership-regulations-in-a-streaming-world-time-to-change-the-channel (“Broadcasters operate under one set of ownership regulations and cable providers operate under another set. Meanwhile, the emerging market of internet-based video distribution continues to operate almost entirely free from ownership regulations. Companies like Netflix, Amazon, and YouTube entered the market without facing the ownership limitations, public-interest obligations, or local-content requirements imposed on their legacy competitors.”).

[68] See, e.g., Fruits et al., supra note 45 (“Merging parties currently must provide substantially similar competitive analyses and market data to both antitrust authorities and the FCC. This redundancy creates unnecessary administrative burdens, without providing proportionate regulatory benefits.”).

[69] Nielsen, supra note 18.

[70] Tod Spangler, Netflix Content Spending, Set to Hit $18 Billion in 2025, Is “Not Anywhere Near a Ceiling,” CFO Says, Variety (Mar. 5, 2025), https://variety.com/2025/digital/news/netflix-content-spending-2025-ceiling-cfo-1236328510.

[71] Public Interest Statement, In the Matter of Cox Enterprises, Inc. and Charter Communications, WC 25-233, Appendix E, Declaration of Bryan Keating & Jonathan Orszag ¶ 61 (July 14, 2025), https://www.fcc.gov/ecfs/document/10715141122783/3 [hereafter “Keating & Orszag”].

[72] Keating & Orszag, supra note 70 ¶ 62 n.73 (reporting approximately 52.9 and 49.6 percent of mass market locations serviceable by Charter and Cox, respectively, are also serviceable by at least one competing FTTP provider at the end of 2024).

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

[74] Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], U.S. Bureau of Labor Statistics (retrieved from FRED, Federal Reserve Bank of St. Louis, Aug. 4, 2025), https://fred.stlouisfed.org/series/CPIAUCSL; Consumer Price Index for All Urban Consumers: Internet Services and Electronic Information Providers in U.S. City Average, U.S. Bureau of Labor Statistics, https://data.bls.gov/timeseries/CUUR0000SEEE03?output_view=data (last visited Aug. 4, 2025).

[75] Ellis Scherer & Joe Kane, Broadband Convergence Is Creating More Competition, Information Tech. & Innov. Found. (Jul. 2025), available at https://www2.itif.org/2025-broadband-convergence.pdf.

[76] Press Release, Charter Announces Second Quarter 2025 Results, Charter Commcn’s (Jul. 25, 2025), https://corporate.charter.com/newsroom/charter-announces-second-quarter-2025-results.

[77] Fitch Ratings, Fixed Wireless Access Growth Disrupts U.S. Telecom Market (Mar. 26, 2025), https://www.fitchratings.com/research/corporate-finance/fixed-wireless-access-growth-disrupts-us-telecom-market-26-03-2025.

[78] Public Interest Statement, supra note 65 at 30.

[79] Brendan Carr, Free State Foundation Seventeenth Annual Policy Conference, YouTube (Mar. 25, 2025), https://www.youtube.com/live/G33c8UlQjxE?si=vxILcpPlzXcCvj3K.

[80] Starlink Network Update, Starlink, https://www.starlink.com/updates/network-update (last visited Jul. 30, 2025),

[81] Amazon Plans to Offer Satellite Internet Service in Late 2025, PYMTS (Jul. 14, 2025), https://www.pymnts.com/amazon/2025/amazon-plans-offer-satellite-internet-service-late-2025.

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

[83] Fruits et al., supra note 21, Table 1. As a private company, Cox does not report mobile wireless subscribers. Even if all of its customers subscribed to mobile wireless service, however, Cox would account for less than 2% of total subscribers.

[84] Fruits, supra note 15.

[85] Nielsen, supra note 18.

[86] Pay TV Providers Ranked by the Number of Subscribers in the United States as of 1st Quarter 2025, Statista (May 18, 2025), https://www.statista.com/statistics/251793/pay-tv-providers-with-the-largest-number-of-subscribers-in-the-us.

[87] Press Release, Public Knowledge Warns $34.5 Billion Cox/Charter Merger Might Be Weaponized, Public Knowledge (May 16, 2025), https://publicknowledge.org/public-knowledge-warns-34-5-billion-cox-charter-merger-might-be-weaponized (quoting Public Knowledge Legal Director John Bergmayer: “As always with cable mergers, the question is as much a loss of opportunities for content creators and programmers to reach an audience, as the loss of choices to subscribers.”)

[88] 2023 Broadband Capex Report, USTelecom (Oct. 18, 2024), available at https://ustelecom.org/wp-content/uploads/2024/10/UST-1376-CAPEX-Report_2024_4-as-of-Oct-4.pdf.

[89] Charter & Cox presentation, supra note 1.

[90] Public Interest Statement, supra note 65 at 30.

[91] Keating & Orszag, supra note 70 ¶¶ 32-37.

[92] Public Interest Statement, supra note 65 at 38.

[93] Keating & Orszag, supra note 70 ¶¶ 42-45.

[94] Jeff Baumgartner, Charter and Cox State Their Case at the FCC, LightReading (Jul. 17, 2025), https://www.lightreading.com/regulatory-politics/charter-and-cox-make-their-case-at-the-fcc.

[95] Public Interest Statement, supra note 65 at 30.

[96] Baumgartner, supra note 93.

[97] Keating & Orszag, supra note 70 ¶ 48.

[98] Public Interest Statement, supra note 65 at 52.

[99] Press Release, Comcast Corporation Abandons Proposed Acquisition of Time Warner Cable After Justice Department and the Federal Communications Commission Informed Parties of Concerns, Dept. of Justice (Apr. 24, 2025), https://www.justice.gov/archives/opa/pr/comcast-corporation-abandons-proposed-acquisition-time-warner-cable-after-justice-department.

[100] Id. See also William P. Rogerson, Economic Theories of Harm Raised by the Proposed Comcast/TWC Transaction (2015), in The Antitrust Revolution (7^th ed., John E. Kwoka, Jr. & Lawrence J. White eds., 2018); Jon Sallet, The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews, Telecomms. Pol’y Rsch. Conf. (Sep. 25, 2015), available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0925/DOC-335494A1.pdf.

[101] Sallet, supra note 99 (“there was minimal horizontal overlap between the Applicants in the local markets for residential broadband and Pay TV service”).

[102] DOJ, supra note 98.

[103] Sallet, supra note 99 (“We understood that entrants are particularly vulnerable when competition is nascent. Thus, staff was particularly concerned that this transaction could damage competition in the video distribution industry by increasing both Comcast’s incentive and its ability to disadvantage OVDs and thus retard or permanently stunt the growth of a competitive OVD industry. In doing so, consumers would be denied the benefits that innovative competition could bring.”).

[104] For a critical evaluation of these theories of harm, see Geoffrey A. Manne, The FCC Distorted Market Realities to Scuttle the Comcast-TWC Merger, Truth on Mkt. (Oct. 2, 2015), https://truthonthemarket.com/2015/10/02/the-fcc-distorted-market-realities-to-scuttle-the-comcast-twc-merger.

[105] Sallet, supra note 99 (“Similarly, we also considered a national market for interconnection in which ISPs negotiate with OVDs (and their content delivery networks) over the terms by which the OVDs would reach consumers. Post-transaction, an OVD might have needed an interconnection agreement with the merged entity in order to achieve national distribution, so we also considered the ability of the merged company to impose terms that would disadvantage the OVD.”).

[106] Sallet, supra note 99 (“Alongside incentives came ability. Increased bargaining power was the central concern. The combination of distribution assets had the potential to increase the merged entity’s bargaining power in both national markets—the market where video distributors negotiate the terms and conditions to distribute video content for programmers and the interconnection market through which broadband providers provide mass-market delivery services to OVDs. Because OVDs are subject to national economies of scale, the merged company could significantly impair an OVD’s ability to compete. … But after a merger, that OVD would have to strike a bargain with only one firm, which would give that company the ability to disadvantage the OVD, or perhaps even exclude the OVD from reaching its subscribers.”).

[107] Rogerson, supra note 99 (“government reviewers were concerned that [ADM terms] could also be used simply to deny OVD competitors access to programming and that OVDs would be particularly vulnerable to such anticompetitive actions when they were just attempting to enter and had relatively small market shares.”)

[108] Sallet, supra note 99 (“we considered their competitive effect when combined with data caps and other retail broadband terms and conditions that raised the price of OVDs for consumers”).

[109] Sallet, supra note 99 (“Without the merger, a company taking action against OVDs for the benefit of the Pay TV system as a whole would incur costs but gain additional sales—or protect existing sales—only within its footprint. But the combined entity, having a larger footprint, would internalize more of the external ‘benefits’ provided to other industry members.”).

[110] Protecting and Promoting the Open Internet, 47 CFR Parts 1, 8, and 20 (GN Docket No. 14-28, FCC 15-24. Apr. 13, 2015).

[111] See, e.g., Leticia Miranda, Why Comcast Walked Away, ProPublica (Apr. 23, 2015), https://www.propublica.org/article/why-comcast-seems-to-be-walking-away (“Bloomberg complained to the FCC that Comcast placed Bloomberg TV in the outer dial away from most other business networks and its own channel, CNBC, in the lower dial with other business news where viewers would be more likely to come upon it.”)

[112] Rogerson, supra note 99 (“As part of a dispute with Netflix over interconnection fees that began in early 2013 and lasted for approximately nine months, Comcast allegedly allowed its interconnection points with Cogent and other transit providers that delivered Netflix traffic to Comcast to become congested, which severely deteriorated the ability of Comcast subscribers to view Netflix content.”)

[113] Nielsen, supra note 18.

[114] Billy Thompson, The Rise and Fall of Streaming TV?, Mich. J. Econ. (May 25, 2024), https://sites.lsa.umich.edu/mje/2024/05/25/the-rise-and-fall-of-streaming-tv; Park & McClain, supra note 15.

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

[116] Koren W. Wong -Ervin, Antitrust Analysis of Vertical Mergers: Recent Developments and Economic Teachings, Antitrust Source (Feb. 2019), available at https://www.americanbar.org/content/dam/aba/publications/antitrust/magazine/archived/2019/february/antitrust-analysis-vertical-mergers.pdf.

[117] Trial Brief of the United States, United States v. AT&T Inc., (No. 1:17-cv-02511-RJL D.D.C. 2018). (“Here, the critical question is this: Would consumers quit subscribing to AT&T’s competitors and switch to AT&T if they did not carry Time Warner content, thus allowing AT&T to increase the price of that content? If so, the merger will allow AT&T to increase its rivals’ costs—and those higher costs will, in turn, be passed on to consumers.”)

[118] Trial brief, supra note 116 (“For example, post-merger, if Turner and Charter are unable to reach a deal, the merged entity now would realize a benefit in the form of increased profits for DirecTV from new subscribers to AT&T’s service gained from Charter as subscribers switch from Charter to AT&T to ensure continuity in their reception of the desired Turner content. Accordingly, the model predicts that post-merger bargaining between Turner and Charter will result in a higher price for Turner content.”)

[119] United States v. AT&T Inc., 310 F. Supp. 3d 161 (D.D.C. 2018) [hereafter AT&T District]

[120] United States v. AT&T Inc., No. 18-5214 (D.C. Cir. 2019). [hereafter AT&T Circuit]

[121] AT&T District, supra note 118 at 198-190 n. 16.

[122] See, e.g., AT&T District, supra note 118 at 240 (“I am thus left with projections of harm for the years 2016, 2017, and 2021 that all concede have not and will not occur in the real world due to Turner’s actual affiliate agreements.”).

[123] AT&T District, supra note 118 at 207, 215-218.

[124] AT&T District, supra note 118 at 218-219.

[125] AT&T District, supra note 118 at 212.

[126] AT&T District, supra note 118 at 184.

[127] AT&T Circuit, supra note 119 at 6.

[128] Id.

I. Introduction

Thank you for the opportunity to respond to the U.S. Justice Department (DOJ) and the National Economic Council’s (NEC) request for information on state laws, regulations, policies, and practices that adversely affect interstate commerce and business activities in other states.

The request correctly identifies a critical and growing threat to the American common market: the growing tendency of individual states—particularly those with large economies—to enact regulations that project their policy preferences nationwide. This practice imposes significant economic burdens on out-of-state businesses and consumers, creating negative externalities, stifling innovation, and undermining the principles of federalism and the Commerce Clause, which have been the bedrock of U.S. economic prosperity for more than two centuries. This phenomenon can be described as a form of regulatory protectionism achieved through market power. It represents a fundamental challenge to the constitutional design of a unified national economy.

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. Earlier this year, ICLE submitted comments to the DOJ and the Federal Trade Commission (FTC) regarding anticompetitive regulatory barriers, which are included as an appendix to these comments.^[1]

From the perspective of law & economics, the optimal legal regime is one that minimizes transaction costs and allows for the efficient allocation of resources across jurisdictions. A patchwork of conflicting state regulations governing national markets achieves the opposite; it erects barriers to trade, dramatically increases compliance costs, and leads to a fragmentation of the national economy. Such regulatory fragmentation prevents firms from achieving economies of scale, distorts investment decisions, and ultimately harms consumers through higher prices and reduced choice.

The frequent thread across these disparate regulatory areas is commonly known as the “California Effect,” referring to that state’s strategic use of its immense population (12% of U.S. population)  and market power (14% of U.S. GDP) as leverage to impose its regulatory will on the entire nation. Out-of-state firms are faced with a coercive choice: either adopt California’s standards for all of their national operations or forfeit access to the nation’s largest state economy. This dynamic creates de-facto national standards without national consensus or congressional deliberation, fundamentally distorting the principles of federalism.

For instance, the DOJ was right to file suit against California for its burdensome regulations on the production of eggs.^[2] California laws effectively drive up the price of eggs for the whole nation by regulating the allowable space of confinement for chickens, and making it illegal to sell eggs produced out of state that do not conform to these laws. This is despite the California Department of Food and Agriculture admitting there being no basis in science that these regulations “reduce food-borne illnesses… or [address] other human or safety concerns.”^[3]

The California Effect is not limited to California, however, as the strategy is now employed by numerous states seeking to establish themselves as “leaders” in advancing specific social or environmental policies. The dynamic is most visible in vehicle emissions, where 17 states and the District of Columbia have voluntarily adopted California’s stricter standards, creating a regulatory bloc that controls more than 40% of the U.S. auto market and effectively sets a national standard. This pattern extends to other areas, as well. Numerous states have followed California’s lead by enacting their own data-privacy and climate-disclosure requirements.

Officials in states like New York, New Jersey, and Maryland have openly celebrated their adoption of California’s standards as a means to achieve their own policy goals. This trend illustrates a broader shift in federalism, where multiple states—driven by their own policy ambitions—are willing to create regulatory patchworks that impose their preferences on the national economy, leading to the very balkanization that the Commerce Clause was designed to prevent.

Compounding this problem is a clear trend of judicial reticence. Recent Supreme Court jurisprudence, particularly in National Pork Producers Council v. Ross^[4] and in the denial of certiorari in the challenge to California’s Assembly Bill 5,^[5] signals a significant retreat from the judiciary’s traditional role in policing state laws with extraterritorial effects under the Dormant Commerce Clause or many federal preemption statutes.

The Court has shown a reluctance to weigh a state law’s asserted local benefits against its out-of-state economic harms, effectively weakening a key constitutional check on state overreach. This judicial deference implicitly shifts the primary venue for resolving such disputes from the courts to Congress and the executive branch. The political branches must therefore act to reassert federal authority over interstate commerce.

II. A Practical Note on Tactical Considerations

The DOJ, in particular, has an important role to play in promoting a common market and economic growth through the use of advocacy and litigation. Workshops and research on the national effects of state laws could go a long way toward establishing a record for future legislation and litigation.

The DOJ should also engage in strategic litigation of its own, and submit amicus briefs in cases brought by others, targeting state laws with negative extraterritorial effects. As noted above, the DOJ’s intervention against California’s laws regulating the egg industry could, if successful, have positive effects on the pocketbooks of Americans nationwide.

In order to be most effective in litigation, the DOJ should focus on federal laws and regulatory schemes that offer field preemption or something like the “significant interference” standard from federal banking law.^[6] In these situations, courts are much more likely to find federal law preempts harmful extraterritorial state laws. As noted above, Dormant Commerce Clause arguments have been significantly weakened by recent Supreme Court jurisprudence. Similarly, Supremacy Clause arguments based on conflict preemption are also much more difficult to sustain, as states need only to show that affected parties can comply with both federal and state law in order to survive.

For instance, the Federal Meat Inspection Act preemption clause has been found to “sweep[] widely” and, as such, it “prevents a State from imposing additional or different—even if non-conflicting—requirements that fall within the scope of the Act.”^[7] In that case, preemption applies “[w]here under federal law a slaughterhouse may take one course of action in handling a nonambulatory pig, [but] under state law the slaughterhouse must take another.”^[8] Similarly, as detailed further below,^[9] federal banking laws like the National Banking Act allow nationally chartered banks to exercise certain powers that state law cannot prevent and with which it cannot significantly interfere.

The DOJ should also continue to advocate for the application of the Dormant Commerce Clause against state laws that would fail the Pike balancing test accepted by the plurality of the Supreme Court in National Pork Producers Council. The DOJ should also advocate for a stronger Dormant Commerce Clause in select cases where the harms caused by state laws are especially clear.

Below, in addition to legislative solutions, we offer examples of laws that the DOJ and other executive agencies should consider in their efforts to restore a common market and promote economic growth.

III. Automobile-Dealer Franchise Laws

State automobile-dealer franchise laws are anachronistic, anticompetitive, and unconstitutional relics of a market that ceased to exist more than half a century ago. They serve no legitimate public-policy purpose. Instead, they function as a classic example of crony capitalism, where a politically powerful special interest group has captured the legislative process to protect itself from competition and innovation. The costs of this protectionist regime are borne by the entire nation in the form of higher prices, reduced consumer choice, suppressed technological advancement, and a fragmented national market.^[10]

To wit, this section details the economic harms and legal infirmities of these protectionist statutes. It urges the DOJ and NEC to pursue a coordinated federal strategy to dismantle these barriers and restore competition to the U.S. automobile market.

The origins of franchise laws trace to a period from the 1930s to the 1950s when the U.S. automobile market was overwhelmingly dominated by the “Big Three” domestic manufacturers.^[11] In this environment, manufacturers were perceived to be abusing their superior bargaining power to pursue exploitative practices. States responded by passing rules governing automotive franchise laws, ultimately leading to statutes in all 50 states. Critically, the intent behind these state laws was to rebalance power in interbrand relationships: that is, the laws were intended to address the carmakers’ vertical power over their own network of franchised dealers.

State laws from this period included bars on various activities, from compelling dealers to accept otherwise unwanted vehicles, to terminating franchise status without cause, to granting additional franchises within an existing dealer’s franchise area. Yet among the vestigial prohibitions, the ban on manufacturers selling directly to consumers is at once the most obviously disruptive to commerce and the most unmoored from the laws’ original rationale. Indeed, the entire legal regime was premised upon the interaction between a manufacturer and a franchisee, and the relative power in that relationship.

The contemporary automobile marketplace bears no resemblance to its mid-20th Century antecedent. The relative market share of the “Big Three” has dropped from roughly 90% in the 1950s to just 40% today.^[12] Interbrand competition has come to define the market and has rendered effectively moot concerns about powerful franchisors coercing dealers—an industry that has itself evolved from “mom and pop” operations to large publicly traded conglomerates.

The persistence of dealer franchise laws, despite the utter evaporation of the market conditions that led to their adoption, is a textbook example of regulatory capture, as predicted by Public Choice Theory. In this case, the interest group (auto dealers) has hijacked the policy process to generate rents, while distributing the associated costs broadly to consumers. For example, in Michigan, the state passed an update to its franchise act at the behest of dealers specifically to preclude Tesla from the market.^[13]

Blocking new entrants from the automotive marketplace on the basis of their preference for direct sales is legally unsupportable. Indeed, the market’s new entrants—such as Tesla, Lucid, Rivian, and Scout—have no franchisees to protect. There is simply no interbrand relationship to regulate, as has been recognized by at least one state supreme court.^[14] The core analytical flaw in every defense of dealer franchise laws is this fundamental category error: they conflate the legitimate (albeit outdated) regulation of an existing vertical relationship with the illegitimate prohibition of a competing business model.

The Dormant Commerce Clause prohibits states from enacting laws that facially discriminate against, or place an undue burden upon, interstate commerce. State dealer franchise laws discriminate against interstate commerce by dictating a specific business structure that an out-of-state manufacturer must adopt to access that state’s market. Arguments about public health and safety offered by dealers are clearly pretextual, and have been consistently debunked by legal scholars, economists, and FTC staff.^[15]

Even if found not to be discriminatory, dealer franchise laws still fail the balancing test the Supreme Court articulated in Pike v. Bruce Church, Inc., which held that a state law may be held invalid if “the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”^[16]

The burden of dealer franchise laws bears considerable weight, since it impacts both consumers and the development of an entirely new set of entrants to the automotive market, and thereby price-moderating competition. The costs borne by the latter were highlighted in a 2009 paper by a DOJ economist, citing a Goldman Sachs report. The report estimated that direct distribution could reduce the cost of a new vehicle by as much as 8.6% (more than $2,200 per vehicle) through efficiencies in matching supply with demand, lower inventory costs, and reduced sales commissions.^[17] In effect, in agitating to uphold such laws, dealers seek to mandate a hidden tax on most vehicle purchases in the nation.

To address these issues, the DOJ should take action. Specifically, the DOJ’s Anticompetitive Regulations Task Force should:

1. issue a formal report detailing the anticompetitive harms of state direct-sales prohibitions;
2. file statements of interest and amicus curiae briefs in ongoing private litigation challenging these laws, lending the federal government’s legal weight to the cause of competition, much as legal and economic scholars have done in cases like Lucid v. Georgia; and
3. explore direct legal challenges against states, arguing that their laws are unconstitutional under the Dormant Commerce Clause or are otherwise preempted by federal policy.

IV. State and Local Land-Use Regulations

While land-use regulation is traditionally a local prerogative, a growing body of economic research demonstrates that the cumulative effect of overly restrictive local zoning and development policies, particularly in the nation’s most productive metropolitan areas, has created a formidable barrier to interstate commerce. These regulations—including urban growth boundaries (UGBs), inclusionary zoning mandates, restrictive design reviews, and excessive system-development charges (SDCs)—artificially constrain the supply of housing and inflate its cost.

The primary interstate burden of these local policies is the impediment to labor mobility. By making it prohibitively expensive for Americans to move to areas with the greatest economic opportunity, these regulations misallocate the nation’s most valuable resource—its human capital. Workers in lower-productivity regions are effectively trapped, unable to access higher-wage jobs in more dynamic economies, which in turn suppresses national economic growth, reduces overall productivity, and exacerbates regional inequality.

Restrictive land-use regulations directly drive up housing costs to levels far exceeding the physical cost of construction. Research demonstrates that these policies are a primary cause of housing unaffordability in highly regulated markets, such as those on the West Coast.^[18] For example, Oregon’s UGBs have been shown to constrain land supply and contribute to housing-price increases. Since Portland, Oregon’s adoption of its UGB, the local home-price index has increased at an annual rate 27% higher than the national average.^[19]

Similarly, inclusionary zoning ordinances, which require developers to sell or rent a percentage of new units below market rates, function as a tax on new construction. This can reduce the overall supply of housing and increase the cost of market-rate units. Portland’s implementation of such an ordinance was followed by an immediate and significant drop in new multifamily housing permits, from an annual average of 3,915 to just 1,709 in the first full year.^[20] Excessive SDCs and lengthy design-review processes add further costs and uncertainty.

The most significant interstate consequence of these inflated housing costs is the creation of a barrier to labor mobility. High housing prices in the nation’s most productive cities prevent workers from moving to take advantage of better job opportunities. This geographical misallocation of labor has a depressive effect on aggregate economic growth. Businesses in high-cost areas struggle to attract and retain workers, while the national economy suffers from a less efficient allocation of talent.

Direct federal preemption of local zoning is politically difficult and faces legal challenges, as land use is a power traditionally reserved to the states and delegated to localities. This does not, however, render the problem intractable to federal action. The federal government has a long and established history of using its spending power to influence state and local policy, particularly in the realm of housing and infrastructure.

Congress and the executive branch should condition federal funding from programs such as the Community Development Block Grant (CDBG) program, the HOME Investment Partnerships Program, and federal transportation grants on state and local governments implementing meaningful reforms to their land-use and zoning regulations. Such reforms should include, but not be limited to, eliminating or expanding UGBs; legalizing higher-density housing “by right” (especially near transit); streamlining permitting processes; and ensuring that development fees are proportional to the marginal cost of providing new services.^[21] This creates a powerful reason for localities to internalize the national economic costs of their restrictive policies.

The U.S. Department of Housing and Urban Development (HUD) is the agency with the primary expertise and programmatic infrastructure to administer such an incentive-based system. The U.S. Transportation Department (DOT) should also be involved to ensure that its grantmaking encourages transit-oriented development and corresponding zoning reform.

V. Prevailing-Wage Laws

We noted in our earlier comments to the DOJ and FTC that prevailing-wage laws and project labor agreements (PLAs) represent significant regulatory interventions in construction-labor markets that substantially distort competition, inflate costs, and create artificial barriers to market entry.^[22] These regulations—including the federal Davis-Bacon Act (1931), state “Little Davis-Bacon” acts,  and government-mandated PLAs—fundamentally alter market dynamics by imposing wage floors and labor terms that would not emerge under competitive conditions.

Traditionally, prevailing-wage laws and PLAs have had little effect on interstate commerce. This year, however, Oregon enacted HB 2688, which will have far-reaching effects on interstate—and possibly international—commerce.^[23] The law extends state-specific prevailing-wage requirements to offsite manufacturing, regardless where that manufacturing occurs. While such laws apply to labor performed at the physical jobsite of a public project, the Oregon law expands this mandate to cover the offsite fabrication of “bespoke” or custom-made components, such as HVAC systems, structural elements, and plumbing systems.

This is a clear attempt by a state to regulate economic activity far beyond its borders. This extraterritorial application of state law violates the principles of the Commerce Clause, creates economic protectionism that harms Oregon-based businesses, and could impose substantial costs on public-infrastructure projects nationwide.

The critical issue of federal concern is the law’s explicit extraterritorial reach. Under HB 2688, a manufacturing firm producing a custom part for an Oregon public-works project in another state would be legally required to pay its workers Oregon’s prevailing wage for that work. This is a direct attempt by one state to impose its labor and wage standards on businesses operating entirely within the jurisdiction of other states.

The Dormant Commerce Clause prohibits states from enacting laws that unduly burden or discriminate against interstate commerce. HB 2688 is a clear violation of this principle. It is not an incidental effect, as the law is explicitly designed to control the wages paid for manufacturing that occurs outside of Oregon. This creates a direct burden on out-of-state firms, forcing them to comply with Oregon’s wage scales, which may differ significantly from the wages and economic conditions in their own localities.

Federal intervention is necessary to prevent Oregon from setting a precedent that could lead to a fractured national economy, where every state attempts to apply its own labor laws to any product that crosses its borders. The DOJ should challenge the law in federal court before its July 1, 2026 effective date by seeking an injunction to prevent its enforcement. The legal argument should focus on the law’s explicit extraterritoriality and its discriminatory effect on interstate commerce. Congress could also enact legislation clarifying that state prevailing-wage laws cannot be applied to manufacturing and fabrication that occurs outside the state’s geographic boundaries.

The U.S. Labor Department (DOL) has primary subject-matter expertise in this area, as it administers the federal Davis-Bacon Act, which governs prevailing wages on federally funded projects. The DOL can provide essential analysis on the burdens that extraterritorial state wage laws place on the national labor and manufacturing markets. The DOJ would be the appropriate agency to initiate legal action to enjoin the law.

VI. Certificates of Convenience and Necessity and Certificates of Need

We noted in our earlier comments to the DOJ and FTC that certificates of convenience and necessity (CCNs) and certificate-of-need (CON) laws represent some of the most formidable government-imposed barriers to market entry across numerous regulated industries.^[24] CCNs and CONs are formal authorizations that permit companies to initiate operations or construct facilities in specific geographic areas. They effectively create government-sanctioned monopolies or oligopolies that undermine basic economic principles of competition.

CCNs are commonly required for private firms to provide various utilities—such as electric, gas, and water services—but may also be required to provide various services deemed to be common carriers. Health-care facilities may be subject to CONs and certificates of public advantage (COPAs). Each of these “certificate” laws are explicitly designed to protect incumbent, in-state providers from new competition—including from out-of-state businesses—thereby creating direct and substantial burdens on the national market.

The primary adverse impact of these laws is the erection of anticompetitive barriers to entry. CON laws, which apply to the health-care sector in 35 states and the District of Columbia, prevent out-of-state medical providers from establishing new facilities or offering innovative services unless they can prove to a state board—often composed of their potential competitors—that their service is “needed.” This process is notoriously burdensome and expensive, often taking years and costing tens of thousands of dollars in fees. It effectively insulates existing hospitals and providers from competition. The Institute for Justice has argued that the system violates the Dormant Commerce Clause by restricting the interstate market in medical equipment and services, as an out-of-state medical-device manufacturer may be unable to sell its products to a Virginia provider who is denied a CON to use them.^[25]

Similarly, CCN laws grant exclusive, monopolistic territories to utilities providing services like water, sewer, or telecommunications. This framework prevents out-of-state or alternative providers from entering a market to offer more competitive pricing or innovative services, locking consumers into a single, state-protected provider.

This suppression of competition leads directly to higher costs and lower quality for consumers. A large body of economic research demonstrates that CON laws are associated with higher health-care prices, increased per-capita spending, and worse patient outcomes.^[26] We reported in our earlier comments that the FTC and DOJ have both concluded that these laws can suppress supply, misallocate resources, and enable anticompetitive agreements among providers, without delivering on their stated goals of lowering costs or improving quality.^[27]

Congress has clear authority under the Commerce Clause to regulate interstate markets for health care and utilities. The federal government has also previously intervened in this area; the National Health Planning and Resources Development Act of 1974 once mandated that states adopt CON laws, but Congress repealed this mandate in 1986, as evidence of their failure mounted. Congress should now act to explicitly preempt state CON and CCN laws that create barriers to entry for out-of-state providers, or otherwise burden the interstate flow of services and capital. Such legislation would dismantle these state-level cartels and restore competition to these critical sectors.

The DOJ and FTC have long recognized the anticompetitive nature of CON laws and should continue to challenge them through antitrust enforcement and advocacy. These agencies can file amicus briefs in support of private litigation challenging these laws under the Dormant Commerce Clause and can launch their own investigations into how these regulatory schemes facilitate anticompetitive conduct.

The federal government also provides substantial funding to states for health care through the U.S. Department of Health and Human Services (HHS) and for various utility and infrastructure projects. The administration should condition receipt of these funds on the full repeal of a state’s CON and CCN laws. This would create a powerful financial reason for states to eliminate these protectionist policies that harm the national economy.

The relevant federal agencies with subject-matter expertise are HHS, the FTC, and the DOJ for CON laws, and the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC) for CCN laws related to energy and telecommunications, respectively.

VII. Corporate Practice of Medicine

The corporate practice of medicine (CPOM) doctrine refers to regulations that restrict both standard corporations and other nonphysician entities from employing physicians or directly engaging in medical practice. Initially, CPOM regulations were driven by concerns that corporate involvement in medicine would prioritize financial interests over patient care. But CPOM regulations were never based on empirical assessments of problems that were (or were not) associated with one or another model of health-care delivery or practice management. Whatever their historical rationale, the CPOM policy solution appears to be a poor fit to the complexities of modern health care.

At best, the CPOM doctrine represents an early attempt to address theoretical market failures in health care—specifically, concerns about information asymmetries between providers and patients, and potential principal-agent problems that might arise when corporate interests influence medical decisionmaking. The modern CPOM landscape does not, however, serve to address any such concerns because, in practice, the laws see extreme variance in their application—undermining their coherence and predictability.

For instance, many of the distinctions between entities that are or are not permitted to employ or supervise physicians have little to no empirical foundation. Not a few seem the product of rent-seeking rather than research-based policy reform. Consider that, in New York, some recent cases involving CPOM have essentially amounted to business disputes among private parties, rather than public enforcement. Physicians have even used the doctrine as a defense against contract claims filed by corporations.[28]

To the extent that the primary goal of CPOM doctrine is to ensure quality care, it may paradoxically hinder this objective by stifling innovation. For example, the corporate business form plays a crucial role in facilitating industry expansion. Unlike other entity structures—such as sole proprietorships, general partnerships, and limited partnerships—the corporate form offers limited liability, a formalized structure, and liquidity. These traits are key features that attract investors and enable the efficient raising of capital, which in turn fosters business growth.

In an era in which innovation is essential to improving health-care accessibility and efficiency, CPOM restrictions hinder the adoption of corporate structures and emerging technologies in the provision of health care. Reforming these regulations could unlock significant advancements, fostering a health-care system better equipped to meet patients’ needs in the modern age.

Toward this end, the DOJ should seek to collaborate with the FTC to assess the empirical case for CPOM restrictions, as applied, in order to assess the extent to which the intended benefits actually accrue, in light of the tremendous costs associated with foregone investment and, at best, compliance efforts. In the event that the research supports moving away from the existing patchwork of CPOM laws, federal competition agencies would do well to support state legislation geared toward reform.

VIII. Marijuana Trafficking

The growing conflict between state laws legalizing recreational marijuana and its continued prohibition under the federal Controlled Substances Act (CSA)^[29] has created a significant negative externality: large-scale, illicit interstate trafficking. This problem stems directly from a failure of federal enforcement policy to manage the predictable consequences of a state-by-state legalization patchwork.

In 2013, the DOJ issued the “Cole Memorandum,” which established a policy of discretionary non-enforcement of the CSA in states that had legalized marijuana, provided those states implemented “strong and effective regulatory and enforcement systems” to prevent certain harms.^[30] A key federal priority identified in the memo was “[p]reventing the diversion of marijuana from states where it is legal under state law in some form to other states.” While the Cole Memo was rescinded in 2018,^[31] subsequent administrations have largely continued a similar policy of prosecutorial discretion, creating de-facto tolerance for state-legal markets.

The interstate commerce burden arises because this policy of federal deference has failed. States with legalized markets have become source hubs for a massive illicit trade that supplies marijuana to states where it remains illegal. Criminal organizations exploit price differentials between legal markets, where supply is abundant, and prohibition states, where black-market prices are higher. These organizations operate under the cover of state-legal systems to produce marijuana for illegal export, directly contravening a core premise of the federal government’s permissive stance.

The primary adverse impact of this failed federal policy is borne by the citizens and governments of states that have chosen not to legalize marijuana. These states are forced to expend significant public resources to contend with an influx of illegal drugs originating from states with legal markets. Law-enforcement agencies in neighboring states report a dramatic increase in marijuana-related enforcement actions tied directly to diversion. In Nebraska, which borders Colorado, law-enforcement agencies have noted a significant rise in traffic stops and seizures of marijuana being transported east on Interstate 80.^[32] Similarly, the Kansas Highway Patrol has engaged in a practice of targeting vehicles with Colorado license plates—a practice that, while found to be unconstitutional, highlights the perceived scale of the trafficking problem.^[33]

States with newly liberalized marijuana laws have become magnets for transnational criminal organizations. The Oklahoma Bureau of Narcotics has conducted numerous large-scale busts of illegal grow operations run by Chinese crime syndicates and Mexican drug cartels that were established after the state legalized medical marijuana.^[34] These operations produce marijuana not for the Oklahoma medical market, but for illicit trafficking throughout the country. This demonstrates that the regulatory systems in legalizing states are not preventing diversion, as the Cole Memo framework presumed they would.

The illicit trade imposes substantial social and economic costs on receiving states, including increased burdens on their criminal-justice systems, public-health services, and child-welfare agencies. These costs represent a direct transfer of the negative consequences of one state’s policy choice onto the citizens of another—a classic negative externality that the federal government has a duty to address.

This issue is exceptionally amenable to federal action, as the underlying conduct—the cultivation, distribution, and possession of marijuana—remains illegal under federal law. The CSA provides the federal government with clear and undisputed authority to regulate interstate drug trafficking. The current problem is not a lack of federal authority, but a failure to exercise that authority in ways that respect the federalist system and protect non-legalizing states from the spillover effects of their neighbors’ policies.

The policy of deference outlined in the Cole Memo was an exercise of prosecutorial discretion, not a change in the law. The executive branch can, at any time, revise its enforcement priorities to address the documented failure of legalizing states to prevent interstate diversion. This does not require new legislation; it requires the enforcement of existing law to mitigate the interstate harms that the current policy enabled. The federal government’s constitutional authority to regulate commerce among the states includes the power—and the responsibility—to prevent the policy choices of one state from inflicting direct economic and social costs on another.

The DOJ should formally reestablish and vigorously enforce the federal priority of preventing the diversion of marijuana from states with legal markets to other states. This should involve targeting, investigating, and prosecuting individuals and criminal organizations that exploit state-legal regimes to traffic marijuana across state lines. This policy should be clearly communicated to U.S. attorneys and to officials in states with legal marijuana, making it clear that the federal government’s continued policy of general noninterference is contingent on those states demonstrating effective control over diversion.

The DOJ, including its components such as the Drug Enforcement Administration (DEA) and the U.S. Attorneys’ Offices, is the agency with the sole jurisdiction, expertise, and responsibility for enforcing the Controlled Substances Act and addressing illicit interstate drug trafficking.

IX. State Antitrust and Unfair-Competition Laws

In some cases, state antitrust or unfair-competition laws diverge from federal competition law. This creates problems not only by raising compliance costs, but also—when state rules are more stringent—by potentially restricting competition itself. Paradoxical as it may sound, an overly stringent reading of antitrust law can stifle efficient contracts or business models, deter integrations that lower costs and prices, and ultimately harm the very consumers they are meant to protect.

California’s Unfair Competition Law presents a paradigmatic example of state legislation that significantly affects interstate commerce and imposes substantial economic costs beyond California’s borders. The statute—codified at California Business & Professions Code § 17200—prohibits “any unlawful, unfair or fraudulent business act or practice,” with courts interpreting the “unfair” prong to reach conduct that may not violate federal antitrust law.^[35] When applied to businesses operating in national markets—particularly digital platforms—the UCL effectively compels nationwide changes to business practices, product designs, and contractual relationships, thereby imposing California’s regulatory preferences, which may well run counter to federal antitrust law, on the entire country.

The recent Epic Games v. Apple litigation illustrates how California’s UCL can supersede federal antitrust policy through nationwide injunctions. In that case, the district court rejected Epic’s federal antitrust claims, finding that Apple’s restrictions on third-party app stores and in-app payment systems did not violate the Sherman Act.^[36] Nevertheless, the same court held that Apple’s anti-steering provisions violated the UCL’s “unfair” prong and issued a permanent injunction requiring Apple to modify its App Store policies nationwide.^[37] The 9th U.S. Circuit Court of Appeals affirmed both holdings, creating an incongruous result in which conduct explicitly found lawful under federal antitrust law was enjoined across the United States based on California’s broader unfairness standard.^[38]

This outcome generates significant interstate economic costs through multiple channels. First, platforms and other businesses operating nationally must harmonize their products and services to comply with California’s standards. As Lazar Radic and Daniel Gilman note, “this discrepancy effectively enables a single state’s unfair competition law to undermine federal antitrust policy nationwide.”^[39] This renders the UCL a de-facto federal regulation without the procedural safeguards or democratic input that federal lawmaking requires. The situation presents precisely the type of state law that warrants federal attention: one that imposes substantial compliance costs on out-of-state businesses, creates negative externalities for consumers nationwide, and undermines the coherence of federal competition policy.

Second, the UCL’s expansive reach creates risks of conflicting state mandates that cannot be reconciled in a single national product or service. If other states adopt divergent unfairness standards with different requirements for platform operations, businesses face mutually inconsistent obligations that increase legal uncertainty, operational complexity, and barriers to entry. This regulatory fragmentation is particularly problematic in digital markets, where platform operations are inherently interstate and cannot easily be segregated by geography.

Third, the availability of UCL claims enables strategic forum shopping, allowing litigants to circumvent federal antitrust standards by pursuing state law claims in California courts. Our brief on the Epic Games v. Apple case warned that the panel’s decision, if left standing, “risks chilling procompetitive conduct by deterring investment in efficiency-enhancing business practices, such as Apple’s ‘walled-garden’ iOS.”^[40] This undermines the coherence and predictability of federal competition policy, as conduct deemed procompetitive under federal law can nevertheless be enjoined nationwide under California’s more expansive standard. More fundamentally, it “risks creating a fundamental contradiction by enjoining conduct under the UCL that is benign—and even beneficial—under antitrust law.”^[41] This allows California to effectively override federal competition policy through state unfair-competition law, creating a patchwork of potentially conflicting standards that businesses operating nationally must navigate.

The theoretical constraint on the UCL’s reach—the requirement that unfair conduct be tethered to antitrust law—has proven insufficient to prevent these extraterritorial effects. Under Cel-Tech Communications, Inc. v. L.A. Cellular Telephone Co., the UCL’s unfair prong for competitor suits requires conduct that “threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law.”^[42] But as Epic v. Apple demonstrates, courts have interpreted this tethering requirement broadly enough to condemn conduct that federal courts have explicitly found promotes competition and consumer welfare.

The economic impacts extend beyond direct compliance costs. When California law forces changes to national platform policies, it affects the entire ecosystem of businesses and consumers who rely on those platforms. In Epic v. Apple, the injunction’s effects ripple through to the millions of app developers who must adapt to new payment systems and policies, potentially increasing transaction costs and reducing the security benefits that the district court recognized as legitimate procompetitive justifications for Apple’s original policies.¹¹ These spillover effects demonstrate how a single state’s competition law can reshape entire industries operating in interstate commerce.

This situation presents the type of state law that warrants federal attention under this RFI. The UCL’s application to national digital markets creates negative externalities for out-of-state businesses and consumers, invites regulatory balkanization, and undermines the uniformity of federal competition policy. Federal legislative or regulatory intervention may be necessary to clarify the relationship between state unfair-competition laws and federal antitrust standards, particularly in markets where business operations are inherently interstate and cannot be effectively segregated by state boundaries.

California has also been at the forefront of fragmenting federal antitrust law in other ways. For example, the California Law Revision Commission (CLRC) is currently reviewing proposed amendments to the state’s antitrust statutes, particularly the Cartwright Act, with a major goal of distancing California from the perceived constraints of federal antitrust law that limit liability for single-firm conduct under Section 2 of the Sherman Antitrust Act.^[43] This initiative risks fragmenting U.S. antitrust law by proposing amendments to the Cartwright Act that systematically contravene federal antitrust principles.^[44] These proposed changes aim to achieve this by abandoning the traditional error-cost framework, which prioritizes avoiding false positives (Type I errors) in favor of preventing underenforcement based on unsubstantiated assumptions.

Furthermore, California seeks to overturn key Supreme Court precedents: relaxing standards for refusals to deal, moving closer to the more interventionist EU approach and risking chilled innovation; allowing antitrust liability based on harm to only one side of a two-sided market, thereby neglecting the holistic economic analysis required for platform economies and shifting away from the consumer-welfare standard; and removing the recoupment requirement for predatory pricing, thus lowering the evidentiary standard and risking the deterrence of pro-competitive, low-price behavior. This collective departure from the established U.S. antitrust framework, driven by an “unexamined assumption” that more enforcement is inherently better, risks deterring pro-competitive behavior, harming consumers and innovation, and dismantling decades of settled doctrine—ultimately threatening the predictability and coherence of U.S. antitrust law.

Because California’s market is so large, firms cannot realistically confine their practices to one state. In other words, stricter Cartwright Act rules would effectively shape business conduct nationwide, forcing companies to adjust policies across state lines beyond what federal antitrust law requires. This legal fragmentation also invites forum shopping and raises compliance costs, undermining the predictability of a unified federal antitrust system and chilling pro-competitive behavior beyond California.

There are also some instances where states, either through legislation or judicial precedent, continue to treat certain vertical restraints as per-se unlawful, even after the Supreme Court made clear that such restraints should be evaluated under the rule of reason, in light of their potential pro-competitive and pro-consumer benefits. Since the 1970s, federal antitrust law has recognized that vertical restrictions may generate efficiencies—e.g., when the Court abandoned the per-se rule against non-price vertical restraints, emphasizing their role in promoting interbrand competition.[45]

The Court later extended this reasoning to resale price maintenance, holding that such agreements are not automatically illegal but must be judged under the rule of reason.[46] The Court found that such agreements can have procompetitive benefits, such as encouraging retailers to invest in services or promotional efforts that enhance interbrand competition and allowing manufacturers to compete not just on price, but on quality and service. In response to Leegin, however, some states—such as Maryland and New York—enacted laws declaring resale price maintenance illegal or unenforceable.^[47] Some states, like Utah, have enacted specific sectoral regulation, such as the Contact Lens Consumer Protection Act (2015), which bans minimum resale-price maintenance practices in the contact-lens sector.^[48]

These rules not only directly contradict a Supreme Court precedent; in their eagerness to protect specific competitors, they prohibit business practices that promote efficiency. They therefore undermine the very essence of the market economy that has allowed the United States to become the largest and most innovative economy in the world. In order to promote greater economic growth, these regulations should be repealed.

X. Automotive and Fuel Markets

The most profound examples of the “California Effect” can be found in the state’s influence over the national automotive and fuel markets. This influence stems from a suite of interlocking state regulations that project California’s policy preferences across the country.

The foundation of this influence was a unique waiver from federal preemption under the Clean Air Act that allowed the state to set its own, more stringent vehicle-emissions standards. This authority was magnified by Section 177 of the act, which permits other states to adopt California’s standards. Currently, 17 states and the District of Columbia have adopted California’s light-duty vehicle standards. Meanwhile, 10 states have adopted its heavy-duty standards, creating a regulatory bloc that effectively sets national policy for more than 40% of the U.S. population.

This de-facto national standards-setting for vehicles is complemented by a series of state-specific fuel regulations that create a fragmented national energy market, including:

• California Reformulated Gasoline (CaRFG) Program: This program establishes stringent specifications for fuel parameters like sulfur and benzene content that are unique to California. To access the state’s large market, out-of-state fuel producers must incur significant costs to modify their refining processes to meet these standards.^[49]
• Low Carbon Fuel Standard (LCFS): The LCFS directly regulates extraterritorial conduct by assigning a “carbon intensity” score to fuels based on their entire lifecycle, from extraction to consumption. This calculation includes emissions produced during production and transportation that occur entirely outside of California’s borders, directly penalizing producers in other states that may have higher transport-related emissions due to their geographic location.^[50]
• Import Reporting Mandates: The California Energy Commission requires fuel importers to file comprehensive marine-import reports with detailed information about their cargo, ownership, and transport, imposing new and extensive compliance costs on out-of-state market participants.^[51]

The combined effect of these vehicle and fuel regulations is the splintering of what should be integrated national markets, imposing substantial costs on businesses and consumers nationwide. The vehicle-emissions standards create a classic Dormant Commerce Clause problem, wherein one state’s regulatory preferences become the de-facto national standard, forcing manufacturers to design their entire vehicle fleets to meet California’s requirements.

This fragmentation is mirrored in the fuel market. The unique CaRFG and LCFS standards effectively separate California’s fuel market from the rest of the country. This isolation disrupts national supply dynamics and raises costs for producers, who must invest in specialized refining processes and complex compliance tracking to serve the California market. These costs are ultimately passed on to consumers—not just in California, but nationwide—as the national fuel supply chain becomes less efficient and more fragmented.

The LCFS, in particular, creates a direct burden on out-of-state producers by penalizing them based on factors inherent to their location, such as the distance their product must travel to reach California. This dynamic is exacerbated as more states opt in to California’s emissions standards, further solidifying a patchwork of regulations that undermines a unified national economy.

The legal foundation for California’s regulatory regime is the waiver provision in the Clean Air Act, a statutory authority granted by Congress. This authority has been the subject of significant legal and political conflict. Legal challenges to the extraterritorial effects of these regulations, particularly under the Dormant Commerce Clause, have had limited success in the courts. Notably, the 9^th U.S. Circuit Court of Appeals rejected a Dormant Commerce Clause claim against the LCFS in Rocky Mountain Farmers Union v. Corey,^[52] deferring to the state’s regulatory authority, despite the clear out-of-state impacts.

This judicial reticence to scrutinize the extraterritorial burdens of state environmental laws places the responsibility for a solution squarely on the political branches. Because California’s unique authority is a product of federal statute, not a constitutional right, it is exceptionally amenable to federal action. Congress possesses plenary power under the affirmative Commerce Clause to amend or repeal the waiver provision entirely. Likewise, the Environmental Protection Agency (EPA) retains administrative authority to grant, deny, or reconsider these waivers, providing an executive-branch pathway to restore a single national standard.

Congress should enact legislation to repeal California’s unique waiver authority under Section 209 of the Clean Air Act. This action would establish a single, uniform national market for new motor vehicles and eliminate the foundation upon which California’s fragmented fuel market is built. It would reduce the immense compliance costs currently borne by manufacturers and fuel producers, enhance consumer choice, and ensure that standards for national industries are set at the national level based on a holistic assessment of costs and benefits.

The EPA and DOT, acting through the National Highway Traffic Safety Administration (NHTSA), are the federal agencies with the statutory authority and technical expertise to set and enforce a single, cohesive national standard for vehicle emissions and fuel economy. Restoring their exclusive jurisdiction would bring much-needed certainty and efficiency to these critical, interconnected sectors of the U.S. economy.

XI. State Interchange-Fee Regulations

Many states have seen proposals for laws that would regulate interchange fees for credit- and debit-card transactions. To date, only Illinois has passed such a law. In June 2024, Illinois enacted the Illinois Interchange Fee Prohibition Act (IFPA), a first-of-its-kind law aimed at reshaping the economics of credit- and debit-card transactions in the state, but with implications far beyond.^[53] The IFPA prohibits payment-card issuers, networks, and processors from charging or collecting interchange fees on those portions of a transaction that represent gratuities or state or local sales taxes.

It is clear that the IFPA’s reach extends well beyond Illinois’ borders. Under the IFPA, an Illinois merchant’s credit-card transaction processed by a national bank must exclude interchange on the sales tax and gratuity portions, regardless where the issuer is based. Since the vast majority of credit- and debit-card issuers are headquartered or chartered in other states—or even outside the United States—the act would compel these institutions to adjust their fee structures for transactions completed in Illinois. They will also have to collaborate with acquirers, networks, and Illinois-based merchants to adjust the way that transactions are reported.

The IFPA thus imposes substantial additional compliance costs on issuers, acquirers, and networks. When combined with loss of part of the interchange-fee revenue from transactions within Illinois, this means out-of-state issuers will almost certainly be forced to undertake some combination of 1) reduced card rewards and benefits, 2) new or increased annual fees, 3) higher interest rates, and/or 4) higher interchange fees to be paid for by out-of-state merchants.

These compensatory actions would affect most or even all U.S. cardholders, the vast majority of whom live outside Illinois. Reduced rewards and increased fees would diminish the attractiveness of card use, leading to lower consumer spending, thereby harming merchants as well. There would thus be harmful extraterritorial effects across the value chain. While banks, payment processors, and networks would suffer concentrated costs and losses, at least some of these would be passed on to consumers and merchants.

For good reason, the law currently faces serious legal challenges. In August 2024, the Illinois Bankers Association, American Bankers Association, America’s Credit Unions, the Illinois Credit Union League, and the Illinois Retail Merchants Association brought a motion for pre-enforcement injunctive relief from the IFPA.

Each set of plaintiffs in the case was able to assert a relevant federal law or constitutional principle the IFPA violated. Nationally chartered banks pointed to the National Banking Act (NBA) and various federal regulations that apply specifically to them. Federal savings associations cited the Home Owners’ Loan Act (HOLA), which similarly empowers and regulates them. Federal credit unions asserted preemption under the Federal Credit Union Act (FCUA), because it gives the National Credit Union Administration exclusive authority to regulate them. State banks chartered in Illinois pointed to state laws that give banks the same powers as nationally chartered banks. Out-of-state banks brought both Dormant Commerce Clause and federal law claims that they have the right to be treated similarly to in-state banks and nationally chartered banks, respectively.

The district court issued two rulings, first finding that the NBA and HOLA likely preempt the IFPA under Supreme Court jurisprudence holding state laws are preempted if they “prevent or significantly interfere with the exercise of a national bank’s powers.”^[54] This is different from normal conflict preemption, which requires showing that an entity can’t comply with both sets of laws. Instead, it only requires a showing of significant interference with their ability to exercise their powers under national law. Here, IFPA’s significant interference is clear: it forbids national banks and savings associations from collecting a category of fees they would otherwise collect in the normal course of offering card services.

In a later opinion, the district court found that federal law demanded similar treatment for out-of-state banks as national banks. And “because the Court granted the preliminary injunction with respect to nationally chartered banks, forcing out-of-state state banks to comply with the IFPA would run afoul” of the law.^[55]

On the other hand, the court rejected other arguments made by plaintiffs. The Dormant Commerce Clause arguments made by out-of-state banks were rejected on grounds that they were held to the same law as in-state banks. And both the federal credit unions and credit-card networks were unsuccessful in asserting federal preemption, as their relevant statutes were subject only to conflict preemption and it was possible to comply with both sets of laws.

Thus, the court found that the IFPA was likely preempted by federal law as to federally chartered banks and savings associations and to out-of-state banks, and issued a preliminary injunctions as to those parties. This leaves Illinois in an unusual position of only being able to enforce its law against its own in-state banks, federal credit unions, and credit-card networks. Litigation in this case remains ongoing.

The DOJ should consider joining the amici work of the Office of the Comptroller of the Currency (OCC)^[56] in favor of the plaintiffs in this case in order to make clear that federal law preempts the IFPA and similar laws that would effectively raise the cost of payment cards nationwide.

XII. Digital Privacy

The digital economy is, by its nature, an interstate and global marketplace. Yet it is increasingly being subject to a fragmented and conflicting set of state-level regulations. This trend was initiated by passage of the California Consumer Privacy Act (CCPA) in 2018, which was subsequently amended and expanded by the California Privacy Rights Act (CPRA). The CCPA/CPRA created a comprehensive data-privacy regime that applies not only to businesses in California but to any for-profit entity nationwide that does business in California and meets certain thresholds, such as having gross annual revenue of more than $25 million or buying, selling, or sharing the personal information of 100,000 or more California residents.

In the absence of a preemptive federal privacy law, California’s statute has served as a catalyst for other states to enact their own versions. This has resulted in a rapidly growing patchwork of similar but substantively different privacy laws across the country. As of mid-2025, 20 states have passed comprehensive data-privacy laws, each with their own unique definitions, scope, consumer rights, and enforcement mechanisms. This creates a bewildering and costly compliance landscape for any business that operates online and serves customers in multiple states, as these laws generally apply to personal information about residents of that specific state. As noted by Jennifer Huddleston and Ian Adams:

While these laws purport to apply only inside each state’s borders, they burden an inherently interstate—indeed, global—media, and the direct and indirect costs and effects of state laws and regulations are significant. … Notably, the CCPA’s costs impact not only companies in the technology sector but a wide range of industries: from retail and entertainment to construction and mining.^[57]

The compliance costs associated with this regulatory patchwork are extraordinary. Businesses must dedicate significant legal, engineering, and administrative resources to track, interpret, and implement the varying requirements of each state’s law. Economic analysis by the Information Technology and Innovation Foundation (ITIF) estimates that, if all 50 states were to enact their own privacy laws, the total out-of-state compliance costs imposed on the U.S. economy would be between $98 billion and $112 billion annually.^[58] Over a 10-year period, this cost would exceed $1 trillion. A substantial portion of this burden—estimated at more than $200 billion over 10 years—would fall on small and medium-sized businesses, which lack large tech firms’ resources to navigate this complex environment. California’s law alone is estimated to impose $32 billion in annual costs on out-of-state businesses.

This costly and uncertain regulatory environment stifles innovation and harms competition. The high fixed costs of compliance function as a significant barrier to entry for startups and smaller firms, entrenching the market position of large, established technology companies that can afford large compliance departments. Furthermore, overly prescriptive rules—such as aggressive data-minimization requirements—can impede the development of new data-driven technologies like artificial intelligence (AI), which rely on access to large datasets for training and improvement. This puts U.S. firms at a competitive disadvantage in the global technology race.

Rather than empowering consumers, the patchwork of differing rights, definitions, and disclosure requirements across states leads to confusion and “notice fatigue.”^[59] Consumers are inundated with a constant stream of lengthy and legalistic privacy policies and pop-up notices that they cannot reasonably be expected to read or understand, undermining the goal of genuine transparency and meaningful control over personal information. There is a broad and powerful consensus across the political and economic spectrum—from industry groups and consumer advocates to policymakers and academics—that the current state-level patchwork is untenable and that a federal solution is urgently needed.

The primary legal challenge to these state laws rests on the Dormant Commerce Clause, which prohibits states from enacting laws that unduly burden interstate commerce. Because data transmissions do not abide state borders, a single online action can involve multiple states. This means that state laws purporting to regulate the internet trigger Dormant Commerce Clause scrutiny due to their extraterritorial impact. The application of these laws to businesses not physically located in the regulating state raises significant constitutional problems.

The primary point of contention in the federal debate revolves around the preemptive effect of a federal law. One approach advocates for a federal “ceiling,” which would create a single, uniform national standard for data privacy and explicitly preempt all state laws in the field. An alternative approach argues for a federal “floor,” which would establish a baseline of privacy protections but would explicitly permit states to enact and enforce stronger or more specific laws.

While appealing to some states’ rights advocates, the “floor” approach fails to solve the fundamental economic problem. It would not alleviate the crushing compliance costs of this regulatory patchwork, as businesses would still have to comply with the most stringent provisions of every state in which they operate, in addition to the federal baseline.

Rather than imposing a single, top-down, one-size-fits-all federal privacy statute, a more innovative and market-oriented solution exists, grounded in the principles of competitive federalism. This approach, developed by scholars at ICLE and the American Enterprise Institute (AEI), proposes that Congress enact a targeted federal statute requiring states to recognize and enforce contractual choice-of-law provisions in privacy policies.^[60]

The mechanism for this proposal is straightforward. A business operating nationally would be permitted to select the comprehensive privacy law of a single state—for example, the Virginia Consumer Data Protection Act or the Utah Consumer Privacy Act—and designate in its terms of service that this law governs its relationship with all its U.S. customers. The federal statute would ensure that this contractual choice is honored and enforced by courts and regulators in all other states.

This choice-of-law framework provides numerous benefits. It immediately solves the patchwork problem for businesses, allowing them to comply with a single, coherent legal regime rather than a morass of 50 different ones. At the same time, it preserves a meaningful and dynamic role for state regulation, avoiding the risks of a static and potentially ill-fitting federal mandate. Most importantly, as the authors argue, this approach would foster a “double competition” that would ultimately benefit consumers:

1. Competition Among States: States would be encouraged to compete to develop the most efficient, innovative, and effective privacy laws. A state that enacted a well-balanced, clear, and effective law could attract businesses to choose its regime, much as Delaware has become the preferred state for corporate charters. This would turn states into true “laboratories of democracy” for privacy regulation.
2. Competition Among Firms: Businesses would compete to offer privacy policies that are aligned with the preferences of different segments of the consumer market. A firm could choose to adopt a more stringent privacy regime as a competitive differentiator to attract privacy-conscious consumers, while another might choose a more flexible regime that enables more personalized services. This market competition would allow for more accurate discovery of consumers’ true valuation of different aspects of privacy versus other product features and benefits.

The ICLE-AEI approach offers a path forward to resolve the economic harms inherent in the current patchwork without resorting to heavy-handed federal preemption that would stifle state innovation. The FTC, with its long history of consumer protection and privacy enforcement, and the U.S. Commerce Department, with its expertise in the digital economy, are the federal agencies best positioned to help craft and oversee such a choice-of-law framework.

XIII. Artificial Intelligence

Following the pattern established with data privacy, states are now racing to regulate AI, threatening to create a new and even more complex regulatory patchwork before a national market for this transformative technology can fully mature. In 2024 alone, state lawmakers introduced more than 600 AI-related bills, with nearly 100 enacted into law.^[61] In 2025, that number is expected to grow significantly, with all 50 states having introduced legislation on the topic.

These state-level efforts are not uniform. They address a wide range of issues, from the use of AI in employment and housing decisions to “deepfake” generation and consumer disclosures. Colorado, for example, enacted a comprehensive law governing “high-risk” AI systems, while California is advancing regulations on automated decisionmaking technology through its privacy agency, and Illinois has mandated new disclosures for AI in employment.^[62]

The extraterritorial mechanism of these laws is inherent to the nature of AI and the internet. AI models are developed and deployed in a digital environment that knows no state borders. A single AI system developed by a company in one state, trained on data from across the country, and deployed via the cloud to users in all 50 states may become subject to a morass of conflicting state-level mandates. A law in one state governing algorithmic discrimination or requiring specific disclosures has the practical effect of regulating the design, development, and deployment of that AI system for the entire national market. This creates a direct burden on interstate commerce, as developers are forced to either build their systems to the most restrictive state standard or attempt the costly and technically difficult task of walling off their products from residents of certain states.

The premature fragmentation of AI regulation will impose immense economic costs, stifle American innovation, and create an untenable compliance environment, particularly for the startups and smaller firms that are driving much of the nation’s technological progress.

The compliance costs of a 50-state AI regulatory patchwork would be enormous. As demonstrated by the experience with state privacy laws, which are projected to impose more than $1 trillion in out-of-state costs over a decade, a similar patchwork for the more complex field of AI would create a compliance nightmare.^[63] Businesses would be forced to divert substantial resources from research and development into legal and compliance departments simply to navigate the labyrinth of conflicting state definitions, mandates, and disclosure requirements. This burden falls disproportionately on smaller innovators, who lack the vast legal resources of established tech giants, creating a significant barrier to entry and chilling competition.

This regulatory uncertainty actively harms innovation. The development of advanced AI is an iterative process that requires experimentation. A fragmented legal landscape, where the rules can change from one state to the next, discourages the long-term capital investment necessary for foundational research and development. As ICLE has noted in the context of other emerging technologies, attempting to create a single regulatory scheme for a broad and diverse category like “AI” commits the error of “regulatory overaggregation,” creating an ill-fitting legal regime that fails to account for the vast differences between various applications.^[64] This approach risks prohibiting beneficial technologies before they have a chance to mature.

A fragmented domestic market also undermines U.S. competitiveness in a critical area of national security and economic importance. As other global actors, such as the European Union, move forward with unified regulatory frameworks like the EU AI Act, a fragmented U.S. market creates a competitive disadvantage. American firms will be forced to contend with 50 different sets of rules at home, hindering their ability to scale and compete effectively on the global stage. This concern is reflected in the White House’s AI Action Plan, which seeks to discourage state-level AI regulation that could hinder American AI development.^[65]

The emerging patchwork of state AI laws is exceptionally amenable to federal action, and the legal basis for such action is firmly grounded in the Constitution. The Commerce Clause grants Congress the authority to regulate interstate commerce, and there is no question that AI development and deployment constitute such commerce.

The primary constitutional challenge to these state laws rests on the Dormant Commerce Clause, which prohibits states from enacting laws that unduly burden or discriminate against interstate commerce.^[66] State AI laws that have extraterritorial effects—such as those that attempt to regulate the design of AI models that operate nationally—are vulnerable to challenge under this doctrine. As one analysis notes, “There is no natural reason for data to stop at state borders, meaning virtually all economic activity involving AI is interstate commerce.”^[67]

As with data privacy, Congress should enact a federal statute requiring states to recognize and enforce contractual choice-of-law provisions for AI systems. This approach would allow an AI developer to select the regulatory framework of a single state to govern its system’s operation nationwide. This immediately solves the patchwork problem for businesses, allowing them to comply with one coherent set of rules, rather than 50 conflicting ones. At the same time, it preserves the role of states as “laboratories of democracy” and fosters a “double competition” that benefits the entire economy.

This choice-of-law framework offers a durable solution that could prevent the economic damage of a splintered AI market without resorting to a rigid federal mandate that could quickly become obsolete.

The U.S. Commerce Department—through its component agencies like the National Institute of Standards and Technology (NIST) and the National Telecommunications and Information Administration (NTIA)—and the FTC, with its expertise in consumer protection and competition, are the agencies best positioned to provide the technical and policy guidance necessary to implement this federalist approach to AI governance.

The DOJ has tools at its disposal to prevent states from imposing extraterritorial regulatory effects that exceed their proper jurisdiction. The DOJ has long played a role in ensuring that state laws do not impede the flow of interstate commerce, whether through antitrust enforcement, intervention in preemption litigation, or filing statements of interest in private suits that raise constitutional questions.^[68] In the AI context, the DOJ could intervene in cases where state statutes effectively regulate conduct occurring wholly outside of state borders—such as the design, training, or deployment of models that serve a national or global user base. By articulating the limits of state authority under the Dormant Commerce Clause, the DOJ could also help to clarify the constitutional boundaries of state AI regulation and prevent any single state from dictating standards for the entire country.

In addition, the DOJ could issue guidance that emphasizes the federal government’s interest in preserving a national market for AI technologies, much as it has done in the past when states attempted to regulate extraterritorially in fields like transportation.^[69] Such guidance, particularly if coordinated with the White House and federal agencies charged with AI policy, would provide courts with a clear statement of executive-branch priorities. It would also serve as a deterrent, signaling to state legislatures that extraterritorial mandates are likely to invite federal opposition and constitutional challenge.

By combining litigation interventions with policy guidance, the DOJ could play a crucial role in cabining state overreach, ensuring that AI regulation develops within a coherent national framework, rather than a patchwork that undermines innovation and interstate commerce.

XIV. Conclusion

These comments identify a clear pattern of individual states increasingly weaponizing their economic power to impose regulatory preferences on the entire nation, creating a fundamental threat to the constitutional structure of American federalism and the efficiency of interstate commerce. The “California Effect” and similar dynamics represent a profound departure from the traditional understanding that states possess sovereign authority within their borders, not beyond them. When large states leverage their market share to compel nationwide compliance with their regulatory schemes—whether in vehicle emissions, data privacy, AI governance, or payments—they effectively nullify other states’ policy choices and usurp Congress’ constitutional role in regulating interstate commerce.

The economic costs of this regulatory balkanization are substantial and measurable. State data-privacy laws alone impose an estimated $98-112 billion in annual out-of-state compliance costs, with the burden falling disproportionately on smaller businesses that lack the resources to navigate multiple regulatory regimes. Similar patterns emerge across sectors: automobile-dealer franchise laws add thousands of dollars to vehicle prices through mandated inefficiencies; land-use restrictions trap workers in low-productivity regions; and certificate-of-need laws insulate incumbents from competition while raising health-care costs. These are not merely theoretical concerns but documented market failures that reduce economic growth, suppress innovation, and ultimately harm consumers nationwide.

The current judicial reluctance to enforce constitutional limits on state overreach—exemplified by cases like National Pork Producers Council v. Ross—places the primary responsibility for addressing these problems squarely on the political branches. Congress possesses clear constitutional authority under the Commerce Clause to restore uniformity to interstate markets, whether through direct preemption, conditional spending requirements, or innovative approaches like mandating recognition of contractual choice-of-law provisions. The executive branch can pursue strategic litigation targeting the most egregious examples of extraterritorial regulation, particularly where federal preemption doctrines provide strong legal foundations for challenge.

The urgency of federal action cannot be overstated. Each year of delay allows this regulatory fragmentation to become more entrenched, raising the political and economic costs of reform. As emerging technologies like AI face the same pattern of premature state-level regulation that has already damaged other sectors, the window for preventing a comprehensive balkanization of the U.S. economy continues to narrow.

The choice before policymakers is clear: restore the constitutional principles that have underwritten American economic prosperity for more than two centuries, or accept a future where the largest states dictate national policy through market coercion rather than democratic consensus.

The solutions outlined in these comments offer practical pathways forward that respect legitimate state interests, while protecting the national economy from destructive regulatory competition. Federal intervention in this context does not represent an expansion of government power but rather a restoration of constitutional limits that prevent any single state from imposing its will on the entire nation. The economic and constitutional stakes demand immediate and sustained federal attention to preserve both the efficiency of U.S. markets and the integrity of American federalism.

^[1] Eric Fruits, Daniel J. Gilman, Ben Sperry, Kristian Stout, & Mario A. Zúñiga, ICLE Comments to FTC and DOJ on Anticompetitive Regulations, Department of Justice Anticompetitive Regulations Task Force, Docket No. ATR2025-0001, Federal Trade Commission Request for Public Comment Regarding Reducing Anti-Competitive Regulatory Barriers (May 27, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/05/DOJ-FTC-Competition-Comments-2025.pdf [hereafter “Appendix”].

^[2] See Complaint for Declaratory and Injunctive Relief, United States v. State of California, 25-cv-06230 (Jul. 9, 2025), available at https://www.justice.gov/opa/media/1407446/dl.

^[3] Animal Confinement Notice of Proposed Action 16, Cal. Dep’t of Food & Agric., available at https://www.cdfa.ca.gov/ahfss/pdfs/regulations/AnimalConfinement1stNoticePropReg_0 5252021.pdf (last visited Sep. 15, 2025).

^[4] 598 US _ (2023).

^[5] California Trucking Association v. Bonta, 34 F.4th 604 (9th Cir. 2022), cert. denied, 142 S. Ct. 2883 (2022).

^[6] See, e.g., Cantero v. Bank of America, N.A., 602 U.S. 205 (2024).

^[7] Nat’l Meat Ass’n v. Harris, 565 U.S. 452, 459–60 (2012).

^[8] Id. at 460.

^[9] See infra State Interchange Fee Regulations.

^[10] Daniel A. Crane, Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism, 101(2) Iowa L. Rev. 573-607 (2016), https://repository.law.umich.edu/articles/1721.

^[11] Brief of Legal and Economic Scholars, Lucid Group USA, Inc. v. State of Georgia, Ga. S25A1139 (Jul. 10, 2025), https://laweconcenter.org/resources/brief-of-legal-and-economic-scholars-to-the-georgia-supreme-court-in-lucid-v-georgia.

^[12] James M. Rubenstein, Making and Selling Cars: Innovation and Change in the U. S. Automotive Industry (The Johns Hopkins University Press, 2001), at 188.

^[13] Dan Crane, Car Dealer Bill Restricts Competition and Limits Consumer Choice, Mackinac Center (Sep. 21, 2020), available at https://www.house.mi.gov/Document/?DocumentId=43595&DocumentType=CommitteeTestimony.

^[14] Mass. State Auto. Dealers Ass’n, Inc. v. Tesla Motors MA, Inc., 15 N.E. 3d 1152 (Mass. 2014), https://law.justia.com/cases/massachusetts/supreme-court/2014/sjc-11545.html.

^[15] Press Release, FTC Staff: Missouri and New Jersey Should Repeal Their Prohibitions on Direct-to-Consumer Auto Sales by Manufacturers, Fed. Trade Comm’n (May 16, 2014), https://www.ftc.gov/news-events/news/press-releases/2014/05/ftc-staff-missouri-new-jersey-should-repeal-their-prohibitions-direct-consumer-auto-sales.

^[16] Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).

^[17] Gerald R. Bodisch, Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers, Economic Analysis Group, (May 2009), available at https://www.justice.gov/sites/default/files/atr/legacy/2009/05/28/246374.pdf.

^[18] Joseph Gyourko, Jonathan S. Hartley, & Jacob Krimmel, The Local Residential Land Use Regulatory Environment Across U.S. Housing Markets: Evidence from a New Wharton Index, 124 J. Urban Econ. 103337 (2021).

^[19] S&P Dow Jones Indices LLC, S&P CoreLogic Case-Shiller U.S. National Home Price Index [CSUSHPINSA], (retrieved from FRED, Federal Reserve Bank of St. Louis, Sep. 15, 2025); S&P Dow Jones Indices LLC, S&P CoreLogic Case-Shiller OR-Portland Home Price Index [POXRSA], (retrieved from FRED, Federal Reserve Bank of St. Louis, Sep. 15, 2025), https://fred.stlouisfed.org/graph/?g=1MjE9.

^[20] Noel Johnson & Mike Kingsella, The Cautionary Tale of Portland’s Inclusionary Housing Policy, Up for Growth (Apr. 15, 2019) available at https://web.archive.org/web/20210924152240/https://upforgrowth.org/news/cautionary-tale-portlands-inclusionary-housing-policy.

^[21] See, e.g., Sheetz v. El Dorado County, 601 U.S. _ (2024).

^[22] See Appendix.

^[23] H.B. 2688, 2025 Reg. Sess. (Or. 2025), https://olis.oregonlegislature.gov/liz/2025R1/Measures/Overview/HB2688.

^[24] See Appendix.

^[25] Virginia Certificate of Need, Institute for Justice, https://ij.org/case/vacon-2 (last visited Sep. 15, 2025).

^[26] Matthew D. Mitchell & Christopher Koopman, 40 Years of Certificate-of-Need Laws Across America, Mercatus Center (Sep. 27, 2016), https://www.mercatus.org/research/data-visualizations/40-years-certificate-need-laws-across-america.

^[27] See Appendix.

[28] See, e.g., Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 979 N.Y.S. 2d 439 (2013).

^[29] 21 U.S. Code § 801 et seq.

^[30] Memorandum from James. M. Cole, Deputy Attorney General to United States Attorneys re: Guidance Regarding Marijuana Enforcement (Aug. 29, 2013), available at https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.

^[31] Memorandum from Jefferson B. Sessions, Attorney General to United States Attorneys re: Marijuana Enforcement (Jan. 4, 2018), available at https://upload.wikimedia.org/wikipedia/commons/7/7d/DOJ_Sessions_memo_20180104.pdf.

^[32] See, e.g., Elaine Grant, Nebraska Cops Continue to Complain About Burden of Colorado Pot, Colorado Public Radio (Jan. 22, 2015), https://www.cpr.org/show-segment/nebraska-cops-continue-to-complain-about-burden-of-colorado-pot.

^[33] Interstate 80 Traffic Stops Targeting Out-of-State Drivers, Petersen Law, https://www.criminaldefensene.com/interstate-80-traffic-stops-targeting-out-of-state-drivers (last visited Sep. 15, 2025).

^[34] Press Release, Oklahoma Attorney General, More than 40,000 Marijuana Plants, 1,000 Lbs. of Processed Marijuana Seized in Organized Crime Task Force Sting in Mayes, Craig Counties, Oklahoma Attorney General’s Office (Jun. 26, 2025), https://oklahoma.gov/oag/news/newsroom/2025/june/more-than-40000-marijuana-plants-1000lbs-of-processed-marijuana-seized.html.

^[35] Cal. Bus. & Prof. Code § 17200.

^[36] Epic Games, Inc. v. Apple, Inc., 559 F. Supp. 3d 898, 933-1033 (N.D. Cal. 2021).

^[37] Id. at 1049-50.

^[38] Epic Games, Inc. v. Apple, Inc., 67 F.4th 946 (9th Cir. 2023), cert. denied, No. 23-344 (U.S. Jan. 16, 2024).

^[39] Lazar Radic & Daniel J. Gilman, Four Problems with the Supreme Court’s Refusal to Hear the Epic v Apple Dispute, Truth on the Market (Jan. 18, 2024), https://truthonthemarket.com/2024/01/18/four-problems-with-the-supreme-courts-refusal-to-hear-the-epic-v-apple-dispute.

^[40]

Amicus Brief of the International Center for Law & Economics, Epic Games, Inc. v. Apple Inc., Nos. 21-16506, 21-16695 (9th Cir., Jun. 20, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/06/File-Stamp-FINAL-2023-06-20-ICLE-Rehearing-En-Banc-Amicus-Brief-in-Epic-Apple.pdf.

^[41] Id. at 3.

^[42] Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 186-87 (1999).

^[43] Staff Memorandum, 2025-21 Draft Language for Single Firm Conduct Provision, Calif. Law Revis. Comm. (Mar. 24, 2025), available at https://clrc.ca.gov/pub/2025/MM25-21.pdf.

^[44] See Lazar Radic, California Leads the Charge in Systematically Dismantling US Federal Antitrust Law, Truth on the Market (May 28, 2025), https://truthonthemarket.com/2025/05/28/california-leads-the-charge-in-systematically-dismantling-us-federal-antitrust-law.

[45] Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 54–59 (1977).

[46] Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 889–907 (2007).

^[47] Elai Katz, Resale Price Maintenance Examined Under State Laws, 247(95) N.Y. Law J. (May 17, 2012).

^[48] Utah Code Ann. § 58-16a-905.1.

^[49] Andrew Morris, Gasoline, Markets, and Regulators 8(3) Engage 4-13 (2003), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=989827.

^[50] David Deerson, PLF and Friends Ask SCOTUS to Review Extraterritorial Fuel Regulations, Pacific Legal Foundation (Feb. 8, 2019), https://pacificlegal.org/plf-and-friends-ask-scotus-to-review-extraterritorial-fuel-regulations.

^[51] David R. Carpenter, Maureen F. Gorsen, & Jack Raffetto, California Issues Major New Gasoline Regulations for Refiners, Traders, and Brokers Through Emergency Rulemaking, Sidley Austin (Jun. 5, 2024),  https://www.sidley.com/en/insights/newsupdates/2024/06/california-issues-major-new-gasoline-regulations-for-refiners-traders-and-brokers.

^[52] No. 12-15131 (9th Cir. 2013).

^[53] See Julian Morris & Ben Sperry, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA, Int’l Ctr. Law Econ. (Jul. 7, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/07/IFPA-Paper-2025.pdf. Much of this subsection is adapted from that white paper.

^[54] Illinois Bankers Association et al. v. Kwame Raoul, 2024 WL 5186840 (N.D. Ill., Aug. 15, 2024). See also Cantero v. Bank of America, N.A., 602 U.S. 205, 213-14 (2024); Barnett Bank of Marion Cty., N.A. v. Nelson, 517 U.S. 25, 33 (1996).

^[55] Illinois Bankers Ass’n v. Kwame Raoul, 2025 WL 409060, at 7-8 (N.D. Ill., Feb. 6, 2025).

^[56] Brief of the Office of the Comptroller of the Currency, Illinois Bankers Association et al v. Raoul, No. 1:2024cv07307 (N.D. Ill. Oct. 2, 2024), available at https://www.occ.treas.gov/topics/laws-and-regulations/litigation/amicus-curiae-brief-illinois-bankers-assoc-v-raoul.pdf.

^[57] Jennifer Huddleston & Ian Adams, Potential Constitutional Conflicts in State and Local Data Privacy Regulations, Regulatory Transparency Project (Dec. 2, 2019), https://rtp.fedsoc.org/paper/potential-constitutional-conflicts-in-state-and-local-data-privacy-regulations.

^[58] Daniel Castro, Luke Dascoli, & Gillian Diebold, The Looming Cost of a Patchwork of State Privacy Laws, Information Technology and Innovation Foundation (Jan. 24, 2022), https://itif.org/publications/2022/01/24/looming-cost-patchwork-state-privacy-laws.

^[59] See, e.g., Sarah E Carter, A Value-Centered Exploration of Data Privacy and Personalized Privacy Assistants, 1 Digit Soc. 27 (2022).

^[60] Geoffrey A. Manne & Jim Harper, A Choice-of-Law Alternative to Federal Preemption of State Privacy Law, Int’l. Ctr. Law Econ. & Am. Enterprise Inst. (Mar. 2024), available at https://laweconcenter.org/wp-content/uploads/2024/03/2024-03-Manne-and-Harper.proof43.pdf.

^[61] Artificial Intelligence (AI) Legislation, MultiState, https://www.multistate.ai/artificial-intelligence-ai-legislation (retrieved Sep. 15, 2025).

^[62] Annette Tyman & Jason Priebe, Artificial Intelligence Legal Roundup: Colorado Postpones Implementation of AI Law as California Finalizes New Employment Discrimination Regulations and Illinois Disclosure Law Set to Take Effect, Seyfarth Shaw (Sep. 12, 2025), https://www.seyfarth.com/news-insights/artificial-intelligence-legal-roundup-colorado-postpones-implementation-of-ai-law-as-california-finalizes-new-employment-discrimination-regulations-and-illinois-disclosure-law-set-to-take-effect.html.

^[63] Daniel Castro, Luke Dascoli, & Gillian Diebold, The Looming Cost of a Patchwork of State Privacy Laws, ITIF (2022), https://itif.org/publications/2022/01/24/looming-cost-patchwork-state-privacy-laws.

^[64] Kristian Stout, Brian Albrecht, Miko?aj Barczentewicz, Eric Fruits, Geoffrey A. Manne, & Julian Morris, ICLE Response to the AI Accountability Policy Request for Comment, Int’l Ctr. Law Econ. (Jun. 12, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/06/NTIA-AI-Comments-final.pdf.

^[65] Kristian Stout, The White House’s AI Action Plan, Int’l Ctr. Law Econ. (Jun. 24, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/07/tldr-White-House-AI-ACtion-Plan.pdf.

^[66] Matt Perault & Jai Ramaswamy, The Commerce Clause in the Age of AI: Guardrails and Opportunities for State Legislatures, Andreesen Horowitz (2025), https://a16z.com/the-commerce-clause-in-the-age-of-ai-guardrails-and-opportunities-for-state-legislatures.

^[67] Max Gulker & Marc Scribner, A Moratorium on State Laws Targeting AI Would Safeguard Innovation and Interstate Commerce, Reason (Aug. 7, 2025), https://reason.org/commentary/a-moratorium-on-state-laws-targeting-ai-would-safeguard-innovation-and-interstate-commerce.

^[68] See, e.g., Press Release, Justice Department Files Complaints Against Hawaii, Michigan, New York and Vermont Over Unconstitutional State Climate Actions, Dep’t Just. (May 1, 2025), https://www.justice.gov/opa/pr/justice-department-files-complaints-against-hawaii-michigan-new-york-and-vermont-over.

^[69] See, e.g., Memorandum in Support of Motion to Intervene as Plaintiffs by the United States and the U.S. Environmental Protection Agency, Case No. 2:25-cv-02255-DC-AC  (E.D. Cal. Aug. 14, 2025), available at https://www.justice.gov/atr/case-document/file/1459366/dl; see also 28 U.S. Code § 516-517 (DOJ authority to file statements of interest in cases related to important federal interests).

William Baumol and David Bradford’s 1970 article “Optimal Departures from Marginal Cost Pricing” is a cornerstone in the economics of public utility regulation. While it appeared in the American Economic Review as a work of formal economic theory—complete with equations and proofs—it also has clear significance for law & economics. Baumol and Bradford demonstrate how regulators should think about pricing in industries where marginal cost pricing—the economists’ ideal—is not feasible. That problem arises in settings like electricity, telecommunications, and transportation, where costs are often decreasing, and prices set equal to marginal cost would not recover total expenditures.

Read the full piece here.

Turning back to the agency beat: in a Sept. 7 guest essay in The New York Times, former Assistant U.S. Attorney General Jonathan Kanter responded to Judge Amit Mehta’s recent decision on remedies in the Google Search case. Kanter seemed to think that Mehta had let Google off easy, or so I surmise from Kanter’s title: “Why Google Got Off Easy.” 

Read the full piece here.

A Sept. 25 press release from the Federal Trade Commission (FTC) declares a sort of victory: “FTC Secures Historic $2.5 Billion Settlement Against Amazon.” The settlement comes in the infamous “dark patterns” case, where—as the press release reminds us—the agency “alleged that Amazon used deceptive methods to sign up consumers for Prime subscriptions and made it exceedingly difficult to cancel.” (Here’s the initial June 2023 complaint, and here’s the amended complaint filed in September 2023.)

Those methods must have been sneaky indeed, given there were a reported 197 million Amazon Prime subscriptions in the United States alone by March 2025—up from a nontrivial 184 million subscribers in June 2024. That is a rather a large number, given the total U.S. population of about 340 million people.

Read the full piece here.

On the docket for this week’s meeting of the Federal Communications Commission (FCC) is a notice of proposed rulemaking (NPRM) on broadcast-ownership rules, which just so happens to arrive amid a profound shift in the industry’s content-distribution model from broadcast to streaming. Streaming services now command nearly half of all U.S. television viewing, while local broadcast stations struggle under regulations designed for a bygone era of spectrum scarcity.

Which rules the FCC ultimately adopts will go a long way toward determining whether the agency continues to oversee the decline of an industry strangled by obsolete regulations. The stakes extend beyond broadcasting itself to the survival of local journalism and the competitive balance between heavily regulated traditional media and unrestrained digital platforms.

The proposed rulemaking is part of the FCC’s 2022 Quadrennial Regulatory Review, a statutorily mandated assessment under Section 202(h) of the Telecommunications Act of 1996, which requires the FCC to determine whether ownership rules remain “necessary in the public interest as the result of competition.”

As consumers increasingly ditch broadcast television for streaming services, a review of ownership rules demands a comprehensive deregulatory approach, rather than piecemeal reform to preserve the public-interest goals these rules were originally designed to serve.

Read the full piece here.

When late-night show Jimmy Kimmel Live! came back from its temporary “break,” viewers in many markets discovered something odd: Kimmel wasn’t back on their local stations. In markets with ABC affiliates owned by media giants Sinclair and Nexstar, stations skipped the show entirely, substituting their own content instead.

This incident highlights a bigger question that regulators can no longer ignore: as fewer companies control more local TV stations, who decides what shows get aired?

With Nexstar’s announced plans to acquire Tegna in a $6.2 billion deal, the Federal Communications Commission (FCC) must once again face a familiar question: Are the agency’s decades-old media-ownership rules protecting local programming (especially journalism) or hastening its demise?

This question lies at the heart of the modern localism debate, where the FCC’s structural approach to preserving community-focused broadcasting confronts a rapidly changing economic reality that has outpaced the regulatory framework.

Read the full piece here.

The Brazilian government’s executive branch hosted a political ceremony last week in which it unveiled its “Digital Brazil Agenda,” which proposes six government projects to build a “safer, more competitive, and more innovative digital environment.” The most high-profile of these was the Digital Child and Teenager Act, which would set rules for how social-media platforms must manage use of their products by minors. But just as important was Bill 4.675/2025, the long-awaited ex-ante digital markets regulation bill, which was formally submitted by President Luiz Inácio Lula da Silva’s government to the Brazilian House of Representatives.

The submission marks the culmination of a public consultation that the Ministry of Finance kicked off in January 2024 (see here and here). Indeed, the Brazilian antitrust community had been eagerly awaiting the government’s next steps ever since the ministry published its report on the matter last October. And while Bill 4.675/2025’s fate remains uncertain, it appears to have much stronger prospects of passage than its predecessor, which languished amid a political stalemate.

In this post, we will explore four key aspects of the bill. To start, we will break down its substantive features, including the criteria for designating companies as having “systematic relevance in digital markets,” the menu of possible special obligations, the absence of efficiency or justification defenses, and the proposed sanctions.

Next, we explain why it matters that the legislation is proposed as an amendment to the Brazilian Competition Law (BCL), rather than a freestanding regulatory regime, as well as how this affects its objectives and the limits to intervention. We argue that Bill 4.675/2025 could clash with existing competition law in various ways.

Third, we examine the proposal’s institutional design and, in particular, the decision to create a new Digital Markets Superintendency. There are obvious potential risks that could arise from having two investigative bodies within the agency. We argue that this could exacerbate legal fragmentation and the proliferation of conflicting standards and goals.

Finally, we offer reflections on the Brazilian political and economic context, the bill’s prospects in Congress, and the importance of conducting regulatory-impact assessments before moving forward. Unfortunately, there are currently no plans for any such assessments.

Read the full piece here.

California has sought in recent years to take the lead in protecting children from online harms, but the state’s proposed legislative solutions have repeatedly been held up in courts. Assembly Bill 1064, which is currently on Gov. Gavin Newsom’s desk after clearing both the state Senate and Assembly, appears destined for the same fate.

Read the full piece here.

Acompany that has filed more than 6,000 copyright lawsuits against individual defendants—quickly settling most for amounts carefully calculated below the cost of defense—has now set its sights on Meta, a corporation worth more than $1 trillion.

Strike 3 Holdings’ recent lawsuit against the tech giant alleging widespread piracy for training of artificial intelligence represents a dramatic strategic shift that will test whether technical evidence sufficient to extract settlements from resource-constrained individuals can survive the scrutiny of one of the world’s most well-funded legal departments. The case also promises to reveal whether Strike 3’s business model represents legitimate copyright enforcement or a sophisticated form of legal extortion that finally picked the wrong target.

For full disclosure, I’ve been retained as an economics expert by individual defendants in several other cases in which Strike 3 has alleged copyright infringement. I offer my thoughts based on my experiences.

Read the full piece here.

Brazilian President Luiz Inácio Lula da Silva recently endorsed giving the Administrative Council for Economic Defense (CADE) much more power to regulate Big Tech, even as U.S. President Donald Trump threatens to impose tariffs “on countries whose taxes, legislation and regulations target US big tech companies such as Google, Meta, Amazon and Apple.”

Read the full piece here.

Talk-show host Jimmy Kimmel’s suspension by ABC following pushback from affiliate stations about comments he made Sept. 15 about the alleged killer of Charlie Kirk has been major news.

The timing of the decisions by affiliate groups Nexstar and Sinclair to preempt Jimmy Kimmel Live! from their programming schedule was noteworthy, in that both came just hours after Federal Communications Commission (FCC) Chair Brendan Carr appeared on a conservative podcast encouraging the affiliates to “step up” in the wake of Kimmel’s comments. Carr noted that the broadcasters have a “license granted by us at the FCC that comes with it an obligation to operate in the public interest,” adding that:

We can do this the easy way or the hard way. These companies can find ways to change conduct to take actions, frankly on Kimmel, or there’s going to be additional work for the FCC ahead.

The implication certainly would appear to be that the commission might exercise its authority to issue fines or revoke licenses for a pattern of news distortion if no action was taken with respect to Kimmel’s comments.

While Carr’s apparent threats may appear on their face to be a First Amendment violation, current caselaw suggests that it would be difficult for Jimmy Kimmel to be able to successfully challenge this conduct. It also raises the question of why broadcasters are treated differently under the law to begin with. A better path forward would be to recognize the drastic changes in the modern media marketplace, and to give broadcasters full First Amendment protections.

Read the full piece here.

Just weeks after Skydance Media completed its acquisition of Paramount Global, the new company is reportedly preparing a majority cash bid to acquire Warner Bros. Discovery (WBD) in its entirety, including its cable networks and movie studio.

A Skydance-Warner combination could reshape the global entertainment landscape. Backed by Paramount Skydance CEO David Ellison’s substantial family financial resources, the potential combination would represent significant consolidation in the media industry and is likely to face regulatory scrutiny. The deal’s economics, however, offer compelling benefits that regulators should consider.

Read the full piece here.

A recurring claim among a certain breed of would-be antitrust reformers—most recently given voice by Sen. Josh Hawley (R-Mo.) during a June hearing of the Senate Judiciary Committee’s antitrust subcommittee—is that “big is bad.”

The claim suffers first and foremost from conceptual ambiguity. Big in what sense? Market share? Revenue? Headcount? Asset size? Geographic scope? Each of these measures captures something different about a firm.

A company might employ thousands but hold only a modest market share, or it might have huge revenues while operating in a highly fragmented sector. Proponents of the “big is bad” sentiment tend to lump each of these together, as if they had the same causes and consequences for the economy, when in reality they point to different competitive dynamics and policy implications.

Read the full piece here.

O presidente Luiz Inácio Lula da Silva recentemente defendeu conceder ao Conselho Administrativo de Defesa Econômica (Cade) mais poder para regular as big techs, mesmo com o presidente dos Estados Unidos, Donald Trump, ameaçando impor tarifas “aos países cujos impostos, legislações e regulações visem as grandes empresas de tecnologia norte-americanas, como Google, Meta, Amazon e Apple”.

A declaração de Trump seguiu-se a uma ordem executiva assinada por ele em fevereiro deste ano, na qual afirmava o compromisso do governo norte-americano em defender empresas americanas contra regulações internacionais assimétricas. O Brasil, no entanto, não recuou.

Read the full piece here.

The European Commission’s €2.95 billion decision against Google arrives amid heightened EU-U.S. trade tensions, the Trump administration’s recent criticism of EU tech regulations, internal disagreements within the Commission, and heated commentary on both sides of the Atlantic.

But beyond geopolitics, the decision also raises important legal and policy questions. In particular, the Commission’s apparent request for a structural divestiture as a remedy involves tradeoffs worthy of consideration.

Read the full piece here.

TL;DR

Background: Online retail and travel platforms compete to attract shoppers by building a reputation for low prices and high quality. This is typically achieved through a variety of means, which traditionally have included most-favored-nation (MFN) clauses. Using MFNs, platforms like Amazon or Booking.com contractually prevent sellers from offering lower prices on competing marketplaces. These provisions helped platforms to protect their investments in customer acquisition, quality control, and trust-building by ensuring rivals couldn’t free-ride on these efforts.  

But… Competition regulators around the world have increasingly taken issue with these clauses. The EU’s Digital Markets Act (DMA), for instance, bars so-called gatekeepers from imposing MFN clauses, viewing them as anti-competitive restrictions on seller freedom. And legislation in many European member states imposes similar requirements to all online platforms.

However… Platforms have experimented with other ways of protecting their reputation. Germany’s Bundeskartellamt (BKA) case against Amazon shows this evolution: instead of comparing seller prices across platforms, which is now illegal, Amazon benchmarks against industrywide pricing. By banning these transparent contracts, the BKA makes it increasingly difficult for platforms to offer compelling goods and services without running afoul of EU rules and national enforcement. In turn, this has important ramifications for how platforms govern their ecosystems, prompting them to turn to increasingly opaque and  potentially restrictive alternatives.

KEY TAKEAWAYS

The Economics of Platform Reputation

Today’s digital platforms face a classic economic challenge. To succeed, they must invest billions in creating trusted marketplaces—building logistics networks, fighting fraud, handling customer service, and establishing reputations for fair prices. These investments reduce search costs for consumers and create value for sellers through increased traffic and conversion rates.

Without mechanisms to protect these investments, both sellers and rival platforms can free-ride. Sellers benefit from a platform’s customer base and trust, while offering better deals elsewhere. Competing platforms capitalize on this by offering lower fees, avoiding the need to make their own costly investments in market-making infrastructure. Consumers might do product research on Platform A but buy on Platform B—using the first platform’s investments, while denying it revenue.

MFN clauses have long been one market solution to this problem. They align incentives: platforms invest in quality knowing they could capture returns, while sellers gain access to valuable customer bases. Despite mixed evidence on their welfare effects (see ICLE’s upcoming literature review on the topic), the DMA and national legislation in many European states have banned such clauses. 

But banning MFNs doesn’t eliminate the underlying economic problem. Instead, it forces platforms to opt for potentially inferior solutions.

The Move to Market Benchmarking

The German BKA case illustrates Amazon’s post-MFN strategy. Instead of contractually restricting sellers’ pricing decisions on other platforms, Amazon uses algorithms to determine whether prices on its platform align with broader market expectations. The system identifies three categories: “pricing errors,” which are removed entirely; “significantly high prices,” which lose Buy Box eligibility; and “uncompetitive prices” (which are subject to restricted visibility).

Crucially, these determinations aren’t based on whether a specific seller offers lower prices elsewhere—that would constitute an MFN clause. Instead, Amazon benchmarks against the entire industry. If widgets typically sell for $10-15 across all online retail outlets, a seller pricing at $20 on Amazon might lose their access to the Buy Box, regardless of their prices on other platforms or even whether they sell elsewhere.

This approach maintains Amazon’s reputation for competitive prices, while technically complying with MFN prohibitions. It does, however, represent a shift from bilateral governance (agreements between Amazon and individual sellers) to unilateral market-making (Amazon deciding what constitutes a “fair” market price).

When Solutions Become Problems

With its Amazon decision, the BKA creates more problems than it solves. The German competition authority simultaneously worries that Amazon’s mechanisms might force sellers to price below cost (driving them from the marketplace), while also claiming that Amazon might raise marketplace prices by matching the lowest prices found elsewhere. These contradictory concerns reveal the conceptual confusion: regulators haven’t clearly articulated what competitive harm they’re trying to prevent.

The regulatory chaos surrounding these mechanisms further illustrates the problem. Amazon’s Buy Box design was approved by the European Commission in 2022 as part of commitments to address self-preferencing concerns. Yet German authorities are now challenging related pricing mechanisms under national law. This fragmentation—where platforms can comply with all EU rules yet face contradictory national enforcement—shows what happens when regulators ban specific practices without addressing underlying economic realities. Each jurisdiction interprets the “solution” differently, creating compliance nightmares that the DMA was specifically designed to prevent.

More fundamentally, the transition from MFN clauses to algorithmic price monitoring reveals an uncomfortable truth about platform regulation: economic incentives are stubborn. When regulators ban specific contractual tools without providing viable alternatives for legitimate business needs, markets don’t simply accept the void—they fill it with whatever mechanisms remain available. 

Today’s price benchmarking algorithms may be tomorrow’s prohibited practice (as Germany is trying to make it), prompting yet another evolution toward even less transparent mechanisms. This cycle wastes resources, creates legal uncertainty, and may ultimately produce market outcomes worse than those the original MFN clauses created.

For more on this issue, see the International Center for Law & Economics forthcoming white paper on MFN clauses.

Cartel collusion among competitors is widely seen as the “supreme evil of antitrust,” and for more than three decades, competition-law enforcers in the United States and abroad have cooperated to ferret out cartel activity. Beginning in the 1990s, major jurisdictions started to emphasize highly effective “leniency” agreements to get cartel members to inform on their partners and thereby bring secret cartels to light.

Enforcers recently have taken stops to reverse apparent declines in the effectiveness of leniency programs. In July, the U.S. Justice Department (DOJ) introduced a new program that features direct payments to whistleblowers who inform on cartels. This might usher in a new era of even more successful cartel enforcement.

Read the full piece here.

Commercial competition in outer space is expected to grow rapidly, with major economic benefits, including lowered costs, increased innovation, and the development of new industries.

The proposed European Union Space Act, however, threatens to undermine beneficial competition by imposing new regulatory burdens on firms, especially U.S. satellite operators. In contrast, the Trump administration is acting to reduce burdens on space commerce.

The administration may wish to press for elimination of the EU Space Act’s restrictions through international negotiations that focus on reducing anticompetitive market distortions.

Read the full piece here.

Judge Amit P. Mehta’s memorandum opinion in the Google Search case has dropped. It’s 230 pages, and I’ve merely skimmed it. A careful discussion–from me or anyone else–will wait a bit. For now, the remedies are quite a bit more than Google had proposed, but at the same time, a good deal less than the U.S. Justice Department (DOJ) wanted.

Among other things, Judge Mehta rejected the DOJ’s proposed structural relief, and for good reasons. He does not order the divesture of the Chrome browser, in part because: “Plaintiffs do not satisfy the Circuit’s ‘clearer indication of a significant causal connection’ test for structural remedies.” He also doesn’t order the divestiture of Android (one of the DOJ’s contingent proposals).

Read the full post here.

The “user-side” search-query data remedy carved out by U.S. District Court Judge Amit Mehta in the just handed-down U.S. v Google decision appears to be animated by a similar intuition (search quality depends on large volumes of click-and-query signals) as the EU Digital Markets Act’s Article 6(11), but they also diverge in important ways. Where Judge Mehta’s approach is narrower, more tethered to proven competitive harm, and deliberately cabined by process safeguards (including a cap and technical oversight), Article 6(11) DMA is ex ante, continuous, and tied into a notoriously suboptimal process managed by the European Commission.

One key problem with the DMA process is that we still don’t know how the privacy safeguards on sharing query data are meant to be interpreted, depending on how one reads “anonymised.” I set out those differences below, using the D.C. District Court’s final remedies opinion, as well as my earlier analysis and comments on the DMA compliance workshops (2024 and 2025).

I also flag a particularly telling bridge between the two regimes: the U.S. court explicitly acknowledges that DMA-style anonymization can wipe out the overwhelming majority of queries, but nonetheless appears to treat that possibility as an acceptable feature of the privacy constraint on data sharing.

Read the full piece here.

List of Core Platform Services and Designation of Gatekeepers

Do you have any comments or observations on the current list of core platform services?

We would like to take this opportunity to focus on the question of whether artificial intelligence (AI) should be designated as a core platform service (CPS). Our view is that such a designation would be inappropriate and counterproductive. The reason is simple: AI is not a single, unitary technology or service. Treating it as though it would produce flawed regulatory outcomes, confuse enforcement, and risk stifling innovation.

AI is not a monolith but a heterogeneous collection of technologies, methods, and applications (Radic & Stout, 2024). There is no such thing as a clearly defined “AI market”. Instead, AI is better understood as a loosely connected bundle of technologies, each with its own characteristics, players, and business models. This becomes clear when looking at the different layers of what is sometimes called the “AI stack”. At the foundational level are semiconductors, computing hardware, and cloud or XaaS providers that make raw processing power available. On top of this comes data collection and preparation—an entire industry devoted to cleaning, labelling, and managing data. Model training follows, with quite different approaches—such as supervised, unsupervised, reinforcement, and transfer learning—each serving distinct purposes. Finally, trained models are deployed in different contexts: some in the cloud, others at the “edge” on local devices, others still on-premises—each tied to different firms and business strategies.

This technological diversity is mirrored in the sheer variety of AI applications. It makes little analytical sense to treat large language models (LLMs) for text generation as if they were part of the same service as computer vision systems for medical imaging, or to lump autonomous drones together with self-driving cars simply because both rely on AI. Radiology tools that analyse X-rays do not compete with protein-folding models used in medical research. These technologies serve different users, address different needs, and are not substitutable. Collapsing them all under the label “AI” is no more helpful than speaking of “food markets” or “technology markets”—a generality that obscures more than it clarifies.

It would be similarly misguided—and premature—to include a narrower group of generative-AI services (essentially seeking to capture offerings like ChatGPT, Claude, and Gemini) in the list of core platform services. The generative-AI space remains in its infancy and does not appear to have reached what Teece (1986) refers to as the paradigmatic stage of development. In other words, it is still unclear what the primary types of AI-based services will be in the years ahead. By arbitrarily capturing  today’s most successful generative-AI services—and potentially applying the DMA’s rigid rules to them—policymakers risk significantly impeding the development of these services by preventing their developers from exploring different features and platform architectures.

Designating AI as a single core platform service would therefore be a mistake. It risks generating inaccurate assessments of market power by either underestimating or overestimating concentration. If the relevant market is artificially broadened to include non-substitutable products, a firm’s dominance in a particular niche may be underestimated. Conversely, the narrative that AI is simultaneously vast and yet dangerously concentrated often rests more on technological anxiety and enforcement bias than on sound economic analysis.

Worse still, lumping diverse AI systems into one regulatory framework could distort innovation by implicitly favouring some technologies over others. Rules that are easier to apply to deterministic, “controllable” systems might inadvertently disadvantage more open-ended and creative forms of AI. And because this monolithic view obscures the real competitive dynamics of these nascent markets, it risks making authorities blind to emerging threats, new entry, or potential consumer benefits.

It must also be noted that competition, new entry, and technological advance are the hallmarks of every level of the AI stack. And the market leaders, such as they are, can hardly be characterized as “gatekeepers”. Moreover, it is startups, rather than incumbents, that have taken an early lead in generative AI (and in Web 2.0 before it).

A better approach would be to avoid blanket designations altogether and instead pursue a principled, case-by-case analysis of competition in the AI ecosystem through EU competition law. This means consistently asking basic but indispensable questions: who are the consumers?; what exactly is the product or service?; and to what extent is the AI in question substitutable either for human intelligence or for non-AI technologies? Only by working through these questions can enforcers arrive at meaningful market definitions and avoid abstract generalizations that mislead more than they help.

Designating “AI” as a core platform service would amount to an erroneous abstraction. AI is not one thing but a constantly evolving bundle of technologies with many uses and many implications. A more granular, evidence-based approach is essential if the Commission wishes to safeguard competition, protect consumers, and promote innovation without causing unnecessary harm.

Do you have any comments or observations on the designation process?

The DMA’s designation process exhibits procedural problems that may raise concerns under EU administrative-law principles, potentially including: an asymmetric application of evidentiary standards, inconsistencies in the application of qualitative criteria across different designation decisions, and insufficient procedural safeguards.

First, Art. 3(5) provides that undertakings may present “sufficiently substantiated arguments” to demonstrate that a core platform service should not be designated despite meeting quantitative thresholds. But it also appears to impose a heightened standard on evaluation of these arguments, allowing the Commission to reject them as insufficiently substantiated “because they do not manifestly call into question the presumptions under Article 3(2)”. This standard appears to create different evidentiary burdens for deviating from the presumptions in 3(2).

For Commission-initiated investigations under Article 3(8):

• The Commission may consider qualitative factors such as potential network effects, switching costs, and ecosystem integration;
• The standard appears to be whether there is sufficient indication of gatekeeper characteristics, regardless of the 3(2) criteria; and
• Recital 23 suggests that a forward-looking assessment is appropriate.

Yet for rebuttals under Article 3(5):

• Companies must meet the “manifestly call into question” threshold;
• The same qualitative factors that support Commission designation may be insufficient for rebuttal; and
• It is unclear whether forward-looking assessments could ever “manifestly call into question” the presumptions, which are based on backward-looking determinations.

The Commission’s approach to iPadOS and iMessage illustrates the potential inconsistencies in applying such qualitative criteria. In the iPadOS designation decision, despite falling below certain quantitative thresholds, the Commission initiated proceedings to assess whether iPadOS should be designated based on qualitative factors, including ecosystem effects and business-user importance. But in iMessage, the Commission decided not to designate the service, considering factors such as the relative number of users compared to competing services and the limited importance to business users. These contrasting outcomes raise questions regarding when qualitative factors override quantitative thresholds, what constitutes sufficient evidence to “manifestly call into question” presumptions, and whether similar analytical frameworks apply to Commission investigations and company rebuttals.

Unpredictable designation criteria create several inefficiencies. To start, they create compliance uncertainty. Companies must prepare for potential designation without clear guidance on likelihood, leading to potentially wasteful overcompliance or risky underpreparation. Second, they could harm innovation, with companies seeking to avoid features or growth that might trigger unclear thresholds. Finally, arbitrary designation decisions may advantage some competitors over others without any competitive justification, creating undesirable market distortions.

Perhaps more importantly, the principle of legal certainty, established in cases such as Case C-776/23 P Spain v. Commission, “requires that rules of law be clear and precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law and take steps accordingly”. The current interpretation of Article 3(5) raises concerns regarding the precision and predictability requirements of the Court of Justice’s case law on legal certainty. The “manifestly call into question” standard lacks detailed guidance; the interaction between qualitative and quantitative criteria remains unclear; and companies are often unable to predict with reasonable certainty how their arguments will be evaluated.

Furthermore, the DMA establishes a presumption-based system in which quantitative thresholds create rebuttable presumptions of gatekeeper status. But the application of these reveals tensions. In particular, the same factors (network effects, switching costs, ecosystem integration) appear to be sufficient for the Commission to initiate designation proceedings, yet insufficient for companies to rebut designation presumptions. This asymmetry may violate the general EU principle of equal treatment, which requires that comparable situations not be treated differently and different situations not be treated the same, unless objectively justified. It may also violate the principle of equality of arms and due process laid down in Art. 6 of the European Convention of Human Rights, which requires that each party has a reasonable opportunity to present its case and influence the outcome of a decision without a substantial disadvantage.

The processes by which these determinations are made may also violate the requirements under Art. 41 of the Charter of Fundamental Rights. Art. 41 CFR guarantees the right to good administration, including the right to be heard before adverse measures, the right of access to one’s file, and the obligation of administration to give reasons for decisions. Current DMA procedures raise potential concerns about each element. On the right to be heard, response windows can be too short for complex economic work, opportunities for oral presentation are limited, and there is no clear ability to reply to third-party submissions. On access to the file, the scope of access to the Commission’s economic analysis is uncertain, confidentiality claims can constrain meaningful review, and there is no established procedure comparable to merger control. Finally, as to the duty to give reasons, the detail provided in designation decisions varies, replies to company arguments can be cursory, and the underlying economic reasoning is not always fully articulated.

By contrast, Regulation 139/2004 on the control of concentrations provides for pre-notification meetings (Art. 4), multiple state-of-play meetings (Art. 18), access to file procedures (Art. 18), and the right to an oral hearing (Art. 14 of the Implementing Regulation). Likewise, antitrust proceedings (under Regulation 1/2003) include a detailed statement of objections, full access to the file, minus confidential information (Art. 27), oral hearing before an independent hearing officer, and peer-review procedures (Art. 14).

Despite entailing more severe economic consequences, the DMA’s procedures are, at the very least, less developed than these established frameworks, and may fall short on several dimensions. This is particularly true given the DMA’s penalties of up to 20% of worldwide turnover and potential breakups. Under CJEU jurisprudence (e.g., Intel v Commission, Case C-413/14 P), sanctions of this magnitude arguably require procedural safeguards proportionate to their severity. Likewise, the European Court of Human Rights’ Engel criteria suggest that administrative proceedings with such severe penalties may require criminal-law-level protections.

Obligations

Do you have any comments or observations on the current list of obligations that gatekeepers have to respect?

The DMA is now the cornerstone of the EU’s regulatory framework for digital platforms, imposing a detailed list of obligations on designated gatekeepers under Articles 5 to 7, 11, 14, and 15. These obligations were promoted as clear, self-executing “dos and don’ts”, capable of ensuring fairness and contestability in a fast-moving digital economy. But two structural problems immediately stand out. First, the obligations are badly drafted: their language is often vague and cumbersome. This produces legal uncertainty, raises compliance costs, and undermines the very promise of swift and effective enforcement. Second, the obligations are uncarefully drafted: rather than seamlessly complementing the EU’s broader regulatory architecture, they risk clashing with existing instruments, such as data protection, fundamental rights, and competition law. The drafting problems relate to the overall architecture of DMA obligations, as well as to individual duties and responsibilities.

General

The problem of poor drafting becomes immediately visible in Recital 65 DMA, which stresses that the obligations’ effectiveness depends on them being clearly defined and circumscribed “whilst fully complying with applicable law”. That said, the recital then limits this clarity requirement to obligations that are “susceptible of being further specified” and, in the event of circumvention, to all obligations. In practice, this means that only the obligations under Article 6 are open to specification by the Commission, while those under Article 5 and Article 7 are assumed to be sufficiently clear and self-executing.

This distinction is highly questionable. The obligations under both Articles 5 and 6 are drafted in cumbersome language that raises complex compliance questions. The relative clarity of Article 5 obligations cannot plausibly be explained by the text of the law. Nor can it be explained by enforcement experience. To be sure, some Article 5 obligations have close antecedents in competition law (e.g., Article 5(4) on most-favoured-nation clauses). Others, such as Article 5(2) on the cross-use of data, are informed by a more nuanced and evolving body of case law, with the CJEU taking a cautious approach to data sharing across services. Still others, such as Article 5(7) on disintermediation in payment systems and browsers, have little precedent. By contrast, some Article 6 obligations, notably Article 6(5) on self-preferencing, are more grounded in enforcement practice, the merits of such practice notwithstanding.

Against this background, there is no coherent reason to allow the further specification of Article 6 obligations while treating Article 5 obligations as self-executing. In fact, this asymmetry creates perverse incentives. Because Article 5 obligations may only be clarified in the event of circumvention, a gatekeeper uncertain of its compliance obligations may be tempted to “test the limits” of the law, effectively triggering Commission clarification through violation. This is wasteful from the perspective of administrative efficiency and detrimental to legal certainty. A more consistent approach would be to recognise that both Articles 5 and 6 obligations may need further specification, and to require the Commission to provide clarity—within the confines of the law—proactively rather than reactively.

Individual obligations

A central problem with the DMA’s obligations is that they have been drafted without sufficient regard for the tradeoffs they may create. One striking illustration is Article 6(7), which requires gatekeepers to provide business users with interoperability for the software and hardware features of their core platform services. Crucially, such access must be granted on an equal footing with the interoperability that exists internally among the gatekeeper’s own services.

Interoperability has long been promoted as a “super tool” to promote contestability in markets prone to tipping (Scott Morton et al., 2023). But it is also well known that interoperability is not costless. It can entail a tradeoff between competition and noncompetition values—most notably system integrity and security. In the digital space, opening access for one actor often means opening access for all actors; selective interoperability is practically impossible. Thus, obligations to interoperate may generate vulnerabilities that extend far beyond the narrow competition question at hand (Kerber & Schweitzer, 2017).

Recent enforcement practice illustrates the magnitude of this problem. In a public communication, the Commission revealed that business users have invoked Article 6(7) to request access to Apple’s Just-In-Time Compiler (JIT) engine in iOS, which is a core component of all major browser engines. Allowing third parties to inject and execute arbitrary code in such a sensitive area has been described by the cybersecurity community as a “major security vulnerability” (Kohlenberger, 2025). Such concerns cannot be dismissed as self-serving rhetoric from gatekeepers. They raise real risks of exploitation at scale, with implications for consumer protection, data security, and even national security.

The problem is not that interoperability is uniformly undesirable; rather, it is that the DMA’s obligation is drafted without recognising the tradeoffs involved. A rule that purports to promote contestability may, if enforced without regard for security, generate systemic harm. This is a textbook example of uncareful drafting: an obligation that may be well meaning in competition terms, but that fails to account for the broader legal and policy ecosystem into which it must fit.

In fact, some of the DMA’s interoperability obligations may fail even from a competition perspective. A case in point is Article 7, where gatekeeper providers of “number-independent interpersonal communications services” must interoperate their products with those of non-gatekeepers. This obligation may enable consumers using gatekeeper services to communicate with consumers using non-gatekeeper services. In that case, it is questionable why consumers of gatekeeper services would want to actually switch to other services, considering that a basic level of communication is enabled (Hovenkamp, 2023).

Interoperability obligations are but one example of the DMA’s uncareful drafting. Under Article 14, the DMA introduces an extended merger-reporting obligation for gatekeepers. This obligation appears to require notification where the “merging entities or the target of concentration provide core platform services or any other services in the digital sector or enable the collection of data”. Does the term “merging parties” not already incorporate the target of an acquisition, as the merging parties comprise the buyer and the target? Furthermore, why separate “core platform services” from “any other services in the digital sector”—considering it is virtually impossible for a core platform service to be unrelated to the digital sector (the regulation is called the “Digital” Markets Act, after all)? Also, how should one interpret whether a target “enables the collection of data”? Given that nearly all businesses in the digital economy operate with data, this provision risks becoming excessively broad.

This matters because badly written rules not only impair legal certainty, but also waste valuable enforcement resources.

Clashes with EU law

The DMA’s obligations have been drafted without sufficient attention to their interaction with the wider body of EU law. Formally, the regulation insists that it applies “without prejudice” to other instruments. In practice, however, this clause is something of a myth (Bania, 2023). The DMA is likely to generate frictions across multiple domains: potential double (or even triple) jeopardy under competition law (Robertson, 2024), tensions with guarantees of fundamental rights (Barczentewicz, 2022), and broader inconsistencies with parallel EU legislation. Even when head-on conflict does not arise, unintended consequences abound.

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 (Unekbas, 2023). The Data Act explicitly excludes gatekeepers from benefitting as recipients of data sharing. It is thus unclear whether a gatekeeper could ever benefit from data portability under Article 6 DMA. The Commission, exercising its power of specification, might conclude that transfers of data among large gatekeepers are inconsistent with the legislation’s objectives, particularly since the Data Act explicitly states that gatekeepers do not need further data access. 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.

Furthermore, the DMA itself restricts data use through Article 5(2), which prohibits gatekeepers from combining personal data across services without GDPR-compliant consent. Yet as gatekeepers are typically dominant undertakings, questions arise as to whether such consent can ever be regarded as “genuine”, given the CJEU’s view on the imbalance of power between users and gatekeepers. Recent developments suggest that even contractual relationships may no longer constitute a reliable lawful basis for data processing in such contexts.

Taken together, these overlapping rules mean that large technology firms face increasingly narrow and unpredictable avenues for lawful data acquisition. They cannot rely with certainty on data sharing, intrafirm data relocation, contractual ties, or even user consent. The DMA was meant to provide clarity and certainty; instead, it risks producing the opposite by entangling gatekeepers in a web of conflicting obligations that may undermine legal certainty across the EU’s digital policy framework.

Do you have any other comments in relation to the DMA obligations?

DMA obligations warrant two additional points of consideration that relate to enforcement and flexibility.

Enforcing the DMA obligations

The DMA was conceived as a pragmatic response to the perceived failures of traditional competition enforcement in digital markets. The rationale was clear: competition law was too slow, too resource intensive, and too ineffective to address entrenched gatekeeper power (Monti, 2021). The DMA was presented as a superior alternative. It consisted of a set of ex-ante obligations that would cut through procedural delays and deliver quick, effective remedies.

In practice, however, this promise has not materialised. The Commission’s first enforcement actions reveal lengthy proceedings, protracted compliance discussions, and frequent recourse to parallel competition-law investigations. Rather than largely replacing competition enforcement in the digital arena, the DMA currently functions as a weak complement, far from the “sector-specific competition law” it was supposed to embody (Petit, 2021).

A central reason lies in the non-self-executing nature of the obligations. Contrary to the legislative narrative, Articles 5–7, 11, 14, and 15 do not provide clearcut, automatic rules. Their language is often difficult to interpret. The recitals sometimes clarify, but at other times inject additional uncertainty. This undermines the very clarity and speed that justified the DMA in the first place. A legislative simplification of the obligations would therefore be welcome (Boscheck, 2024).

The challenge is compounded by the fact that many obligations require continuous specification in light of dynamic market realities. Digital markets evolve rapidly, and static “dos and don’ts” are inevitably ambiguous in practice. Specification proceedings, such as those launched against Apple regarding its App Store rules, demonstrate the value of an iterative process (Commission, 2024). These procedures not only help gatekeepers understand what is required of them but also enable the Commission to tailor obligations to real-world business models. Their systematic use should be encouraged.

Finally, enforcement is hampered by the DMA’s uneasy relationship with economic analysis. Legislators deliberately tried to sideline economics in the DMA’s design, excluding efficiency defences and relying on crude quantitative thresholds for designation. But as Fletcher and others remind us, economic insights remain indispensable (Fletcher et al., 2024). The obligations may look formalistic, but their effects are deeply economic: they reshape incentives, alter business models, and interact with network effects and data feedback loops. Ignoring these realities risks blunt, even counterproductive, enforcement. Economic analysis can and should play a constructive role, especially in diagnosing outcomes, monitoring effects, and informing specification proceedings. It is only by reintegrating economics into enforcement that the DMA can deliver on its initial promise of effective intervention.

Flexibility in the DMA obligations

A second promise of the DMA obligations was their supposed flexibility. Many emphasised that—unlike competition law, whose enforcement often arrived after the market had already “moved on”—the DMA would be nimble, capable of addressing fast-moving dynamics in digital markets. The regulation was presented as a “future-proof” tool, a law that could adapt quickly to new forms of gatekeeper conduct.

It is unclear whether the DMA truly meets the ambition. The fundamental dilemma of all technology regulation applies here: the law must aspire to regulate the future, but it can only be drafted with reference to the past. The DMA’s obligations draw heavily from prior antitrust cases (Vezzoso, 2024). In practice, the law “runs forward by looking backward”.

This is problematic in at least two respects. First, conduct prohibited by reference to past case law is not necessarily economically unsound today (exclusive dealing comes to mind). Gatekeepers may need to engage in similar practices to maintain ecosystem value or to support complementary innovation. Second, digital markets evolve rapidly. A practice that appeared abusive yesterday may be competitively irrelevant today, while novel sources of market power may not be captured at all. In this sense, the DMA risks being rigid and, over time, obsolete.

The regulation does contain mechanisms designed to provide flexibility (Witt, 2023). Article 12 allows the Commission to expand or update obligations via delegated acts following a market investigation. Article 13 introduces an “anti-circumvention” rule to prevent gatekeepers from exploiting loopholes. The Commission can also recommend new core platform services for designation. These are important tools, but they are not costless.

Market investigations preceding delegated acts require substantial resources and time, undermining the promised speed of intervention. Anti-circumvention risks degenerating into a “whack-a-mole challenge”: every time one gatekeeper strategy is prohibited, another may emerge, especially considering the sheer volume of complaints from business users (Uwe-Franck & Peitz, 2024). For an already-overstretched (some say “grossly understaffed”) authority charged with enforcing the DMA alongside antitrust and foreign-subsidy rules, such demands are daunting (Comte, 2025).

The real test is whether the Commission can deploy these tools pragmatically and prioritise interventions that safeguard contestability without stifling innovation. Flexibility is not just about having legal mechanisms to adapt; it is about using them judiciously, recognising when certain practices may enhance rather than hinder welfare, and ensuring that scarce enforcement resources are targeted where they matter most. Only then can the DMA avoid the fate of becoming yet another slow, rigid, backward-looking instrument in a forward-moving digital economy.

Enforcement

Do you have any comments or observations on the tools available to the Commission for enforcing the DMA?

The DMA was presented as a harmonising regulation grounded on Article 114 TFEU. Both the co-legislators and the Commission stressed that the alternative to a uniform EU framework was not “no regulation”, but rather the proliferation of 27 divergent national regimes. The DMA’s value proposition thus rests on its promise of legal certainty and a level regulatory playing field across the European Union.

Whether the DMA can deliver on this promise is open to question. The harmonisation clause in Article 1(6) DMA makes clear that the regulation does not pre-empt all national measures. It allows member states to apply national competition rules to prohibit unilateral conduct insofar as they are applied to undertakings other than gatekeepers, or to impose further obligations on gatekeepers within the meaning of the DMA.

This formulation creates two clear avenues for fragmentation. A narrow reading suggests that, so long as national rules are formally directed at undertakings other than designated gatekeepers, they remain untouched by the DMA. A broader reading permits member states to impose additional obligations on gatekeepers, so long as they do not directly contradict the DMA’s own obligations (Lamadrid & Fernandez, 2021). The implications are profound. The effect may be to preserve a wide margin for national authorities to regulate conduct that overlaps substantially with the DMA. In practice, this risks differential treatment of similar behaviour across the EU, undermining the DMA’s central harmonising function (van den Boom, 2023).

The German Act Against Restraints on Competition, with its amendments targeting undertakings of “paramount significance across markets”, is a case in point. Both the amendment’s aims and its list of prohibited practices are functionally equivalent to the DMA. The primary differences are that the German rule regards the list of prohibited practices as exhaustive, and the rule does not consider the practices at stake to be per-se prohibited; rather, it introduces a reversal of the burden of proof, allowing firms to provide objective justifications for their conduct, which is not possible under the DMA. But fundamentally, the German regime targets gatekeepers in all but name, raising the prospect of parallel enforcement with different standards (Colangelo, 2022).

Practice confirms that this is not a hypothetical concern. The Bundeskartellamt has initiated proceedings against Google and Meta concerning data collection and processing, and against Apple for alleged self-preferencing. These are issues already regulated under the DMA. The coexistence of national and EU enforcement in such cases risks precisely the fragmentation that the DMA was supposed to prevent (Barczentewicz, 2023).

A further concern is that careless enforcement of the DMA may elevate the risk of double or even triple jeopardy, in violation of the ne bis in idem principle (Cappai & Colangelo, 2021). The DMA is, in essence, a form of sector-specific competition law, targeted at large digital platforms. As such, it overlaps with traditional antitrust enforcement and, in some contexts, with parallel regulatory regimes. Unless carefully coordinated, this overlap can lead to multiple proceedings and multiple fines for the same conduct.

The Court of Justice has recently clarified the scope of ne bis in idem in bpost and Nordzucker. The Court held that the principle is a fundamental right that must be respected, although not in absolute terms. Restrictions may be permissible where they meet the requirements of legality, proportionality, and effectiveness: they must be grounded in law, not go beyond what is necessary, and be sufficiently coordinated to achieve legitimate regulatory aims. In practice, this means that the same conduct may fall under different regimes, but only if enforcement is properly structured and coordinated.

The DMA and the ECN+ Regulation contain provisions for cooperation between the Commission and national authorities. But whether these mechanisms are sufficiently effective in practice remains an empirical question. If coordination fails, the risk is that gatekeepers will be punished multiple times for the same underlying conduct, raising not just concerns of fairness but potential breaches of fundamental rights—thus elevating the problem into a matter of constitutional significance under EU law.

Do you have any comments in relation to the enforcement to the DMA?

This question is beset by a broader conceptual problem; it is unclear what the success metrics of DMA enforcement even are. In theory, the DMA is not outcome-driven: it does not prescribe a specific market structure or design. Instead, it claims to create opportunities for competitors and complementors on gatekeeper platforms by making markets “fair and contestable”.

This, however, raises the question of how fairness and contestability should be measured, or what they even mean. When is a core platform service truly “fair and contestable”? If the answer is simply that it is so once a gatekeeper complies with the DMA, then fairness and contestability collapse into tautologies. They become self-referential concepts, offering no real benchmarks. This is problematic because (i) the DMA’s obligations are often ambiguous, (ii) a gatekeeper might satisfy the letter of the law while sidestepping its intended “spirit”, and (iii) without clear goals and measurable benchmarks for success, it may be impossible—or, at least, exceedingly difficult—for either the Commission or the gatekeepers to know whether DMA compliance has been achieved. The result is likely to be confusion, costly litigation, and diminished effectiveness of the law.

Clear and objective metrics are therefore indispensable. They are needed not only to give concrete meaning to the DMA’s “spirit”, but also to determine whether the regulation meets its stated objectives. The Commission initially sought to place this burden on gatekeepers, requiring them to explain how and why changes to their core platform services complied with the DMA (Colangelo & Ribera, 2025). The volume of infringement decisions issued since the law’s entry into force suggests that this approach has failed. A more thoughtful and detailed framework is evidently needed.

The first step must be to unpack what “fairness and contestability” actually mean in the DMA. This should help to clarify both the objectives they are meant to serve and the criteria by which success or failure of enforcement can be assessed.

“Contestability” in the DMA seems to be defined as promoting “potential competition” by eliminating barriers to entry and expansion, thereby promoting existing rivals and fostering new market entries. For example, Article 6(4) DMA seeks to boost potential entries at the downstream and upstream level regarding app distribution by compelling gatekeepers to allow and technically enable third-party app stores and apps to interoperate with their operating systems.

“Fairness” is primarily linked to addressing “conflicts of interest” between gatekeepers and business users, particularly concerning value appropriation and conditions of access and competition. The fairness objective is likely redistributive in nature: Because gatekeepers have “unfairly” appropriated monopoly rents from the value that business users create on their platforms, the DMA aims to correct this by redistributing those rents to business users or competitors (Colangelo and Ribera, 2025). The assumption is that a severe power imbalance exists between gatekeepers, on the one hand, and businesses, competitors, and consumers, on the other, which has misaligned each actor’s contribution to the core platform service with the benefits they derive from it (Radic, Manne, & Auer, 2025).

The problem is that, even if we accept that “fairness” and “contestability” can be defined in theory, that does not tell us whether they have been advanced in practice. As vague and malleable standards, they provide no clear benchmark against which success can be measured.

For example, Art. 6(4)—on interoperability with and the installation of third-party applications—appears aimed at promoting potential competition. In theory, compliance with the provision could be measured by assessing the persistence of barriers to entry and expansion. But assessing compliance in this way would be problematic, as some barriers to entry—such as the screening of apps and app stores—protect the platform’s integrity and overall quality (Barczentewicz, 2022, July), and could therefore undermine other goals pursued by the DMA. In other words: success by one yardstick could mean failure by another.

Moreover, such an assessment lacks limiting principles. If there is no cost associated with seeking entry into the gatekeepers’ platform, self-interested business users—i.e., all business users—can always claim that entry is not sufficiently free, easy, or that there is not enough potential competition. Consumers’ revealed preferences—e.g., continued use of curated app stores with strong safeguards—risk being dismissed as evidence of platform obstruction or consumer inertia.

This makes Art. 6(4), and similar provisions aimed at boosting potential competition—such as Art. 6(9) on data portability or Art. 6(7) on interoperability with gatekeepers’ hardware and software—particularly ill-suited for interpretation by reference to their overarching objective. The mere fact that third-party app stores or sideloaded apps exist does not reveal whether they exert meaningful competitive pressure, nor whether their absence reflects gatekeeper obstruction, or simply a lack of consumer demand.

By the same token, if data portability or interoperability fail to boost rivals’ market position, the Commission or disappointed competitors can always claim that the gatekeeper did not provide “effective” access (Arts 6(7) and 6(9) require effective interoperability and data portability, respectively). But what does “effectiveness” mean in this context? Is interoperability “effective” if it is merely possible, or only if it actually produces increased entry? The former could be dismissed as falling short of the spirit of the law; the latter would require the Commission to continually redefine that spirit in line with its shifting expectations of what constitutes an acceptable level of potential competition. In either case, compliance becomes a moving target: the gatekeeper can never demonstrate success conclusively, while rivals can always claim that the regulatory experiment has not gone far enough.

Then there is the question of assessing the counterfactual. How is the Commission to determine whether competition is more vigorous than it would have been absent these provisions, or whether observed changes in competitive pressure are the product of gatekeepers’ conduct, rather than occurring despite it? As ICLE scholars have written elsewhere, regulations that pursue “potential competition” (or “contestability”) as an end in itself risk collapsing into tautology: every disappointed entrant can point to unrealized opportunities and blame the platform, while regulators are left to adjudicate inherently subjective claims (Radic, Manne, & Auer, 2025).

If third-party app stores fail to gain traction, gatekeepers may be accused of subtle obstruction; if they succeed, critics can argue that the DMA merely ratified an inevitability or that the gatekeeper could have done more. The same could be said of other provisions aimed at boosting contestability or potential competition. Either way, policymakers and firms are deprived of a clear benchmark for successful compliance. Worse still, the rule may impose real costs—such as by forcing platforms to dilute security and curation practices that consumers value—without producing any offsetting, measurable gains in competition.

Similar concerns arise with regard to DMA provisions aimed at addressing conflicts of interest. In the cases of, e.g., Arts. 5(4), 5(5), 5(6), 5(9), 5(10), 6(2), 6(10), & 6(13), success could  theoretically be measured by the extent to which a conflict of interest has been assuaged or eliminated. But here, again, determining what constitutes successful enforcement is elusive.

First, if a competitor or the Commission concludes that too few users have been steered to a rival site or payment system under, e.g., Art. 5(4), it can always allege that the gatekeeper obstructed steering or failed to promote it sufficiently. The Epic v. Apple litigation in the United States illustrates how such disputes can devolve into endless quarrels over degrees of access and facilitation (see Epic Games, Inc. v. Apple Inc., 2025).

Second, there is no objective standard for what counts as a “satisfactory” increase in traffic to competitors. Suppose a hypothetical gatekeeper provided flawless channels of communication between business users and customers, yet no users concluded contracts outside the platform. Would this constitute compliance with Art. 5(4)? On a formal reading, yes—but it is difficult to imagine the Commission accepting such an outcome as successful enforcement.

The deeper problem is that, despite the claim that the DMA is not outcome-driven, “perfect” compliance can rarely be judged without reference to outcomes. And because the law supplies no limiting principles or alternative benchmarks, the definition of compliance risks collapsing into whatever regulators—and, indirectly, rivals—want it to be. Simply put, conflicts of interest will be deemed resolved only when competitors are satisfied, an equilibrium that is inherently short lived, destined to be relitigated, and disconnected from consumers’ interests.

Third, and more generally, so-called “conflicts of interest” (i.e., when a company both operates and participates in a platform) are not inherently anticompetitive; in multisided markets, vertical integration and self-preferencing often reduce transaction costs, increase the incentives for investment, and improve the user experience (Manne & Radic, 2022; Manne, 2020; Manne & Bowman, 2021). Measuring success in terms of the “elimination” of such conflicts risks assuming the problem, rather than demonstrating it. Arguably, in the case of the DMA, this ship has already sailed. Thus, the fact that developers make greater use of steering or promotional links does not show that consumers are better off, nor that competition has intensified: it may just indicate that developers are shifting marketing costs onto gatekeepers’ ecosystems.

Moreover, “conflict of interest” provisions invite a one-way ratchet: if developers exercise their new rights aggressively, regulators will count this as success; if they do not, it can be portrayed as evidence that gatekeepers continue to undermine them in some more subtle way. As with Article 6(4), there is no falsifiable benchmark of success. Any outcome can be interpreted as proof that the DMA is necessary (and thus a “success” in the broadest terms), while the costs imposed on platforms and consumers—ranging from degraded user experience to higher prices—are downplayed or ignored. In this sense, the DMA risks becoming less a framework for evidence-based competition policy than a perpetual grievance mechanism for rivals who would prefer to compete through regulation, rather than in the marketplace.

Although we tentatively divide the DMA’s provisions into those aimed at fostering potential competition and those aimed at eliminating conflicts of interest, this taxonomy is more theoretical than practical. In reality, most provisions simultaneously affect both existing and potential competition, while also addressing conflicts of interest. This reflects the Commission’s view that contestability and fairness are “intertwined”, such that a single provision can be said to advance both objectives (Colangelo & Ribera, 2025).

The broader point is that, apart from the most straightforward provisions (e.g., Article 6(8)’s obligation to share advertising performance data or Article 6(2)’s prohibition on using third-party data to compete against business users), the metrics for judging the success of enforcement are ultimately circular. Because of the DMA’s self-referential nature—i.e., the absence of clear external benchmarks for assessing “fairness” and “contestability” (Radic, Manne & Auer, 2025)—the question will always remain whether more could have been done to eliminate conflicts of interest and lower barriers to entry. When are barriers sufficiently low, or conflicts of interest adequately mitigated? When have gatekeepers’ advantages been sufficiently dissipated? And what counts as an acceptable balance of bargaining power between gatekeepers and business users?

In this sense, both compliance and success become moving targets. Any of the tens of thousands of business users and competitors that are (by the DMA’s own admission) meant to benefit from it can always argue that they do not, or do not benefit enough. After all, the DMA’s built-in assumption of permanent imbalances of power between gatekeepers and all other stakeholders (Radic, Manne, & Auer, 2025) virtually guarantees an endless supply of such claims, precisely because there is little or no cost to making them—and because this, and other presumptions underlying the DMA, are essentially irrefutable.

A second step is therefore needed to determine whether enforcement of the DMA is succeeding and, ironically, it requires looking beyond the letter of the DMA. The Commission must clearly and unambiguously articulate the implicit objectives that underpin the regulation, which have thus far been obscured behind the rhetorical veil of “fairness and contestability”. The DMA must spell out its true aims, because meaningful assessment of compliance requires more than circular references to abstract principles. Without identifiable long-term policy goals embedded in each provision, enforcement risks devolving into an exercise in discretion without due process—where success is measured not against objective standards, but against regulatory expectations and the demands of the loudest rivals. This would produce an unstable and perpetually contested regime.

Scholars have attempted to distil these tacit objectives of the DMA in the broader pursuit of legal certainty. Colangelo & Ribera (2025) interpret the regulation as implicitly seeking to shape market structures by promoting consumer choice, platform openness, transparency, and the neutralization of competitive advantages. Radic, Manne, & Auer (2025) likewise underscore its redistributive thrust, emphasizing the levelling down of gatekeepers, the transfer of rents to complementors and competitors, and the facilitation of rivals.

The issue is that these implied metrics of “success” are likewise misguided and risk producing enforcement that merely levels down gatekeepers, distorts product design, and ultimately leaves consumers worse off. To be clear, it’s not that structure or process never matter, but the DMA elevates them into ends in themselves. “Openness”, “neutralization”, and “design transparency” are treated as proxies for regulatory success, even when they undermine scale and scope economies, degrade relevance and security (e.g., through weaker default protections or forced interoperability), or substitute one set of frictions (fragmentation, higher developer costs, lower ad effectiveness) for another.

When compliance is evidenced by more app stores, more toggles, or less personalization—rather than by better outcomes for users—enforcement drifts into undefined industrial policy. It equalizes rivals and standardizes designs, while leaving prices, quality, innovation, privacy, and security as afterthoughts. The effect resembles a “Harrison Bergeron” world of forced symmetry, where advantages are deliberately suppressed, rather than harnessed. That tilt increases false positives (blocking or reshaping efficiency-enhancing conduct) and chills investment in features that most users actually value.

In this way, the DMA’s tacit measures of success fall into the same trap as its explicit ones, chasing circular, abstract goals that risk harming consumers and distorting markets.

First, the DMA favours certain business models and product designs. Where multiple compliance options exist, it effectively prescribes outcomes, narrowing gatekeepers’ ability to choose solutions that might satisfy the rule at lower cost or with better consumer performance. For example, Article 5(2) prohibits combining data across CPSs, implicitly disfavouring behavioural advertising. In response to Meta’s program, the Commission indicated that gatekeepers must offer a less-personalized alternative (e.g., contextual ads). If that interpretation stands, the Commission should explain why this particular design mandate improves consumer welfare, rather than merely reshaping business models.

Second, “openness” is too often tallied by counting access points, rather than benefits to users. Article 6(4) aims to enable alternative app stores and apps on gatekeeper OSs. True success, however, should entail entry that yields lower prices, higher quality, or greater innovation for end users without degrading security or privacy. Treating “more app stores” as a sufficient metric mistakes means for ends.

Third, “neutralizing competitive advantages” risks penalizing competition on the merits. Article 6(2) bars gatekeepers from using non-public business-user data to compete with those users—even where the resulting products benefit consumers. Article 6(5) prohibits self-preferencing. The relevant question should, instead, be whether the conduct harms consumers (through higher prices, lower quality, or reduced innovation), not whether it disadvantages rivals. Success should therefore require evidence that intervention prevents consumer harm, not merely that it levels down a gatekeeper.

These structural/process metrics also suffer from deeper methodological flaws. Causality is hard to establish: more business users or new entries could reflect unrelated dynamics or simply the weakening of gatekeeper offerings, rather than welfare-enhancing competition (Radic, Manne & Auer, 2025). Conversely, if entry lags, a gatekeeper expands into adjacent markets, or maintains market share, it does not follow that enforcement failed. Unless the Commission equates “foul play” with growth or expansion—an interpretation it has not claimed—rival-focused indicators will routinely misfire.

Further, enforcement will often rely on gatekeeper-provided data (e.g., for personalized advertising), thereby compounding asymmetry. The DMA’s one-size-fits-all approach papers over differences across CPSs: switching costs, baseline contestability, and security/privacy tradeoffs vary widely (e.g., browsers vs. online social networking). Any serious assessment must account for these heterogeneities—and, ultimately, for consumer outcomes—rather than whether a checklist of structural changes has been ticked.

Regulation—no matter how ambitious—cannot remake underlying economic realities. To the extent the DMA’s implicit metrics prioritize market reconfiguration over actual consumer outcomes, they risk costly, distortionary, and self-defeating enforcement. In short, interventions should be justified by net benefits to consumers, not by rival-centric or design-prescriptive targets.

Effectiveness and Impact on Business Users and End Users of the DMA

Do you have any comments or observations on how the gatekeepers are demonstrating their effective compliance with the DMA?

There are several observations to be made based on gatekeeper’s compliance reports, dedicated websites, and workshops.

Compliance costs

First, the DMA involves high compliance costs, as well as resources diverted from other, potentially more productive endeavours. These costs cannot be ignored, as sound policymaking requires weighing the costs and the benefits of regulation, including the costs of administering the system and potential error costs (i.e., the costs of false positives and false negatives).

As pointed out by Barczentewicz (2025a, 2025b), the costs of DMA compliance for gatekeepers are substantial. The Commission initially projected compliance costs of roughly €10 million annually for all gatekeepers combined. In its compliance workshop earlier this year, however, Amazon reported its costs are “multiple orders of magnitude beyond that predicted amount”, while a Meta representative stated their costs are “a long way north of” third-party estimates of $10-20 million per year.

The allocation of gatekeeper personnel to DMA compliance is also considerable. According to Meta, the company has involved more than 11,000 employees and invested nearly 600,000 engineering hours. In its compliance workshop, Apple claimed its engineers have spent “hundreds of thousands of hours”, with thousands of employees involved in the effort to comply within highly “compressed timelines”. Similarly, Google assigned approximately 3,000 people to work full-time for two years on compliance for a single article of the DMA.

These expenses involve tradeoffs and opportunity costs. Indeed, gatekeepers have argued this massive expenditure is a “hidden tax” that diverts resources from innovation. As Amazon’s representatives explained during its workshop, money spent on compliance “takes away that work from other areas that you could be innovating and providing benefits to customers in Europe”.

Undefined concepts and conflicting interpretations

Second, compliance reports and dedicated websites consistently highlight a frustration with the DMA’s ambiguity. A significant part of gatekeepers’ communication is dedicated to the challenges of complying with a regulation they describe as ambiguous and lacking clear guidance from the Commission. Gatekeepers have consistently argued that DMA is characterized by undefined key concepts and conflicting interpretations. Apple pointedly observed during its workshop that when “no two people agree on what the DMA’s substantive obligations mean”, the resulting ambiguity undermines the rule of law.

In line with this, gatekeepers have repeatedly pleaded for clearer compliance guidance from the Commission. These requests have, however, largely been met with silence under the misguided philosophy that the entire burden of DMA compliance—including interpreting the terse statute—should be on the gatekeepers. This forces companies to navigate a “Kafkaesque regulatory environment”, where they can be fined for noncompliance without clear standards (Barczentewicz (2025a).

These costs are exacerbated by legal fragmentation. The DMA’s promise of a “single European rulebook” does not appear to have materialized. Companies like Amazon and Google reported facing parallel national enforcement actions, such as from Germany’s Federal Cartel Office, on matters squarely covered by the DMA, such as price filters (Colangelo, 2025). This fragmentation multiplies compliance costs and uncertainty.

Harms to EU users and businesses

Third, gatekeepers have argued in their workshops that the Commission’s DMA enforcement is “decontextualized from impact” and is causing tangible harm to European users and businesses. The Commission might view these arguments as self-interested, rather than as genuine concern for the public interest. Yet the two are not necessarily incompatible. Because gatekeepers have a personal stake in keeping their platforms competitive—through low prices, better user experience, and innovative products—their self-interest may, in fact, align with consumer welfare.

Accordingly, gatekeepers claim the DMA’s enforcement leads to “inferior digital services” for European consumers. In its workshop, for instance, Google mentioned “withholding of innovations from Europe” as a direct consequence of the DMA. Apple warned that being forced to rush compliance creates the risk of “premature solutions with bugs” and could force companies to “hit the pause button” on European innovation.

It is possible—even likely—that some of these claims are true. For example, Apple delayed the launch of Apple Intelligence in Europe for six months, and is now reportedly withholding new features, such as live translation, from the AirPods 3.

Significant privacy and security concerns

Fourth, another central theme of the compliance workshops is the Commission’s systematic dismissal of privacy and security concerns.

Apple stated that cybersecurity agencies were “nowhere to be found” in key decisions and that some third parties are exploiting interoperability requirements for data harvesting, requesting the ability to “read the contents from each and every message and email on the user’s device”. Amazon’s vetting process for data access found that more than 75% of applicants were from outside the EU, many appearing to be “data aggregators with opaque privacy policies”. Google presented data showing users are 50 times more likely to encounter malware off the Google Play Store, underscoring the real-world risks of sideloading mandates (Barczentewicz, 2025a; 2025b).

Technical difficulties

Fifth, Gatekeepers have also highlighted the technical difficulties of compliance. For example, Google explained that its use of frequency thresholding as a “state of the art” anonymization method for sharing search-query data is required by law, pushing back against competitors who claimed the method rendered the data useless. The Commission acknowledged the legal requirement for anonymization but stated it should not significantly reduce data quality, which might be a contradictory proposition.

In its workshop, Meta explained the limited data used for its “less personalised ads” (LPA) option, but noted that the Commission’s strict interpretation of “no data combination” risks imposes an “unviable business model” that is also largely useless to SMEs. In other words: complying with the Commission’s rigid reading of an already rigid regulation risks destroying precisely what makes the regulated companies successful—and what draws business users to them in the first place.

Similarly, Microsoft explained that its controversial “Recall” feature processes data entirely locally on a user’s PC for security. Despite this, the Commission is exploring data portability mandates for the feature, which Microsoft suggests raises serious security concerns.

Conclusion

While the specific technical challenges detailed by Google, Apple, Meta, and Microsoft in their respective compliance workshops demonstrate their efforts to balance compliance with core responsibilities like user security and business viability, they also reveal a fundamental impasse in the DMA’s implementation. The core issue is not simply technical difficulty, but a deep-seated risk that the Commission will systematically dismiss these efforts as self-serving attempts to undermine the regulation.

There is an uncomfortable truth at the heart of the DMA: Measures that enhance user privacy and security often align with the gatekeepers’ economic interests in maintaining a controlled “walled garden” ecosystem. An enforcement approach that remains blind to this duality of interest is likely to see only the self-interest and dismiss the genuine user benefits of such actions. The workshops suggest this is already happening, with the Commission engaging in a systematic dismissal of privacy and security concerns (Barczentewicz, 2025a; 2025b).

Do you have any concrete examples on how the DMA has positively and/or negatively affected you/your organisation?

We have observed a range of significant negative impacts across various digital services, affecting companies’ operational efficiency and users’ experiences. While the DMA aimed to foster competition, innovation, and consumer choice, our impression, supported by recent reports (Cennamo et al., 2025; Jebelli & Ledford, 2024), suggests that the implementation of its provisions has, in many instances, led to degraded services, substantial economic losses, increased security risks, and a noticeable slowdown in the rollout of new innovations within the European Union.

Degraded user experiences and service functionality

The DMA’s prohibitions on integrated services have created a more fragmented digital landscape, directly impacting the seamlessness of user experiences. For instance, the changes mandated by Article 6(5) of the DMA, which prohibits “non-discriminatory conditions”, have significantly altered online search services.

Google, as a designated gatekeeper, has removed the smooth integration of products such as Google Maps into search results. Previously, a search for a local business or restaurant would display results plotted on Google Maps, often with a dedicated “Maps” tab, allowing for immediate booking or directions. Users are now often forced to navigate multiple websites and apps for tasks that were once streamlined, increasing friction and requiring additional steps to access basic information. A study found that this specific change led to a 21% increase in searches for mapping services in the EU (Pape & Rossi, 2024). Meanwhile, competing map services have not experienced a notable uptick in traffic (Ibid), suggesting that users continue to prefer Google Maps—even if it takes them longer to get there.

In the accommodation sector, Google’s changes under Article 6(5) have made hotel offers less organized, clear, and intuitive. Beyond the evident qualitative impact on the consumer experience, the change has also reduced hotels’ ability to reach customers directly and diverted traffic toward intermediaries (Delgado, 2024). The DMA has therefore produced clear winners and losers—with potential beneficiaries such as Booking.com, itself a Gatekeeper, among those gaining from the shift.

Finally, the new regulatory framework has also introduced increased consumer confusion and complex choices. For example, Article 5(2) of the DMA requires users to navigate extensive pop-ups to confirm their preferences for service integration versus separate functionality. This change complicates previously simple tasks, such as setting default apps or browsers on devices, and forces users to scroll lengthy lists of options (Jebelli & Ledford, 2024).

Substantial economic losses for businesses

The DMA’s adverse effects could translate into measurable economic losses for businesses across the EU—not just gatekeepers (Cennamo et al., 2025). For example, potential revenue losses up to €114 billion are projected for firms in service sectors across the EU, corresponding to a loss of up to 0.64% of total turnover in the relevant sectors. This also translates to an estimated drop in revenue per worker across these service sectors by up to €1,122 per year.

According to Cennamo and coauthors, a major contributor to these losses stems from the impact on online-advertising services. Article 5(2) prohibits gatekeepers from combining and using personal data across core platform services for advertising without explicit user consent, overriding other legal justifications like legitimate interest. This restriction significantly lowers the effectiveness of personalized and targeted advertising due to the loss of valuable information signals. Studies indicate that personalized marketing can reduce customer acquisition costs by up to 50%, and personalized ads can be three times more valuable than non-personalized ones.

The shift from personalized to generic marketing can also reduce clickthrough rates, with some field experiments showing a drop from 25% to 12%. Following GDPR compliance, which is less stringent than the DMA’s requirements, web publishers experienced a 5.7% decrease in revenue per click and a 2% reduction in online sales revenues, alongside an 8% reduction in profits due to compliance costs. Marketing experts predict that smaller firms, in particular, will face higher customer acquisition costs because they lack the resources to efficiently target audiences without the platforms’ data-aggregation capabilities. This has also led to a potential forced pivot toward more intrusive, less personalized ads or subscription-based models for platforms.

Additionally, new compliance and cybersecurity costs arise from managing explicit user consents and potentially collecting first-party data, with some small businesses reporting spending between €1,000 and €50,000 on GDPR compliance alone, increasing their regulatory costs by 20-30%.

The retail sector also faces substantial impacts, with estimated losses of between €4.4 billion and €59 billion, or up to 1.1% of the sector’s total turnover. These losses stem from reduced ad-targeting efficiency, a decline in organic traffic due to the stronger presence of intermediaries in search results, less-efficient recommender systems on marketplaces, and the loss of useful integrations like maps and review systems.

The accommodation sector has been particularly hard hit due to its heavy reliance on digital-platform services. Changes in Google Search results to comply with the DMA have led to a 36% drop in direct bookings for hotels through Google Hotel Ads for hotels (Delgado, 2024). Reduced visibility of Free Business Listing, which previously offered a costless and efficient discovery tool, has further diminished booking opportunities. These changes have inadvertently increased the prominence of Online Travel Agencies (e.g., Booking.com), leading to higher distribution costs and greater dependency on third-party platforms for hotels.

Stifled innovation and delayed services

Most concerning is the way the DMA has begun to stifle innovation in Europe. Some have referred to this as a “digital curtain” that separates European citizens from innovative digital services available elsewhere (Jebelli & Ledford, 2024). Indeed, regulatory uncertainty caused by the DMA has led companies to delay launching new products and features in the EU, or even bypass the European market altogether (Auer, 2024).

Concrete examples include delays in the rollout of advanced AI products and new social-media platforms. Google Gemini (an advanced AI for enhanced search) and Meta’s Threads (a new social-media platform) faced months-long delays in Europe, with some users waiting half a year for access. Google’s Gemini-powered AI Overviews—which offers multi-step reasoning capabilities in search results and has benefited more than a billion global users—were not immediately available in Europe.

Similarly, Meta announced in July 2024 that its new multimodal AI capabilities, which can interpret combinations of video, audio, images, and text for products like smartphones and smart glasses, would not be launched in the European Union due to regulatory uncertainties, despite being available in the UK and Brazil.

Apple, for reasons tied to Article 6(7)—which mandates interoperability with rival services—has also announced it will not roll out new AI features like Phone Mirroring, SharePlay Screen Sharing enhancements, and Apple Intelligence for its devices in the EU. These features, designed to enhance productivity and personalization, will leave EU consumers behind their global counterparts, affecting daily activities and EU’s users familiarity with cutting-edge technologies.

Conclusion

While the DMA was envisioned to promote a more competitive and fair digital market, its current implementation has imposed significant costs and functional disruptions on gatekeepers’ core platform services and, by extension, on businesses and consumers across the EU. We observe a clear tradeoff where the pursuit of market contestability has come at the expense of platform efficiency, user experience, economic vitality, and technological innovation. The evidence points to a critical need for a more nuanced and adaptable regulatory framework that carefully weighs these costs against the promised benefits, ensuring that European citizens and businesses are not disadvantaged in the global digital economy.

Do you have any comments in relation to the impact and effectiveness of the DMA?

Effectiveness is not the same as “success”. If a regulation is poorly designed, “effective compliance” or “effectiveness” may look more like failure than achievement. An act can be “effective” in a narrow sense, while still causing harm. With the DMA, compliance does not erase the significant costs and unintended consequences that cloud its supposed success. Similarly, “impact” can be positive or negative, intended or unintended, and either aligned with the DMA’s objectives or entirely external to them.

With that said, the Commission’s recently published second annual enforcement report on the DMA focused, as expected, on what has been achieved. The report celebrates concrete and measurable steps the Commission has taken to rein in “gatekeeper” platforms: investigations launched, compliance workshops held, and remedies imposed.

This is a selection of the seen effects: the visible indicators of action and the metrics that suggest movement (although not necessarily progress). A holistic analysis of the DMA’s impact and effectiveness must, however, also consider the “unseen” effects: the costs, tradeoffs, and unintended consequences that do not show up in press releases or enforcement statistics, but which may matter just as much.

The DMA’s achievements, according to the Commission

According to the Commission’s reports, the DMA’s visible achievements fall into three categories: designating new core platform services as “gatekeepers”; monitoring the implementation of substantive obligations; and addressing noncompliance with enforcement actions.

In its first year, six firms’ core platform services were designated as “gatekeepers” under the DMA’s terms—five American (Alphabet, Amazon, Apple, Meta, and Microsoft) and one Chinese (ByteDance). Last year saw two gatekeepers added to the list: the online-reservation platform Booking.com and Apple’s iPad OS.

On the monitoring front, the Commission initiated proceedings against Apple, alleging that it had not enabled “genuine” consumer choice (through choice screens) for selecting web browsers on iOS. It also scrutinized the integration and connectivity of Apple’s ecosystem (e.g., Apple Watch and iPhone) and initiated “specification proceedings” to demonstrate how Apple could remedy alleged deficits in interoperability. Regarding Alphabet and Microsoft, the Commission “corrected” the firms’ compliance with default settings and preinstalled apps on Android and Windows devices.

The Commission also initiated further enforcement action in some cases. For example, it took issue with Meta’s “pay-or-consent” model, whereby Facebook users could continue using the social-media platform for free in exchange for agreeing to be served ads, or they could pay a monthly fee for an ad-free experience. In April 2025, the Commission found Meta in violation of the DMA for not giving users a third choice: one that uses less personal data for targeted advertising.

But these enforcement statistics are relevant largely for regulators’ end-of-year reports and periodic evaluations. The cases brought may or may not be misguided. They may or may not pass a cost-benefit analysis. In other words: the fact that an infringement decision was issued or that a compliance workshop was held says nothing about whether the DMA benefits the public. For this, one must look under the hood.

Unseen effects

Details of the DMA’s implementation paint a rosy picture of accomplishment. But there are at least four kinds of other less obvious effects that deserve closer scrutiny:

• The DMA has thus far had mixed effects for consumers and businesses;
• The DMA competes with competition law for scarce enforcement resources;
• The DMA may divert attention from matters that have a greater impact on the “fairness and contestability” of European digital markets; and
• The DMA may exacerbate problems in an already-inflamed transatlantic trade relationship.

Effects on consumers and businesses

Among the dubious effects that can be attributed to the DMA are that mandatory third-party app stores and sideloading mandates have enabled the proliferation of pornography apps on iOS. Moreover, features like Apple Intelligence and the AI Suite were delayed in the EU due to concerns about DMA compliance. Others like advanced screen mirroring and SharePlay have not been released at all for much the same reason.

To avoid “self-preferencing” accusations, Google has removed or degraded popular features from its search engine, such as quick flight lookups in search results. This came after rivals complained that the one-box Google Flights search widget was unfair. The change caused some to initially witness traffic drops of up to 30% after Google’s first tweaks. Google was not displaying direct links to flights and hotels, as this would presumably be “unfair” to hotel and flight intermediaries (Delgado, 2024). Like Apple, Google also reportedly held back certain AI features or products in Europe pending regulatory clarity. For example, AI overviews were launched in only eight EU member states, and after nine months of delay.

A recent report by the Chamber of Progress (Jebelli & Ledford, 2025) provides a more detailed qualitative overview of the degradation of services due to the DMA, concluding that “[all] consumers have to show for [the DMA] are second-class digital services lagging behind the rest of the world”. The report identified increased user friction, reduced search efficiency, confusing and tedious choices, more irrelevant ads, less private and secure services, and delayed or unavailable innovations.

These consequences, as well as the follow-on effect of higher costs imposed on mostly U.S. firms, will be felt by European companies. According to one study based on industry interviews (Suominen, 2022), increased regulatory costs could lead EU firms to spend an additional 5% on technology services. “The DMA and DSA alone could imply an immediate cost increase of €71 billion ($71 billion) on European companies, equivalent to 0.3 percent of EU GDP”. (Ibid). Of special note, much of this would be incurred by European SMEs—an amount “equivalent to some 40,000 European jobs (measured as revenue over employment)”, according to the report.

Another report (Cennamo et al., 2025) found potential revenue losses of up to €114 billion “for firms in service sectors across the EU from the loss of efficiency of the most widely used digital services platforms. This corresponds to a loss up to 0.64% of the total turnover of the sectors considered”. Especially hard hit would be the accommodation sector (revenue losses of between €1 billion and €14 billion, with annual lost revenue per-worker of up to €3,579) and the retail sector (which could lose between €4.4 billion and €59 billion in revenues, with annual lost revenue per-worker of up to €1,122).

More generally, a recent study found that the market perceives a 10-20% negative impact on businesses from ex-ante regulation (Arai, 2025). Indeed, “over 60 percent of micro and small European firms stated that a 5 percent technology cost increase would be much worse or worse than inflation, slowing demand, or supply chain backlogs”. (Suominen, 2022).

None of this was noted in the Commission’s annual enforcement report.

Competition for enforcement resources

One must also consider the cost—not in Euros, but in institutional bandwidth—of enforcement itself. The DMA is enforced primarily by the European Commission’s Directorate-General for Competition (DG COMP), the same body responsible for applying the EU’s competition-law framework. This matters because the resources poured into DMA monitoring and enforcement—technical teams, legal experts, data scientists, policy analysts—are resources not available to investigate potential abuses of dominance, cartels, or anticompetitive mergers. Enforcement doesn’t scale effortlessly and regulatory capacity is finite, especially for understaffed public authorities.

The irony here is striking: DG COMP has already made digital markets a top enforcement priority for traditional competition law. The 2024 Competition Policy Report stated that the Commission is pursuing “several cases in digital markets against large digital companies”. These include cases that completely overlap with the “achievements” claimed under the DMA.

The glaring example here is Apple’s App Store practices, which faced a €1.8 billion fine for “preventing [developers] from informing iOS users about alternative and cheaper subscription services”. This demonstrates that the Commission is deeply engaged with the digital space through competition enforcement, regardless of the DMA.

The point is not to present competition and DMA enforcement as substitutes; the legislative history and text clearly present the two mechanisms as complementary. It is also true, however, that the DMA was originally pitched by invoking an imaginary consensus (Radic, 2025) that traditional competition tools are too slow or unwieldy for fast-moving digital markets.

That may be true in some cases. But if it is the DMA’s primary justification, we should ask whether the DMA actually fixes a flaw in the system, or simply displaces it with a different, possibly less accountable model. If traditional enforcement is “unworkable” (and the Commission’s own enforcement record raises doubts), then perhaps the answer is to reform how competition law is applied, rather than building a parallel regime that consumes the same limited resources. The risk here is one of duplication with little additional value. Indeed, application of both the DMA and competition law could result in legal fragmentation by treating the same conduct differently.

Diversion from core issues and enforcement opportunity costs

The prevailing sense that the DMA constitutes a significant institutional accomplishment may also distort policy priorities. It is no secret that the Commission sees itself not just as a market regulator, but as a standard setter for the world. The DMA has been presented as a model for proactive tech regulation in action. There is satisfaction, perhaps even pride, in being the global frontrunner in digital rulemaking.

But this attention and energy may come at the expense of less headline-grabbing tasks. One such task is the completion and enforcement of the single common market—a project that remains unfinished decades after its launch. Despite harmonization efforts, many European firms still struggle to scale across borders. Barriers in taxation, licensing, procurement, and logistics persist. Funding ecosystems remain fragmented, particularly for startups and small and medium-sized enterprises (SMEs). When asked by the European Investment Bank what makes scaling so hard for European firms, SMEs answered: availability of skilled staff, fragmented business regulations, and access to funding (EIB, 2023). Perhaps the answers to the fairness, contestability, and competitiveness of European digital markets should be sought here.

Indeed, in the current climate, the DMA risks becoming a source of regulatory displacement. It channels focus onto “gatekeepers” like Google and Apple—powerful and photogenic targets—while deflecting attention from structural problems that make life harder for European entrepreneurs. To put it more bluntly, most European startups are not failing because of platform dominance. They are failing because of fragmented markets and shallow capital pools (Garicano, 2025; see also Draghi, 2024). Yet these root causes are harder to tackle, less media-friendly, and more politically complex.

Harming the transatlantic trade relationship

The DMA’s early enforcement unfolds against an unusually incendiary transatlantic backdrop. In Washington, EU digital rules are increasingly framed as trade-salient measures that disproportionately burden U.S. firms. The Office of the U.S. Trade Representative’s 2025 national trade estimate flags EU digital measures as barriers, and administration statements and aligned advocacy portray the DMA as an “anti-American” regime that could warrant tariff or Section 301 responses. That perception—whether it is right or wrong—matters for stability, and it has plainly entered the U.S. policy conversation.

In parallel, commentary from various observers has underscored that tariff threats are already being brandished as leverage in response to European digital regulation, with the DMA repeatedly cited. These signals elevate the risk that individual DMA actions will be read in Washington through a trade lens, not one of competition policy.

Recent Commission decisions amplify those optics. The Commission has stressed nationality-neutral application and has, in fact, designated non-U.S. firms (e.g., ByteDance and Booking.com) and declined designation where warranted (e.g., iMessage). Yet the most visible enforcement milestones to date—the first noncompliance decisions and fines—have centred on U.S. firms, which inevitably reverberates in the U.S. trade debate. In a charged trade environment, these headlines can be—and routinely are—read to support retaliatory measures.

Against this backdrop, it would be prudent to accompany enforcement with a calibrated de-escalation and transparency package that safeguards the regulation’s objectives while lowering the temperature on the trade front.

First, a time-limited pause on launching new noncompliance proceedings on novel or highly contestable issues—framed as a window for clarifying standards—would create space to publish administrable guidance on the respective roles of Articles 3(5) and 3(8) (including what “manifestly call into question” means in practice and how forward-looking qualitative factors are weighed). This pause could also be used to commit to prompt, detailed, and nonconfidential versions of designation and noncompliance decisions.

Second, sequencing remedies to minimize trade salience—prioritizing proportionate, behaviour-based fixes and supervisory commitments, reserving structural measures only for egregious and repeated noncompliance and, absent urgency, only after judicial review—would reduce the scope for mischaracterization of the act as industrial policy, while remaining squarely within the DMA’s remedial toolbox.

Third, a communications and transparency track—regular plain-language case notes on evidentiary reasoning, and a simple “neutrality dashboard” showing the origin and mix of designated and non-designated services—would make the regime’s even-handedness legible to trade audiences. Taken together, these steps could help convey a sense of nationality-neutral enforcement.

Conclusion

In conclusion, whether right or wrong, the DMA is now the law of the land. As the European Commission celebrates the second year of DMA enforcement, Europe should not lose sight of what is often unseen (especially in official reports): the effects on consumers and businesses, the opportunity costs within DG COMP, the distraction from deeper single-market integration, and the risks to transatlantic alignment.

Additional Comments and Attachments

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Consultation on AI in the Context of DMA Review

Question 6: What are the main obstacles to developing AI models and commercialising AI-based products and services?

The discussion about competition in the AI realm and the alleged main obstacles to developing AI models and commercialising AI-based products and services is often framed in pessimistic terms, assuming that digital markets are prone to converge on “entrenched monopolies”; and, therefore, often ending with proposals of “pre-emptive enforcement” or to enact specific sectoral regulation (Barnett, 2024).

A more balanced assessment, however, reveals a market that is nonetheless vibrant, competitive, and dynamic at multiple layers of the value chain—even if there are some reasonable concerns about possible input foreclosure at some points. At the level of consumer-facing applications and services, such as large language models (LLMs) and other AI-powered tools, competition is especially intense. New entrants are proliferating, with novel products being launched at a rapid pace and often gaining millions of users within weeks.

The possibility of multi-homing—where consumers use two or more services simultaneously—further amplifies these dynamics. For instance, users can easily switch between or combine services like ChatGPT, Claude, and Gemini. This creates a fluid environment where no single provider can rely on entrenched dominance, since users face low switching costs and often experiment with competing offerings. The result is a high degree of rivalry on both features and performance, which benefits consumers and pushes firms to innovate continuously. As commentators have noted, these competitive pressures are visible in the constant cycle of upgrades and feature releases across providers of LLM-based applications (Auer & Zúñiga, 2025; Chilson, 2025).

At the model-development layer, the picture is more nuanced, but still more competitive than is sometimes assumed. It is true that the costs of developing frontier foundation models are substantial, involving millions of dollars in compute and data expenses. Yet the narrative that only a handful of incumbents can realistically operate in this space is overstated. Several competing players—such as OpenAI, Anthropic, Google DeepMind, Meta, Mistral, Cohere, xAI and Stability AI—are actively building and releasing new models. Moreover, the rise of open-source models has significantly lowered barriers to entry for new firms and research groups. Open-source projects like Meta’s LLaMA, Google’s Gemma, Mistral AI, and Falcon, among others, have made it possible for smaller organisations to adapt and deploy competitive models without incurring prohibitive training costs.

The case of DeepSeek is illustrative: by leveraging open-source foundations and focusing on fine-tuning and optimisation, it was able to produce a model that rivalled much larger efforts, demonstrating that creativity and efficient resource use can substitute, to some extent, for sheer scale. This open-source dynamic injects competitive tension into the model-development layer, ensuring that innovation is not monopolised by the largest players (Auer & Zúñiga, 2025; Chilson, 2025).

At the infrastructural layer, there are more credible risks of bottlenecks, particularly concerning access to specialised chips and to cloud-computing services. Nvidia currently maintains a commanding lead in the market for GPUs used to train and deploy AI models. Its CUDA ecosystem and advanced chips have made it the default choice for most developers. Nevertheless, this position should not be misinterpreted as uncontested dominance.

There is active competition from hyper-scalers developing their own chips: Google’s Tensor Processing Units (TPUs), Amazon’s Trainium and Inferentia processors, and Microsoft’s ongoing investments all represent attempts to reduce dependence on Nvidia and to diversify the supply of high-performance compute (although Microsoft has postponed that investment). In addition, startups such as Cerebras and SambaNova are pursuing alternative architectures that, while still niche, could prove disruptive if technological breakthroughs enable them to scale. Policymakers, therefore, should be cautious in treating the chip market as if it were inherently monopolistic.

A similar dynamic is observable in cloud computing. It is correct that a small number of providers—Amazon Web Services (AWS), Microsoft Azure, and Google Cloud—currently dominate AI workloads. This dominance is, however, checked by both competitive churn and new entry. Cloud customers frequently switch providers in response to pricing, service, and performance differences, and firms are increasingly adopting multi-cloud strategies to avoid lock-in (Chilson, 2025).

Furthermore, Oracle—once considered a marginal player—has invested heavily in expanding its cloud infrastructure and has begun to win significant AI-related contracts. This demonstrates that even markets with a concentrated structure are subject to competitive forces when customers retain credible alternatives. In short, while cloud computing represents a possible chokepoint for AI development, competition in this area is currently active and evolving.

Critically, many of the perceived bottlenecks in AI reflect not a lack of competition but the reality of high fixed costs, technological uncertainty, and economies of scale inherent to cutting-edge innovation. These are structural features of the industry, rather than evidence of anticompetitive conduct. Over time, as technologies mature, costs decrease, and knowledge diffuses, barriers to entry typically diminish, as has been observed in prior waves of general-purpose technologies.

Considering these dynamics, the main obstacles to AI development and commercialisation are best understood as challenges of scale and technological sophistication, rather than structural foreclosure imposed by dominant firms. Access to compute, chips, and data are genuine hurdles, but they are not insurmountable, and they are being actively mitigated by competitive entry, open-source innovation, and user multihoming. Policymakers should be cautious about adopting interventionist measures that assume a static, monopolistic landscape, as such measures could inadvertently stifle the very dynamism that has characterised AI markets thus far.

This review of the DMA provides an opportunity to reflect on how best to balance vigilance against genuine risks of input foreclosure, while also recognizing the robust competitive forces already at play. Overstating the risks of concentration could lead to regulatory overreach, undermining incentives for investment in infrastructure and innovation. A more prudent approach is to monitor potential chokepoints closely while allowing competitive dynamics—including those spurred by open-source models, cloud churn, and custom chip development—to continue shaping the market. This would ensure that regulation supports, rather than impedes, the competitive vibrancy essential for AI innovation.

Do you have any further comments or observations on the DMA’s role to ensure fairness and contestability in the AI sector?

In line with the above, it would be premature and potentially counterproductive to include AI services or products (such as LLMs or generative AI) to the list of core platform services (CPS) under the DMA.

First, it is important to recognize that AI is a general-purpose technology that is already embedded in several of the services expressly listed as CPS under the DMA, such as search engines and social-networking services (Art. 2(2) DMA). In these contexts, AI’s functionality is already covered by existing CPS designations, making the creation of a separate AI-specific category redundant. Moreover, introducing an additional category would risk regulatory duplication and legal uncertainty, since embedded AI services within existing CPS are already subject to gatekeeper obligations, and any standalone treatment would overlap with parallel frameworks such as the AI Act.

If the Commission were nonetheless to pursue inclusion of a specific category of AI service or product (for example, LLMs or foundational models) within the CPS list, this should follow a proper regulatory process. Such a process must begin by establishing a solid evidentiary basis that demonstrates relevant markets have tipped in favour of a few entrenched providers, due to the presence of strong network effects, the services’ multisided nature, a significant degree of dependence on both business and end users, lock-in effects, or vertical integration, as contemplated in Recital 2 of the DMA.

Any such regulatory process should subsequently include a thorough cost–benefit analysis of the proposed inclusion. In particular, it must be acknowledged that the obligations and prohibitions triggered by CPS and gatekeeper designation under the DMA are substantial, both in terms of compliance costs and in their effects on firms’ ability to monetize platforms. Extending these obligations to AI could undermine the very dynamism that currently defines these markets. As noted above, the AI ecosystem is characterised by rapid entry, robust open-source alternatives, and significant multihoming by users. In such a competitive environment, imposing gatekeeper obligations risks freezing a static conception of market power that fails to reflect the fluid and evolving nature of technological progress.

Finally, overlap with other regulatory initiatives—most prominently the EU Artificial Intelligence Act—raises a further concern. The AI Act already establishes horizontal rules governing transparency, safety, and risk management in AI systems. Adding a CPS category under the DMA would create duplicative, and potentially inconsistent, obligations. Rather than expanding the DMA’s scope, a more prudent approach is to rely on the AI Act to address systemic risks associated with AI, and to use the DMA only insofar as AI functionalities are already captured through existing CPS categories. This would preserve regulatory coherence, while avoiding unnecessary burdens on a still-developing and highly competitive sector.

Robust competition in the AI sector is manifest; there is no basis for incorporating AI services or products into the DMA.

In order to assist the Commission in understanding the competitiveness of this sector, we attach to this submission the following writings by the authors of these comments:

1. Stout & Hemphill, A Framework for Understanding and Evaluating AI Commercialization Strategies
2. Auer & Zuniga, AI Partnerships and Competition: Damned if You Buy, Damned if You Don’t
3. Manne, Albrecht, Auer, Radic, & Zúñiga, ICLE Comments on the CMA’s Provisional Findings on the Cloud Services Market
4. Manne, Auer, Stout, Radic, & Zúñiga, ICLE Comments on JFTC Request for Information and Comments Concerning Generative AI and Competition
5. Radic & Stout, What Is the Relevant Product Market in AI?
6. Manne, Auer, Stout, Radic, & Zúñiga, ICLE Comments to DOJ on Promoting Competition in Artificial Intelligence
7. Manne, Auer, Wudrick, & Zúñiga, ICLE and Macdonald-Laurier Institute Comments to Competition Bureau Canada Consultation on AI and Competition
8. Manne, Auer, & Zúñiga, ICLE Comments to UK Competition and Markets Authority on AI Partnerships
9. Manne & Auer, ICLE Comments to European Commission on AI Competition
10. Manne & Auer, From Data Myths to Data Reality: What Generative AI Can Tell Us About Competition Policy (and Vice Versa)

How is the DMA affecting AI rollout in the EU?

Perhaps most concerning is the way the DMA has begun to stifle innovation in Europe. Some have referred to this as a “digital curtain” that separates European citizens from cutting-edge digital services available elsewhere (Jebelli & Ledford, 2024). Indeed, regulatory uncertainty caused by the DMA has led companies to delay launching new products and features in the EU, or even to bypass the European market altogether (Auer, 2024). This is particularly true in the realm of generative AI.

Concrete examples include delays to Apple Intelligence and related capabilities: Apple publicly said in 2024 that it would hold back Apple Intelligence, iPhone Mirroring, and enhanced SharePlay Screen Sharing in the EU due to DMA interoperability requirements and the risk of compromising privacy and security. These features all were rolled out in the United States on schedule, even as they were explicitly withheld in Europe pending clarity.

Google’s rollout of AI services has likewise been staggered. When Google launched the Gemini mobile apps in May 2024 and made them ostensibly available “globally”, they were withheld in the EU and UK, with Google saying it would expand only where consistent with local rules. Moreover, while Google’s AI Overviews debuted in the United States in May 2024 and later expanded to many markets, EU availability remained limited amid heightened regulatory scrutiny. Indeed, several outlets reported EU holds or limited availability well into 2025. The upshot for European users was months of delayed access compared to peers in other regions.

Meta offers a parallel illustration of the broader regulatory chill around launching AI assistants in Europe. In June 2024, it paused the EU launch of Meta AI after Ireland’s Data Protection Commission (DPC) requested a delay over training-data issues. While that pause was seemingly driven more by the GDPR than the DMA, it underscores how overlapping EU regimes have combined to make firms sequence AI launches outside Europe first—precisely the pattern the DMA’s uncertainty exacerbates.

Taken together, these time-lags map onto the “digital curtain” that critics describe. Europeans get powerful AI capabilities later, or not at all, while the same products proceed elsewhere. That is the very dynamic many warned the DMA would catalyse when layered atop existing EU rules.

I. Introduction

Thank you for the opportunity to respond to the U.S. Justice Department (DOJ) and the National Economic Council’s (NEC) request for information on state laws, regulations, policies, and practices that adversely affect interstate commerce and business activities in other states.

The request correctly identifies a critical and growing threat to the American common market: the growing tendency of individual states—particularly those with large economies—to enact regulations that project their policy preferences nationwide. This practice imposes significant economic burdens on out-of-state businesses and consumers, creating negative externalities, stifling innovation, and undermining the principles of federalism and the Commerce Clause, which have been the bedrock of U.S. economic prosperity for more than two centuries. This phenomenon can be described as a form of regulatory protectionism achieved through market power. It represents a fundamental challenge to the constitutional design of a unified national economy.

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. Earlier this year, ICLE submitted comments to the DOJ and the Federal Trade Commission (FTC) regarding anticompetitive regulatory barriers, which are included as an appendix to these comments.^[1]

From the perspective of law & economics, the optimal legal regime is one that minimizes transaction costs and allows for the efficient allocation of resources across jurisdictions. A patchwork of conflicting state regulations governing national markets achieves the opposite; it erects barriers to trade, dramatically increases compliance costs, and leads to a fragmentation of the national economy. Such regulatory fragmentation prevents firms from achieving economies of scale, distorts investment decisions, and ultimately harms consumers through higher prices and reduced choice.

The frequent thread across these disparate regulatory areas is commonly known as the “California Effect,” referring to that state’s strategic use of its immense population (12% of U.S. population)  and market power (14% of U.S. GDP) as leverage to impose its regulatory will on the entire nation. Out-of-state firms are faced with a coercive choice: either adopt California’s standards for all of their national operations or forfeit access to the nation’s largest state economy. This dynamic creates de-facto national standards without national consensus or congressional deliberation, fundamentally distorting the principles of federalism.

For instance, the DOJ was right to file suit against California for its burdensome regulations on the production of eggs.^[2] California laws effectively drive up the price of eggs for the whole nation by regulating the allowable space of confinement for chickens, and making it illegal to sell eggs produced out of state that do not conform to these laws. This is despite the California Department of Food and Agriculture admitting there being no basis in science that these regulations “reduce food-borne illnesses… or [address] other human or safety concerns.”^[3]

The California Effect is not limited to California, however, as the strategy is now employed by numerous states seeking to establish themselves as “leaders” in advancing specific social or environmental policies. The dynamic is most visible in vehicle emissions, where 17 states and the District of Columbia have voluntarily adopted California’s stricter standards, creating a regulatory bloc that controls more than 40% of the U.S. auto market and effectively sets a national standard. This pattern extends to other areas, as well. Numerous states have followed California’s lead by enacting their own data-privacy and climate-disclosure requirements.

Officials in states like New York, New Jersey, and Maryland have openly celebrated their adoption of California’s standards as a means to achieve their own policy goals. This trend illustrates a broader shift in federalism, where multiple states—driven by their own policy ambitions—are willing to create regulatory patchworks that impose their preferences on the national economy, leading to the very balkanization that the Commerce Clause was designed to prevent.

Compounding this problem is a clear trend of judicial reticence. Recent Supreme Court jurisprudence, particularly in National Pork Producers Council v. Ross^[4] and in the denial of certiorari in the challenge to California’s Assembly Bill 5,^[5] signals a significant retreat from the judiciary’s traditional role in policing state laws with extraterritorial effects under the Dormant Commerce Clause or many federal preemption statutes.

The Court has shown a reluctance to weigh a state law’s asserted local benefits against its out-of-state economic harms, effectively weakening a key constitutional check on state overreach. This judicial deference implicitly shifts the primary venue for resolving such disputes from the courts to Congress and the executive branch. The political branches must therefore act to reassert federal authority over interstate commerce.

II. A Practical Note on Tactical Considerations

The DOJ, in particular, has an important role to play in promoting a common market and economic growth through the use of advocacy and litigation. Workshops and research on the national effects of state laws could go a long way toward establishing a record for future legislation and litigation.

The DOJ should also engage in strategic litigation of its own, and submit amicus briefs in cases brought by others, targeting state laws with negative extraterritorial effects. As noted above, the DOJ’s intervention against California’s laws regulating the egg industry could, if successful, have positive effects on the pocketbooks of Americans nationwide.

In order to be most effective in litigation, the DOJ should focus on federal laws and regulatory schemes that offer field preemption or something like the “significant interference” standard from federal banking law.^[6] In these situations, courts are much more likely to find federal law preempts harmful extraterritorial state laws. As noted above, Dormant Commerce Clause arguments have been significantly weakened by recent Supreme Court jurisprudence. Similarly, Supremacy Clause arguments based on conflict preemption are also much more difficult to sustain, as states need only to show that affected parties can comply with both federal and state law in order to survive.

For instance, the Federal Meat Inspection Act preemption clause has been found to “sweep[] widely” and, as such, it “prevents a State from imposing additional or different—even if non-conflicting—requirements that fall within the scope of the Act.”^[7] In that case, preemption applies “[w]here under federal law a slaughterhouse may take one course of action in handling a nonambulatory pig, [but] under state law the slaughterhouse must take another.”^[8] Similarly, as detailed further below,^[9] federal banking laws like the National Banking Act allow nationally chartered banks to exercise certain powers that state law cannot prevent and with which it cannot significantly interfere.

The DOJ should also continue to advocate for the application of the Dormant Commerce Clause against state laws that would fail the Pike balancing test accepted by the plurality of the Supreme Court in National Pork Producers Council. The DOJ should also advocate for a stronger Dormant Commerce Clause in select cases where the harms caused by state laws are especially clear.

Below, in addition to legislative solutions, we offer examples of laws that the DOJ and other executive agencies should consider in their efforts to restore a common market and promote economic growth.

III. Automobile-Dealer Franchise Laws

State automobile-dealer franchise laws are anachronistic, anticompetitive, and unconstitutional relics of a market that ceased to exist more than half a century ago. They serve no legitimate public-policy purpose. Instead, they function as a classic example of crony capitalism, where a politically powerful special interest group has captured the legislative process to protect itself from competition and innovation. The costs of this protectionist regime are borne by the entire nation in the form of higher prices, reduced consumer choice, suppressed technological advancement, and a fragmented national market.^[10]

To wit, this section details the economic harms and legal infirmities of these protectionist statutes. It urges the DOJ and NEC to pursue a coordinated federal strategy to dismantle these barriers and restore competition to the U.S. automobile market.

The origins of franchise laws trace to a period from the 1930s to the 1950s when the U.S. automobile market was overwhelmingly dominated by the “Big Three” domestic manufacturers.^[11] In this environment, manufacturers were perceived to be abusing their superior bargaining power to pursue exploitative practices. States responded by passing rules governing automotive franchise laws, ultimately leading to statutes in all 50 states. Critically, the intent behind these state laws was to rebalance power in interbrand relationships: that is, the laws were intended to address the carmakers’ vertical power over their own network of franchised dealers.

State laws from this period included bars on various activities, from compelling dealers to accept otherwise unwanted vehicles, to terminating franchise status without cause, to granting additional franchises within an existing dealer’s franchise area. Yet among the vestigial prohibitions, the ban on manufacturers selling directly to consumers is at once the most obviously disruptive to commerce and the most unmoored from the laws’ original rationale. Indeed, the entire legal regime was premised upon the interaction between a manufacturer and a franchisee, and the relative power in that relationship.

The contemporary automobile marketplace bears no resemblance to its mid-20th Century antecedent. The relative market share of the “Big Three” has dropped from roughly 90% in the 1950s to just 40% today.^[12] Interbrand competition has come to define the market and has rendered effectively moot concerns about powerful franchisors coercing dealers—an industry that has itself evolved from “mom and pop” operations to large publicly traded conglomerates.

The persistence of dealer franchise laws, despite the utter evaporation of the market conditions that led to their adoption, is a textbook example of regulatory capture, as predicted by Public Choice Theory. In this case, the interest group (auto dealers) has hijacked the policy process to generate rents, while distributing the associated costs broadly to consumers. For example, in Michigan, the state passed an update to its franchise act at the behest of dealers specifically to preclude Tesla from the market.^[13]

Blocking new entrants from the automotive marketplace on the basis of their preference for direct sales is legally unsupportable. Indeed, the market’s new entrants—such as Tesla, Lucid, Rivian, and Scout—have no franchisees to protect. There is simply no interbrand relationship to regulate, as has been recognized by at least one state supreme court.^[14] The core analytical flaw in every defense of dealer franchise laws is this fundamental category error: they conflate the legitimate (albeit outdated) regulation of an existing vertical relationship with the illegitimate prohibition of a competing business model.

The Dormant Commerce Clause prohibits states from enacting laws that facially discriminate against, or place an undue burden upon, interstate commerce. State dealer franchise laws discriminate against interstate commerce by dictating a specific business structure that an out-of-state manufacturer must adopt to access that state’s market. Arguments about public health and safety offered by dealers are clearly pretextual, and have been consistently debunked by legal scholars, economists, and FTC staff.^[15]

Even if found not to be discriminatory, dealer franchise laws still fail the balancing test the Supreme Court articulated in Pike v. Bruce Church, Inc., which held that a state law may be held invalid if “the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”^[16]

The burden of dealer franchise laws bears considerable weight, since it impacts both consumers and the development of an entirely new set of entrants to the automotive market, and thereby price-moderating competition. The costs borne by the latter were highlighted in a 2009 paper by a DOJ economist, citing a Goldman Sachs report. The report estimated that direct distribution could reduce the cost of a new vehicle by as much as 8.6% (more than $2,200 per vehicle) through efficiencies in matching supply with demand, lower inventory costs, and reduced sales commissions.^[17] In effect, in agitating to uphold such laws, dealers seek to mandate a hidden tax on most vehicle purchases in the nation.

To address these issues, the DOJ should take action. Specifically, the DOJ’s Anticompetitive Regulations Task Force should:

1. issue a formal report detailing the anticompetitive harms of state direct-sales prohibitions;
2. file statements of interest and amicus curiae briefs in ongoing private litigation challenging these laws, lending the federal government’s legal weight to the cause of competition, much as legal and economic scholars have done in cases like Lucid v. Georgia; and
3. explore direct legal challenges against states, arguing that their laws are unconstitutional under the Dormant Commerce Clause or are otherwise preempted by federal policy.

IV. State and Local Land-Use Regulations

While land-use regulation is traditionally a local prerogative, a growing body of economic research demonstrates that the cumulative effect of overly restrictive local zoning and development policies, particularly in the nation’s most productive metropolitan areas, has created a formidable barrier to interstate commerce. These regulations—including urban growth boundaries (UGBs), inclusionary zoning mandates, restrictive design reviews, and excessive system-development charges (SDCs)—artificially constrain the supply of housing and inflate its cost.

The primary interstate burden of these local policies is the impediment to labor mobility. By making it prohibitively expensive for Americans to move to areas with the greatest economic opportunity, these regulations misallocate the nation’s most valuable resource—its human capital. Workers in lower-productivity regions are effectively trapped, unable to access higher-wage jobs in more dynamic economies, which in turn suppresses national economic growth, reduces overall productivity, and exacerbates regional inequality.

Restrictive land-use regulations directly drive up housing costs to levels far exceeding the physical cost of construction. Research demonstrates that these policies are a primary cause of housing unaffordability in highly regulated markets, such as those on the West Coast.^[18] For example, Oregon’s UGBs have been shown to constrain land supply and contribute to housing-price increases. Since Portland, Oregon’s adoption of its UGB, the local home-price index has increased at an annual rate 27% higher than the national average.^[19]

Similarly, inclusionary zoning ordinances, which require developers to sell or rent a percentage of new units below market rates, function as a tax on new construction. This can reduce the overall supply of housing and increase the cost of market-rate units. Portland’s implementation of such an ordinance was followed by an immediate and significant drop in new multifamily housing permits, from an annual average of 3,915 to just 1,709 in the first full year.^[20] Excessive SDCs and lengthy design-review processes add further costs and uncertainty.

The most significant interstate consequence of these inflated housing costs is the creation of a barrier to labor mobility. High housing prices in the nation’s most productive cities prevent workers from moving to take advantage of better job opportunities. This geographical misallocation of labor has a depressive effect on aggregate economic growth. Businesses in high-cost areas struggle to attract and retain workers, while the national economy suffers from a less efficient allocation of talent.

Direct federal preemption of local zoning is politically difficult and faces legal challenges, as land use is a power traditionally reserved to the states and delegated to localities. This does not, however, render the problem intractable to federal action. The federal government has a long and established history of using its spending power to influence state and local policy, particularly in the realm of housing and infrastructure.

Congress and the executive branch should condition federal funding from programs such as the Community Development Block Grant (CDBG) program, the HOME Investment Partnerships Program, and federal transportation grants on state and local governments implementing meaningful reforms to their land-use and zoning regulations. Such reforms should include, but not be limited to, eliminating or expanding UGBs; legalizing higher-density housing “by right” (especially near transit); streamlining permitting processes; and ensuring that development fees are proportional to the marginal cost of providing new services.^[21] This creates a powerful reason for localities to internalize the national economic costs of their restrictive policies.

The U.S. Department of Housing and Urban Development (HUD) is the agency with the primary expertise and programmatic infrastructure to administer such an incentive-based system. The U.S. Transportation Department (DOT) should also be involved to ensure that its grantmaking encourages transit-oriented development and corresponding zoning reform.

V. Prevailing-Wage Laws

We noted in our earlier comments to the DOJ and FTC that prevailing-wage laws and project labor agreements (PLAs) represent significant regulatory interventions in construction-labor markets that substantially distort competition, inflate costs, and create artificial barriers to market entry.^[22] These regulations—including the federal Davis-Bacon Act (1931), state “Little Davis-Bacon” acts,  and government-mandated PLAs—fundamentally alter market dynamics by imposing wage floors and labor terms that would not emerge under competitive conditions.

Traditionally, prevailing-wage laws and PLAs have had little effect on interstate commerce. This year, however, Oregon enacted HB 2688, which will have far-reaching effects on interstate—and possibly international—commerce.^[23] The law extends state-specific prevailing-wage requirements to offsite manufacturing, regardless where that manufacturing occurs. While such laws apply to labor performed at the physical jobsite of a public project, the Oregon law expands this mandate to cover the offsite fabrication of “bespoke” or custom-made components, such as HVAC systems, structural elements, and plumbing systems.

This is a clear attempt by a state to regulate economic activity far beyond its borders. This extraterritorial application of state law violates the principles of the Commerce Clause, creates economic protectionism that harms Oregon-based businesses, and could impose substantial costs on public-infrastructure projects nationwide.

The critical issue of federal concern is the law’s explicit extraterritorial reach. Under HB 2688, a manufacturing firm producing a custom part for an Oregon public-works project in another state would be legally required to pay its workers Oregon’s prevailing wage for that work. This is a direct attempt by one state to impose its labor and wage standards on businesses operating entirely within the jurisdiction of other states.

The Dormant Commerce Clause prohibits states from enacting laws that unduly burden or discriminate against interstate commerce. HB 2688 is a clear violation of this principle. It is not an incidental effect, as the law is explicitly designed to control the wages paid for manufacturing that occurs outside of Oregon. This creates a direct burden on out-of-state firms, forcing them to comply with Oregon’s wage scales, which may differ significantly from the wages and economic conditions in their own localities.

Federal intervention is necessary to prevent Oregon from setting a precedent that could lead to a fractured national economy, where every state attempts to apply its own labor laws to any product that crosses its borders. The DOJ should challenge the law in federal court before its July 1, 2026 effective date by seeking an injunction to prevent its enforcement. The legal argument should focus on the law’s explicit extraterritoriality and its discriminatory effect on interstate commerce. Congress could also enact legislation clarifying that state prevailing-wage laws cannot be applied to manufacturing and fabrication that occurs outside the state’s geographic boundaries.

The U.S. Labor Department (DOL) has primary subject-matter expertise in this area, as it administers the federal Davis-Bacon Act, which governs prevailing wages on federally funded projects. The DOL can provide essential analysis on the burdens that extraterritorial state wage laws place on the national labor and manufacturing markets. The DOJ would be the appropriate agency to initiate legal action to enjoin the law.

VI. Certificates of Convenience and Necessity and Certificates of Need

We noted in our earlier comments to the DOJ and FTC that certificates of convenience and necessity (CCNs) and certificate-of-need (CON) laws represent some of the most formidable government-imposed barriers to market entry across numerous regulated industries.^[24] CCNs and CONs are formal authorizations that permit companies to initiate operations or construct facilities in specific geographic areas. They effectively create government-sanctioned monopolies or oligopolies that undermine basic economic principles of competition.

CCNs are commonly required for private firms to provide various utilities—such as electric, gas, and water services—but may also be required to provide various services deemed to be common carriers. Health-care facilities may be subject to CONs and certificates of public advantage (COPAs). Each of these “certificate” laws are explicitly designed to protect incumbent, in-state providers from new competition—including from out-of-state businesses—thereby creating direct and substantial burdens on the national market.

The primary adverse impact of these laws is the erection of anticompetitive barriers to entry. CON laws, which apply to the health-care sector in 35 states and the District of Columbia, prevent out-of-state medical providers from establishing new facilities or offering innovative services unless they can prove to a state board—often composed of their potential competitors—that their service is “needed.” This process is notoriously burdensome and expensive, often taking years and costing tens of thousands of dollars in fees. It effectively insulates existing hospitals and providers from competition. The Institute for Justice has argued that the system violates the Dormant Commerce Clause by restricting the interstate market in medical equipment and services, as an out-of-state medical-device manufacturer may be unable to sell its products to a Virginia provider who is denied a CON to use them.^[25]

Similarly, CCN laws grant exclusive, monopolistic territories to utilities providing services like water, sewer, or telecommunications. This framework prevents out-of-state or alternative providers from entering a market to offer more competitive pricing or innovative services, locking consumers into a single, state-protected provider.

This suppression of competition leads directly to higher costs and lower quality for consumers. A large body of economic research demonstrates that CON laws are associated with higher health-care prices, increased per-capita spending, and worse patient outcomes.^[26] We reported in our earlier comments that the FTC and DOJ have both concluded that these laws can suppress supply, misallocate resources, and enable anticompetitive agreements among providers, without delivering on their stated goals of lowering costs or improving quality.^[27]

Congress has clear authority under the Commerce Clause to regulate interstate markets for health care and utilities. The federal government has also previously intervened in this area; the National Health Planning and Resources Development Act of 1974 once mandated that states adopt CON laws, but Congress repealed this mandate in 1986, as evidence of their failure mounted. Congress should now act to explicitly preempt state CON and CCN laws that create barriers to entry for out-of-state providers, or otherwise burden the interstate flow of services and capital. Such legislation would dismantle these state-level cartels and restore competition to these critical sectors.

The DOJ and FTC have long recognized the anticompetitive nature of CON laws and should continue to challenge them through antitrust enforcement and advocacy. These agencies can file amicus briefs in support of private litigation challenging these laws under the Dormant Commerce Clause and can launch their own investigations into how these regulatory schemes facilitate anticompetitive conduct.

The federal government also provides substantial funding to states for health care through the U.S. Department of Health and Human Services (HHS) and for various utility and infrastructure projects. The administration should condition receipt of these funds on the full repeal of a state’s CON and CCN laws. This would create a powerful financial reason for states to eliminate these protectionist policies that harm the national economy.

The relevant federal agencies with subject-matter expertise are HHS, the FTC, and the DOJ for CON laws, and the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC) for CCN laws related to energy and telecommunications, respectively.

VII. Corporate Practice of Medicine

The corporate practice of medicine (CPOM) doctrine refers to regulations that restrict both standard corporations and other nonphysician entities from employing physicians or directly engaging in medical practice. Initially, CPOM regulations were driven by concerns that corporate involvement in medicine would prioritize financial interests over patient care. But CPOM regulations were never based on empirical assessments of problems that were (or were not) associated with one or another model of health-care delivery or practice management. Whatever their historical rationale, the CPOM policy solution appears to be a poor fit to the complexities of modern health care.

At best, the CPOM doctrine represents an early attempt to address theoretical market failures in health care—specifically, concerns about information asymmetries between providers and patients, and potential principal-agent problems that might arise when corporate interests influence medical decisionmaking. The modern CPOM landscape does not, however, serve to address any such concerns because, in practice, the laws see extreme variance in their application—undermining their coherence and predictability.

For instance, many of the distinctions between entities that are or are not permitted to employ or supervise physicians have little to no empirical foundation. Not a few seem the product of rent-seeking rather than research-based policy reform. Consider that, in New York, some recent cases involving CPOM have essentially amounted to business disputes among private parties, rather than public enforcement. Physicians have even used the doctrine as a defense against contract claims filed by corporations.[28]

To the extent that the primary goal of CPOM doctrine is to ensure quality care, it may paradoxically hinder this objective by stifling innovation. For example, the corporate business form plays a crucial role in facilitating industry expansion. Unlike other entity structures—such as sole proprietorships, general partnerships, and limited partnerships—the corporate form offers limited liability, a formalized structure, and liquidity. These traits are key features that attract investors and enable the efficient raising of capital, which in turn fosters business growth.

In an era in which innovation is essential to improving health-care accessibility and efficiency, CPOM restrictions hinder the adoption of corporate structures and emerging technologies in the provision of health care. Reforming these regulations could unlock significant advancements, fostering a health-care system better equipped to meet patients’ needs in the modern age.

Toward this end, the DOJ should seek to collaborate with the FTC to assess the empirical case for CPOM restrictions, as applied, in order to assess the extent to which the intended benefits actually accrue, in light of the tremendous costs associated with foregone investment and, at best, compliance efforts. In the event that the research supports moving away from the existing patchwork of CPOM laws, federal competition agencies would do well to support state legislation geared toward reform.

VIII. Marijuana Trafficking

The growing conflict between state laws legalizing recreational marijuana and its continued prohibition under the federal Controlled Substances Act (CSA)^[29] has created a significant negative externality: large-scale, illicit interstate trafficking. This problem stems directly from a failure of federal enforcement policy to manage the predictable consequences of a state-by-state legalization patchwork.

In 2013, the DOJ issued the “Cole Memorandum,” which established a policy of discretionary non-enforcement of the CSA in states that had legalized marijuana, provided those states implemented “strong and effective regulatory and enforcement systems” to prevent certain harms.^[30] A key federal priority identified in the memo was “[p]reventing the diversion of marijuana from states where it is legal under state law in some form to other states.” While the Cole Memo was rescinded in 2018,^[31] subsequent administrations have largely continued a similar policy of prosecutorial discretion, creating de-facto tolerance for state-legal markets.

The interstate commerce burden arises because this policy of federal deference has failed. States with legalized markets have become source hubs for a massive illicit trade that supplies marijuana to states where it remains illegal. Criminal organizations exploit price differentials between legal markets, where supply is abundant, and prohibition states, where black-market prices are higher. These organizations operate under the cover of state-legal systems to produce marijuana for illegal export, directly contravening a core premise of the federal government’s permissive stance.

The primary adverse impact of this failed federal policy is borne by the citizens and governments of states that have chosen not to legalize marijuana. These states are forced to expend significant public resources to contend with an influx of illegal drugs originating from states with legal markets. Law-enforcement agencies in neighboring states report a dramatic increase in marijuana-related enforcement actions tied directly to diversion. In Nebraska, which borders Colorado, law-enforcement agencies have noted a significant rise in traffic stops and seizures of marijuana being transported east on Interstate 80.^[32] Similarly, the Kansas Highway Patrol has engaged in a practice of targeting vehicles with Colorado license plates—a practice that, while found to be unconstitutional, highlights the perceived scale of the trafficking problem.^[33]

States with newly liberalized marijuana laws have become magnets for transnational criminal organizations. The Oklahoma Bureau of Narcotics has conducted numerous large-scale busts of illegal grow operations run by Chinese crime syndicates and Mexican drug cartels that were established after the state legalized medical marijuana.^[34] These operations produce marijuana not for the Oklahoma medical market, but for illicit trafficking throughout the country. This demonstrates that the regulatory systems in legalizing states are not preventing diversion, as the Cole Memo framework presumed they would.

The illicit trade imposes substantial social and economic costs on receiving states, including increased burdens on their criminal-justice systems, public-health services, and child-welfare agencies. These costs represent a direct transfer of the negative consequences of one state’s policy choice onto the citizens of another—a classic negative externality that the federal government has a duty to address.

This issue is exceptionally amenable to federal action, as the underlying conduct—the cultivation, distribution, and possession of marijuana—remains illegal under federal law. The CSA provides the federal government with clear and undisputed authority to regulate interstate drug trafficking. The current problem is not a lack of federal authority, but a failure to exercise that authority in ways that respect the federalist system and protect non-legalizing states from the spillover effects of their neighbors’ policies.

The policy of deference outlined in the Cole Memo was an exercise of prosecutorial discretion, not a change in the law. The executive branch can, at any time, revise its enforcement priorities to address the documented failure of legalizing states to prevent interstate diversion. This does not require new legislation; it requires the enforcement of existing law to mitigate the interstate harms that the current policy enabled. The federal government’s constitutional authority to regulate commerce among the states includes the power—and the responsibility—to prevent the policy choices of one state from inflicting direct economic and social costs on another.

The DOJ should formally reestablish and vigorously enforce the federal priority of preventing the diversion of marijuana from states with legal markets to other states. This should involve targeting, investigating, and prosecuting individuals and criminal organizations that exploit state-legal regimes to traffic marijuana across state lines. This policy should be clearly communicated to U.S. attorneys and to officials in states with legal marijuana, making it clear that the federal government’s continued policy of general noninterference is contingent on those states demonstrating effective control over diversion.

The DOJ, including its components such as the Drug Enforcement Administration (DEA) and the U.S. Attorneys’ Offices, is the agency with the sole jurisdiction, expertise, and responsibility for enforcing the Controlled Substances Act and addressing illicit interstate drug trafficking.

IX. State Antitrust and Unfair-Competition Laws

In some cases, state antitrust or unfair-competition laws diverge from federal competition law. This creates problems not only by raising compliance costs, but also—when state rules are more stringent—by potentially restricting competition itself. Paradoxical as it may sound, an overly stringent reading of antitrust law can stifle efficient contracts or business models, deter integrations that lower costs and prices, and ultimately harm the very consumers they are meant to protect.

California’s Unfair Competition Law presents a paradigmatic example of state legislation that significantly affects interstate commerce and imposes substantial economic costs beyond California’s borders. The statute—codified at California Business & Professions Code § 17200—prohibits “any unlawful, unfair or fraudulent business act or practice,” with courts interpreting the “unfair” prong to reach conduct that may not violate federal antitrust law.^[35] When applied to businesses operating in national markets—particularly digital platforms—the UCL effectively compels nationwide changes to business practices, product designs, and contractual relationships, thereby imposing California’s regulatory preferences, which may well run counter to federal antitrust law, on the entire country.

The recent Epic Games v. Apple litigation illustrates how California’s UCL can supersede federal antitrust policy through nationwide injunctions. In that case, the district court rejected Epic’s federal antitrust claims, finding that Apple’s restrictions on third-party app stores and in-app payment systems did not violate the Sherman Act.^[36] Nevertheless, the same court held that Apple’s anti-steering provisions violated the UCL’s “unfair” prong and issued a permanent injunction requiring Apple to modify its App Store policies nationwide.^[37] The 9th U.S. Circuit Court of Appeals affirmed both holdings, creating an incongruous result in which conduct explicitly found lawful under federal antitrust law was enjoined across the United States based on California’s broader unfairness standard.^[38]

This outcome generates significant interstate economic costs through multiple channels. First, platforms and other businesses operating nationally must harmonize their products and services to comply with California’s standards. As Lazar Radic and Daniel Gilman note, “this discrepancy effectively enables a single state’s unfair competition law to undermine federal antitrust policy nationwide.”^[39] This renders the UCL a de-facto federal regulation without the procedural safeguards or democratic input that federal lawmaking requires. The situation presents precisely the type of state law that warrants federal attention: one that imposes substantial compliance costs on out-of-state businesses, creates negative externalities for consumers nationwide, and undermines the coherence of federal competition policy.

Second, the UCL’s expansive reach creates risks of conflicting state mandates that cannot be reconciled in a single national product or service. If other states adopt divergent unfairness standards with different requirements for platform operations, businesses face mutually inconsistent obligations that increase legal uncertainty, operational complexity, and barriers to entry. This regulatory fragmentation is particularly problematic in digital markets, where platform operations are inherently interstate and cannot easily be segregated by geography.

Third, the availability of UCL claims enables strategic forum shopping, allowing litigants to circumvent federal antitrust standards by pursuing state law claims in California courts. Our brief on the Epic Games v. Apple case warned that the panel’s decision, if left standing, “risks chilling procompetitive conduct by deterring investment in efficiency-enhancing business practices, such as Apple’s ‘walled-garden’ iOS.”^[40] This undermines the coherence and predictability of federal competition policy, as conduct deemed procompetitive under federal law can nevertheless be enjoined nationwide under California’s more expansive standard. More fundamentally, it “risks creating a fundamental contradiction by enjoining conduct under the UCL that is benign—and even beneficial—under antitrust law.”^[41] This allows California to effectively override federal competition policy through state unfair-competition law, creating a patchwork of potentially conflicting standards that businesses operating nationally must navigate.

The theoretical constraint on the UCL’s reach—the requirement that unfair conduct be tethered to antitrust law—has proven insufficient to prevent these extraterritorial effects. Under Cel-Tech Communications, Inc. v. L.A. Cellular Telephone Co., the UCL’s unfair prong for competitor suits requires conduct that “threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law.”^[42] But as Epic v. Apple demonstrates, courts have interpreted this tethering requirement broadly enough to condemn conduct that federal courts have explicitly found promotes competition and consumer welfare.

The economic impacts extend beyond direct compliance costs. When California law forces changes to national platform policies, it affects the entire ecosystem of businesses and consumers who rely on those platforms. In Epic v. Apple, the injunction’s effects ripple through to the millions of app developers who must adapt to new payment systems and policies, potentially increasing transaction costs and reducing the security benefits that the district court recognized as legitimate procompetitive justifications for Apple’s original policies.¹¹ These spillover effects demonstrate how a single state’s competition law can reshape entire industries operating in interstate commerce.

This situation presents the type of state law that warrants federal attention under this RFI. The UCL’s application to national digital markets creates negative externalities for out-of-state businesses and consumers, invites regulatory balkanization, and undermines the uniformity of federal competition policy. Federal legislative or regulatory intervention may be necessary to clarify the relationship between state unfair-competition laws and federal antitrust standards, particularly in markets where business operations are inherently interstate and cannot be effectively segregated by state boundaries.

California has also been at the forefront of fragmenting federal antitrust law in other ways. For example, the California Law Revision Commission (CLRC) is currently reviewing proposed amendments to the state’s antitrust statutes, particularly the Cartwright Act, with a major goal of distancing California from the perceived constraints of federal antitrust law that limit liability for single-firm conduct under Section 2 of the Sherman Antitrust Act.^[43] This initiative risks fragmenting U.S. antitrust law by proposing amendments to the Cartwright Act that systematically contravene federal antitrust principles.^[44] These proposed changes aim to achieve this by abandoning the traditional error-cost framework, which prioritizes avoiding false positives (Type I errors) in favor of preventing underenforcement based on unsubstantiated assumptions.

Furthermore, California seeks to overturn key Supreme Court precedents: relaxing standards for refusals to deal, moving closer to the more interventionist EU approach and risking chilled innovation; allowing antitrust liability based on harm to only one side of a two-sided market, thereby neglecting the holistic economic analysis required for platform economies and shifting away from the consumer-welfare standard; and removing the recoupment requirement for predatory pricing, thus lowering the evidentiary standard and risking the deterrence of pro-competitive, low-price behavior. This collective departure from the established U.S. antitrust framework, driven by an “unexamined assumption” that more enforcement is inherently better, risks deterring pro-competitive behavior, harming consumers and innovation, and dismantling decades of settled doctrine—ultimately threatening the predictability and coherence of U.S. antitrust law.

Because California’s market is so large, firms cannot realistically confine their practices to one state. In other words, stricter Cartwright Act rules would effectively shape business conduct nationwide, forcing companies to adjust policies across state lines beyond what federal antitrust law requires. This legal fragmentation also invites forum shopping and raises compliance costs, undermining the predictability of a unified federal antitrust system and chilling pro-competitive behavior beyond California.

There are also some instances where states, either through legislation or judicial precedent, continue to treat certain vertical restraints as per-se unlawful, even after the Supreme Court made clear that such restraints should be evaluated under the rule of reason, in light of their potential pro-competitive and pro-consumer benefits. Since the 1970s, federal antitrust law has recognized that vertical restrictions may generate efficiencies—e.g., when the Court abandoned the per-se rule against non-price vertical restraints, emphasizing their role in promoting interbrand competition.[45]

The Court later extended this reasoning to resale price maintenance, holding that such agreements are not automatically illegal but must be judged under the rule of reason.[46] The Court found that such agreements can have procompetitive benefits, such as encouraging retailers to invest in services or promotional efforts that enhance interbrand competition and allowing manufacturers to compete not just on price, but on quality and service. In response to Leegin, however, some states—such as Maryland and New York—enacted laws declaring resale price maintenance illegal or unenforceable.^[47] Some states, like Utah, have enacted specific sectoral regulation, such as the Contact Lens Consumer Protection Act (2015), which bans minimum resale-price maintenance practices in the contact-lens sector.^[48]

These rules not only directly contradict a Supreme Court precedent; in their eagerness to protect specific competitors, they prohibit business practices that promote efficiency. They therefore undermine the very essence of the market economy that has allowed the United States to become the largest and most innovative economy in the world. In order to promote greater economic growth, these regulations should be repealed.

X. Automotive and Fuel Markets

The most profound examples of the “California Effect” can be found in the state’s influence over the national automotive and fuel markets. This influence stems from a suite of interlocking state regulations that project California’s policy preferences across the country.

The foundation of this influence was a unique waiver from federal preemption under the Clean Air Act that allowed the state to set its own, more stringent vehicle-emissions standards. This authority was magnified by Section 177 of the act, which permits other states to adopt California’s standards. Currently, 17 states and the District of Columbia have adopted California’s light-duty vehicle standards. Meanwhile, 10 states have adopted its heavy-duty standards, creating a regulatory bloc that effectively sets national policy for more than 40% of the U.S. population.

This de-facto national standards-setting for vehicles is complemented by a series of state-specific fuel regulations that create a fragmented national energy market, including:

• California Reformulated Gasoline (CaRFG) Program: This program establishes stringent specifications for fuel parameters like sulfur and benzene content that are unique to California. To access the state’s large market, out-of-state fuel producers must incur significant costs to modify their refining processes to meet these standards.^[49]
• Low Carbon Fuel Standard (LCFS): The LCFS directly regulates extraterritorial conduct by assigning a “carbon intensity” score to fuels based on their entire lifecycle, from extraction to consumption. This calculation includes emissions produced during production and transportation that occur entirely outside of California’s borders, directly penalizing producers in other states that may have higher transport-related emissions due to their geographic location.^[50]
• Import Reporting Mandates: The California Energy Commission requires fuel importers to file comprehensive marine-import reports with detailed information about their cargo, ownership, and transport, imposing new and extensive compliance costs on out-of-state market participants.^[51]

The combined effect of these vehicle and fuel regulations is the splintering of what should be integrated national markets, imposing substantial costs on businesses and consumers nationwide. The vehicle-emissions standards create a classic Dormant Commerce Clause problem, wherein one state’s regulatory preferences become the de-facto national standard, forcing manufacturers to design their entire vehicle fleets to meet California’s requirements.

This fragmentation is mirrored in the fuel market. The unique CaRFG and LCFS standards effectively separate California’s fuel market from the rest of the country. This isolation disrupts national supply dynamics and raises costs for producers, who must invest in specialized refining processes and complex compliance tracking to serve the California market. These costs are ultimately passed on to consumers—not just in California, but nationwide—as the national fuel supply chain becomes less efficient and more fragmented.

The LCFS, in particular, creates a direct burden on out-of-state producers by penalizing them based on factors inherent to their location, such as the distance their product must travel to reach California. This dynamic is exacerbated as more states opt in to California’s emissions standards, further solidifying a patchwork of regulations that undermines a unified national economy.

The legal foundation for California’s regulatory regime is the waiver provision in the Clean Air Act, a statutory authority granted by Congress. This authority has been the subject of significant legal and political conflict. Legal challenges to the extraterritorial effects of these regulations, particularly under the Dormant Commerce Clause, have had limited success in the courts. Notably, the 9^th U.S. Circuit Court of Appeals rejected a Dormant Commerce Clause claim against the LCFS in Rocky Mountain Farmers Union v. Corey,^[52] deferring to the state’s regulatory authority, despite the clear out-of-state impacts.

This judicial reticence to scrutinize the extraterritorial burdens of state environmental laws places the responsibility for a solution squarely on the political branches. Because California’s unique authority is a product of federal statute, not a constitutional right, it is exceptionally amenable to federal action. Congress possesses plenary power under the affirmative Commerce Clause to amend or repeal the waiver provision entirely. Likewise, the Environmental Protection Agency (EPA) retains administrative authority to grant, deny, or reconsider these waivers, providing an executive-branch pathway to restore a single national standard.

Congress should enact legislation to repeal California’s unique waiver authority under Section 209 of the Clean Air Act. This action would establish a single, uniform national market for new motor vehicles and eliminate the foundation upon which California’s fragmented fuel market is built. It would reduce the immense compliance costs currently borne by manufacturers and fuel producers, enhance consumer choice, and ensure that standards for national industries are set at the national level based on a holistic assessment of costs and benefits.

The EPA and DOT, acting through the National Highway Traffic Safety Administration (NHTSA), are the federal agencies with the statutory authority and technical expertise to set and enforce a single, cohesive national standard for vehicle emissions and fuel economy. Restoring their exclusive jurisdiction would bring much-needed certainty and efficiency to these critical, interconnected sectors of the U.S. economy.

XI. State Interchange-Fee Regulations

Many states have seen proposals for laws that would regulate interchange fees for credit- and debit-card transactions. To date, only Illinois has passed such a law. In June 2024, Illinois enacted the Illinois Interchange Fee Prohibition Act (IFPA), a first-of-its-kind law aimed at reshaping the economics of credit- and debit-card transactions in the state, but with implications far beyond.^[53] The IFPA prohibits payment-card issuers, networks, and processors from charging or collecting interchange fees on those portions of a transaction that represent gratuities or state or local sales taxes.

It is clear that the IFPA’s reach extends well beyond Illinois’ borders. Under the IFPA, an Illinois merchant’s credit-card transaction processed by a national bank must exclude interchange on the sales tax and gratuity portions, regardless where the issuer is based. Since the vast majority of credit- and debit-card issuers are headquartered or chartered in other states—or even outside the United States—the act would compel these institutions to adjust their fee structures for transactions completed in Illinois. They will also have to collaborate with acquirers, networks, and Illinois-based merchants to adjust the way that transactions are reported.

The IFPA thus imposes substantial additional compliance costs on issuers, acquirers, and networks. When combined with loss of part of the interchange-fee revenue from transactions within Illinois, this means out-of-state issuers will almost certainly be forced to undertake some combination of 1) reduced card rewards and benefits, 2) new or increased annual fees, 3) higher interest rates, and/or 4) higher interchange fees to be paid for by out-of-state merchants.

These compensatory actions would affect most or even all U.S. cardholders, the vast majority of whom live outside Illinois. Reduced rewards and increased fees would diminish the attractiveness of card use, leading to lower consumer spending, thereby harming merchants as well. There would thus be harmful extraterritorial effects across the value chain. While banks, payment processors, and networks would suffer concentrated costs and losses, at least some of these would be passed on to consumers and merchants.

For good reason, the law currently faces serious legal challenges. In August 2024, the Illinois Bankers Association, American Bankers Association, America’s Credit Unions, the Illinois Credit Union League, and the Illinois Retail Merchants Association brought a motion for pre-enforcement injunctive relief from the IFPA.

Each set of plaintiffs in the case was able to assert a relevant federal law or constitutional principle the IFPA violated. Nationally chartered banks pointed to the National Banking Act (NBA) and various federal regulations that apply specifically to them. Federal savings associations cited the Home Owners’ Loan Act (HOLA), which similarly empowers and regulates them. Federal credit unions asserted preemption under the Federal Credit Union Act (FCUA), because it gives the National Credit Union Administration exclusive authority to regulate them. State banks chartered in Illinois pointed to state laws that give banks the same powers as nationally chartered banks. Out-of-state banks brought both Dormant Commerce Clause and federal law claims that they have the right to be treated similarly to in-state banks and nationally chartered banks, respectively.

The district court issued two rulings, first finding that the NBA and HOLA likely preempt the IFPA under Supreme Court jurisprudence holding state laws are preempted if they “prevent or significantly interfere with the exercise of a national bank’s powers.”^[54] This is different from normal conflict preemption, which requires showing that an entity can’t comply with both sets of laws. Instead, it only requires a showing of significant interference with their ability to exercise their powers under national law. Here, IFPA’s significant interference is clear: it forbids national banks and savings associations from collecting a category of fees they would otherwise collect in the normal course of offering card services.

In a later opinion, the district court found that federal law demanded similar treatment for out-of-state banks as national banks. And “because the Court granted the preliminary injunction with respect to nationally chartered banks, forcing out-of-state state banks to comply with the IFPA would run afoul” of the law.^[55]

On the other hand, the court rejected other arguments made by plaintiffs. The Dormant Commerce Clause arguments made by out-of-state banks were rejected on grounds that they were held to the same law as in-state banks. And both the federal credit unions and credit-card networks were unsuccessful in asserting federal preemption, as their relevant statutes were subject only to conflict preemption and it was possible to comply with both sets of laws.

Thus, the court found that the IFPA was likely preempted by federal law as to federally chartered banks and savings associations and to out-of-state banks, and issued a preliminary injunctions as to those parties. This leaves Illinois in an unusual position of only being able to enforce its law against its own in-state banks, federal credit unions, and credit-card networks. Litigation in this case remains ongoing.

The DOJ should consider joining the amici work of the Office of the Comptroller of the Currency (OCC)^[56] in favor of the plaintiffs in this case in order to make clear that federal law preempts the IFPA and similar laws that would effectively raise the cost of payment cards nationwide.

XII. Digital Privacy

The digital economy is, by its nature, an interstate and global marketplace. Yet it is increasingly being subject to a fragmented and conflicting set of state-level regulations. This trend was initiated by passage of the California Consumer Privacy Act (CCPA) in 2018, which was subsequently amended and expanded by the California Privacy Rights Act (CPRA). The CCPA/CPRA created a comprehensive data-privacy regime that applies not only to businesses in California but to any for-profit entity nationwide that does business in California and meets certain thresholds, such as having gross annual revenue of more than $25 million or buying, selling, or sharing the personal information of 100,000 or more California residents.

In the absence of a preemptive federal privacy law, California’s statute has served as a catalyst for other states to enact their own versions. This has resulted in a rapidly growing patchwork of similar but substantively different privacy laws across the country. As of mid-2025, 20 states have passed comprehensive data-privacy laws, each with their own unique definitions, scope, consumer rights, and enforcement mechanisms. This creates a bewildering and costly compliance landscape for any business that operates online and serves customers in multiple states, as these laws generally apply to personal information about residents of that specific state. As noted by Jennifer Huddleston and Ian Adams:

While these laws purport to apply only inside each state’s borders, they burden an inherently interstate—indeed, global—media, and the direct and indirect costs and effects of state laws and regulations are significant. … Notably, the CCPA’s costs impact not only companies in the technology sector but a wide range of industries: from retail and entertainment to construction and mining.^[57]

The compliance costs associated with this regulatory patchwork are extraordinary. Businesses must dedicate significant legal, engineering, and administrative resources to track, interpret, and implement the varying requirements of each state’s law. Economic analysis by the Information Technology and Innovation Foundation (ITIF) estimates that, if all 50 states were to enact their own privacy laws, the total out-of-state compliance costs imposed on the U.S. economy would be between $98 billion and $112 billion annually.^[58] Over a 10-year period, this cost would exceed $1 trillion. A substantial portion of this burden—estimated at more than $200 billion over 10 years—would fall on small and medium-sized businesses, which lack large tech firms’ resources to navigate this complex environment. California’s law alone is estimated to impose $32 billion in annual costs on out-of-state businesses.

This costly and uncertain regulatory environment stifles innovation and harms competition. The high fixed costs of compliance function as a significant barrier to entry for startups and smaller firms, entrenching the market position of large, established technology companies that can afford large compliance departments. Furthermore, overly prescriptive rules—such as aggressive data-minimization requirements—can impede the development of new data-driven technologies like artificial intelligence (AI), which rely on access to large datasets for training and improvement. This puts U.S. firms at a competitive disadvantage in the global technology race.

Rather than empowering consumers, the patchwork of differing rights, definitions, and disclosure requirements across states leads to confusion and “notice fatigue.”^[59] Consumers are inundated with a constant stream of lengthy and legalistic privacy policies and pop-up notices that they cannot reasonably be expected to read or understand, undermining the goal of genuine transparency and meaningful control over personal information. There is a broad and powerful consensus across the political and economic spectrum—from industry groups and consumer advocates to policymakers and academics—that the current state-level patchwork is untenable and that a federal solution is urgently needed.

The primary legal challenge to these state laws rests on the Dormant Commerce Clause, which prohibits states from enacting laws that unduly burden interstate commerce. Because data transmissions do not abide state borders, a single online action can involve multiple states. This means that state laws purporting to regulate the internet trigger Dormant Commerce Clause scrutiny due to their extraterritorial impact. The application of these laws to businesses not physically located in the regulating state raises significant constitutional problems.

The primary point of contention in the federal debate revolves around the preemptive effect of a federal law. One approach advocates for a federal “ceiling,” which would create a single, uniform national standard for data privacy and explicitly preempt all state laws in the field. An alternative approach argues for a federal “floor,” which would establish a baseline of privacy protections but would explicitly permit states to enact and enforce stronger or more specific laws.

While appealing to some states’ rights advocates, the “floor” approach fails to solve the fundamental economic problem. It would not alleviate the crushing compliance costs of this regulatory patchwork, as businesses would still have to comply with the most stringent provisions of every state in which they operate, in addition to the federal baseline.

Rather than imposing a single, top-down, one-size-fits-all federal privacy statute, a more innovative and market-oriented solution exists, grounded in the principles of competitive federalism. This approach, developed by scholars at ICLE and the American Enterprise Institute (AEI), proposes that Congress enact a targeted federal statute requiring states to recognize and enforce contractual choice-of-law provisions in privacy policies.^[60]

The mechanism for this proposal is straightforward. A business operating nationally would be permitted to select the comprehensive privacy law of a single state—for example, the Virginia Consumer Data Protection Act or the Utah Consumer Privacy Act—and designate in its terms of service that this law governs its relationship with all its U.S. customers. The federal statute would ensure that this contractual choice is honored and enforced by courts and regulators in all other states.

This choice-of-law framework provides numerous benefits. It immediately solves the patchwork problem for businesses, allowing them to comply with a single, coherent legal regime rather than a morass of 50 different ones. At the same time, it preserves a meaningful and dynamic role for state regulation, avoiding the risks of a static and potentially ill-fitting federal mandate. Most importantly, as the authors argue, this approach would foster a “double competition” that would ultimately benefit consumers:

1. Competition Among States: States would be encouraged to compete to develop the most efficient, innovative, and effective privacy laws. A state that enacted a well-balanced, clear, and effective law could attract businesses to choose its regime, much as Delaware has become the preferred state for corporate charters. This would turn states into true “laboratories of democracy” for privacy regulation.
2. Competition Among Firms: Businesses would compete to offer privacy policies that are aligned with the preferences of different segments of the consumer market. A firm could choose to adopt a more stringent privacy regime as a competitive differentiator to attract privacy-conscious consumers, while another might choose a more flexible regime that enables more personalized services. This market competition would allow for more accurate discovery of consumers’ true valuation of different aspects of privacy versus other product features and benefits.

The ICLE-AEI approach offers a path forward to resolve the economic harms inherent in the current patchwork without resorting to heavy-handed federal preemption that would stifle state innovation. The FTC, with its long history of consumer protection and privacy enforcement, and the U.S. Commerce Department, with its expertise in the digital economy, are the federal agencies best positioned to help craft and oversee such a choice-of-law framework.

XIII. Artificial Intelligence

Following the pattern established with data privacy, states are now racing to regulate AI, threatening to create a new and even more complex regulatory patchwork before a national market for this transformative technology can fully mature. In 2024 alone, state lawmakers introduced more than 600 AI-related bills, with nearly 100 enacted into law.^[61] In 2025, that number is expected to grow significantly, with all 50 states having introduced legislation on the topic.

These state-level efforts are not uniform. They address a wide range of issues, from the use of AI in employment and housing decisions to “deepfake” generation and consumer disclosures. Colorado, for example, enacted a comprehensive law governing “high-risk” AI systems, while California is advancing regulations on automated decisionmaking technology through its privacy agency, and Illinois has mandated new disclosures for AI in employment.^[62]

The extraterritorial mechanism of these laws is inherent to the nature of AI and the internet. AI models are developed and deployed in a digital environment that knows no state borders. A single AI system developed by a company in one state, trained on data from across the country, and deployed via the cloud to users in all 50 states may become subject to a morass of conflicting state-level mandates. A law in one state governing algorithmic discrimination or requiring specific disclosures has the practical effect of regulating the design, development, and deployment of that AI system for the entire national market. This creates a direct burden on interstate commerce, as developers are forced to either build their systems to the most restrictive state standard or attempt the costly and technically difficult task of walling off their products from residents of certain states.

The premature fragmentation of AI regulation will impose immense economic costs, stifle American innovation, and create an untenable compliance environment, particularly for the startups and smaller firms that are driving much of the nation’s technological progress.

The compliance costs of a 50-state AI regulatory patchwork would be enormous. As demonstrated by the experience with state privacy laws, which are projected to impose more than $1 trillion in out-of-state costs over a decade, a similar patchwork for the more complex field of AI would create a compliance nightmare.^[63] Businesses would be forced to divert substantial resources from research and development into legal and compliance departments simply to navigate the labyrinth of conflicting state definitions, mandates, and disclosure requirements. This burden falls disproportionately on smaller innovators, who lack the vast legal resources of established tech giants, creating a significant barrier to entry and chilling competition.

This regulatory uncertainty actively harms innovation. The development of advanced AI is an iterative process that requires experimentation. A fragmented legal landscape, where the rules can change from one state to the next, discourages the long-term capital investment necessary for foundational research and development. As ICLE has noted in the context of other emerging technologies, attempting to create a single regulatory scheme for a broad and diverse category like “AI” commits the error of “regulatory overaggregation,” creating an ill-fitting legal regime that fails to account for the vast differences between various applications.^[64] This approach risks prohibiting beneficial technologies before they have a chance to mature.

A fragmented domestic market also undermines U.S. competitiveness in a critical area of national security and economic importance. As other global actors, such as the European Union, move forward with unified regulatory frameworks like the EU AI Act, a fragmented U.S. market creates a competitive disadvantage. American firms will be forced to contend with 50 different sets of rules at home, hindering their ability to scale and compete effectively on the global stage. This concern is reflected in the White House’s AI Action Plan, which seeks to discourage state-level AI regulation that could hinder American AI development.^[65]

The emerging patchwork of state AI laws is exceptionally amenable to federal action, and the legal basis for such action is firmly grounded in the Constitution. The Commerce Clause grants Congress the authority to regulate interstate commerce, and there is no question that AI development and deployment constitute such commerce.

The primary constitutional challenge to these state laws rests on the Dormant Commerce Clause, which prohibits states from enacting laws that unduly burden or discriminate against interstate commerce.^[66] State AI laws that have extraterritorial effects—such as those that attempt to regulate the design of AI models that operate nationally—are vulnerable to challenge under this doctrine. As one analysis notes, “There is no natural reason for data to stop at state borders, meaning virtually all economic activity involving AI is interstate commerce.”^[67]

As with data privacy, Congress should enact a federal statute requiring states to recognize and enforce contractual choice-of-law provisions for AI systems. This approach would allow an AI developer to select the regulatory framework of a single state to govern its system’s operation nationwide. This immediately solves the patchwork problem for businesses, allowing them to comply with one coherent set of rules, rather than 50 conflicting ones. At the same time, it preserves the role of states as “laboratories of democracy” and fosters a “double competition” that benefits the entire economy.

This choice-of-law framework offers a durable solution that could prevent the economic damage of a splintered AI market without resorting to a rigid federal mandate that could quickly become obsolete.

The U.S. Commerce Department—through its component agencies like the National Institute of Standards and Technology (NIST) and the National Telecommunications and Information Administration (NTIA)—and the FTC, with its expertise in consumer protection and competition, are the agencies best positioned to provide the technical and policy guidance necessary to implement this federalist approach to AI governance.

The DOJ has tools at its disposal to prevent states from imposing extraterritorial regulatory effects that exceed their proper jurisdiction. The DOJ has long played a role in ensuring that state laws do not impede the flow of interstate commerce, whether through antitrust enforcement, intervention in preemption litigation, or filing statements of interest in private suits that raise constitutional questions.^[68] In the AI context, the DOJ could intervene in cases where state statutes effectively regulate conduct occurring wholly outside of state borders—such as the design, training, or deployment of models that serve a national or global user base. By articulating the limits of state authority under the Dormant Commerce Clause, the DOJ could also help to clarify the constitutional boundaries of state AI regulation and prevent any single state from dictating standards for the entire country.

In addition, the DOJ could issue guidance that emphasizes the federal government’s interest in preserving a national market for AI technologies, much as it has done in the past when states attempted to regulate extraterritorially in fields like transportation.^[69] Such guidance, particularly if coordinated with the White House and federal agencies charged with AI policy, would provide courts with a clear statement of executive-branch priorities. It would also serve as a deterrent, signaling to state legislatures that extraterritorial mandates are likely to invite federal opposition and constitutional challenge.

By combining litigation interventions with policy guidance, the DOJ could play a crucial role in cabining state overreach, ensuring that AI regulation develops within a coherent national framework, rather than a patchwork that undermines innovation and interstate commerce.

XIV. Conclusion

These comments identify a clear pattern of individual states increasingly weaponizing their economic power to impose regulatory preferences on the entire nation, creating a fundamental threat to the constitutional structure of American federalism and the efficiency of interstate commerce. The “California Effect” and similar dynamics represent a profound departure from the traditional understanding that states possess sovereign authority within their borders, not beyond them. When large states leverage their market share to compel nationwide compliance with their regulatory schemes—whether in vehicle emissions, data privacy, AI governance, or payments—they effectively nullify other states’ policy choices and usurp Congress’ constitutional role in regulating interstate commerce.

The economic costs of this regulatory balkanization are substantial and measurable. State data-privacy laws alone impose an estimated $98-112 billion in annual out-of-state compliance costs, with the burden falling disproportionately on smaller businesses that lack the resources to navigate multiple regulatory regimes. Similar patterns emerge across sectors: automobile-dealer franchise laws add thousands of dollars to vehicle prices through mandated inefficiencies; land-use restrictions trap workers in low-productivity regions; and certificate-of-need laws insulate incumbents from competition while raising health-care costs. These are not merely theoretical concerns but documented market failures that reduce economic growth, suppress innovation, and ultimately harm consumers nationwide.

The current judicial reluctance to enforce constitutional limits on state overreach—exemplified by cases like National Pork Producers Council v. Ross—places the primary responsibility for addressing these problems squarely on the political branches. Congress possesses clear constitutional authority under the Commerce Clause to restore uniformity to interstate markets, whether through direct preemption, conditional spending requirements, or innovative approaches like mandating recognition of contractual choice-of-law provisions. The executive branch can pursue strategic litigation targeting the most egregious examples of extraterritorial regulation, particularly where federal preemption doctrines provide strong legal foundations for challenge.

The urgency of federal action cannot be overstated. Each year of delay allows this regulatory fragmentation to become more entrenched, raising the political and economic costs of reform. As emerging technologies like AI face the same pattern of premature state-level regulation that has already damaged other sectors, the window for preventing a comprehensive balkanization of the U.S. economy continues to narrow.

The choice before policymakers is clear: restore the constitutional principles that have underwritten American economic prosperity for more than two centuries, or accept a future where the largest states dictate national policy through market coercion rather than democratic consensus.

The solutions outlined in these comments offer practical pathways forward that respect legitimate state interests, while protecting the national economy from destructive regulatory competition. Federal intervention in this context does not represent an expansion of government power but rather a restoration of constitutional limits that prevent any single state from imposing its will on the entire nation. The economic and constitutional stakes demand immediate and sustained federal attention to preserve both the efficiency of U.S. markets and the integrity of American federalism.

^[1] Eric Fruits, Daniel J. Gilman, Ben Sperry, Kristian Stout, & Mario A. Zúñiga, ICLE Comments to FTC and DOJ on Anticompetitive Regulations, Department of Justice Anticompetitive Regulations Task Force, Docket No. ATR2025-0001, Federal Trade Commission Request for Public Comment Regarding Reducing Anti-Competitive Regulatory Barriers (May 27, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/05/DOJ-FTC-Competition-Comments-2025.pdf [hereafter “Appendix”].

^[2] See Complaint for Declaratory and Injunctive Relief, United States v. State of California, 25-cv-06230 (Jul. 9, 2025), available at https://www.justice.gov/opa/media/1407446/dl.

^[3] Animal Confinement Notice of Proposed Action 16, Cal. Dep’t of Food & Agric., available at https://www.cdfa.ca.gov/ahfss/pdfs/regulations/AnimalConfinement1stNoticePropReg_0 5252021.pdf (last visited Sep. 15, 2025).

^[4] 598 US _ (2023).

^[5] California Trucking Association v. Bonta, 34 F.4th 604 (9th Cir. 2022), cert. denied, 142 S. Ct. 2883 (2022).

^[6] See, e.g., Cantero v. Bank of America, N.A., 602 U.S. 205 (2024).

^[7] Nat’l Meat Ass’n v. Harris, 565 U.S. 452, 459–60 (2012).

^[8] Id. at 460.

^[9] See infra State Interchange Fee Regulations.

^[10] Daniel A. Crane, Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism, 101(2) Iowa L. Rev. 573-607 (2016), https://repository.law.umich.edu/articles/1721.

^[11] Brief of Legal and Economic Scholars, Lucid Group USA, Inc. v. State of Georgia, Ga. S25A1139 (Jul. 10, 2025), https://laweconcenter.org/resources/brief-of-legal-and-economic-scholars-to-the-georgia-supreme-court-in-lucid-v-georgia.

^[12] James M. Rubenstein, Making and Selling Cars: Innovation and Change in the U. S. Automotive Industry (The Johns Hopkins University Press, 2001), at 188.

^[13] Dan Crane, Car Dealer Bill Restricts Competition and Limits Consumer Choice, Mackinac Center (Sep. 21, 2020), available at https://www.house.mi.gov/Document/?DocumentId=43595&DocumentType=CommitteeTestimony.

^[14] Mass. State Auto. Dealers Ass’n, Inc. v. Tesla Motors MA, Inc., 15 N.E. 3d 1152 (Mass. 2014), https://law.justia.com/cases/massachusetts/supreme-court/2014/sjc-11545.html.

^[15] Press Release, FTC Staff: Missouri and New Jersey Should Repeal Their Prohibitions on Direct-to-Consumer Auto Sales by Manufacturers, Fed. Trade Comm’n (May 16, 2014), https://www.ftc.gov/news-events/news/press-releases/2014/05/ftc-staff-missouri-new-jersey-should-repeal-their-prohibitions-direct-consumer-auto-sales.

^[16] Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).

^[17] Gerald R. Bodisch, Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers, Economic Analysis Group, (May 2009), available at https://www.justice.gov/sites/default/files/atr/legacy/2009/05/28/246374.pdf.

^[18] Joseph Gyourko, Jonathan S. Hartley, & Jacob Krimmel, The Local Residential Land Use Regulatory Environment Across U.S. Housing Markets: Evidence from a New Wharton Index, 124 J. Urban Econ. 103337 (2021).

^[19] S&P Dow Jones Indices LLC, S&P CoreLogic Case-Shiller U.S. National Home Price Index [CSUSHPINSA], (retrieved from FRED, Federal Reserve Bank of St. Louis, Sep. 15, 2025); S&P Dow Jones Indices LLC, S&P CoreLogic Case-Shiller OR-Portland Home Price Index [POXRSA], (retrieved from FRED, Federal Reserve Bank of St. Louis, Sep. 15, 2025), https://fred.stlouisfed.org/graph/?g=1MjE9.

^[20] Noel Johnson & Mike Kingsella, The Cautionary Tale of Portland’s Inclusionary Housing Policy, Up for Growth (Apr. 15, 2019) available at https://web.archive.org/web/20210924152240/https://upforgrowth.org/news/cautionary-tale-portlands-inclusionary-housing-policy.

^[21] See, e.g., Sheetz v. El Dorado County, 601 U.S. _ (2024).

^[22] See Appendix.

^[23] H.B. 2688, 2025 Reg. Sess. (Or. 2025), https://olis.oregonlegislature.gov/liz/2025R1/Measures/Overview/HB2688.

^[24] See Appendix.

^[25] Virginia Certificate of Need, Institute for Justice, https://ij.org/case/vacon-2 (last visited Sep. 15, 2025).

^[26] Matthew D. Mitchell & Christopher Koopman, 40 Years of Certificate-of-Need Laws Across America, Mercatus Center (Sep. 27, 2016), https://www.mercatus.org/research/data-visualizations/40-years-certificate-need-laws-across-america.

^[27] See Appendix.

[28] See, e.g., Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 979 N.Y.S. 2d 439 (2013).

^[29] 21 U.S. Code § 801 et seq.

^[30] Memorandum from James. M. Cole, Deputy Attorney General to United States Attorneys re: Guidance Regarding Marijuana Enforcement (Aug. 29, 2013), available at https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.

^[31] Memorandum from Jefferson B. Sessions, Attorney General to United States Attorneys re: Marijuana Enforcement (Jan. 4, 2018), available at https://upload.wikimedia.org/wikipedia/commons/7/7d/DOJ_Sessions_memo_20180104.pdf.

^[32] See, e.g., Elaine Grant, Nebraska Cops Continue to Complain About Burden of Colorado Pot, Colorado Public Radio (Jan. 22, 2015), https://www.cpr.org/show-segment/nebraska-cops-continue-to-complain-about-burden-of-colorado-pot.

^[33] Interstate 80 Traffic Stops Targeting Out-of-State Drivers, Petersen Law, https://www.criminaldefensene.com/interstate-80-traffic-stops-targeting-out-of-state-drivers (last visited Sep. 15, 2025).

^[34] Press Release, Oklahoma Attorney General, More than 40,000 Marijuana Plants, 1,000 Lbs. of Processed Marijuana Seized in Organized Crime Task Force Sting in Mayes, Craig Counties, Oklahoma Attorney General’s Office (Jun. 26, 2025), https://oklahoma.gov/oag/news/newsroom/2025/june/more-than-40000-marijuana-plants-1000lbs-of-processed-marijuana-seized.html.

^[35] Cal. Bus. & Prof. Code § 17200.

^[36] Epic Games, Inc. v. Apple, Inc., 559 F. Supp. 3d 898, 933-1033 (N.D. Cal. 2021).

^[37] Id. at 1049-50.

^[38] Epic Games, Inc. v. Apple, Inc., 67 F.4th 946 (9th Cir. 2023), cert. denied, No. 23-344 (U.S. Jan. 16, 2024).

^[39] Lazar Radic & Daniel J. Gilman, Four Problems with the Supreme Court’s Refusal to Hear the Epic v Apple Dispute, Truth on the Market (Jan. 18, 2024), https://truthonthemarket.com/2024/01/18/four-problems-with-the-supreme-courts-refusal-to-hear-the-epic-v-apple-dispute.

^[40]

Amicus Brief of the International Center for Law & Economics, Epic Games, Inc. v. Apple Inc., Nos. 21-16506, 21-16695 (9th Cir., Jun. 20, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/06/File-Stamp-FINAL-2023-06-20-ICLE-Rehearing-En-Banc-Amicus-Brief-in-Epic-Apple.pdf.

^[41] Id. at 3.

^[42] Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 186-87 (1999).

^[43] Staff Memorandum, 2025-21 Draft Language for Single Firm Conduct Provision, Calif. Law Revis. Comm. (Mar. 24, 2025), available at https://clrc.ca.gov/pub/2025/MM25-21.pdf.

^[44] See Lazar Radic, California Leads the Charge in Systematically Dismantling US Federal Antitrust Law, Truth on the Market (May 28, 2025), https://truthonthemarket.com/2025/05/28/california-leads-the-charge-in-systematically-dismantling-us-federal-antitrust-law.

[45] Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 54–59 (1977).

[46] Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 889–907 (2007).

^[47] Elai Katz, Resale Price Maintenance Examined Under State Laws, 247(95) N.Y. Law J. (May 17, 2012).

^[48] Utah Code Ann. § 58-16a-905.1.

^[49] Andrew Morris, Gasoline, Markets, and Regulators 8(3) Engage 4-13 (2003), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=989827.

^[50] David Deerson, PLF and Friends Ask SCOTUS to Review Extraterritorial Fuel Regulations, Pacific Legal Foundation (Feb. 8, 2019), https://pacificlegal.org/plf-and-friends-ask-scotus-to-review-extraterritorial-fuel-regulations.

^[51] David R. Carpenter, Maureen F. Gorsen, & Jack Raffetto, California Issues Major New Gasoline Regulations for Refiners, Traders, and Brokers Through Emergency Rulemaking, Sidley Austin (Jun. 5, 2024),  https://www.sidley.com/en/insights/newsupdates/2024/06/california-issues-major-new-gasoline-regulations-for-refiners-traders-and-brokers.

^[52] No. 12-15131 (9th Cir. 2013).

^[53] See Julian Morris & Ben Sperry, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA, Int’l Ctr. Law Econ. (Jul. 7, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/07/IFPA-Paper-2025.pdf. Much of this subsection is adapted from that white paper.

^[54] Illinois Bankers Association et al. v. Kwame Raoul, 2024 WL 5186840 (N.D. Ill., Aug. 15, 2024). See also Cantero v. Bank of America, N.A., 602 U.S. 205, 213-14 (2024); Barnett Bank of Marion Cty., N.A. v. Nelson, 517 U.S. 25, 33 (1996).

^[55] Illinois Bankers Ass’n v. Kwame Raoul, 2025 WL 409060, at 7-8 (N.D. Ill., Feb. 6, 2025).

^[56] Brief of the Office of the Comptroller of the Currency, Illinois Bankers Association et al v. Raoul, No. 1:2024cv07307 (N.D. Ill. Oct. 2, 2024), available at https://www.occ.treas.gov/topics/laws-and-regulations/litigation/amicus-curiae-brief-illinois-bankers-assoc-v-raoul.pdf.

^[57] Jennifer Huddleston & Ian Adams, Potential Constitutional Conflicts in State and Local Data Privacy Regulations, Regulatory Transparency Project (Dec. 2, 2019), https://rtp.fedsoc.org/paper/potential-constitutional-conflicts-in-state-and-local-data-privacy-regulations.

^[58] Daniel Castro, Luke Dascoli, & Gillian Diebold, The Looming Cost of a Patchwork of State Privacy Laws, Information Technology and Innovation Foundation (Jan. 24, 2022), https://itif.org/publications/2022/01/24/looming-cost-patchwork-state-privacy-laws.

^[59] See, e.g., Sarah E Carter, A Value-Centered Exploration of Data Privacy and Personalized Privacy Assistants, 1 Digit Soc. 27 (2022).

^[60] Geoffrey A. Manne & Jim Harper, A Choice-of-Law Alternative to Federal Preemption of State Privacy Law, Int’l. Ctr. Law Econ. & Am. Enterprise Inst. (Mar. 2024), available at https://laweconcenter.org/wp-content/uploads/2024/03/2024-03-Manne-and-Harper.proof43.pdf.

^[61] Artificial Intelligence (AI) Legislation, MultiState, https://www.multistate.ai/artificial-intelligence-ai-legislation (retrieved Sep. 15, 2025).

^[62] Annette Tyman & Jason Priebe, Artificial Intelligence Legal Roundup: Colorado Postpones Implementation of AI Law as California Finalizes New Employment Discrimination Regulations and Illinois Disclosure Law Set to Take Effect, Seyfarth Shaw (Sep. 12, 2025), https://www.seyfarth.com/news-insights/artificial-intelligence-legal-roundup-colorado-postpones-implementation-of-ai-law-as-california-finalizes-new-employment-discrimination-regulations-and-illinois-disclosure-law-set-to-take-effect.html.

^[63] Daniel Castro, Luke Dascoli, & Gillian Diebold, The Looming Cost of a Patchwork of State Privacy Laws, ITIF (2022), https://itif.org/publications/2022/01/24/looming-cost-patchwork-state-privacy-laws.

^[64] Kristian Stout, Brian Albrecht, Miko?aj Barczentewicz, Eric Fruits, Geoffrey A. Manne, & Julian Morris, ICLE Response to the AI Accountability Policy Request for Comment, Int’l Ctr. Law Econ. (Jun. 12, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/06/NTIA-AI-Comments-final.pdf.

^[65] Kristian Stout, The White House’s AI Action Plan, Int’l Ctr. Law Econ. (Jun. 24, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/07/tldr-White-House-AI-ACtion-Plan.pdf.

^[66] Matt Perault & Jai Ramaswamy, The Commerce Clause in the Age of AI: Guardrails and Opportunities for State Legislatures, Andreesen Horowitz (2025), https://a16z.com/the-commerce-clause-in-the-age-of-ai-guardrails-and-opportunities-for-state-legislatures.

^[67] Max Gulker & Marc Scribner, A Moratorium on State Laws Targeting AI Would Safeguard Innovation and Interstate Commerce, Reason (Aug. 7, 2025), https://reason.org/commentary/a-moratorium-on-state-laws-targeting-ai-would-safeguard-innovation-and-interstate-commerce.

^[68] See, e.g., Press Release, Justice Department Files Complaints Against Hawaii, Michigan, New York and Vermont Over Unconstitutional State Climate Actions, Dep’t Just. (May 1, 2025), https://www.justice.gov/opa/pr/justice-department-files-complaints-against-hawaii-michigan-new-york-and-vermont-over.

^[69] See, e.g., Memorandum in Support of Motion to Intervene as Plaintiffs by the United States and the U.S. Environmental Protection Agency, Case No. 2:25-cv-02255-DC-AC  (E.D. Cal. Aug. 14, 2025), available at https://www.justice.gov/atr/case-document/file/1459366/dl; see also 28 U.S. Code § 516-517 (DOJ authority to file statements of interest in cases related to important federal interests).

We submit this letter and the white paper, “Dynamic Competition in Broadband Markets: A 2024 Update,” authored by Eric Fruits, Geoffrey A. Manne, Ben Sperry, & Kristian Stout, for the Commission’s Notice of Inquiry (NOI) regarding the Nineteenth Section 706 Report. The attached white paper addresses several issues raised in the NOI. In it, we find that that the broadband marketplace exhibits dynamic competition which has resulted in more households being connected to the internet, increased broadband speeds while prices have fallen, more households served by multiple providers, and new technologies like satellite and 5G expanding internet access, leading to greater intermodal competition among providers.

As the Commission conducts its inquiry “concerning the availability of advanced telecommunications capability to all Americans” and “determine[s] whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion,”[1] the innovation and investment present in this dynamic marketplace should not—as in prior administrations—be obfuscated by creative (re-)definitions of what counts as “advanced telecommunications” or “deployment.”

The Commission is right to focus on deployment in a technologically neutral manner. The attached white paper has much data worth considering on how intermodal competition has served consumers well in the broadband marketplace.

Thank you for the opportunity to provide these comments.

[1] 47 U.S.C. § 1302(b).

Topic A: Competitiveness and Resilience

A.1.   Do the current Guidelines provide clear, correct and comprehensive guidance on how merger control reflects the objective of having a productive and competitive economy?

Properly understood, “competitiveness” and “productivity” are the products of well-functioning, efficient markets. In this sense, they are fully consistent with the purpose of the EUMR: to safeguard competition and consumers from excessive market power, which distorts resource allocation, creates deadweight loss, and diminishes overall economic performance. In dynamic markets, productivity and competitiveness are mutually reinforcing: greater efficiency in the use of resources drives firms to compete more effectively on the European and global markets, while robust competitive pressures from inside and out provides incentives for firms to innovate and improve efficiency. As discussed in Section F, the Guidelines could offer clearer direction on how productivity and efficiency gains are weighed under the Significant Impediment of Effective Competition Test (“SIEC Test”). This guidance would be particularly timely in light of the Draghi Report’s recognition that size and scale can generate substantial economic benefits, including sustained productivity growth.

Arguably, the greater concern lies in potential misinterpretations of an increasingly prominent policy buzzword: competitiveness. Unlike “productivity”, which can be grounded in measurable efficiency gains (Syverson, 2011), “competitiveness” is not embedded in the current EUMR framework. It therefore could be misconstrued or selectively invoked to justify policies at odds with the EUMR’s objectives. A common fallacy is to equate European competitiveness with protecting European-owned firms from foreign rivals, including by preventing the acquisition of European firms by foreign undertakings. Sustainable competitiveness instead arises from maintaining an open, contestable, and innovation-friendly market that attracts capital, rewards efficiency, and drives long-term productivity growth.

Absent demonstrable public-policy concerns (e.g., security) of the kind contemplated in Article 21(4) EUMR, prohibiting or materially impeding mergers, partnerships, or joint ventures between European and foreign companies on the premise that such combinations would harm European competitiveness has it exactly backward. Access to foreign investment, capital, and know-how is a critical driver of firm growth and innovation (e.g., Valickova et al., 2015); restricting these inputs would stifle the development and scaling of European companies and ultimately erode—rather than enhance—Europe’s competitiveness.

To avoid confusion, the new Guidelines should make this point unequivocally: that “competitiveness” is a byproduct of a well-functioning, predictable EUMR anchored in unitary standards and sound economic analysis. Such an approach is essential to maintain confidence in the EU market, attract investment, scale promising companies, and ultimately ensure that the continent remains competitive. Predictable and consistent merger review—not discretionary or selective assessments of concentration—has long been Europe’s forte and one of its chief competitive advantages. The Guidelines should build on this strength, not squander it.

A.4.   What are the characteristics of markets where scale is necessary to compete effectively? Please be as specific as possible on the level of scale needed and why.

As the Draghi Report notes, companies and markets increasingly require scale to compete effectively—particularly in global, innovation-driven technology sectors. Markets where scale is decisive typically exhibit a combination of high fixed costs and low marginal costs, substantial R&D requirements, and strong network effects that reward larger user bases. In such markets, size often confers bargaining power to secure better inputs, prices, and even exclusive agreements with suppliers or distributors. Intangible assets—such as brand recognition and trust—further reinforce the advantages of scale, making it harder for smaller rivals to catch up. In such environments, achieving sufficient scale is often crucial.

In the tech sector, for instance, startups that cannot secure adequate funding and infrastructure often fail simply because they are unable to scale. In these contexts, mergers can play a critical role by providing access to the resources needed to compete. By pooling complementary assets and capabilities (Teece et al., 1997; Cirjevskis, 2019), a merger can enable a firm to move beyond the proof-of-concept stage and develop a commercially viable product. Without such combinations, many promising startups in these fields remain trapped in the lab, unable to reach the market.

A.5    What are the benefits that merged companies’ increased scale might bring to competitiveness:

A.5.1   In a scenario where the increased scale does not create or strengthen market power (e.g. a merger between complementary players in terms of products or geography)? Please select the benefits that you believe are relevant for increased competitiveness of the merged entity.

a. Network effects (i.e., whereby a product or service gains additional value as more people use it. Combining complementary assets (products, technologies, or geographic reach) can foster network effects that improve competitiveness and consumer welfare. Empirical studies consistently show that where network effects result from complementary integration, rather than exclusionary practices, they can lower transaction costs and spur innovation. For instance, research on payment systems and two-sided markets (e.g., Rochet & Tirole 2003; Evans & Schmalensee 2007) highlights that larger integrated platforms often deliver efficiencies that fragmented competitors cannot.

A concrete example would be the combination of complementary user bases: a merger between a payment-services provider strong in Europe and another strong in Asia could connect two previously fragmented networks, thereby increasing the overall value of the network to both consumers and merchants. Similarly, in online marketplaces, merging two regional platforms can generate stronger indirect (cross-side) network effects, as more buyers attract more sellers and vice versa, increasing liquidity and choice.

A practical illustration of such network effects is PayPal’s acquisition of Xoom in 2015. PayPal’s large user base in the United States and Europe was complemented by Xoom’s strength in remittance corridors to emerging markets. By merging, the two networks became more valuable to each participant: U.S. senders could now reach recipients in markets where PayPal previously had little presence, while Xoom users gained access to PayPal’s global merchant and consumer ecosystem. This expansion of complementary user bases increased cross-border transaction volumes, deepened liquidity, and enhanced the utility of the combined platform for both consumers and merchants.

Metrics to assess the benefits from network effects may include: the number of active users/merchants cross-border; buyer-seller ratios and growth; reduction in average time to match supply and demand; and retention/churn rates.

b. Intangible capital (assets lacking physical substance, e.g. patents, copyrights, goodwill, know-how). A startup can benefit significantly in a merger that offers access to the intangible capital of an established acquirer, providing it with valuable assets such as brand reputation, industry expertise, customer trust, and established relationships. This support is especially critical in a firm’s early stages, when its brand recognition and trust are limited, thus making market penetration challenging. Additionally, the acquirer’s proprietary knowledge and operational experience can enhance the startup’s product development and go-to-market strategies, increasing the likelihood of commercial success.

A practical example is Facebook’s acquisition of Instagram. At the time of the acquisition, Instagram was a rapidly growing startup, but relatively unknown beyond its core user base. After merging with Facebook, it gained access to Facebook’s strong brand, extensive marketing capabilities, and trusted reputation. This intangible capital helped Instagram to build credibility with both advertisers and users, accelerating its growth and monetization. Additionally, Facebook’s expertise in scaling social platforms enabled Instagram to refine its product roadmap and expand its infrastructure more efficiently. By leveraging Facebook’s brand, marketing expertise, and operational know-how, Instagram rapidly expanded its advertiser base and launched innovative features like Stories and Reels.

Metrics to measure the benefits of intangible capital post-merger include user growth and engagement (active users, retention); advertiser and customer expansion (number of advertisers, revenue per advertiser); brand recognition (brand awareness, NPS); product-development efficiency (time-to-market, feature launches); and revenue and monetization (total revenue, monetization rate).

For instance, following Facebook’s acquisition, Instagram’s user base grew from 30 million in 2012 to more than 1 billion active users by 2023. Before the merger, the platform also had very few advertisers and generated minimal ad revenue (close to zero). After the merger, however, Instagram became a major monetization engine, with ad revenue estimated at $30–35 billion annually by 2023. While precise causality is hard to identify in cases like this, there is at least a possibility this growth would not have been attained absent the merger with Facebook.

c. Access to equity investment. Mergers often allow smaller firms or startups to tap benefit from the financial and managerial resources of larger, well-capitalized acquirers (Manne, 1965). By integrating into a larger entity, a startup can leverage the acquirer’s balance sheet, investor credibility, and established financial channels to secure funding and deploy those funds more effectively than would be possible independently.

This access to capital is particularly important for scaling operations, investing in infrastructure, and pursuing global market expansion—activities that typically require resources far beyond what early-stage venture funding can provide. In the European context, access to equity investment through mergers is especially valuable, given the limited alternatives for raising large-scale capital. As highlighted in the Draghi Report, poor access to capital remains one of the EU’s primary competitive weaknesses, making mergers an important avenue to bolster the financial capacity of innovative firms.

A concrete example is Facebook’s acquisition of WhatsApp in 2014. At the time, WhatsApp had raised roughly $60 million in venture capital, which was sufficient for early operations but limited for global expansion. Following the acquisition, WhatsApp gained access to Facebook’s extensive financial resources and strategic support, enabling it to scale rapidly, enhance its infrastructure, and expand its user base worldwide. While the exact amount of capital made available post-acquisition was not publicly disclosed, it is widely understood to be orders of magnitude greater than pre-merger venture funding—thereby fuelling exponential growth. Further, WhatsApp’s user base grew from 450 million in 2014 to more than 2 billion users in the 2020s, reflecting both accelerated adoption and the operational advantages unlocked by access to the acquirer’s financial and strategic resources.

One or several of the following metrics could be used to evaluate improved access to equity investment: expected total capital availability; the number and credibility of potential investors; and anticipated reductions in the cost of capital. The Commission could also consider the planned deployment of funds for scaling operations, infrastructure, or R&D, along with forecasted impacts on revenue growth, user acquisition, and product launches. Finally, projected increases in firm valuation and the likelihood of attracting follow-on investment or strategic partnerships could provide additional indicators of the merger’s potential to strengthen targets’ financial capacity, especially where those targets are startups.

d. Ability and incentives to invest (e.g., in network infrastructure). Mergers between firms that sell complementary goods or services can significantly enhance both the ability and incentives to invest (Lafontaine & Slade, 2007). Combining resources allows the merged entity to pool financial, technological, and human capital, reducing the barriers to large-scale investments that would be difficult or risky for either firm independently. By consolidating financial resources, the merged entity may also be able to fund costly infrastructure projects, R&D, or platform upgrades more easily. Access to the acquirer’s balance sheet, operational expertise, and risk-management capabilities increases the firm’s capacity to undertake long-term investments.

A merger can also enhance the incentives to invest. A larger integrated firm can internalize the benefits of investment across its complementary assets, increasing expected returns and reducing the risk of underinvestment. Network effects amplify these incentives: investing in infrastructure that improves connectivity benefits a broader user base, enhancing overall platform value and attracting more users or partners. For instance, merging regional cloud-service providers allows may enable investment in data centres that serve a larger customer base, generating higher returns than isolated investments. The impact of such investments can be measured through metrics like capital expenditure on network or infrastructure projects; deployment speed and coverage; returns on investment; and adoption rates among users enabled by the improved infrastructure.

A practical example is Google’s acquisition of Waze in 2013. Google Maps and Waze offered complementary navigation services; Google Maps provided global mapping and directions, while Waze contributed real-time, crowd-sourced traffic data. By integrating Waze’s technology and user insights, Google could invest more efficiently in infrastructure such as real-time traffic analytics, routing algorithms, and server capacity. This enhanced both the ability and incentive to invest, as the combined platform could scale innovations across a much larger user base, improving returns on infrastructure spending without materially increasing market power

Metrics to gauge increased incentives to invest following a merger could reasonably include changes in capital allocation to infrastructure or R&D; acceleration in time-to-market for new products; ROI on investment projects; growth in user adoption or network coverage; and internal incentive alignment through KPIs or performance targets that encourage risk-taking and innovation. For example, in the case of Google Maps and Waze, these metrics can be observed in the increased investment in real-time traffic analytics, faster rollout of routing improvements, and expanded coverage benefiting a larger user base, reflecting the combined firm’s greater ability and stronger incentives to invest.

e. Ability and incentives to innovate (i.e., R&D, including high-risk innovation). Mergers between complementary firms can significantly enhance both their ability and incentives to innovate, particularly for R&D and high-risk projects. By combining resources, expertise, and intellectual property, the merged entity can undertake larger, more ambitious innovation projects than either firm could independently. Access to the acquirer’s technical talent, research infrastructure, and financial resources can also mitigate the risks associated with high-cost or high-uncertainty innovation, increasing the likelihood that breakthrough products or technologies will be developed.

A practical example is Google’s acquisition of DeepMind in 2014. DeepMind was a small AI startup with world-class research talent, but limited resources. Integration with Google provided access to vast computing infrastructure, data, and financial backing, allowing DeepMind to pursue high-risk AI-research projects—such as AlphaGo and AlphaFold—that would have been difficult to undertake independently. The merger enhanced both the firm’s ability to innovate—through access to hardware, data, and collaborative expertise—and its incentive to innovate, as successes could be scaled across Google’s products, generating significant returns on research investments.

Metrics to assess these benefits include a forecast of R&D expenditure before and after the merger; the number of patents filed, or research breakthroughs achieved; the speed and scale of product or technology development; adoption of innovations by end-users or other business units; and ROI or downstream commercial impact of high-risk projects. In the DeepMind example, these metrics are evident in the development and deployment of AI breakthroughs like AlphaGo, which combined high-risk research with substantial practical impact across Google’s ecosystem.

f. Ability and incentives to derive value from aggregation of data. Mergers between complementary firms can enhance both their ability and incentives to derive value from data aggregation. By combining datasets, the merged entity can generate richer insights, improve algorithmic performance, and develop new products or services that neither firm could achieve independently. It is, however, important to note that the ability to extract meaningful insights is ultimately more important than the sheer volume of data collected (Manne & Auer, 2020). All else being equal and assuming the acquirer is capable of leveraging data effectively, access to larger and more diverse datasets can enable high-value applications like personalized recommendations, targeted advertising, and improved operational efficiency. Simultaneously, the merged entity has stronger incentives to invest in data analytics and infrastructure, as the benefits of enhanced insights can be captured across a broader platform or user base.

A practical example is Facebook’s acquisition of Instagram, which allowed the company to integrate Instagram’s user data with its existing social graph. This aggregation enabled more effective ad targeting, improved content recommendation algorithms, and better user-engagement analytics. Even before full integration, such forward-looking indicators as the projected increase in actionable insights, potential ad-revenue growth, and anticipated improvements in algorithmic accuracy all signalled that the merger would likely be procompetitive by enhancing innovation and platform efficiency.

Metrics that can be used to predict these benefits ex ante include the projected increase in dataset size and diversity; expected improvements in algorithmic accuracy or predictive performance; anticipated uplift in user engagement or retention; anticipated expansion in monetizable insights; and planned investment in data-infrastructure or analytics capabilities. These forward-looking metrics would help assess whether the merger will increase the firm’s capacity and incentives to generate value from combined data, thereby producing efficiencies that benefit consumers.

g. Improves access to market (i.e., ability to reach new customers or geographies in the internal market or outside the internal market). Mergers between complementary firms can significantly enhance their ability and incentives to reach new customers or expand into new geographies. By combining distribution channels, sales networks, and customer bases, the merged entity can enter markets more efficiently and with lower costs than either firm could achieve independently. This expanded reach also increases incentives to invest in marketing, localization, and other market-entry activities, as the benefits of customer acquisition can be realized across a larger platform.

A practical example is Microsoft’s acquisition of LinkedIn in 2016, which allowed LinkedIn to leverage Microsoft’s global-enterprise customer base, cloud infrastructure, and sales networks to expand adoption among professionals and organizations worldwide. Pre-acquisition, LinkedIn had a strong social-networking presence, but limited integration with enterprise tools. Post-acquisition, the platform gained access to Microsoft’s suite of products and global reach, accelerating growth and increasing user engagement across multiple regions.

Metrics that can be used to evaluate these benefits ex ante include projected increases in customer reach; number of new geographic markets entered; growth in user acquisition or active users in target regions; anticipated increases in sales or monetization potential; and planned investments in marketing, localization, or distribution infrastructure.

h. Ability to procure products more competitively from large suppliers. Mergers between complementary firms can enhance the ability and incentives to procure inputs or products more competitively from large suppliers. By combining purchasing volumes, the merged entity can achieve economies of scale and stronger bargaining power, allowing it to negotiate better prices, more favourable contract terms, or improved delivery conditions. This efficiency can lower costs for the merged firm and potentially benefit consumers through lower prices or improved service quality.

A practical example is the merger of Kraft Foods and Heinz in 2015, which allowed the combined company to consolidate procurement across a larger portfolio of products. By pooling demand for raw materials, packaging, and logistics services, Kraft Heinz could negotiate better terms with suppliers, streamline supply chains, and achieve cost savings that would have been difficult for either company independently. Another example is Nvidia Corp.’s acquisition of Mellanox in 2019. By integrating Mellanox’s high-performance networking hardware with Nvidia’s GPU infrastructure, the combined company was able to negotiate more competitive procurement of semiconductors, networking components, and specialized hardware. This allowed Nvidia to achieve cost savings, streamline supply chains, and improve its ability to deploy large-scale datacentre and AI solutions efficiently.

Metrics that can be used to evaluate these benefits include projected reductions in unit-procurement costs; anticipated improvements in contract terms or supplier service levels; expected increases in procurement volume or efficiency; and foreseen impact on product pricing and profitability.

i. Ability to compete in global markets outside the EU. Mergers between complementary firms can enhance their ability and incentives to compete in global markets beyond the EU. By combining resources, distribution networks, and complementary capabilities, the merged entity can overcome barriers to entry in new geographies, reduce costs, and scale more efficiently than either firm could independently. Integration may also strengthen the incentives to invest in marketing, localization, regulatory compliance, and supply-chain optimization, as the benefits of international expansion can be realized across a larger, more capable platform.

Scale that comes from combining complementary products or geographies primarily improves global competitiveness by lowering per?unit fixed costs of exporting and by pushing the merged firm further up the productivity distribution. Indeed, this exactly the margin on which firms can enter and thrive in foreign markets in heterogeneous?firm trade models. In Melitz?type frameworks, larger, more productive firms are the ones that can cover the fixed costs of exporting and penetrate more (and tougher) markets; openness reallocates output toward these firms and raises average industry productivity without requiring market power (Melitz 2003; Melitz & Ottaviano 2008). Empirically, bigger markets and tighter integration reduce markups and increase average productivity—features that enhance, rather than dampen, rivalry as firms expand abroad (Melitz & Ottaviano 2008)

A practical example were the mergers of Spotify with certain regional music-streaming startups in 2014–2015, which allowed Spotify to leverage local expertise, licensing agreements, and distribution channels to accelerate entry into North America, Latin America, and Asia. By combining these complementary assets, Spotify could scale internationally more quickly, improve content offerings, and compete more effectively with global rivals like Apple Music and Pandora.

Metrics that can be used to evaluate these benefits ex ante include projected increases in active users or subscribers in target regions; anticipated expansion into new geographic markets; planned investments in localization, marketing, and compliance; forecasted growth in revenues or market share outside the EU; and expected improvements in operational efficiency for international operations.

j. Ability to use countervailing market power vis-à-vis infrastructure providers. Mergers between complementary firms can enhance their ability and incentives to exercise countervailing market power vis-à-vis infrastructure providers. By combining demand and resources, the merged entity can negotiate better terms for access to such critical inputs as cloud services, payment processing, telecommunications, or logistics infrastructure. This increased bargaining power can reduce costs, improve service quality, and ensure more reliable access to essential infrastructure—benefiting both the firm and ultimately consumers.

A practical example is Dropbox’s acquisition of HelloSign in 2019. By integrating HelloSign’s electronic-signature platform, Dropbox increased its leverage with cloud-infrastructure providers and API partners, enabling more favourable pricing, improved service-level agreements, and better support for scaling operations. This strengthened Dropbox’s ability to deploy secure, large-scale document management and e-signature services efficiently, while retaining negotiating flexibility with key infrastructure providers.

Metrics that can be used to assess these benefits ex ante include expected reductions in input costs; projected improvements in contract terms or delivery reliability; anticipated capacity secured from infrastructure providers; foreseen impact on production timelines or scalability; and forecast gains in operational efficiency due to improved bargaining power.

A.7.   Under which conditions can scale that brings benefits but creates or strengthens market power be achieved only through a merger, as opposed to other means, i.e. organic growth or cooperation?

Under certain market conditions, a merger may be the only realistic means to achieve the scale necessary to generate efficiency benefits, even when this scale also creates or strengthens market power (Demsetz, 1983). This is particularly true in sectors characterized by high fixed costs, capital intensity, and rapid innovation cycles. By consolidating critical assets like data, infrastructure, or customer bases, mergers can create barriers that are difficult for competitors to overcome. While this market power may raise competitive concerns, it is frequently a necessary byproduct of achieving the efficiencies and capabilities essential to compete globally, especially in innovation-driven sectors.

For example, in AI markets, access to additional computing power could give startups a competitive advantage, leading to better services and lower prices for consumers. A startup may possess innovative technology but lack immediate access to the kinds of infrastructure that only a larger company can provide. In this context, a merger can facilitate the rapid consolidation of critical assets and capabilities, accelerating scale economies that otherwise would take years to acquire, if they are achievable at all.

Similarly, in fast-evolving fields like biotechnology, merging complementary capabilities can be the only efficient path to bring innovations to market promptly. For instance, when one company holds promising research but lacks clinical-development expertise, while another possesses those capabilities, a merger integrates these assets in a way that loose collaborations or partnerships typically cannot match within necessary timeframes.

Mergers may also be indispensable to achieve the scale required for commercialization. Startups developing highly specialized technologies—such as breakthrough battery innovations—may depend on established manufacturers’ production facilities and supply-chain networks to scale effectively.

From an economic and regulatory standpoint, it is crucial to recognize that blocking such mergers risks stifling innovation by preventing the realization of critical scale benefits. While alternatives like organic growth or cooperation can be effective in some markets, sectors with significant asset specificity, indivisibilities, strong network effects, and complex complementary resources may require consolidation to unlock the efficiencies necessary for global competitiveness (see, e.g., Klein, 1996).

A.8.   To what extent can scale that brings benefits be achieved through expansion into new geographic or product markets, rather than consolidation within the same product and geographic market?

Scale benefits can often be partly achieved through expansion into new geographic or product markets, which allows firms to access new customers and diversify risk without necessarily raising significant competition concerns. For example, a French company might grow by entering Spanish markets or adjacent product categories, instead of acquiring competitors in its existing market.

This strategy is not, however, always sufficient. In sectors with strong local network effects or multi-sided platforms, high fixed costs, or complex regulatory environments, achieving scale within the core geographic and product markets remains critical. For instance, a ride-hailing app with a strong user base in one jurisdiction may not be able to capitalize on users in other jurisdictions. Local expertise, integrated infrastructure, and established relationships are often difficult to replicate through expansion alone. Startups face particularly significant challenges in scaling organically across regions, due to the needs for tailored infrastructure and compliance with diverse regulations. This may make consolidation within incumbent markets a more viable path to necessary scale. This challenge is amplified in the EU, where the Single Market remains incomplete because of persistent regulatory, tax, cultural, and linguistic differences.

Ultimately, the choice between expansion and consolidation depends on market-specific factors, including network effects, asset indivisibility, and regulatory complexity. While geographic and product expansion can contribute to scale, consolidation within core markets often remains essential to unlock full efficiency and competitive benefits.

A.9.   How should the Commission take into account the negative effects of a merger on competitors’, suppliers’ or business customers’ resilience when assessing its impact on competition?

It is not clear that merger assessment is the appropriate legal tool to address broader concerns such as “resilience” or geopolitical dependence on a limited number of suppliers. Resilience, as such, is not a standalone factor under the EUMR. The EU merger-control framework is relatively narrow, designed to focus on market power and competition dynamics—areas where the Commission possesses clear expertise and well-established analytical tools.

At the same time, it is undeniable that mergers that reduce the number of viable suppliers or create excessive concentration, particularly in critical inputs, can make supply chains more fragile and susceptible to shocks, thus increasing the EU’s overall dependence on a few concentrated sources. Given that this could have critical strategic implications for the EU and its member states, the question arises whether the Commission should take such geopolitical risks into account when reviewing mergers under the EUMR.

Geopolitical risks and supply-chain resilience involve complex and multifaceted issues that extend beyond competition law and typically require targeted policy instruments. For instance, it is unclear how DG COMP could adequately analyse whether concentration of a specific input in a particular region—inside or outside the EU—exposes the EU to supply-chain shocks. While such analyses may not be impossible (indeed, they might be both possible and necessary), DG COMP is not well-positioned to conduct them. While granting the College of Commissioners a more prominent role in merger review could offer a partial solution, it risks politicizing and delaying the merger-control process to the detriment of businesses and European consumers.

To address these challenges effectively, the EU should instead consider relying on other tools, such as strategic stockpiling of critical materials; foreign-investment screening; industrial-policy initiatives; and trade-diversification strategies. These specialized instruments are better suited to manage systemic risks and ensure supply-chain security, without conflating them with merger control’s primary objective of preserving competitive market structures—an objective that already aligns with certain resilience concerns.

Ultimately, maintaining a clear boundary between competition assessment and geopolitical policy, to the highest extent possible, would safeguard both legal certainty and regulatory effectiveness. As we have argued in our answers to other questions in this survey, it is here where the EU’s competitive advantage lies.

A.15. In which type of markets/sectors are smaller or larger firms typically more innovative?

In the dynamic landscape of innovation, smaller and larger firms both demonstrate distinct innovation strengths across different markets and sectors (Acs & Audretsch, 1988; Cohen & Klepper, 1996; Akcigit & Kerr, 2018). While this is far from an exact science, we outline some general characteristics below.

Smaller firms, particularly tech startups, typically excel in new, disruptive areas and developing novel technological advancements (Acs & Audretsch, 1988; Christensen, 1997; Akcigit & Kerr, 2018). Characterized by agility, a high degree of risk tolerance, and innovative business models, they offer scalable products or services (Kerr & Nanda, 2015). Many successful startups are founded by entrepreneurs seeking a more flexible environment than large firms can offer (Gans, Hsu, & Stern, 2002). These entities often originate specific technologies that large companies don’t easily develop in-house (Christensen, 1997). Their diverse innovation is evident in acquisitions by major digital platforms, often spanning sectors outside the acquirer’s “core functionalities” (Gautier & Lamesch, 2022; Motta & Peitz, 2020). For example, Alphabet has acquired firms in cybersecurity, home automation, cloud computing, wearables, GPS navigation, and social gaming. Microsoft’s acquisitions include companies specializing in video games, social networking, and e-commerce. This highlights their contributions across specialized and emerging digital markets (Gautier & Lamesch, 2022).

Conversely, larger firms and established incumbents are often highly innovative in building on existing strengths, scaling technologies, and deploying innovations widely due to their significant resources (Cohen & Klepper, 1996; Bloom, Sadun, & Van Reenen, 2012). They are among the most productive and innovative segments of the modern economy, with high rates of innovation and substantial patent holdings (Autor, Dorn, Katz, Patterson, & Van Reenen, 2020; Hall, Jaffe, & Trajtenberg, 2005). R&D investments and productivity generally increase with firm size; in 2023, for instance, Amazon spent $85.6 billion on R&D, and Alphabet (Google) spent $45.4 billion. Large firms are uniquely capable of adopting advanced technologies, such as AI; absorbing high fixed costs; managing organizational changes; and leveraging extensive datasets (Brynjolfsson & Hitt, 2000; Brynjolfsson, Rock, & Syverson, 2019). Their strategic acquisitions of startups are vital, integrating smaller firms’ innovations into their ecosystems, as well as providing superior managerial capabilities and greater scale for broader commercialization (Bena & Li, 2014; Phillips & Zhdanov, 2013; Igami & Uetake, 2020).

Ultimately, both small and large firms play complementary roles: smaller firms pioneer disruptive ideas, while larger firms provide the scale and investment needed for widespread adoption and sustained R&D (Acs & Audretsch, 1988; Akcigit & Kerr, 2018). Mergers often facilitate this natural symbiosis, with large incumbents supplying the resources to scale innovative but inherently risky ventures (Gans et al., 2002; Bena & Li, 2014).

A.16. How do different market structures, such as tight oligopolies or markets with a leading company followed by smaller firms, influence the ability and incentives to innovate and invest?

Market structure alone is a poor predictor of innovation outcomes, as both concentrated and more fragmented markets can foster strong incentives to invest, depending on the circumstances (Aghion, Bloom, Blundell, Griffith, & Howitt, 2005; Gilbert, 2006; Sutton, 1991). In tight oligopolies, large incumbents often have the scale, resources, and diversified portfolios needed to fund costly long-term R&D, and dynamic competition can push them to innovate as a primary means of rivalry (Cohen & Klepper, 1996; Nickell, 1996; Vives, 2008). In leader–follower markets, dominant firms can commercialize and scale promising inventions, while smaller rivals and startups drive disruptive experimentation, often relying on acquisitions or partnerships with incumbents as viable exit paths (Teece, 1986; Arora, Fosfuri, & Gambardella, 2001; Gans, Hsu, & Stern, 2002; Kerr & Nanda, 2015). Many firms later deemed “innovative” were recognized as such only after being successfully scaled by an acquirer (Bena & Li, 2014; Phillips & Zhdanov, 2013). Accordingly, policymakers should avoid structural presumptions and instead assess the specific economic mechanisms at-play in each market before drawing conclusions about innovation incentives (Arrow, 1962; Aghion et al., 2005; Gilbert, 2006). These mechanisms include (among others) firms’ ability to appropriate returns on innovation; exploit economies of scale in R&D; respond to dynamic competitive pressures; access capital and bear risk; and foster entry and experimentation, in addition to the existence of viable exit strategies (Levin, Klevorick, Nelson, & Winter, 1987; Teece, 1986; Cohen & Klepper, 1996; Nickell, 1996; Hall & Lerner, 2010; Nanda & Rhodes-Kropf, 2013; Kerr & Nanda, 2015; Akcigit & Kerr, 2018; Cohen, Nelson, & Walsh, 2000).

A.18. What are the benefits companies may enjoy due to their global presence that can give them a competitive advantage in markets (with)in Europe?

First, less regulation in markets outside of Europe significantly benefits globally operating firms. As the Draghi Report confirms, Europe is characterized by overregulation, and inconsistent and restrictive regulations that create a “competitiveness and innovation gap” compared to regions like the United States and China. For instance, the compliance costs for a typical SME can be as high as €10,000. The EU’s “risk-averse regulatory approach” leads to legal uncertainty and disadvantages European firms, inadvertently favoring non-European companies not bound by these rules.

The General Data Protection Regulation (GDPR) is a prime example: within a year of it coming into force, European tech startups saw a 26.1% drop in monthly venture-funding deals relative to their U.S. counterparts, a decline that persisted through 2020 (Jia, Jin, & Wagman, 2021). This regulation disproportionately favored incumbents, leading to increased market concentration as websites relied more on large vendors like Google and Facebook and cut ties with smaller ad-tech providers. It also resulted in a “lost generation” of apps, with approximately one-third of existing apps exiting the EU market and new entries falling by roughly half (Kummer & Schulte, 2019; Peukert et al., 2022). The Draghi Report explicitly points to the GDPR as a regulation that has hindered EU companies due to its fragmented implementation.

Second, better access to financing or equity investments outside Europe provides a crucial advantage. European companies often struggle to attract sufficient risk capital, facing fragmented capital markets and unfavourable conditions for venture-capital investment within the EU, as highlighted by the Draghi Report. This “funding gap” forces many European entrepreneurs to seek financing from U.S. venture capitalists and to scale up in the U.S. market. Between 2008 and 2021, nearly 30% of “unicorns” founded in Europe relocated their headquarters abroad, predominantly to the United States (Atomico, 2021). In the AI sector, 61% of global funding goes to U.S. companies, 17% to Chinese, and only 6% to those in the EU (Draghi Report).

Acquisitions by large incumbent firms are one of the most important components for providing vitality to the overall venture ecosystem, accounting for approximately 80% of “liquidity events” for venture capital today (NVCA, 2025). Policies that restrict these acquisitions, such as those related to “self-preferencing” or stringent merger control (e.g., DMA’s Art. 14), can reduce larger firms’ motivation to make purchases, thereby deterring initial financing and the formation of new ventures. Indeed, venture investors become much less likely to invest in new startups without clear exit pathways.

Finally, the EU’s stringent environmental and social-protection standards impose substantial direct and operational costs on firms, which can weaken overall competitiveness and reduce EU firms’ incentives and ability to grow to a critical scale (Draghi, 2024). Compliance with environmental rules costs the chemical industry more than €20 billion annually, with some firms devoting up to 10% of their capital expenditures to regulatory compliance, while sustainability reporting under the CSRD can add up to €1 million per-year for listed companies (Draghi, 2024; European Commission, 2021a).

These burdens divert resources that could otherwise support innovation, expansion, or price competition. Moreover, they disproportionately affect smaller firms with limited compliance capacity, such as SMEs and startups (Draghi, 2024). Mechanisms like the Carbon Border Adjustment Mechanism further raise potential trade costs—estimated at €4–7 billion in certain sectors—which can serve as an incentive to shift production to jurisdictions with looser standards (“carbon leakage” or “social dumping”) (European Commission, 2021b; OECD, 2020).

Overall, the EU’s regulatory load increases production costs and reduces firms’ ability to compete on price and speed in global markets. While foreign companies operating in the EU are subject to the same rules, they are often not bound by them during their critical early-growth phase, allowing them to scale more easily before entering the EU market (Draghi, 2024). This puts EU firms, which often have been subject to a regulatory straitjacket since their inception, at a distinct competitive disadvantage (Draghi, 2024).

A.20. What would be pro-competitive consolidations in global strategic sectors, such as digital and deeptech markets (e.g., IoT, advanced connectivity, cybersecurity, cloud, quantum, and/or AI), clean and resource efficient technologies or biotechnologies that would benefit competition in the Single Market?

Pro-competitive consolidations in strategic sectors like AI, quantum computing, clean technologies, and biotechnologies are among those that combine complementary assets in ways that enhance firms’ ability and incentives to innovate, invest, and compete, without creating durable market power that forecloses rivals. In high-fixed-cost, scale-intensive markets—where small firms often pioneer breakthrough technologies but lack the resources to commercialize them—mergers can accelerate product development, improve interoperability, and achieve efficiencies that benefit consumers in the Single Market. Such transactions can also strengthen EU firms’ global competitiveness and encourage new market entry by providing credible acquisition pathways for startups.

The competitive benefits lie in merger-specific, verifiable efficiencies—particularly dynamic, innovation-driven ones—while the potential harms, such as foreclosure or the entrenchment of market power, should be carefully assessed and mitigated through evidence-based analysis, rather than structural presumptions.

Topic B: Assessing Market Power Using Structural Features and Other Market Indicators

B.1.    Do the current Guidelines provide clear, correct, and comprehensive guidance with regards to structural indicators / market features as well as the frameworks to assess coordination and foreclosure theories of harm?

The current EU Horizontal and Non?Horizontal Merger Guidelines offer workable screens (rather than presumptions) for structure, and a generally sound framework for coordinated and foreclosure theories of harm. In particular, the Non?Horizontal Guidelines’ “ability–incentive–effects” approach; their recognition that non?horizontal mergers are generally less likely to impede competition than horizontal mergers; and the <30% share/HHI<2000 “safe harbour” are all clear and correct starting points.

Where the guidelines are less complete is precisely where recent consultation materials contemplate moving: toward stricter indicators or rebuttable presumptions based on shares/HHI; expanded lists of “market features”; and more aggressive screens for coordinated effects (e.g., diversion, margins, pivotality, GUPPI/vGUPPI). The economic literature is clear the concentration measures are, at best, diagnostics and, at worst, misleading predictors of harm. The national–local concentration disconnect, the weak and often non?causal link between concentration and price, and heterogeneous innovation responses all caution against burden?shifting based on structure alone (e.g., Demsetz 1973; Berry, Gaynor & Scott Morton 2019).

The error?cost implications are straightforward: more rigid presumptions risk condemning efficient deals and misallocating enforcement resources. The EU’s own Topic B backgrounder fairly notes that existing texts mostly provide safe harbours, rather than presumptions, and that any SIEC finding must meet a “more?likely?than?not” standard. This includes below-dominance thresholds, as those are strengths to retain, not weaknesses to reverse.

Two clarifications would materially improve predictability, while preserving the existing balanced framework.

First, state expressly that market shares and HHIs are screens (useful first indications) and not presumptions, and that any SIEC theory—especially “important competitive force” and differentiated?products unilateral effects—must rest on transaction?specific evidence of diversion, margins, and repositioning, not on structural thresholds alone.

Second, in non?horizontal cases, reaffirm that any foreclosure theory must show (i) ability, (ii) incentive, and (iii) likely material effects, and that “foreclosure shares” without an incentive story are insufficient. At the same time, instruct staff to evaluate the elimination of double marginalization and other verifiable, merger?specific efficiencies within the same arithmetic the guidelines already endorse.

These steps would keep the guidelines anchored in effects?based analysis and consistent with the mainstream empirical finding that vertical integrations are often neutral?to?procompetitive on average, with harms arising only under specific conditions that the ability-incentive-effects test is designed to identify.

B.2. Do you consider that the current structural indicators / market features involving market shares and concentration levels and/or the broad frameworks to assess coordination and foreclosure theories of harm should be substantially revised?

1. Horizontal mergers—structural indicators. The current HMG fairly treat shares/HHIs as “useful first indicators” and set only safe?harbour guidance, not presumptions, for horizontal cases. They should continue to function as screens, not as burden?shifting rules. The economics literature finds little policy value in concentration and warns against stronger structural presumptions (Berry, Gaynor & Scott Morton 2019; Demsetz 1973). The effects are sensitive to market definition. For example, in the U.S. context, it shows that national concentration trends are a poor proxy for local competitive conditions (Rinz 2022). The revised guidelines should therefore emphasize case?specific evidence—diversion ratios, margins, bidding evidence, and UPP/GUPPI—over tighter concentration thresholds.
2. Horizontal coordinated effects—framework. The HMG’s Airtours test (ability to reach terms; monitoring; deterrence; and limited outsider disruption) remains the right organizing framework, but the revised guidelines should clarify the evidentiary burden and the type of proof that shows a merger makes coordination “more likely than not”, consistent with CK?Telecoms. In particular, the guidelines should specify what market facts (e.g., transparency, symmetry, capacities, elimination of a “maverick”) move the needle, and what empirical/ documentary evidence is required in differentiated?products settings or with algorithmic pricing. The broader empirical record supports this approach: surveys and newer studies consistently find that most vertical integration is neutral or procompetitive (Lafontaine & Slade 2007; Cooper et?al. 2005; Slade 2019).
3. Non?horizontal mergers vertical foreclosure. We support retaining and clarifying the NHMG’s “ability-incentive-effects” framework, including the role of EDM and other efficiencies. The guidelines should caution against treating “foreclosure shares” or vertical concentration as sufficient; incentives must be demonstrated with profitability?based analysis (including vertical arithmetic or vGUPPI) and credible effects evidence

B.3.    What should be the structural indicators / market features used by the Commission to assess the likelihood of anticompetitive effects in horizontal mergers?

The Commission should continue to use market shares and concentration levels as an initial screen in horizontal mergers, but these should be complemented by richer structural and competitive indicators. Market share and HHI provide a contextual starting point that large increases in concentration might warrant a closer look. They are not, however, dispositive measures of market power. We recommend the guidelines explicitly incorporate other indicators, such as diversion ratios, profit margins, price-elasticity data, and measures of competitive proximity, as well as qualitative evidence (e.g., internal documents on rivalry). These features paint a fuller picture of the merger’s competitive impact than market shares alone. The role of market shares/HHIs should thus remain as “useful first indications” (per current practice) and safe-harbour thresholds, while other structural features guide the substantive analysis of whether a merger is likely to harm competition

Market share and concentration levels are traditional barometers of market structure. A high combined market share or a big jump in HHI post-merger suggests the merged firm might enjoy substantial market power. These metrics are intuitive and backed by economic theory: in a simplistic model, fewer firms or a dominant firm can more easily sustain higher prices. But just as the current ones do in para.14 HMG, the guidelines should stress that these are starting points. There is ample empirical evidence that concentration alone does not reliably predict competitive outcomes. Industries can be concentrated due to efficiency (successful firms attracting more customers) without consumers being harmed by monopolistic behaviour.

Thus, a high share or HHI should prompt further inquiry, not a conclusive presumption of harm. The revised guidelines could reaffirm safe harbours (e.g., combined share under 25% or small HHI increases) as well as clarify that crossing certain thresholds (like combined share well above 40% or HHI above 2000 with a large delta) will typically lead to an in-depth analysis, albeit with no automatic outcome.

The revised guidelines should reflect, however, that structural indicators often have shortcomings in dynamic markets, particularly when combined with the Commission’s narrow approach to defining relevant product markets.  In such circumstances, the use of structural indicators alone risks underestimating the competitive constraints imposed on, and in turn overestimating the market power of, the merging parties and their competitors.

As an example of this, recent approaches to market definition in digital markets have tended to neglect that users—and, in turn, the advertisers that seek their attention—switch between a variety of digital services, and not only among services that share functional similarities.  Indeed, challenger service A will often seek to compete with incumbent service B by offering something slightly different.  Yet, too often, the differentiation which is the core of service A’s competitive challenge to service B is used as the very evidence to deny the existence of competition between these services.

In addition, in many digital markets, switching from one service to another is instant and cost-free, with few capacity constraints on the recipient firm’s growth.  These characteristics means that digital firms often face more intense ongoing competitive pressure from smaller rivals than is the case in other industries where, for instance, it may be costly for the customer to switch, or it may be slow and costly for the rival to increase capacity.

User switching across a broad variety of services is supported by a broad base of real-world evidence.  On several occasions, digital services have become unavailable to users, and in those cases, users have turned to a range of alternative services.  For example, in January 2025, TikTok went dark overnight in the United States for 12-16 hours on the eve of a congressional ban.  As a result, overall time spent on Instagram spiked by nearly 40% across the board, and panel data showed that the lost TikTok time went to Facebook (20% of the increased usage among all apps), Instagram (17%), and then YouTube (14%); even Meta’s Messenger app saw a 5% increase in traffic.

B.4.    Compared to the current Guidelines, should structural indicators be stricter or give rise to legal presumptions? Or should they be laxer/lower?

Structural indicators should not be made stricter or turned into legal presumptions; if anything, they should be used only as soft screens.

First, EU merger control is built around a case?by?case SIEC assessment of which shares/HHI are “useful first indications”, not dispositive rules. The current texts expressly set safe harbours (e.g., <30% share and HHI<2,000 in non?horizontal cases) and emphasize that thresholds “do not give rise to a legal presumption”. Nor do they shift the burden of proof to the parties; proof of a SIEC remains with the Commission on a “more likely than not” standard (including below dominance). Turning these indicative screens into rebuttable presumptions would invert this architecture, risk type?I errors, and conflict with the guidelines’ own “sliding scale” approach to evidence. The better course is to keep (or relax) soft thresholds, while clarifying how other evidence—diversion, margins/UPP?type tools, capacity/pivotality—will be weighed.

Second, the economic record does not support stricter presumptive use of concentration metrics. Decades of IO research finds no stable, policy?reliable relationship between concentration and competitive harm, and cautions against treating structural measures as standalone predictors of price effects (Demsetz 1973; Berry, Gaynor & Scott Morton 2019; Syverson 2019). In short, stricter structural presumptions would be administratively convenient but economically noisy, increasing false positives and chilling procompetitive deals.

Third, structural shortcuts are especially ill?suited outside horizontal theories. The EU’s non?horizontal framework rightly focuses on ability-incentive-effects, rather than on blunt “foreclosure shares”. The modern empirical literature indicates that vertical integration frequently yields efficiencies (most notably, the elimination of double marginalization) and, on balance, consumer gains—even when some rivals’ costs may rise (Lafontaine & Slade 2007; Cooper et?al. 2005; Crawford, Lee, Whinston & Yurukoglu 2018). Converting vertical “screens” into presumptions (e.g., based on capacity shares or generic foreclosure fractions) would flatten this nuance and contradict the NHMG’s emphasis on incentives and net competitive effects. The safer path is to keep structural indicators as triage tools, while requiring concrete evidence of both the profitability of foreclosure and likely downstream harm.

Topic C: Innovation and Other Dynamic Elements in Merger Control

C.1.    Do the current Guidelines provide adequately clear, correct and comprehensive guidance on how the Commission considers dynamic criteria in its assessment of the impact of mergers on competition?

No, to an insufficient extent (c). The current EU Horizontal Merger Guidelines offer limited clarity and insufficient conceptual depth when it comes to assessing mergers through dynamic, innovation-centred lenses. While the document occasionally acknowledges the relevance of innovation to competition, the framework remains grounded in static price-centric logic and lacks the necessary elaboration to guide assessments where innovation is the primary competitive parameter.

Paragraph 5 of the HMGs states that the guidelines apply to mergers between “actual or potential competitors in the same relevant market”. This formulation has grown ambiguous, however, considering recent merger practice. For instance, in Dow/DuPont, the Commission assessed the parties’ position in the same “innovation space”, an analytical move that does not easily square with traditional notions of market definition. In such cases, there is a risk that the concept of “potential competition” may be stretched beyond product markets into speculative future innovation pathways. The guidelines should therefore provide conceptual tools or limiting principles for such extensions.

In Paragraph 8, the Commission explains that it prevents mergers that would deprive consumers of the benefits of effective competition—listing innovation alongside price, quality, and choice—only to reduce all these effects into a shorthand of “price”. While administrative efficiency may justify such an approach in some contexts, innovation and price operate through distinct mechanisms. Mergers may affect innovation incentives in ways that are not analogous to pricing effects. For instance, rivals’ responses to innovation may be nonlinear, and mergers may alter the trajectory of technological development in ways that cannot be captured through marginal-pricing logic. It may be useful to treat the innovation-related harms (and benefits) of mergers under a separate section.

Paragraph 9 may aggravate this problem by presenting a primarily backward-looking counterfactual approach. The Commission notes that it will usually compare post-merger competitive conditions with those prevailing at the time of notification, resorting to forward-looking analysis only in “some” cases. Yet innovation competition is inherently dynamic. Product lifecycles, R&D pipelines, and the evolution of technology often follow discontinuous paths. Assessing such mergers by reference to present conditions risks missing the core competitive harms, or benefits, of a proposed transaction. Hence, it may be useful to qualify this statement by explaining that, when innovation concerns orient a merger assessment, the relevant counterfactual should be inherently dynamic.

Some recognition of the distinctive nature of innovation-based harm is found in Paragraphs 20 and 38, which allow the Commission to downplay market-share metrics in favour of an assessment of firms’ role as “important innovators”. These provisions are intuitive and welcome, but they suffer from under-definition. The guidelines do not clarify what it means to be an “important innovator”, nor how such status should be evidenced. In practice, this has led to increasingly expansive (and hardly predictable) interpretations, ranging from early-stage pipeline overlaps to speculative assessments of future technological positioning. In high-uncertainty settings such as pharmaceuticals or digital technology, this vagueness risks harming legal predictability and may encourage overly cautious dealmaking.

Finally, in connection to Paragraph 8, Paragraph 28 attempts to anchor innovation effects to familiar price-competition logic. It suggests that, when merging firms are close competitors, the removal of rivalry may allow them to raise prices—understood, again, as shorthand for all competition parameters. But this analogy breaks down in the case of innovation. The economics literature suggests that the relationship between competition and innovation is non-monotonic: eliminating a rival does not always reduce innovation incentives and may, in some cases, enhance them (Denicolo & Polo, 2019). The guidelines do not engage with this complexity, leaving a gap in their analytical apparatus.

In sum, while the HMGs do refer to innovation, they do so in a fragmented and conceptually limited manner. The core framework—counterfactual analysis, assessment of closeness of competition, and reliance on market structure—remains designed for static, price-based environments. A more robust and dedicated framework for analysing dynamic competition is needed if merger control is to protect and promote innovation in high-technology markets.

C.3.    In what circumstances can mergers negatively impact the ability and incentives of the merged company to innovate?

Mergers may negatively affect innovation by altering not only firms’ incentives to innovate but also their capacity to do so. The Commission’s dual focus on incentives and abilities in recent merger cases is a promising step. In practice, however, innovation analysis has been dominated by incentive-based reasoning, often grounded in structural assumptions that are ill-suited to assess dynamic competition and innovation. A more balanced and conceptually coherent treatment of innovation harms requires a firmer anchoring of both capability-based analysis and contextual assessments of innovation opportunity and market contestability.

The first limitation arises from an imbalance: while the guidelines and recent decisions refer to both “incentives” and “abilities”, actual enforcement tends to revolve around the former. That is, if a merger is seen to reduce the incentives of the merging parties—or of their rivals—to innovate, it becomes suspect, often without a corresponding analysis of how the merger alters their respective innovation capabilities. The Commission continues to rely on traditional structural indicators (e.g., market shares, concentration levels) as proxies for innovation incentives.

Yet economic theory has long shown that market structure is an unreliable predictor of firms’ innovation behaviour. While some stylized models link innovation incentives to low concentration, others—most famously Schumpeterian models—posit that large firms with market power are more likely to invest in R&D. Neither view holds universally (Cohen & Levin, 1989; Gilbert, 2006). This is why contemporary merger economics relies on fact-intensive and case-specific inquiries to discover whether, in the specific circumstances of the merger, the transaction threatens to hinder innovation (Bourreau, Jullien, & Lefouili, 2024).

A more fruitful approach would be to evaluate innovation incentives through the lens of contestability and opportunity. In dynamic markets, innovation can emerge from both incumbents and entrants, provided the market remains open to challenge and there is opportunity to disrupt (Shapiro, 2012). Monopolists may continue to innovate pre-emptively to maintain dominance, while rivals innovate to seize leadership (Gilbert & Newberry, 1982). Under such conditions, mergers that reduce contestability—for instance, by eliminating a credible future challenger or acquiring a key innovation input—can indeed chill innovation. But the mechanism must be case-specific and substantiated with evidence beyond mere structural inference. Chiefly, the notion of potential competition is inherently probabilistic: a merger that eliminates a company that is certain to be a future challenger is, other things equal, more likely to harm innovation than situations where this probability is more remote.

Equally important is the merger’s impact on the firms’ capabilities to innovate—a dimension that is often underexplored in enforcement practice. Whereas price-based harms mostly hinge on incentive effects, innovation-based harms require a richer understanding of what the firms can do, and how the merger might reshape their innovation potential. The Commission implicitly recognized this in STX/Aker Yards, noting that “the clearest evidence that the crucial factor in the cruise ship market is the know-how of managing complex projects and that a certain lack of innovation can be overcome is the case of Mitsubishi, who was able to deliver in 2004 two cruise ships of very high quality without previous experience in the cruise ship market”. This acknowledgment of capability-based competition underscores the need for merger analysis to scrutinize whether the transaction enhances or suppresses firms’ abilities to innovate, and specifically, how they are affected by the proposed merger.

A constructive step forward in the new guidelines could be to distinguish mergers that bring together overlapping innovation capabilities from those that combine complementary ones. A 2009 paper put the issue plainly: “The question should be framed not in terms of whether product-market competition will be impaired, as that is too much of an immediate concern, but in terms of whether capabilities will be brought under unitary control, thereby possibly thwarting future variety in new product development” (Sidak & Teece, 2009).

In short, the new Guidelines would benefit from a clearer analytical framework that distinguishes among incentives, capabilities, and contestability. In particular, i) keeping the case-specific approach to mergers while ii) moving away from inconclusive assumptions about market structure, and iii) emphasizing mergers’ impact on firms’ ability to innovate, would significantly improve the assessment of innovation harms in merger control.

C.3.a    What theory/theories of harm could the Commission consider (i.e. that would impede a company’s innovation post-merger, including due to the reduction of the incentives to innovate going forward or reduce access to IP licences)?

The Commission’s mandate under the Merger Regulation is to prevent concentrations that would significantly impede effective competition, including through a reduction in innovation. Any theory of harm that seeks to assess post-merger innovation effects must therefore focus on how a transaction may reduce firms’ incentive and/or ability to innovate, including by impairing rivals’ access to important resources or foreclosing future sources of innovation. This objective is not only consistent with consumer welfare but is a necessary condition to protect it in the long term. As a wealth of economic literature confirms, innovation is the principal driver of productivity growth and societal welfare over time (Akcigit & Van Reenen, 2023). Merger policy that aims to preserve a robust innovation ecosystem is thus deeply aligned with a forward-looking interpretation of consumer welfare (Teece, 2023).

As noted under C.3., the Commission historically has elaborated an “innovation theory of harm” focused primarily on the incentives of the merging parties to continue innovation post-transaction. This analysis, however, has often been anchored in such structural indicators as R&D market shares or overlaps in pipeline products. While these provide a starting point, they fail to capture the deeper mechanisms through which innovation may be furthered or impaired. As discussed earlier, the merger’s impact on capability combinations—the unique assets, knowledge bases, and routines that underlie innovation—is a more meaningful predictor of which theories of innovation harm can be constructed. In this respect, the Commission is well-supported by jurisprudence. As the General Court held in CK Telecoms, “the Commission need not limit its analysis to the theories of harm developed in previous decisions”, and may advance alternative ones, provided they are reasonably foreseeable and supported by cogent and consistent evidence.

We refer to our comments under C.3.b for a more detailed analysis of how mergers can harm or benefit innovation potential.

C.3.b    Under which conditions could this theory/these theories of harm materialise?

Horizontal Mergers. The core innovation harm in horizontal mergers arises when the transaction eliminates a direct innovation rival, thus diminishing dynamic rivalry, and where the potential harm from this decrease outweighs potential benefits, such as innovation-related synergies and increased appropriability. The canonical example is where two firms are simultaneously pursuing overlapping R&D or pipeline products in the same technological trajectory. Post-merger, the internalization of competition may reduce the incentive to push forward both lines of development, especially where the merged firm can delay or discontinue one stream without fearing competitive re-entry.

This theory of harm was intensively applied in Dow/DuPont, where the Commission analysed the innovation rivalry between the firms in broad “innovation spaces”. But the case largely hinged on R&D intensity and pipeline overlaps—tools that are coarse and vulnerable to overreach—and assumptions that may not apply everywhere, such as high levels of appropriability. A more refined approach would identify whether the firms possess similar innovation capabilities (e.g., in molecular platforms, data science, or regulatory know-how) and whether the merger would eliminate distinct approaches to innovation from the market. In other words, does the transaction not only reduce competition in outcomes (products), but also in approaches (ways of innovating)?

In addition to overlapping pipelines, horizontal mergers may also raise concerns when the merged entity consolidates R&D resources to the point of excluding rivals from key innovation inputs—e.g., datasets, testing environments, or experimental ecosystems. These may not show up in market-share metrics but could effectively eliminate viable pathways for others to innovate. The Commission briefly touched on this risk in General Electric/Alstom, where it noted that the merged entity could aggregate customer information on demand patterns, which was crucial for continuous innovation in gas-turbine markets.

Non-Horizontal Mergers. Innovation harm in vertical or conglomerate mergers arises primarily through foreclosure—not of product markets, but of innovation pathways.

A merged firm may acquire a critical input necessary for innovation by downstream rivals—such as access to a technological platform, a dataset, IP rights, or specialized manufacturing infrastructure. If access is subsequently restricted, rivals’ ability to innovate is impaired. The merger may, for instance, remove a neutral technology supplier and replace it with a vertically integrated entity that withheld cooperation with competitors. As one example, the abandoned deal between Nvidia and Arm may have produced such effects by withholding from rival firms IP libraries related to semiconductor design.

The important point to consider in foreclosure cases is how critical and irreplaceable the input withheld from competitors might be, and to weigh this potential harm against the benefits of unitary control. In particular, the Commission should inquire into whether innovating firms may use other inputs or innovate around the merged entity’s critical assets. For instance, the remaining firms might build alternative resources, make their own acquisitions, or adopt a modular innovation architecture by orchestrating assets via contracting and alliances.

Conglomerate mergers can impair innovation by bundling or cross-leveraging innovation assets. A firm with dominance in one technological sphere may acquire a firm in a related field to strengthen its control over a converging innovation trajectory. This may discourage independent development across domains, especially where interoperability, standards, or compatibility matter (e.g., IoT, AI, or cloud ecosystems).

Once again, however, the Commission should be careful in its approach to such mergers. Innovation often requires enlarging the scope of the firm (Teece, 1980). Hence, the “financial strength” resulting from a conglomerate merger, as in GE/Honeywell, or the mere addition of another element to a business ecosystem, such as in Booking/eTraveli, should not be taken as sufficient to establish an innovation theory of harm. Instead, in each case, the theory of harm must be based on mapping capabilities and dependencies across firms and innovation systems. The key question is whether the merger leads to strategic control over assets that shape the innovation potential of other market participants, and whether these potential harms outweigh the benefits of unitary control.

C.4.    In what circumstances can mergers negatively impact the ability and incentives of the merged company to invest?

Innovation and investment are inextricably linked. Firms invest in R&D, asset acquisition, and technology development in general to innovate and address profit opportunities, including by surpassing their rivals. Therefore, the comments we have provided from question C.3. remain relevant for this question as well.

C.5     How should the Commission account for the incentives to invest and innovate post-merger depending on the specific market features?

The HMGs rightly emphasize that mergers must be assessed against the backdrop of their relevant legal, economic, and technological context. This contextual sensitivity is particularly important when the primary competitive parameter is innovation. In such cases, the Commission must engage more systematically with market-specific characteristics that influence how, why, and when firms innovate.

A critical and currently underdeveloped dimension of the technological context is the relevant market’s innovation lifecycle. Economic and management literatures have long recognized that industries undergo distinct stages of technological evolution (Utterback & Abernathy, 1975). In the early phases of a product market, firms face deep uncertainty about consumer demand, technological feasibility, and regulatory responses. These conditions often result in a high degree of technological opportunity. Entry is frequent, market shares fluctuate, and innovation thrives through experimentation, variety, and learning by doing.

As the market matures, however, uncertainty diminishes. Dominant designs emerge, innovation efforts converge, and competition shifts from product innovation to process efficiency. Returns to R&D investment tend to fall, and the industry consolidates around a few leading firms. Over time, the market may reach a plateau of incrementalism, in which the scope for further innovation is low unless a disruptive technology resets the lifecycle. This “S-curve” of technological opportunity is widely recognized in the literature but remains largely unincorporated into merger-assessment practice (Cohen, 2010).

Understanding where a product or industry lies along its technological lifecycle is therefore crucial to assessing post-merger incentives to innovate. For instance, a merger between two strong innovators in a maturing market—where opportunities for innovation are dwindling—is, other things equal, more likely to dampen dynamic rivalry than a merger in a nascent, turbulent space where uncertainty and contestability are high. In the latter case, even a powerful merged firm may have strong incentives to innovate due to rapid change, new entrants, and shifting user needs.

It is equally important to recognize that not all technologies proceed through the lifecycle at the same pace. Some may remain in a prolonged phase of disruption, while others quickly settle into stability. For example, platform-based industries (e.g., digital services, AI applications) often sustain innovation over longer periods due to network effects, modularity, and ecosystem complementarities. Conversely, markets based on commoditized inputs or static consumer preferences may reach technological exhaustion more quickly and remain inert for a long time.

The General Court has implicitly recognized the relevance of broader technological trends to competitive assessment. In Cisco Systems, the Court noted that structural dominance in a narrowly defined market may be neutralized by broader industry dynamics—in that case, the growing convergence of videoconferencing and adjacent technologies. This insight can and should be extended to innovation analysis: when industries are undergoing convergence, integration, or modularization, merger-related market power may be short-lived, as the scope for innovation remains fluid.

In practical terms, this means that the Commission should ask the following:

• Is the product or market at a high-opportunity phase of its innovation lifecycle, or a mature/declining one?
• Are there signs of convergence, disruption, or emerging adjacent technologies that render market power unstable?
• Do the merging firms face credible threats from entrants or diversifying incumbents that keep the incentives for innovation high, even post-transaction?
• Conversely, is the merger likely to lock in a dominant design, eliminate residual pathways for differentiation, or consolidate critical assets at a fragile point in the lifecycle?

We commend the Commission’s commitment to case-specific and fact-intensive inquiries in merger law. Our proposal is that, for mergers implicating innovation, the market-specific features—such as technological maturity, rate of change, and the degree of uncertainty—should be considered more thoroughly for a sound analysis of post-merger innovation potential. Integrating these features into merger assessment will allow the Commission to move toward a better understanding of how innovation emerges or stalls in different competitive environments. The goal is to ensure that merger control remains responsive to the true drivers of innovation.

For efficiencies, please refer to our comments under Topic F.

C.6.    In what circumstances can the elimination of a (small) but particularly innovative player with a large competitive potential (e.g., in the case of nascent and emerging market or rapidly developing sectors) harm competition?

The elimination of a small but particularly innovative player may harm competition under a specific set of circumstances. Most notably, this could happen when the target firm possesses a disproportionately large potential to reshape the future technological or competitive landscape, and the acquiring firm has both the incentive and ability to neutralize this threat. This concern has crystallized in recent years under the notion of so-called “killer acquisitions”—a theory of harm that has gained prominence in both academic literature and enforcement practice.

The theory of killer acquisitions refers to the strategic purchase of an innovative target, such as a startup or emerging competitor, with the intent (or likely effect) to terminate or shelve its development pipeline, thereby pre-empting a future threat to the incumbent’s position (Cunningham, Ma, & Ederer, 2021). The concern is that such mergers remove organic sources of dynamic rivalry, particularly in markets where innovation is the primary competitive parameter. Under this view, the merger not only consolidates market power in the present but also forecloses future competition that might have arisen in the absence of the deal. The popularity of this theory has led to the emergence of adjacent concepts, such as:

• “Acquisitions for sleep”, where patents or technologies are quietly retired post-merger, rather than exploited.
• “Reverse killer acquisitions”, in which incumbents reduce or terminate in-house R&D in favour of acquiring external projects, thereby removing incentives for organic innovation.
• “Acqui-hire strategies”, where the true objective is not to acquire a product or technology but to absorb key human capital, often without triggering substantive merger review.

We note that, while intuitively appealing, the killer-acquisitions theory is not without controversy.

First, it risks overstating the link between market entry and innovation. As noted, economic research cautions against a simplistic correlation between the number of firms and the degree of innovation. Concentrated markets may still exhibit robust innovation if dominant firms face credible threats or are incentivized to invest pre-emptively. Thus, fewer firms do not always mean less innovation, and nor does acquisition always lead to suppression.

Second, empirical support for killer acquisitions remains limited and industry specific. A Commission-sponsored study estimates that 5–7% of pharmaceutical acquisitions may qualify as “killer”, a rate comparable to Commission interventions (European Commission, 2024). In contrast, evidence for killer acquisitions in digital markets is significantly weaker, with most acquisitions resulting in product continuation or enhancement, and acquired teams often retaining leadership roles within the buyer’s organization (Ivaldi, Petit, & Unekbas, 2025).

Third, post-merger effects are difficult to observe externally. Discontinuation may result from strategic integration, technical incompatibility, or shifting demand, and not necessarily from anticompetitive motives. Enforcement errors in this area risk chilling benign M&A activity and stifling productive combinations of talent, IP, and capital.

Finally, the so-called “kill zone” hypothesis—that active acquirers deter entry by creating zones of inevitable absorption—is also contested. Some evidence suggests that active acquisition markets instead spur entry and innovation, as startups design themselves for acquisition (Callander & Matouschek, 2022). An adjacent theory is that incumbents buying startups may skew the direction of innovation: entrants may innovate not to disrupt, but to align with incumbent needs (Mendelsohn & Breide, 2024). The long-term concern here is not the absence of innovation, but its path dependency and conformity. That said, it is questionable whether competition authorities like the Commission have the enforcement resources, or the legal mandate, to second-guess the direction of innovation a firm wishes to undertake.

C.6.a    How should the Commission account for the ability and incentives of nascent innovative companies to scale up when assessing the impact of a merger on competition?

The potential benefits and harms of mergers related to innovation in general, on which we elaborated under C.3 remain applicable to transactions where the target is a nascent firm. Perhaps one unique feature of nascent acquisitions that deserves additional consideration is funding. When accounting for nascent innovative firms’ ability and incentives to scale up, the Commission should give weight to the possibility that the merger will supply the small firm with the necessary financial, organizational, and technological resources to expand. This possibility stands as an additional point of caution when considering so-called killer acquisitions.

C.7     In what circumstances can mergers positively impact the ability and incentives of the merged company to innovate?

We welcome the Commission’s recognition that mergers are not inherently inimical to innovation. Under the right conditions, they can enhance the merged firm’s incentives and abilities to innovate, sometimes with positive spillovers for rivals and the broader market. These pro-innovation outcomes typically arise when the transaction facilitates more effective use of R&D resources, enables the combination of complementary capabilities, or changes market conditions in ways that stimulate dynamic rivalry.

One positive pathway is the coordination effect: the ability to reorganize and reallocate research efforts across the combined entity’s laboratories, divisions, or units. By eliminating duplication, the merged firm can free resources for new or higher-value projects, accelerating the development cycle. As two Commission officials have also noted, “a merger will yield the greatest economies of scale in R&D when the merging parties are conducting overlapping research programmes” (Ilzkovitz & Meiklejohn, 2003). In this scenario, the merged entity can spend less to achieve more, thereby increasing R&D productivity.

A second pathway involves learning effects and knowledge spillovers. When firms merge, they integrate not only assets but also (tacit) know-how, which is embedded in processes, teams, and organizational routines. Innovation sharing across the merged firm can generate breakthroughs that neither party could have achieved alone. These effects are often more pervasive and impactful in innovation-driven markets than the cost efficiencies typically associated with price competition. For this reason, some economists argue that innovation synergies should be “considered in the core assessment of mergers rather than relegated to a later stage of efficiency defences”. (Calvano & Polo, 2021).

Moreover, a merger between innovators with complementary capabilities—e.g., one firm with advanced design expertise and another with strong manufacturing or regulatory know-how—can expand the combined entity’s innovation frontier. In such cases, the merger enhances the merged firm’s ability to develop and commercialize new products, particularly in sectors where cumulative innovation and technology integration are important.

Finally, in some cases, post-merger innovation may expand the overall size of the market. For example, the merged entity could introduce a demand-expanding innovation that increases consumer adoption of a technology, raising the total level of investment in the market (Bourreau & Jullien, 2018). This can have a multiplier effect: rivals may have incentives to respond to the expanded market opportunity by increasing their own R&D, leading to higher aggregate innovation.

C.7.a    What elements, evidence and metrics can the Commission consider when balancing the potential positive benefits and spillovers of enhanced R&D capabilities against the potentially anticompetitive effects of a merger?

A merger is more likely to have a positive impact on innovation when:

• The parties’ R&D pipelines are complementary or overlapping in ways that facilitate redeployment and/or consolidation.
• The merger combines critical capabilities or resources that were previously siloed. Examples include consolidating fragmented IP portfolios, combining a strong engineering team with an established manufacturing division, and integrating two products under a single, compatible standard that accelerates development.
• Market conditions—such as growing demand—ensure continued contestability, so that a more capable merged firm still faces incentives to innovate.

C.9.    In what circumstances can the elimination of a potential competitor (that is likely to enter the market in a near future or already exert competitive constraints even if not in the market) harm competition?

Potential competitors can constrain markets in two principal ways:

• Actual Potential Competition: Where a firm is on the brink of entry and is expected to exert competitive pressure once active in the market.
• Perceived Potential Competition: Where the credible prospect of entry disciplines incumbents even before the entrant begins supplying the market.

In either case, the competitive harm arises from the loss of this “disciplining effect” (Schumpeter, 1942). If the potential entrant is eliminated through a merger, incumbents may face reduced pressure to innovate. The likelihood of harm is higher when:

• The potential entrant possesses capabilities or assets that position it uniquely for successful entry, such as superior technology, a strong reputation, or relevant regulatory expertise (e.g., in biopharmaceutical markets).
• The target is already engaged in pre-entry competitive activity—e.g., marketing products or conducting R&D targeted at the incumbent’s market (i.e., the target is already influencing the incumbent’s competitive behaviour)
• Industry conditions suggest low likelihood of alternative entry, such as high sunk costs, strong network effects, or regulatory barriers. Thus, the loss of this entrant significantly reduces contestability.

That said, we urge caution when intervening against acquisitions of potential competitors, as not all acquisitions of potential rivals are harmful. Where the target lacks the necessary capabilities to innovate in the relevant space, faces substantial financial impediments, or its entry is speculative, the firm’s elimination may have little competitive impact. In fact, if the merger materially increases the combined entity’s ability and incentive to innovate—for instance, by combining resources essential for successful product development—the transaction may enhance rather than diminish innovation, even when it involves potential competitors.

C.9.a    How should the Commission assess competition risks linked to situations where a merger eliminates a potential competitor, i.e., the target is likely to enter in a foreseeable future and become a competitor, or despite not yet being in the market already exerts competitive constraints due to its capabilities to enter?

Where a merger eliminates a potential competitor, the assessment should be firmly rooted in the specific circumstances of the case, with particular emphasis on the target’s capabilities, resources, and strategic positioning. The central question is whether the target is likely to enter the relevant market in a way that would materially alter competitive dynamics, either through direct participation or by exerting credible competitive pressure from an adjacent position.

As with all merger assessments, the first analytical step to evaluate the acquisition is market definition. Due to the nature of potential competition, defining a relevant product market may not be easy. In some cases, however, the merging parties may be potential competitors in an emerging market—one that is not yet established but whose contours can nonetheless be defined with reasonable confidence. This is sometimes referred to in the literature as the “future markets” approach (Kern, 2014). The Commission should, considering the relevant case-specific evidence, strive to define such a future market to better demarcate the boundaries of innovation and competition.

Next is to assess the fit between the target’s capabilities and the trajectory of the (future) relevant market. In dynamic industries, entry potential depends not only on the possession of resources but also on whether those resources align with the direction of technological and competitive change. For example, in markets evolving toward increasing specialization (as in some parts of the semiconductor industry where design and manufacturing are becoming very specialized), an entrant should possess specialized capabilities and resources to be considered a credible potential competitor. By contrast, in markets shifting toward integration, a credible entrant would need to show integrated capabilities.

Finally, the Commission could consider the merger in greater detail if it threatens to foreclose future innovation rivalry. Where both firms are likely and capable to enter or expand into the same market in the foreseeable future, the merger may remove the prospect of head-to-head innovation competition, especially where their capabilities overlap in ways that make them substitutes for each other in the innovation process.

C.9.b    Under which conditions could this theory/these theories of harm occur?

Based on our answer to the previous question, we suggest that a loss of future innovation competition could occur if the merger consolidates two firms that are likely to enter the future market with overlapping capabilities that can result in the development of largely substitutable products. By contrast, if the merger combines complementary capabilities, this could constitute evidence that the transaction can enable innovation that could not have occurred otherwise.

Paragraph 60 of the HMG provides that the first leg of the legal test for potential competition requires that the potential competitor already exerts a significant constraining influence on the market, or that there is a significant likelihood it would grow into an effective competitive force. In our view, this standard should not be substantially amended to accommodate the mere threat of potential competition—whether real or perceived by the incumbent—as sufficient in itself.

It is important to distinguish between recognizing the relevance of perception and equating perception with actual competitive constraint. The Court of Justice has, in similar contexts, acknowledged that the perception of competitive threat can influence incumbent behaviour. Indeed, how an incumbent assesses the capabilities and intentions of a potential entrant may shape its own innovation strategies. However, this does not mean that perception alone should be determinative. Doing so risks lowering the evidential threshold in a way that is unlikely to satisfy the Court’s demanding standard for merger prohibitions. Without objective corroboration, reliance on perception could invite speculative findings and potentially chill benign transactions.

EU courts have repeatedly stressed that merger decisions must be grounded in cogent and convincing evidence that can support a finding on the balance of probabilities. Absent tangible indicators of timely entry, elevating the mere threat of potential competition to the level of “significant constraining influence” could be rejected on judicial review as insufficiently substantiated. Accordingly, while the perception of threat can and should be a relevant factual consideration, it must be supported by objective evidence that the potential competitor is genuinely capable of entering and competing effectively within a reasonable timeframe.

C.10.  How should the Commission assess situations where the presence of a potential competitor will exert sufficient competitive constraints to countervail the merging parties’ market power?

Where the Commission establishes the presence of a credible potential competitor—as defined in our earlier answers—this should be treated as a relevant disciplining factor on the merging parties’ market power. Contestable markets theory shows that even a monopolist can be constrained if entry is both feasible and credible (Baumol, 1982). In such cases, the prospect of entry can sustain competitive pressure on innovation. If, as the theory suggests, there exists a capable and incentivized entrant, the merged entity is likely to remain attentive to innovation and responsive to market conditions, knowing that failure to do so could invite entry and erode its position.

C.11.  How should the Commission consider the pre-merger situation in the counterfactual assessment, i.e. when assessing what would have been the situation prevailing absent the merger?

Both the Horizontal and Non-horizontal Merger Guidelines acknowledge that mergers should be assessed against an appropriate counterfactual. While the default counterfactual is static (based on conditions at the time of the merger), both guidelines allow for a dynamic approach where future developments can be reasonably predicted.

For mergers where innovation effects are central, a dynamic counterfactual should be the rule rather than the exception. Innovation unfolds over time and cannot be meaningfully assessed through static models designed for price effects. The Commission should therefore examine how the relevant technological, economic, and legal context is likely to evolve absent the merger. This includes considering technological developments (such as whether the implicated technology is undergoing rapid change or approaching maturity with diminishing innovation opportunities); economic conditions (e.g., expanding or contracting demand in the relevant market), and legal factors (for instance, regulatory developments that can ease or constrain entry).

C.12.  What constitutes the right counterfactual for the Commission where crises, such as the COVID 19 pandemic, wars, or trade measures may have led to short-term shocks of potential temporary rather than permanent nature?

Crises are a relevant and often decisive element in a dynamic counterfactual analysis. They represent periods of discontinuity in which firm strategies shift, competitive conditions realign, and innovation may become both riskier and more rewarding. The European Court of Justice has already acknowledged the relevance of crises in antitrust assessments, confirming that such events can legitimately inform the analysis.

While most crises are temporary, they can trigger lasting structural changes in market conditions, firm behaviour, and customer demand. Where the Commission can predict such changes with a reasonable degree of certainty, the counterfactual should reflect them. For example, post-COVID changes in working patterns have had a durable impact on videoconferencing and related technology markets. Similarly, in the current climate, geopolitical tensions and renewed trade barriers may alter supply-chain strategies, leading firms to consolidate capabilities for resilience—as in the case of European semiconductor design, where domestic capacity-building could be a merger driver in anticipation of hostile trade measures from key supplier jurisdictions.

In short, crises should be incorporated into the counterfactual not merely as temporary shocks, but as potential catalysts for structural market shifts, where such shifts can be identified and evidenced.

C.13.  What should be the right counterfactual in cases of acquisitions of firms in financial difficulties?

In cases involving the acquisition of a firm experiencing financial difficulty, the counterfactual should remain dynamic and forward-looking, particularly where innovation effects are at-stake. Financial distress does not necessarily imply competitive irrelevance. Many innovative firms operate at a loss for extended periods, as significant R&D investments and high-risk projects may take time to yield returns. The Commission should therefore assess whether the firm is still an active innovation player despite its financial position—as those innovation-related capabilities could transfer to a new owner in case of bankruptcy. The Commission’s analysis should also determine whether the financial difficulties are linked to ongoing innovation efforts. If so, the counterfactual should include the realistic possibility that these efforts could succeed and generate competitive benefits absent the merger.

Where innovation projects are underway, the Commission should examine the firm’s capabilities to develop and commercialise them. Such capabilities include product-related capabilities—such as development capacity, technology integration skills, and commercialization channels, as well as financial capabilities—in addition to the ability to raise capital, attract investment, or otherwise secure liquidity to sustain innovation until market launch.

C.13.a  Under which conditions should a failing firm defence be accepted?

Where a financially distressed firm is the subject of a merger, the failing-firm defence should only be accepted under conditions that balance the potential competitive harm from increased market power against the costs of asset and capability loss if the firm were to exit.

If the distressed firm is still innovating (as outlined in the previous answer), the Commission should conduct a deeper, case-specific analysis to determine whether the loss of its innovation potential absent the merger would be more detrimental to competition than the market power effects of the transaction. This requires examining whether the firm possesses both the product-related capabilities (e.g., R&D, technology integration, commercialization) and financial capacity to sustain its innovation until commercialisation.

If the firm is not innovating (or incapable of sustaining innovation), the Commission should weigh the harm from any resulting market power increase against the harm from asset and capability destruction. This is particularly relevant in the EU context, where bankruptcy proceedings are unharmonized and often inefficient—thus raising the risk that valuable assets or know-how could be lost permanently, rather than reallocated to productive use.

C.14   What should be the right counterfactual in cases of acquisitions of firms in declining markets where there is clear evidence that the market size or total demand in a market is shrinking on a permanent basis?

In declining markets, where total demand is shrinking on a permanent basis due to technological change or lasting shifts in consumer behaviour, the counterfactual should still reflect the possibility of dynamic competitive responses.

Economic theory recognises demand growth as a strong driver of innovation, but the reverse is not necessarily symmetrical. While diminishing demand reduces static profit opportunities, it can also spur firms to innovate in order to counteract decline. In such contexts, firms may pursue demand-expanding innovations—e.g., by adapting products to new uses, improving performance to attract switching consumers, or developing adjacent offerings that revitalise the market.

Accordingly, the Commission’s counterfactual should not assume that a declining market inevitably leads to reduced incentives for innovation. Instead, it should examine whether firms have capabilities and strategies aimed at reversing or slowing decline. Relevant evidence could include recent or ongoing product adaptations targeting new or residual demand, and the likelihood that innovation could redefine the market or create new submarkets.

C.15.  Please explain whether you would consider justified to counterbalance the higher level of uncertainty related to the assessment of more distant future market developments also with a more significant impact of the expected effects.

The Court of Justice’s position should be understood as a call to calibrate the quality and intensity of evidence to the degree of uncertainty inherent in the theory of harm. The further into the future the alleged effects are expected to materialise—or the more contingent they are on multiple uncertain events, as in Tetra Laval—the more demanding the evidentiary standard should be.

Accordingly, in cases involving distant harm, it is justified to require more persuasive, multi-sourced evidence to substantiate the Commission’s assessment. This could include triangulation of internal documents, market studies, and third-party testimony; independent expert assessments of technological and market developments; and ex-post studies of previous cases that suggest plausibility under similar conditions.

C.16.  How far in the future should the Commission look when assessing the impact of a merger on competition? How and under what circumstances should the Commission’s assessment consider long investment cycles in a given industry?

The appropriate time horizon for assessing a merger’s impact on innovation should be determined case by case, reflecting the investment and development cycles of the industry concerned. For example, the semiconductor industry cycle resets every four to five years, while some pharmaceuticals may require a decade to progress from clinical trials to commercialisation. In Cisco Systems, the General Court considered a three-year horizon “relatively long” for innovation in video-communications markets. A uniform timeframe would therefore risk arbitrariness.

With that said, the Commission should generally be more willing to assess longer-term effects when innovation is at-stake. Unlike price effects, which may emerge and dissipate quickly, innovation effects typically materialise only after significant lags—from identifying an opportunity, through R&D and prototyping, to market launch and subsequent incremental improvements.

This means that, where credible evidence supports longer investment or development cycles, the Commission’s assessment horizon should extend accordingly, ensuring that potential competitive harm or benefit to innovation is not overlooked simply because it lies beyond the short-term view often applied in price-effect analysis.

C.17.  How should the Commission’s assessment take into account systemic trends and developments unrelated to the merger that may (indirectly) impact the relevant product market and thus the competitive assessment within that market?

Systemic trends and developments—whether technological, regulatory, or geopolitical–shape the broader socioeconomic context in which firms operate. Even where their link to the merger is indirect, they should be incorporated into the competitive assessment where that relationship can be reasonably substantiated.

Economic literature recognises that firms often innovate to mitigate or adapt to systemic changes in resource availability. When systemic trends increase the scarcity or strategic importance of a resource or technology, they can trigger sector-wide innovation incentives. For example, carbon-pricing mechanisms in the EU have spurred innovation in energy-intensive industries to reduce emissions. In a similar vein, the rapid diffusion of AI across sectors is altering production processes, product design, and competitive dynamics.

In merger analysis, the Commission should examine the role of the merging parties in the systemic trend. If, for instance, the target is actively shaping the trend—such as developing sustainable production methods in a resource-constrained sector—the transaction’s impact on that trend becomes relevant. The key question becomes whether the acquirer intends to use the target as a springboard for innovation within the systemic change, or to neutralise a competitive threat arising from it.

By embedding systemic trends into the substantive assessment, the Commission can ensure that merger control remains sensitive to long-term, structural drivers of dynamic competition, rather than focusing solely on immediate market conditions.

Topic E: Digitalisation

E.1.    Do the current Guidelines adequately reflect the evolutions linked to the digitalisation of the economy?

The existing guidelines do not sufficiently reflect the dynamic realities and rapid evolution of digital markets. Given the rapid pace of technological innovation, static-market definitions have become outdated and increasingly inappropriate. The current analytical framework inadequately recognizes the ease and speed with which digital solutions can shift their use cases or functionalities—often accelerated significantly by developments in AI. Moreover, it underestimates how quickly market structures themselves can transform, rendering previous assessments rapidly obsolete. This is particularly evident in markets characterized by strong network effects, where apparent market power or dominance held by a single firm at a given moment can swiftly be eroded by competitors (Evans & Schmalensee, 2016).

Additionally, contemporary enforcement often errs by failing to appreciate that, in two-sided or multi-sided markets, firms with substantially differentiated business models or distinct market positions can still impose significant competitive constraints on one another. Indeed, firms operating one-sided and two-sided business models can, and often do, compete (Ramos & Broos, 2017). Consequently, the current regulatory approaches risk mischaracterizing competitive markets as highly concentrated, potentially harming innovation and consumer interests.

E.2.    Should the revised Guidelines better reflect the evolutions linked to the digitalisation of the economy?

The revised merger guidelines should carefully balance their assessment of competition in the digital economy, recognizing that the highlighted aspects—such as “tipping” dynamics, network effects, data-driven competition, and ecosystem interdependencies—are not inherently harmful. Rather, they often provide significant competitive benefits that enhance consumer welfare, innovation, and market efficiency.

First, while “tipping” or “winner-takes-most” dynamics can theoretically lead to market concentration, they also encourage fierce competition for the market, fostering rapid innovation and investment. In other words, concentration tendencies may coexist with robust innovation incentives—especially in fast-moving sectors.  Indeed, the high stakes involved in “winner takes most” may strengthen competitive incentives, potentially accelerating innovation. By contrast, a permissive regime in which multiple participants can share rewards may lead to a “waiting game”, reducing the incentive to compete vigorously (Denicolò  & Franzoni, 2010).

Second, network effects, frequently perceived negatively, are in fact crucial for creating consumer value in digital markets. The value of many digital services—such as social-media platforms—increases as more users participate. While network effects can reinforce market positions, they also heighten competitive pressure, pushing companies to continuously innovate and improve service quality to maintain user engagement. Thus, “competition for the market” or “life-cycle competition” can replace ordinary compatible competition, and can even be fiercer (Farrell & Klemperer, 2007).

One reason for this tendency is that network effects are a two-sided sword: When people start leaving the platform, each departure makes the network less valuable to those who remain, potentially triggering a mass exodus that feeds on itself. MySpace demonstrates this perfectly: once users began leaving, network effects operated in reverse, hastening the platform’s collapse. The emergence of platforms like TikTok demonstrates how even markets perceived as dominated by powerful network effects remain contestable.

Third, customer inertia or switching costs, while often viewed negatively, can reflect consumer satisfaction, rather than competitive harm. High switching costs sometimes represent consumer preferences or the integration of complementary services that consumers value highly. Indeed, markets subject to lock-in (very high switching costs) may still see fierce competition for users. Companies compete upfront to attract such consumers through tactics like penetration pricing, introductory offers, and price wars.

As explained earlier, this “competition for the market” can effectively substitute for standard compatible competition and might even be more intense, as it reduces differentiation (Farrell & Klemperer, 2007). It is not a simple linear relationship, where lower switching costs are always better for consumers. Accordingly, consumer harm in lock-in cases is possible, but unlikely (Shapiro, 1995). Overlooking these nuances risks penalizing successful businesses that achieve loyalty through excellence rather than anti-competitive practices.

Fourth, data-driven competition can, rather than stifling new entrants, empower innovative companies to rapidly scale by leveraging existing data sources or partnerships (Auer. & Manne, 2024). Companies in generative-AI fields are currently demonstrating how startups can quickly disrupt incumbents despite significant data accumulation by existing market players. Access to data often lowers entry barriers, rather than raising them.

Fifth, ecosystems and interconnected products or services generate substantial consumer benefits through convenience, efficiency, and integration. The seamless interoperability within ecosystems like Apple’s iOS or Google’s Android significantly enhances user experience. Misinterpreting these benefits as competitive threats risks undermining the very innovation that drives market success and consumer satisfaction.

Finally, while interoperability is beneficial, the degradation of interoperability between services, a focus of the revised guidelines, is not inherently anticompetitive. Firms may limit interoperability to protect legitimate business interests, consumer privacy, or enhance security. Forced interoperability risks diminishing incentives for proprietary innovation.

In conclusion, the EU’s merger guidelines should avoid broadly categorizing these aspects as theories of harm. A nuanced understanding acknowledges these features can—and often do—foster significant competitive advantages and consumer benefits. Therefore, a balanced and evidence-based approach that carefully evaluates the context and actual market effects is essential. The guidelines should be structured to identify genuinely harmful mergers without stifling competition, innovation, or consumer welfare in the digital economy.

E.3.    How should the Commission take into account the following competitive dynamics in its assessment of the impact of mergers on competition?

E.3.a    “Tipping”/“Winner takes most” dynamics

The prospect of “tipping” is real in digital markets, but the economic impact of tipping is profoundly two?sided (see, e.g., Denicolò & Franzoni, 2010; Farrell & Klemperer, 2007). On the one hand, direct and indirect network effects, high fixed (but low marginal) costs, data?driven learning curves, and single-homing users can propel a single platform to a high?share equilibrium. On the other, tipping is the mechanism that often delivers the largest welfare gains, by enabling firms to unlock scale efficiencies and coordinate communities of users and complementors around superior technical standards. Seen in this light, tipping is not itself the harm; it is an outcome whose welfare effects depend on (1) why it occurred, (2) whether entry barriers remain surmountable, and (3) whether the merged entity will plausibly relax competitive pressure once tipping occurs.

Accordingly, the Commission’s merger-assessment framework should incorporate four guiding principles:

1. Focus on competition for the market, not only competition in the market. Where tipping is likely, the most relevant competitive dynamic is the battle to become the focal platform. This competition can come from current market players (be they large incumbents or smaller rivals) or firms outside the market that have the right set of dynamic capabilities and assets to compete.
2. Differentiate defensive from offensive tipping. Empirical evidence shows that tipping can be driven by superior product quality, faster iteration, or better ecosystem governance—not merely by foreclosure or predation. A merger that allows the parties to realise scale?dependent quality improvements, to reduce stand?alone cost duplication, or to pool complementary datasets can enhance offensive competition and accelerate tipping in favor of the better platform, benefitting users. In such cases, the Commission should weigh dynamic-efficiency gains at least as heavily as short?run output effects.
3. Even seemingly strong winners can be disrupted where switching costs are falling, users multi?home, or radical innovations emerge (g., MySpace being outcompeted by Facebook, and Yahoo being outcompeted by Google). Enforcers should therefore only conclude tipping is likely to occur when there is strong evidence that the merging firms would acquire an unassailable competitive advantage whose consumer-welfare costs outweigh its benefits.
4. Use effects?based screens, not structural presumptions. Tipping risks should not be treated as a per?se theory of harm. The Commission should require a plausible causal chain: the merger must materially increase tipping probability, and the post?tipping environment must be predictably anticompetitive (g., via higher prices and reduced innovation). Experience with markets that tipped but remained benign (e.g., Blu?ray, cloud gaming, ride hailing in several member states) confirms that scale alone does not foreclose dynamic rivalry. In the more severe cases, remedies targeted at interoperability or data access may resolve concerns without prohibiting welfare?enhancing transactions.

Some examples are useful. The VHS/Betamax, GSM/CDMA, and Blu?ray/HD?DVD “format wars” each culminated in tipping, yet ex-ante rivalry delivered rapid innovation, plummeting prices, and widespread adoption of the superior standard. Merger policy that chilled such standard rivalry would have harmed consumers. Likewise, in mobile OSs, iOS and Android overtook Symbian and BlackBerry despite these rivals’ early lead. These episodes counsel caution before assuming that current market leaders will inevitably perpetuate dominance post?merger.

In short, the Commission should eschew an automatic scepticism toward tipping.  Instead, it should ask whether a challenged merger (i) truncates a live race for the market via tipping, and (ii) leads to consumer harm after the tipping point. Where these conditions are not met, tipping dynamics may be a symptom of robust, welfare?enhancing rivalry.

E.3.b.   Network effects

Network effects are sometimes portrayed as intrinsically anticompetitive because they can amplify incumbency advantages. But that same mechanism may reinforce competition and innovation ex ante, as firms compete for the market. To a first approximation, network effects also benefit users who, by definition, attach greater value to large platforms when network effects are present (Katz & Shapiro, 1985; Farrell & Saloner, 1986). Proper merger analysis must therefore carefully question whether reinforced network effects would be beneficial or detrimental to consumers, while accounting for a rich body of economic evidence establishing that network effects rarely create permanent monopolies absent additional exclusionary conduct (Liebowitz & Margolis, 1999; Evans & Schmalensee, 2016). There is, indeed, scant data to support the notion that churn rates are generally lower in digital-network industries than elsewhere throughout the economy.

It is important for policymakers to recognize the dual nature of network effects. Indeed, while network effects may sometimes cement existing market positions, they can also drive dynamic competition for the market, as well as delivering significant welfare gains when market fragmentation is reduced. Likewise, it is important to acknowledge that strong installed?base effects can boost disruptive R&D by offering innovators a large addressable market. For instance, a game like Fortnite benefits from the strong installed bases of the Xbox, Play Station, iOS, or Android networks (Clements & Ohashi, 2005). Similarly, a service like WhatsApp arguably benefits from the strong networks of incumbent mobile ecosystems. In turn, digital mergers may enable new players to better capitalize on existing userbases thanks to merger-related synergies.

It is also important to note that network effects rarely confer perpetual dominance. In the social-media industry, Facebook supplanted MySpace, and TikTok eroded Instagram’s engagement. In search, Google displaced Yahoo!/AltaVista despite their head start and (potential) data advantages, and vertical search engines (such as Amazon and Booking) now capture a large share of commercial queries. In messaging, iMessage, WhatsApp, Telegram, and Signal each command strong positions in different regions and demographics, despite being textbook examples of services with strong network effects.

Given these complex tradeoffs, it is important to avoid per-se condemnation of mergers involving large network?effects. Instead, articulate safe harbours where empirical evidence shows (i) high multi?homing, (ii) low marginal network returns, or (iii) robust adjacent?market entry. And when network effects are problematic, it is important to encourage remedies like data sharing or other access remedies over structural breakups, which risk destroying consumer value by fragmenting networks. Likewise, it is important to use “dynamic” counterfactuals that recognise potential entry catalysed by technological shifts—such as the emergence of generative AI—rather than assuming static post?merger dominance.

In short, while network effects can sometimes accelerate tipping and raise switching costs, they are equally a primary driver of lower prices, higher quality, and faster innovation. The Commission should therefore treat them as an analytical lens—not a theory of harm in itself. Merger assessment must weigh the magnitude of pro?competitive efficiencies against any credible foreclosure story.

E.3.c    Customer inertia

Customer inertia is often portrayed as a source of durable market power, especially in digital ecosystems where users appear “locked?in” by personalised settings, social graphs, or data repositories. Yet inertia, like network effects, is fundamentally ambivalent: it can reflect frictions that impede efficient switching or the fact that users have found a product that meets their needs better than available substitutes. It is also important to recognize that the prospect of user lock-in encourages firms to compete more aggressively for users in the first place, and this competition may counterbalance the higher prices consumers potentially pay when locked in (Klemperer, 1987). Customer inertia is therefore not, in and of itself, an indicator of likely anticompetitive harm. Overly aggressive intervention that erodes beneficial lock?in may undercut investment incentives and reduce the very consumer surplus the guidelines aim to protect.

E.3.d    Data-driven competition

Economic theory and recent empirical evidence—including the work we published in “Antitrust Dystopia & Antitrust Nostalgia” (Manne & Auer, 2021) and “From Data Myths to Data Reality” (Manne & Auer, 2024)—undermine the common assumption that large troves of data automatically translate into insurmountable market power. Data are best understood as non?rivalrous information goods: they can be copied at almost zero marginal cost and, in many cases, are available through public repositories, licences, or synthetic?data generation. This means that control over a particular corpus rarely forecloses rivals who can obtain comparable inputs elsewhere.

Moreover, the value of data displays sharply diminishing marginal returns. Machine?learning research shows that, beyond a certain threshold, additional data add little predictive power relative to improvements in model architecture or domain expertise. The explosive growth of generative?AI services illustrates the point: despite having far less behavioural data than Google or Meta, newcomers such as OpenAI and Anthropic have matched or surpassed the incumbents’ performance by innovating on model design, reinforcement?learning techniques, and developer tools.

Because the marginal gains from ever?larger datasets taper off so quickly, so?called data network effects are usually weaker than is commonly alleged. Freshness often matters more than depth—search?click logs lose relevance rapidly, for example—while new technologies (cloud computing, open?source ML frameworks) and regulatory changes (GDPR, CCPA) continually erode any short?lived scale advantages. In parallel, formal data?portability mandates and voluntary initiatives—from open?banking APIs to repositories like Hugging?Face—have made it progressively easier for challengers to replicate or bypass incumbent data stores.

Far from dampening competition, these dynamics intensify innovation races. The fear of losing ground to data?rich rivals spurs incumbents to reinvent themselves; think of Google’s pivot from Bard to Gemini, Meta’s release of LLaMA, or Amazon’s multibillion?euro partnership with Anthropic. Confronted with nimble challengers, leading firms cannot afford to rest on historical data advantages.

Against this backdrop, merger analysis should focus less on static measures of data volume and more on four questions: (1) whether genuinely unique, non?substitutable data confer a material and durable advantage; (2) whether rivals can access close substitutes through public sources, partnerships, or synthetic generation; (3) whether the proposed combination would actually raise rivals’ costs of obtaining comparable inputs; and (4) whether any foreclosure risks outweigh concrete efficiencies, such as better model accuracy, lower false?positive rates, or stronger cybersecurity. Unless a transaction can be shown to satisfy each of these conditions, intervention would sacrifice real consumer benefits, while doing little to foster additional competition.

The recent trajectory of generative AI, digital maps, and streaming recommendations all bear out this analysis: dynamism and disruption have flourished precisely because data advantages are contestable and because innovation, not size alone, determines competitive success. The guidelines should therefore discard blanket presumptions about “data monopolies” and instead adopt an evidence?based, effects?oriented approach that recognizes both the limits of data?driven barriers and the substantial benefits that well?executed data combinations can deliver to European consumers and businesses.

E.3.e    Privacy protection-driven competition

Claims that dominant digital platforms entrench their power by exploiting user data often overlook the competitive pressure that privacy itself exerts (Acquisti, Taylor, & Wagman, 2016). Differences in data?governance models have indeed become a salient dimension of competition: some services monetize behavioural data to subsidize zero?price products; others compete precisely by promising not to harvest personal information. Far from being a one?way ratchet toward ever?greater data extraction, the market reveals a rich spectrum of privacy/utility tradeoffs that users actively arbitrate.

The past decade offers multiple illustrations. WhatsApp’s end?to?end encryption, Apple’s App Tracking Transparency (“ATT”), DuckDuckGo’s no?tracking search, and Signal’s open?source protocol each gained traction by differentiating on privacy. Likewise, established players have repeatedly pivoted—Google’s Privacy Sandbox, Meta’s encrypted messaging, Amazon’s Ring opting into local?storage video—to accommodate rising consumer demand for data protection. These strategic responses are evidence that privacy is a competitive variable: firms that fail to match users’ evolving expectations lose engagement and revenue.

Economic theory aligns with these observations. Where consumers are heterogeneous in their privacy preferences, platforms maximize profits via horizontal differentiation and tiered services—ranging from ad?supported free tiers to paid, data?light subscriptions. Mergers that combine complementary assets (for instance, a content library with a secure identity layer) can therefore increase product variety and allow more efficient matching of privacy attributes to user segments. Conversely, it cannot be excluded that transactions that eliminate a high?privacy rival without creating a comparable alternative (potentially via commitments) or bring together close competitors could harm welfare.

Accordingly, the Commission’s analysis should test three propositions rather than presuming privacy degradation.

Does the merger diminish privacy options? If the acquired firm’s data?governance model is unique and the parties cannot credibly replicate it in the combined entity, loss of an important competitive constraint is plausible. If, however, rival services (or the merged platform itself) already offer similar or superior privacy assurances, incremental harm is unlikely.

Are scale?driven efficiencies privacy?enhancing? Larger platforms can invest in advanced encryption, differential?privacy tooling, and secure multiparty computation, spreading fixed costs over more users. Such improvements often exceed what smaller standalones could afford. This is one of the reasons why privacy regulation such as the GDPR has reduced competition from small players (Jia, Jin, & Wagman, 2021; Johnson et al., 2023; Peukert et al., 2022). Integration may therefore raise average data protection.

Finally, it is important to ask whether behavioural commitments can resolve residual concerns? Wholesale prohibition ignores the demonstrated ability of technical and contractual safeguards to reconcile privacy with pro?competitive integration.

In sum, privacy concerns warrant diligent scrutiny, not blanket scepticism. The Commission should approach privacy-protection?driven competition as a two?sided inquiry: (i) could the merger realistically erode consumer welfare (in the form of lower privacy choice or quality), and (ii) might it instead galvanize investment in privacy?enhancing technologies and widen the menu of options available to users (assuming this is what they indeed desire)? With this in mind, an evidence?based framework—grounded in careful examination of the actual merger effects—would better safeguard both consumer welfare and European competitiveness than structural presumptions that treat any data consolidation as suspect.

E.3.f    Multi-sidedness of markets

Modern digital platforms are, almost without exception, multi?sided businesses that create value by orchestrating mutually reinforcing interactions among heterogeneous user groups (Rochet & Tirole, 2003; Armstrong, 2006; Evans & Schmalensee, 2016). Because any change in the conditions offered to one group is immediately transmitted to the others through cross?side elasticities, competitive analysis that homes in on a single “relevant market” is liable to miss the forest for the trees. The correct benchmark is the overall price–quality bundle generated by the system of transactions, not the standalone terms faced by any one category of users.

This has at least two important consequences for policymakers. First, what matters for welfare is the net price charged by the platform once cross?subsidies are taken into account (Rochet & Tirole, 2006; Weyl, 2010). A merger that enables the parties to pool fixed costs, to internalise externalities across sides, or to eliminate double marginalisation can therefore reduce the aggregate prices even if it raises fees on one side of the market.

Second, multi?sided rivalry is often orthogonal: platforms that look like imperfect substitutes (or even complements) on one face can exert intense competitive pressure on another. Search engines, social?network feeds, and video?sharing sites all covet revenue from, largely, the same advertisers. In this sense, Facebook, TikTok, YouTube, and Snapchat compete fiercely in advertising markets, even though the consumer experiences they offer are often highly differentiated. Any attempt to assess market power based solely on the consumer?side overlap—or to read concentration from HHI measures calculated in that narrow space—risks condemning transactions that, in fact, intensify competition for ad dollars.

This logic also implies that foreclosure strategies are rarely profitable unless cross?side gains exceed losses from excluding participants. With this in mind, the cost of closing an interface often outweighs the benefit. It follows that theories of harm premised on input foreclosure or self?preferencing must demonstrate not merely the technical possibility of exclusion but its economic rationality in a multi?sided setting.

European experience bears this out. Interchange?fee caps shifted card?network revenues onto consumers without spurring new entry; Android “choice screens” delivered inferior search defaults, while doing little to erode Google’s share of advertising; and television “must?carry” rules reduced broadcasters’ incentives to invest in exclusive content (Anderson & Coate, 2005; Crawford, 2012). Each episode illustrates how remedies that ignore price?structure neutrality can backfire, raising effective prices or depressing quality on the user side that the Commission is bound to protect.

Finally, a multi?sided lens explains why apparent incumbency advantages can dissolve quickly.  Because user groups can switch asymmetrically, an entrant that secures just one side—for instance, short?form video creators in the case of TikTok—can unravel an incumbent’s equilibrium as advertisers and complementors follow the migrating audience. Put differently, differentiation on the consumer side does not shield a platform from competition on the monetisation side. The merger guidelines should therefore resist calls to treat loosely overlapping ecosystems as separate silos; they should instead ask whether the deal will materially dampen cross?platform rivalry, thereby raising the aggregate (multi-sided) prices charged by these platforms.

In sum, multi?sidedness is not a mere technicality, but the organising principle of the digital economy. The Commission’s merger analysis must internalise this by defining markets around the platform, by evaluating concentration cognizant of the potential for multi?homing and cross?substitution, and by measuring harm and efficiencies at the platform level. Only where robust evidence shows that a transaction will raise the aggregate price charged by the platform on both sides—taking full account of countervailing scale economies and cross?side benefits—should intervention be contemplated.

E.5.    Considering modern competitive dynamics, do you consider that having different frameworks of analysis for horizontal relationships and for non-horizontal relationships is still relevant?

Competition enforcement has traditionally distinguished between horizontal (competitor) and vertical (supplier-buyer) mergers, assuming the former are more problematic for consumers. Recently, however, this distinction has been challenged. Some scholars and agencies argue that many vertical or conglomerate mergers have significant horizontal effects, often by claiming the acquirer would have entered the target’s market if not for the merger (“potential competition”).

This theory seeks to reframe nearly any merger as horizontal. This trend is perhaps best illustrated by recent enforcement actions in the United States. It was central to the FTC’s failed attempt to block Meta’s acquisition of Within, where a court found the claim that Meta would likely develop its own competing VR fitness app to be too speculative. This new perspective is also evident in the FTC’s ongoing lawsuit against Meta concerning its earlier acquisitions of Instagram and WhatsApp. Though initially cleared by global regulators who saw them as operating in separate markets, the FTC now argues these were acquisitions designed to unlawfully neutralize competitive threats. This reflects a modern shift where agencies are more willing to assume potential competition and anticompetitive intent.

Despite this trend, fundamental economic differences between merger types persist. Horizontal mergers combine competitors producing substitutes. By definition, they automatically eliminate a competitor and reduce competition, although this harm may be offset by efficiencies that must be proven.

Vertical mergers, in contrast, combine firms in a supply chain who produce complements and do not directly eliminate a competitor. They are often pursued for efficiencies, such as eliminating “double marginalization”, where successive markups in a supply chain are removed after the merger. This integration can automatically lower costs for the merged entity and lead to lower consumer prices. The likelihood of such pro-competitive efficiencies is generally higher in vertical mergers than in horizontal ones (Cooper, Froeb, O’Brien, & Vita, 2005; Lafontaine & Slade, 2007).

Critics counter that vertical mergers have “intrinsic” horizontal harms. The primary theory is foreclosure: a newly integrated firm gains an incentive to harm its downstream rivals by raising their input costs or cutting off supply. This effect is sometimes described as being exactly parallel to a horizontal merger by eliminating an indirect competitor (Salop & Scheffman, 1983; Riordan & Salop, 1995; Rey & Tirole, 2007).

This theorized harm is, however, neither “intrinsic” nor automatic. It is a contingent strategy that depends on complex factors. The merged firm must have significant upstream market power, and foreclosure must be more profitable than continuing to supply rivals. Furthermore, real-world complexities—such as rivals vertically integrating themselves, or firms diverting products to other markets in response to price signals—make the outcome of a foreclosure strategy highly uncertain. What one observer calls anticompetitive foreclosure, another may see as a rational business response to market conditions.

The core distinction lies in the nature of the competitive impact. In a horizontal merger, the elimination of a direct competitor is an automatic consequence. Any potential harm from a vertical merger, however, relies on a subsequent, non-automatic strategic choice to foreclose rivals—a choice that may not be feasible or advantageous. Moreover, a key efficiency from vertical integration—the reduction of double marginalisation—is also an automatic effect that benefits consumers, often occurring precisely in scenarios where foreclosure risk is highest.

While vertical mergers can produce horizontal harms, the mechanism is more complex, and the probability of a negative outcome is lower. The amalgamation of vertical and horizontal mergers is therefore misleading. It ignores that, in the case of the former, the path to consumer harm is indirect, uncertain, and often countered by inherent, automatic efficiencies.

E.6.    How should the current frameworks of analysis for horizontal and for non-horizontal relationships be adapted to assess the effects that digital and tech mergers can have on competition?

The existing EU frameworks for horizontal and non-horizontal merger analysis already contain all the conceptual machinery needed to evaluate transactions in digital and tech markets. What is required is not a bespoke legal test, but disciplined, evidence-based use of the present tools—market definition, competitive-effects analysis, entry and expansion, and efficiencies—tempered by the error-cost logic that underlies modern competition policy. Proposals to toughen digital-merger enforcement, by reversing burdens of proof or lowering structural thresholds, would likely raise the risk of false positives without demonstrably improving consumer welfare, particularly in markets that evolve as quickly as software and online services (Manne, G.A. 2020).

Within the existing merger-analysis framework, enforcers should fold in the economic particularities of digital businesses, rather than treat them as grounds for a new regime. Multi-sided platforms, for instance, often face competitive constraints that cut across functional market boundaries. Likewise, zero-priced services complicate the use of traditional price metrics. And data-related concerns (such as data security and privacy) can matter for product quality. But none of these features changes the fundamental questions the guidelines already ask. They simply mean that market definition may rely more on diversion ratios or attention measures, that competitive-effects analysis must look past static concentration indices to dynamic rivalry, and that entry analysis should recognize how frequently successful entrants accumulate or purchase the data they need to compete.

For example, the empirical literature gives little support to the claim that incumbent data troves invariably foreclose rivals or create insurmountable “data network effects”. Studies of search engines, ridesharing, forecasting models, and generative-AI systems find diminishing returns to additional data, and frequent cases of entry by firms that began with negligible stores of user information (Auer & Manne, 2020). That evidence cautions against presumptions of harm and underscores why enforcement should remain effects-based and grounded in existing frameworks.

Likewise, when a leading platform acquires a complementary business—say, a mobile app or AI startup—the established vertical (non-horizontal) framework is the right lens. The ability–incentive–effect test asks whether the merged firm could deny rivals critical inputs, whether it would profit by doing so, and whether any such strategy would harm consumers net of efficiencies. Efficiency evidence remains vital because vertical and conglomerate deals often lower transaction costs, eliminate double marginalisation, and accelerate innovation. In that respect, the weight of empirical work from Lafontaine & Slade (2007) and others shows that voluntary vertical integrations tend, on average, to benefit consumers. Where the facts demonstrate credible foreclosure risks that outweigh such benefits, the current framework already permits prohibition or tailored remedies. Where they do not, new presumptions would only chill welfare-enhancing investment.

In short, digital and tech mergers call for the same analytical progression that the EU applies in every sector but populated with market-specific evidence rather than conjecture. By retaining an effects-based methodology, grounding theories of harm in verifiable facts, and giving due credit to efficiencies, the Commission can police genuinely anticompetitive deals without throttling competitive dynamism.

E.7.    How should the Commission assess competition risks of non-horizontal mergers that are not based on a foreclosure conduct by the merged entity?

When a non-horizontal merger raises no classic input-foreclosure issues, the Commission’s task is to decide whether the transaction might nonetheless blunt future rivalry—most famously through a so-called “killer acquisition”. The academic record acknowledges that this is possible, but it also identifies a range of alternative, often pro-competitive explanations for the same observable facts (Barnett, 2024). Treating “killer” theories as presumptively dominant risks misdiagnosis and the attendant error costs that the existing framework is designed to avoid.

First, many targets supply complements that blossom only once they are folded into a broader ecosystem. Facebook’s purchase of Instagram and Google’s purchase of Android did not suppress those services; the acquisitions turbo-charged them, allowing both products to scale globally and to introduce features (such as Instagram Stories) that the standalone firms lacked the resources to deliver. That pattern is consistent with the traditional efficiency logic of vertical or conglomerate integration, not with predation.

Second, acquisitions can reflect the ordinary operation of the market for corporate control. Large buyers may simply believe they can redeploy the target’s assets, talent, or intellectual property more effectively than alternative owners—a judgment borne out, for example, by the rapid post-merger improvement in Instagram’s product strategy and Facebook’s ability to leverage that success across its wider portfolio.

Third, a vibrant exit market is itself a crucial ingredient of venture capital and entrepreneurial activity. For many startups, the possibility of being bought is the principal path to liquidity. Empirical work shows that most young technology firms never reach an initial public offering (IPO), and that the prospect of acquisition is often what makes early-stage innovation financeable in the first place. Deterring these deals would therefore chill exactly the kind of experimentation that policymakers want to encourage.

Fourth, some deals amount to project rescue or acceleration. Google’s cash, engineering capacity, and brand credibility turned Android from a small developer platform into a viable competitor to Apple’s iPhone—a transformation unlikely to have occurred had the startup remained standalone.

Finally, the empirical frequency of true “killer” transactions is low and hard to detect ex ante. Even in pharmaceuticals—where pipelines are unusually transparent—recent estimates put the share of genuine killer acquisitions at roughly five-to-seven percent of deals, leaving the overwhelming majority benign or beneficial (Cunningham, Ederer, & Ma, 2021). In technology markets, where overlap is nebulous and pivoting is common, the signal-to-noise ratio is lower still (Gautier & Lamesch, 2021).

Against that backdrop, the Commission should continue to apply the established ability–incentive–effect logic. It should ask whether the merged firm could profitably shelve or degrade the target’s offering, whether doing so would raise long-run profits once efficiencies and reputational costs are accounted for, and whether consumers would be worse off in the plausible counterfactual where the startup struggles to scale or even fails outright. That inquiry must be grounded in concrete documents, market evidence, and realistic alternative scenarios, not structural conjecture. Where the facts show that elimination of nascent competition is both feasible and profitable, the current framework already permits prohibition or targeted remedies. Where alternative explanations dominate, blocking the deal would sacrifice efficiencies, undermine entrepreneurial incentives, and increase the risk of costly false positives.

In short, the danger that an acquisition might “kill” a budding rival is one legitimate theory of harm—but it is only one, and it is often the least probable. A balanced assessment will test that story against the full range of alternative motives that the economic evidence highlights and weigh the merger’s prospective consumer benefits against the realistically demonstrated risks. That evidence-rich, error-cost-conscious approach is the best way to protect competition without strangling the very innovation ecosystem the Commission seeks to foster.

E.9.    How should the Commission assess competition risks of non-horizontal mergers linked to having a broad range or portfolio of products or services that are interrelated or part of an “ecosystem”?

An examination of the EU legal framework and case law reveals that, despite the prominence of “ecosystems” in contemporary antitrust discourse, the novelty and practical significance of the concept remain debatable (Colangelo, 2025). Rather than constituting a new legal category, “ecosystem” in competition law largely operates as a descriptive label for dynamics already examined in other fields. In competition policy, the term has been repurposed to describe multi-product organisations in which a single firm offers an integrated bundle of interconnected goods and services to end users. Moreover, because many digital ecosystems develop around multi-sided platforms, competition law and economics often conflate “platforms” with “ecosystems”. Platforms are better understood as multi-actor ecosystems that create value by enabling interactions among distinct user groups, rather than as mere multi-product firms.

European case law supports this view. The General Court in Google Android (Case T-604/18) described a digital ecosystem as one that “brings together several categories of supplier, customer and consumer and causes them to interact within a platform”, a formulation later cited by Advocate General Kokott. In Android Auto (Case C-233/23), Advocate General Medina drew on computing literature to define an ecosystem as “an operating model in which data and services are shared by a digital platform’s owner with external developers in service to a community of users”, while the Court itself avoided the term. And in Booking/eTraveli (Case M.10615) the Commission relegated a reference to a “multi-product ecosystem” to a footnote.

Against this background, the theories of harm the Commission should consider are the established non-horizontal ones—vertical/input or customer foreclosure (including raising rivals’ costs), tying or bundling (including technical tying and defaults), and classic conglomerate “portfolio effects”. Potential-competition concerns, when they arise, are best analysed under the horizontal/potential-entry framework. There is, in short, no basis for incorporating a freestanding “ecosystem” theory of harm into the guidelines, given that the concept remains undefined from both legal and economic perspectives and the existing framework already provides a robust basis for assessment.

E.9.b    Under which conditions or market circumstances could this/these theory/theories of harm or concerns materialise.

These concerns could materialise only under conditions that make traditional non-horizontal harms plausible. While numerous decisions address scenarios that could plausibly involve digital ecosystems, theories of harm centred on their construction or reinforcement have been largely absent from decisional practice.

In Meta/Kustomer (Case M.10262) the Commission considered the interconnectedness of markets and Meta’s broader ecosystem as context for possible foreclosure. In Microsoft/Activision (Case M.10646), authorities examined whether the deal would strengthen Microsoft’s multi-product ecosystem in ways that could harm competition, particularly in cloud gaming, with the UK ultimately blocking the merger on a classic vertical input-foreclosure theory. Other recent cases pursued more conventional concerns: Meta/Giphy focused on a “killer acquisition” theory of harm and Adobe/Figma (Case M.11033) on what the Commission termed a “reverse killer acquisition”, both applying potential-competition analysis rather than any distinct ecosystem theory.

The Commission’s prohibition in Booking/eTraveli is widely viewed as the first to invoke an ecosystem theory expressly. Some reasoning is novel—network effects might be reinforced and lead to a significant impediment to effective competition even without any increase in sales; multi-homing and active search may not eliminate inertia; and increased user engagement after product improvements can still be framed as harm if it strengthens a dominant platform. Nevertheless, beyond the vocabulary of “ecosystems”, the substance closely resembles the “portfolio effects” approach developed in Guinness/Grand Metropolitan (Case M.938) and later debated in GE/Honeywell (Case M.2220). Notably, the UK CMA cleared Booking/eTraveli, finding eTraveli was not a particularly significant channel for customer acquisition or retention in accommodation OTAs. In practice, then, materialisation requires the classic ingredients of non-horizontal harm: control over a gateway or “must-have” product, limited switching or effective multi-homing, and a credible, profitable foreclosure strategy that would lessen competition rather than merely reflect efficiencies.

E.9.c    What are the elements, including evidence and metrics, that the Commission could use to assess the potential competition risks linked to having an increased portfolio of interrelated products and services.

The elements and metrics the Commission should use are those already embedded in existing doctrine and guidance. The Commission’s Notice on the Definition of the Relevant Market suggests that a digital ecosystem may, in some cases, comprise a primary core product and several secondary products linked technologically or through interoperability; in such scenarios, it may be appropriate to apply principles similar to aftermarket analysis when defining the relevant product market, and where secondary products are offered as a bundle, the bundle itself may constitute a separate relevant market. The Notice also recognises that not all digital ecosystems can be addressed through an aftermarket or bundling lens and that additional factors such as network effects, switching costs, and multi-homing may need to be considered. Yet these references do not offer a distinct analytical framework.

Consistent with decisional practice, assessment should remain effects-based and organised around the familiar ability–incentive–effect logic: whether the merged firm would control a genuinely “must-have” element or gateway product; whether multi-homing, interoperability and contractual contestability undermine the ability to foreclose; whether “vertical arithmetic” shows that foreclosure would be profitable after lost sales are weighed against any downstream recapture; and whether predicted or observed outcomes indicate a significant impediment to effective competition—prices up, quality or innovation down, rivals’ costs raised—rather than efficiencies from integration.

Because mergers involving complementary products or services are generally regarded as pro-competitive and ecosystems can generate efficiencies through innovation, quality improvements and seamless user experiences, the analysis should remain case-by-case, resist new structural presumptions keyed to “ecosystem size” or portfolio breadth, and avoid converting the language of ecosystems into a shortcut for speculative harms.

E.10.  How should the Commission assess competition risks linked to the merged entity’s accumulation of data?

Data accumulation should not stand on its own as a merger concern because—economically—data is just information: it is largely non-rival, often easy to replicate or purchase, and its value is realized only after firms apply know-how and analytics. Those characteristics make durable data moats rare and hoarding difficult. As we have explained elsewhere, multiple actors can use the same or similar information at the same time, and exclusion is hard. Instead, what tends to matter for competitive performance is not sheer volume, but the quality of models, engineering talent, and compute—all complements that diminish the role of raw data scale. The recent evolution of generative-AI markets underscores this point: despite incumbents’ vast data troves, newer firms have repeatedly set the pace, which is inconsistent with claims that data holdings alone entrench incumbents or foreclose entry.

The empirical record that is typically invoked to support “data network effects” is thin and contested, while policy discussion too often treats conjecture as evidence. Even reports that advance strong claims about data advantages cite little empirical work and, where they do, the findings conflict; yet these conjectures have nonetheless been used to justify far-reaching interventions. Experience in merger control likewise offers little support for data-based doomsday scenarios. High-profile transactions that were predicted to entrench dominance have not borne out those fears ex post—Instagram being the most obvious case—suggesting that scale in data does not reliably translate into lasting competitive harm.

Entry dynamics also cut against treating data as a barrier. Successful platforms typically created the very datasets that later became valuable—after they entered by offering a better product. This is the familiar “sequential entry” pattern in two-sided markets: firms attract users with product improvements and only later monetize the resulting signals. That history makes it a mistake to assume rivals must match incumbents’ datasets before they can compete. It would therefore be a mistake to label such advantages as “barriers” in a way that would condemn the essence of competition: superior products and reputations that entrants can (and do) overcome.

Finally, much of the anxiety about data reflects a broader nostalgia/pessimism bias in digital-market enforcement—presuming harm from novel business models and shifting burdens on thin evidence. That stance risks large error costs while doing little to improve case accuracy. For these reasons, “data accumulation” is unlikely to constitute a credible, standalone theory of harm in merger cases—digital or otherwise. Where data genuinely matters, traditional analyses of ability, incentive, and likely effects already capture the relevant risks; the default assumption should be that data advantages are contestable and that efficiencies from combining datasets are real.

E.11.  How should the Commission assess the relevant standard and criteria determining the value of the target’s data in the context of data aggregation?

The value of a target’s data is neither fixed nor uniform across firms. It depends on the use case, on how quickly the underlying signals decay, and—crucially—on the acquirer’s complementary assets (models, engineering talent, compute, product design). Treating today’s “important” data as a lasting moat, or assuming that a dataset that is valuable to one firm is automatically valuable to rivals, is the very static fallacy that has misled much recent policy debate. Empirically, data advantages tend to be fragile: performance gains exhibit rapid diminishing returns once a model is adequately trained, and better curation, features, and architecture often substitute for sheer scale. That is why small, high-quality, task-relevant corpora and even synthetic data can rival or outperform massive but noisy datasets.

Against that backdrop, the criteria that matter most are data quality, difficulty of replication within commercially relevant horizons, accessibility/governance, and use-case value. Quality dominates because coverage, cleanliness, labelling, and signal-to-noise drive model performance more than raw volume. “Uniqueness” matters only insofar as rivals cannot obtain close substitutes—via public sources, brokers, partnerships, experimentation, or synthetic generation—at reasonable cost and speed. Accessibility (legal rights, contractual terms, interoperability, portability) determines whether any notional advantage can be exercised or diffused. And “value” is contextual: the same clickstream or telematics feed may be pivotal for one workflow or firm and trivial for another. By contrast, volume, velocity, and variety are weak predictors of durable advantage because learning curves typically flatten quickly, and many high-velocity streams are perishable and readily recreated by instrumenting one’s own user interactions.

This dynamic, complements-based view aligns with the economic literature on data-enabled learning. As Hagiu & Wright (2020) show, data can confer an edge only under narrow conditions, and even then, the advantage depends on firm-specific complements and can erode as technologies and business models evolve; it is not a general, transferrable “moat”. It also fits the broader record that “data” is just information: rivals can often assemble functionally similar signals, and the real constraint is organizational capability, not hoarding.

Authorities should also keep sight of the flipside. We want firms—including merging firms—to have strong incentives to assemble novel, high-quality datasets, because these combinations often power meaningfully better products (relevance, safety, fraud prevention, diagnostics) and lower costs. That a post-merger dataset is hard to replicate does not make it suspect; it can be precisely what delivers consumer benefits, and those merger-specific efficiencies should not be assumed away. We would therefore caution against raising evidentiary bars in a way that effectively discounts efficiencies, which are both common and often merger specific.

In short, it is important to avoid the static presumption that data which matters today will matter tomorrow or that its importance carries over across firms, while preserving the incentives to create and responsibly aggregate data that leave consumers better off.

Topic F: Efficiencies

F.1.    Do the current Guidelines provide clear, correct and comprehensive guidance on how the Commission assesses merger efficiencies?

The main provisions relating to efficiency defences under the Horizontal Merger Guidelines, namely paragraphs 76-78, as well as the three cumulative criteria on cognizable efficiency defences (consumer benefit (paras. 79-84); merger-specificity (para. 85); and verifiability (paras. 86-88)) could be revised.  

F.3.    How should the Commission assess whether merger efficiencies will benefit consumers that would otherwise be harmed by the loss of competition resulting from the merger?

The Horizontal Merger Guidelines (para. 79) provide that “the relevant benchmark in assessing efficiency claims is that consumers will not be worse off because of the merger. For that purpose, efficiencies should be substantial and timely, and should, in principle, benefit consumers in those relevant markets where it is otherwise likely that competition concerns would occur”.

Several clarifications may strengthen this benchmark. First, by reference to established jurisprudence, the Commission interprets “consumers” broadly to include both final and intermediate consumers (i.e., business customers). The guidelines would benefit from clarification on how the Commission intends to weigh situations where a merger may harm intermediate customers in the short term but promises longer-term benefits for final consumers.

Second, the requirement that efficiencies be “timely” is often difficult to satisfy in practice. In particular, dynamic efficiencies stemming from R&D synergies or complementarities may take longer to materialize, flowing from research collaboration to marketable results and eventually to consumer benefits (Coninck, 2016). The Commission may wish to consider a longer timeframe for such benefits to be cognizably assessed.

Third, demonstrating that efficiencies are “substantial” is also a challenge for notifying parties. This reflects both the scarcity of robust empirical studies on merger-specific efficiencies and the inherent uncertainty in projecting post-merger outcomes. Parties may also hesitate to rely heavily on efficiency arguments, for fear of signalling weakness in their case. To address this, the Commission could provide further guidance—such as a “best practices” document like its notice on the submission of economic evidence—setting out what forms of evidence and methodologies will be regarded as persuasive when substantiating efficiencies.

For our comments on the “location” of efficiency benefits, see our answers to F.3.d.

F.3.a.   For which types of efficiencies and under which conditions those efficiencies will likely be passed on to consumers?

The Horizontal Merger Guidelines distinguish between two broad categories of efficiencies. On the static side, mergers may yield lower prices through cost savings in production or distribution, with the Commission generally attaching greater weight to reductions in marginal or variable costs rather than fixed costs. On the dynamic side, efficiencies may stem from R&D and innovation, leading to new or improved products for consumers. This framework is sufficiently broad to capture the main sources of merger-related efficiencies.

Whether such efficiencies are likely to be passed on to consumers depends critically on post-merger market conditions. As the guidelines note, the greater the competitive pressure the merged entity continues to face, the stronger its incentive to transmit efficiency gains to consumers. Conversely, where a merger significantly increases market power, it is difficult to assume that the merged firm will voluntarily share those gains with consumers.

In assessing this pass-on mechanism, the Commission may wish to place more emphasis on the role of entry and potential competition. In fast-moving, technology-driven markets, competitive dynamics are often shaped as much by emerging players and rapid innovation as by incumbent rivalry. These features may both discipline firms to pass on efficiency gains and explain why efficiency-seeking transactions are undertaken in the first place. The Commission could therefore attach greater weight to efficiency claims in markets undergoing rapid technological change, where dynamic pressures make pass-on more credible.

F.3.b    Whether there are some types of transactions that, due to their nature, or the characteristics of the products or markets at hand, are more prone to efficiencies?

Not all mergers are equally prone to efficiencies. As the ECJ made clear in CK Telecoms, efficiencies cannot be presumed across the board; their existence must be shown in the specific circumstances of the transaction and market at hand. Indirectly, this statement means that some types of mergers are more likely than others to yield credible efficiency gains.

This is particularly the case where dynamic efficiencies are at-stake. As a former chief economist has argued, transactions with a significant innovative dimension may deserve a more favourable assessment than purely “static” mergers, given the additional sources of efficiencies that only arise through innovation (Regibeau & Rockett, 2019). For example, when merging parties pursue overlapping R&D programmes, consolidation can generate economies of scale in research: the combined entity may achieve higher R&D productivity, conducting the same volume of research at lower cost or producing greater output from the same expenditure (Ilzkovitz & Meiklejohn, 2003).

Similarly, where the parties’ assets are complementary rather than overlapping, their integration may unlock synergies that neither could achieve independently. In such cases, the transaction is more likely to deliver efficiency benefits than mergers that are merely consolidating market shares without a complementary dimension.

F.3.d.   How should the Commission trade off benefits and harm between different consumer groups when efficiencies benefit only a certain group of consumers?

It is challenging to assess a merger that benefits some groups of consumers while harming others. One dimension is the tradeoff between intermediate and final consumers. This issue is particularly salient in multi-sided markets, where a transaction may raise costs for business users but simultaneously lower prices or improve services for end-users. Given the ECJ’s consistent emphasis on protecting consumers as the aim of EU competition rules, such tradeoffs are best resolved in favour of final consumers. To do otherwise risks edging towards a “trading partner welfare” approach that sits uneasily with the logic of EU competition law.

Another dimension concerns tradeoffs between consumers in different product or geographic markets. The Horizontal Merger Guidelines currently give priority to “in-market” efficiencies, expressing reluctance to offset harm within the relevant market against efficiencies occurring outside it. That said, competition law has not been entirely blind to out-of-market effects. For instance, in cases involving sustainability initiatives, authorities have grappled with whether harm to present consumers can be justified by benefits accruing to future consumers.

While there is no established framework for such assessments, past Commission practice has linked the consideration of out-of-market efficiencies to the presence of “considerable commonality” between the consumer groups involved (Mohan, 2014). Building on this precedent, the Commission could clarify the circumstances under which different groups of consumers should be regarded as sufficiently common to justify balancing harms and benefits across them.

F.3.e    How should the Commission trade-off benefits that may materialise already short-term (e.g., product improvements) and harm to consumers that could materialise in the longer run (e.g., entrenchment of an already strong or dominant market position, raising barriers to entry)?

A similar tradeoff scenario arises when efficiencies are expected to materialise in the short term, while potential harms are projected further into the future. Product improvements or cost reductions may be immediate, but concerns about entrenchment of market power or the raising of entry barriers may only emerge over time. These situations undoubtedly merit scrutiny, but the Commission should take care not to create asymmetry in its treatment of efficiencies and harms.

The guidelines already state that efficiencies expected to arise only in the distant future should be given less weight. By the same logic, harm theories premised on long-term conjectures should similarly be discounted unless supported by robust evidence. To do otherwise risks creating what was termed an “innovation paradox”, where parties are asked to substantiate benefits within a narrow timeframe while the Commission is allowed greater room to devise long-term harm scenarios (Gurkaynak, 2023). That would also be incompatible with the ECJ’s message that the burden of proof resting on the Commission must rise with the degree of uncertainty involved in its theory of harm.

This does not mean that long-term harms should be ignored; only that they should be treated consistently with long-term efficiency claims. A more coherent approach would be for the Commission to enlarge its temporal horizon across the board—evaluating both efficiencies and harms within a broader timeframe, while calibrating the weight given to each according to the evidence available.

F.4.    What metrics, evidence and factors should be used to assess whether cost efficiencies are likely to be passed on to consumers in the form of lower prices?

When it comes to cost efficiencies, the central question is not simply whether synergies exist, but whether they will be passed on to consumers. The Commission’s methodology for assessing harm offers a useful parallel here. In building a theory of harm, the Commission considers a range of evidence and constructs a coherent, plausible account of how a merger could reduce competitive pressure and thereby harm consumers. A similar philosophy should govern the evaluation of efficiencies: the evidence should be weighed holistically, with the aim of producing a symmetric and reasonable narrative about how the merger could benefit consumers.

In both cases, the decisive issue is the degree of residual competitive pressure. Just as consumer harm materialises when pressure is weakened, consumer benefit materialises only if sufficient pressure remains to compel the merged entity to share its efficiency gains. This assessment is necessarily case-specific and can draw on a variety of evidence. For instance, if the rationale for the transaction is to facilitate entry into a new market or to compete more effectively against a larger incumbent, the merged firm will have strong incentives to convert efficiencies into lower prices or improved offerings. The task, therefore, is to identify the conditions under which such incentives are credible, and to articulate the circumstances in which cost savings are likely to translate into tangible consumer benefits.

F.5.    What metrics, evidence and factors should be used to assess whether consumers benefit from improved goods or services that may result from increased investment and innovation (‘innovation efficiencies’)?

Assessing whether consumers benefit from innovation efficiencies is inherently challenging, as these gains are uncertain and often unobservable at the time of decision-making. Yet this uncertainty is not unique to efficiencies; it also characterises the Commission’s assessment of potential harms, which likewise rests on forward-looking and hypothetical analysis. It would therefore be inconsistent to demand a higher evidentiary threshold for efficiencies than for theories of harm (Padilla, 2019).

The starting point should be the merging parties’ assets and capabilities. Evidence such as R&D budgets, staff and facilities, and strategic plans can serve as a starting point to identify whether the firms possess the resources necessary to translate a merger into innovation gains. Particular attention should be paid to whether the parties’ research programmes overlap, enabling productivity gains, or are complementary, enabling synergies. In either case, the existence of concrete capabilities at the time of assessment provides a tangible basis for evaluating potential consumer benefits.

The Commission should also consider market context. Innovation cycles vary by sector: in biotechnology or pharmaceuticals, benefits may only emerge after long development and approval periods, whereas in digital markets, faster cycles mean innovation efficiencies can materialise sooner. Structural features such as network effects or “winner-takes-all” dynamics can further amplify the consumer benefits of innovation-driven mergers. These factors provide useful metrics for assessing the credibility and timing of claimed efficiencies.

Finally, while ex-ante analysis will always involve uncertainty, this can be mitigated by incorporating ex-post evaluation into the Commission’s practice (Komninos & Petit, 2021). Periodic reviews of past mergers would generate empirical evidence on when and how innovation efficiencies have materialised. Over time, such data could strengthen ex-ante assessments, improve transparency, and provide a more robust foundation for balancing present and future consumer welfare.

F.5.a    Consumers’ willingness to pay as measured by actual purchasing behaviour.

It is unclear whether willingness-to-pay analyses can be useful to assess demand for innovation. Innovation is, by definition, a future-oriented concept. Thus, measuring the existence or probability of demand for future goods/services should only be taken as a starting point and supplemented by other evidence.

F.6.    What would be an appropriate timeframe for efficiencies to be considered timely?

The guidelines currently state only that efficiencies must arise in a “timely” manner, without prescribing a strict time limit. This open-ended formulation is valuable and should be preserved, as it allows the Commission to calibrate its assessment flexibly. In practice, however, timeliness has often been a stumbling block for efficiency defences, with claims rejected on the basis that the benefits would take too long to materialise.

A more balanced approach would be to apply symmetry between harm and efficiencies. If the Commission is willing to accept a theory of harm that involves, for example, the elimination of a pipeline project several years from market entry, then efficiencies expected over a comparable timeframe should be deemed admissible. This would align the evidentiary standards for harms and benefits (Todino, van de Walle, & Stoican, 2019).

In addition, timeliness should be assessed on a case-by-case basis, reflecting industry dynamics. The Commission itself has recognised divergent time horizons in innovation cases—ranging from one to two years in Novartis/GSK Oncology to nearly a decade in Dow/DuPont. The same logic should guide the evaluation of efficiencies: where industry lifecycles are short and innovation rapid, efficiencies may emerge quickly; in longer-cycle sectors, a longer horizon may be both realistic and necessary.

Finally, the Commission should consider the position of the industry in its technological lifecycle. Mergers driven by emerging opportunities in a new technological paradigm may yield efficiencies relatively swiftly, while in mature sectors, efficiency gains may depend on longer-term, research-intensive processes. A dynamic approach that recognises these differences would improve both the realism and the credibility of efficiency assessments.

F.7.    How can competitive benefits and harms accruing in the near future be balanced with competitive benefits and harms accruing in the more distant future?

Balancing near-term harms against more distant benefits is one of the most challenging aspects of efficiency analysis. Static efficiencies may arise quickly but often yield relatively modest welfare gains, whereas dynamic efficiencies—typically linked to innovation—take longer to materialise but can generate far greater benefits in the long run. This asymmetry raises the question of whether competition law should prioritise the certainty of “one bird in the hand” over the promise of “five in the bush”.

A pragmatic way forward is to borrow from the methodology of risk regulation, which evaluates tradeoffs along two dimensions: likelihood and impact. Short-term harms may be highly likely but of limited scope, whereas long-term efficiencies may be less certain but potentially transformative in their impact on consumer welfare. Rather than favouring one timeframe over the other, the Commission could weigh both dimensions explicitly, calibrating its assessment of efficiencies and harms according to their probability of materialising and the magnitude of their expected effects.

This approach would have the advantage of transparency: parties would know that long-term benefits are not discounted solely because of their timing but are instead assessed with reference to their plausibility and potential impact. It would also allow the Commission to capture the true value of dynamic efficiencies, without disregarding the real costs of short-term consumer harm.

F.8.    How should the Commission assess whether efficiencies are a direct consequence of the notified merger?

Whether efficiencies are truly a direct consequence of the notified merger is often described as “merger-specificity”. In principle, this test asks whether the claimed efficiencies could have been achieved by less restrictive means, such as licensing agreements or joint ventures. If so, the efficiencies are not considered merger specific.

While this criterion has an intuitive appeal, both economic and management literatures suggest it should be applied with caution. From the perspective of transaction cost economics, so-called “less restrictive alternatives” are not always less restrictive in practice. Contracts such as licensing arrangements or joint ventures are costly to negotiate, implement, and monitor (Williamson, 1985). They can also generate lock-in effects, as firms become dependent on jointly created assets or specialised know-how, creating disputes and opportunities for rent extraction. Anticipating these risks, firms may simply forego the arrangement altogether—meaning that the efficiencies would never materialise.

Management studies further indicate that partnerships and mergers are not functional substitutes but distinct organisational modes (Hagedoorn & Sadowski, 1999). Partnerships often rely on complementary specialisation and capability-sharing, whereas mergers involve fuller integration and a more comprehensive deployment of resources. Both forms have their place in an innovation-driven economy, but they are not always interchangeable. For this reason, the Commission should be careful in assuming that efficiencies achievable through merger integration could necessarily be replicated through contractual alternatives.

F.10.  How should the Commission make sure that the efficiencies claimed by the parties are verifiable and likely to materialise?

Ensuring that claimed efficiencies are verifiable and likely to materialise is essential if they are to play a meaningful role in merger assessment. In current practice, this requires that efficiencies be supported by precise, convincing, and, where possible, quantified evidence. A useful way forward would be for the Commission to define minimum standards of proof by considering the totality of the evidence in a case. This should include, where feasible, direct evidence linked to the efficiencies claimed, provided by the parties. For instance, cost data showing expected reductions in production costs or the merger’s impact on achieving minimum efficient scale (thereby reducing costs) can be helpful to quantify efficiency gains from a transaction. Taken together, these measures would make it possible for the Commission both to demand rigorous evidence and to provide a structured pathway for parties to demonstrate that efficiencies are real, verifiable, and ultimately beneficial to consumers.

F.12.  Based on which evidence and metrics can the Commission alleviate uncertainties as to the implementation of efficiencies, in particular when they will not materialise in the very short term?

Uncertainty about the timing of efficiencies is not unique; the Commission already confronts similar challenges when assessing innovation theories of harm, which by their nature often play out over extended timeframes. In those cases, the Commission seeks to substantiate its claims with rigorous and coherent evidence, even where the effects will only materialise in the long run. The same standard should apply symmetrically to efficiencies.

Uncertainties can be alleviated by grounding efficiency claims in tangible evidence: strategic planning documents, sector reports that track likely market developments, or investment commitments that lock parties into future action. These sources can demonstrate that efficiencies, while not immediate, are nonetheless credible and likely to emerge over time. By applying to efficiencies the same evidentiary discipline it applies to harm theories, the Commission would both enhance consistency and avoid systematically undervaluing long-term consumer benefits.

Topic G: Public Policy, Security, and Labour-Market Considerations

G.2.   In your experience, have there been interventions by Member States which resulted in mergers that would have otherwise happened, not taking place?

No. Though we are aware of cases in which national foreign investment laws were used to block or re-design deals (e.g., GE/Alstom in 2015). The Commission could take the opportunity to clarify when such interventions are in line when Art. 21(4), and when they are not. As a matter of principle, we think the Commission should take a narrow, conservative reading of Art. 21(4) public policy considerations.

G.4.   Do the current Guidelines provide clear, correct and comprehensive guidance on how the EU merger control assessment takes into account democracy and media plurality considerations?

“Democracy” has never been a goal of EU merger control, nor has it been value protected by the EUMR. No mergers have ever been blocked because they “harmed democracy”, nor would the EUMR—or the Treaties—allow for such intervention on the sole basis of harm to democracy. By the same token, no anticompetitive merger has ever been allowed because it would benefit “democracy”. As a more general point, “harm to democracy” is a highly contentious, politically charged issue with multitude of possible interpretations. For some, such as the Neo-Brandeisians in the US, protecting democracy means stifling large firms and replicating a Jeffersonian system of small producers. From a more classically liberal perspective, on the other hand, “democracy” means abiding by the rule of law and eschewing arbitrary interference in private matters, including voluntary mergers between consenting parties.

Furthermore, there are important theoretical constraints surrounding the connection between mergers, lobbying and democracy. First, the literature on the nexus between mergers and lobbying is far from settled, and the studies that do exist (e.g., Valletti and Broso, 2024) are limited by modelling assumptions that blur their real-world implications. Second, it is not clear that lobbying is contrary to democracy. In fact, several EU laws and institutional frameworks implicitly or explicitly permit and structure lobbying as a legitimate part of democratic governance. This includes Arts. 10-1 TEU, which establish a foundational right to engage with EU institutions, but also interinstitutional agreements on mandatory transparency, a transparency register and other frameworks which strongly suggest that structured lobbying is viewed as a legitimate form of democratic participation in the EU.

Given the potential for ambiguity, error and the lack of a legal mandate to do so, the Commission should not incorporate such vague and ill-defined goal as the direct protection of democracy into its merger analysis. Doing so goes well beyond the remit of guidelines and would in any case require a reform of the EUMR and, arguably, of the treaties. The best way to protect “democracy”, in this case, is to abide by the EUMR and the goals established therein.

As for media plurality, it should be borne in mind that, according to Art. 21(4) EUMR, “pluralism of the media” is an exception which, by its own admission, reflects exogenous considerations that can be invoked by national authorities only in exceptional circumstances. As such, it is not part of the ordinary framework of merger assessment under EUMR. That being said, “media plurality” could, in theory, be understood as a function of product variety and consumer choice and treated accordingly under the EUMR. In this respect, there are several things that could lead to confusion, and which could thus benefit from some clarification on the Commission’s part.

First, not all media mergers result in less media plurality: some media companies see diversification as a rational profit-maximizing strategy. To the extent that consolidation can result in efficiencies, media mergers therefore need not be at loggerheads with pluralism.

Second, as with the question of consumer choice in competition law more generally, the real, and deeper issue is whether more is always better. For instance, media plurality can lead to clutter, disinformation, and low quality, unverified reporting. As can “more” apps on app stores on any give operating system. At the same time, demarcating between “worthy” and “unworthy” media is a much more complex, normative-laden task than demarcating between “good” and “bad” apps. It is a task for which the Commission is ill-equipped, and one which is better left to European citizens who, given the heterogeneity of cultures across the continent, can — and often do — have contrasting views on these sensitive matters.

Third, measuring media plurality and viewpoint diversity is far more complex than evaluating product choice. It involves defining, gauging, and ranking different opinions; distinguishing those deemed “more” important from those considered trivial; and ultimately making deeply normative judgments. The Commission—tasked with assessing the effects of market power on competition and consumers—is not equipped to make such value-laden determinations. Other EU and national instruments are better suited to address these concerns.

In conclusion, the current guidelines do not mention “media plurality” or “democracy” — and rightly so, for the reasons outlined above. However, given growing pressure to incorporate such goals into merger review, the Commission could briefly explain why doing so would be inappropriate.

G.6.   In which circumstances and under which conditions can the Commission consider that a Member State is taking appropriate measures against a merger that is justified to protect its media plurality in the sense of Art. 21(4) EU Merger Regulation?

The Commission should clearly distinguish between situations where a member state avails itself of Article 21(4) to build up a “national champion” or for protectionist reasons, and those in which media plurality is genuinely threatened. Given the widespread availability of competing media platforms, channels, and sources of information — both online and offline — the Commission should, as a matter of principle, approach Article 21(4) claims with scepticism and adopt clear principles for filtering out those that pursue objectives divergent from the aims of the EUMR.

The Commission has largely done a commendable job of seeing through pretextual invocations of “public policy” arguments by member states in the media sector. For example, in 2020 it recognized Italy’s attempt to block Vivendi’s investment in Mediaset as an infringement of EU free movement rules. The same critical lens should be applied to claims made under Article 21(4).

Below we outline some tentative principles that the Commission could reflect in its new guidelines.

• Substance over slogans: Claims should be grounded in demonstrable risks to media diversity, not in abstract or speculative appeals to cultural identity, national sovereignty, or industrial resilience.
• Market-wide impact, not firm-specific interest: The assessment should focus on whether the merger would significantly reduce the diversity of viewpoints available to the public, rather than whether it disadvantages a particular domestic firm.
• Platform abundance principle: In an environment where audiences can access a wide range of news and content via multiple digital platforms, the burden of proof should be on the member state to show that the merger would meaningfully limit citizens’ access to diverse information.
• Consistency with EU values and competition principles: Invocations of Article 21(4) should not be used to circumvent the objectives of EU merger control by shielding inefficient firms or entrenching state-favored players under the guise of protecting pluralism.
• Transparency and proportionality: The national measure must be clearly articulated, evidence-based, and proportionate to the risk allegedly posed to media plurality — rather than broadly formulated or pretextual.

By articulating and applying such principles, the Commission can safeguard the integrity of the EU merger framework while respecting the legitimate interests of member states. Clear, law-based guidelines also help prevent Article 21(4) from creeping beyond its intended scope — an exceptional provision meant to be used only in truly exceptional circumstances.

G.7.   How should the Commission take into account the consequences of increased market power not only vis-à-vis customers but also vis-à-vis public authorities that may also affect customers?

The Commission does not have a legal mandate to take such effects into account. As such, there is no need for the new guidelines to explain them.

G.9.   Under which circumstances and in which conditions should the Commission consider diversity, including in the sense of diversity of opinions, in its assessment of the impact of mergers on competition?

The EUMR is fundamentally an instrument for the control of market power, not a tool for regulating speech, editorial diversity, or viewpoint pluralism. The Commission’s mandate under the EUMR is to assess whether a concentration would significantly impede effective competition in the internal market or a substantial part of it, particularly as a result of the creation or strengthening of a dominant position (Article 2(3) EUMR).

While the concept of “diversity of opinions” is normatively important in a democratic society, it falls outside the legal remit of competition law as defined by the EUMR. One might attempt to analogize it to product choice, but the comparison is flawed and should be used cautiously. The dynamics of viewpoint diversity in a pluralistic society are far more complex than consumer’s product preferences. As such, they raise a set of issues the Commission is ill-equipped to resolve.

For example, how could the effects on “diversity of opinion” be measured? Would a merger between two newspapers with opposing stances on key policy issues (key for whom?) be seen as promoting diversity, since both viewpoints might be represented within the post-merger entity? Or would it be regarded as harmful to diversity because one perspective would be expected to override the other?

Which views and opinions would the Commission consider when assessing “diversity” of perspectives, and by what criteria? How would it balance diversity in some areas against conformity in others? For instance, would differing opinions on the Serbian elections carry more or less weight than conformity regarding the Italian elections? How would these be measured alongside media stances on vaccines, taxes, digital regulation, gay marriage, or public healthcare? Would all topics be included and treated equally? Why or why not? Would some opinions be considered irrelevant—or even undesirable—while others are given priority? Would substantive agreement on an issue, albeit for different reasons, count as diversity? And what about agreement on the same issue for the same reasons, but expressed in a different style? Would that count towards diversity and media pluralism?

The bottom line is this: Assessing whether a merger reduces viewpoint diversity requires normative judgments that risk politicizing merger control and exceeding the Commission’s legal mandate under the EUMR, which is grounded in consumer welfare, not democratic pluralism. Such concerns are better addressed through media-specific regulation, not through reinterpretation of competition law.

The Audiovisual Media Services Directive and national media plurality laws are more appropriate tools for addressing concerns about concentration of editorial control or political influence in the media sector. Merging those concerns into EUMR analysis risks undermining the predictability, legal certainty, and neutrality of merger review. Alternatively, if the EU legislator wishes to broaden the mandate of merger control to include non-economic goals such as pluralism or democratic discourse, this would require a formal amendment to the EUMR, not informal reinterpretation.

As it stands, the EUMR deliberately excludes “media pluralism” from the standard scope of merger control, reserving it instead for the narrow mechanism under Art. 20(4), which member states may invoke only in exceptional circumstances. As with other industries, the Commission should continue to focus on price and foreclosure effects when assessing media mergers—both because this falls within its legal mandate and because it is best equipped to do so. The guidelines should not and, indeed, cannot, deviate from this principle.

G.12. How should the Commission assess the impact of a transaction on wages/working conditions through increased buyer power in labour markets?

G.12.b What theory/theories of harm could the Commission consider?

A theory of harm should only be considered if there is a clear and measurable link to downstream harm or if the merger causes a significant loss of competition beyond standard restructuring effects. It’s important to separate any potential negative effects related to market power from normal concerns about job losses due to restructuring or offshoring, which fall outside the scope of the EU Merger Regulation, and which are often the result of increased productivity.

G.12.e How can the Commission demonstrate that the impact of a merger on wages and working conditions translates into harm to customers? Is it necessary under the legal mandate of the EU Merger Regulation to demonstrate harm to customers in addition to a negative impact on wages and working conditions?

It is more likely the other way around: a decrease in output is likely to lead to a decrease in demand for labour.

Abstract

In April 2025, the Office of the Comptroller of the Currency cleared the proposed $35 billion merger of Capital One and Discover Bank, making the combined company the third-largest credit card issuers by volume. Because of the highly decentralized nature of the U.S. credit card industry, the merger typically would draw minimal regulatory scrutiny. Because of the significant market share of the two entities in the so-called “subprime” credit card market, however, the merger presented a novel question at the intersection of competition policy and consumer financial services—whether the “subprime” market should be analyzed as a separate market for antitrust purposes. According to one estimate the combined entity will have approximately 30% of the subprime market at the time the merger is consummated.

The OCC did not specifically address whether there was a “subprime” market that should be treated as a separate market for purposes of analyzing the effect on consumers and competition. We agree with that analysis. Although the term “subprime” is used colloquially, defining a “sub-prime market” lacks a determinate and stable definition for purposes of rigorous antitrust analysis. Moreover, consumers who participate in the subprime market are subject to constant change and turnover, moving frequently between the subprime and prime markets. Finally, given the permeability of any demarcation between “prime” and “subprime” consumers, other large credit card issuers already have a presence in the subprime market and could easily expand their existing opera-tions if Capital One-Discover attempted to increase prices for consumers.

Read the full piece at SSRN.

ICLE Director of Law & Economics Programs Gus Hurwitz joined Neil Chilson of the Abundance Institute and Kevin Frazier of the University of Texas School of Law at the Institute for Humane Studies’s Technology, Liberalism, and Abundance Conference for a discussion about how academics can contribute to AI policy. Audio of the full panel, courtesy of the Scaling Laws podcast, is embedded below.

ICLE President Geoffrey A. Manne was a guest on a recent episode of the AdExchanger Talks podcast to discuss how Judge Leonie Brinkema might approach remedies phase of the antitrust trial the U.S. Justice Department (DOJ) brought alleging monopolization in Google’s adtech business. Video of the full interview is embedded below.

ICLE Senior Scholar Mikolaj Barczentewicz took part in a recent Digital Markets Research Hub webinar on the DMA Enforcement Team’s finding that Meta Platforms’ “Consent or Pay” model does not comply with the EU’s Digital Markets Act. Video of the full panel is embedded below.

Executive Summary

This issue brief analyzes the antitrust implications of the proposed $34.5 billion merger between Charter Communications Inc. and Cox Communications Inc. from a law & economics perspective. We examine the proposed transaction under both a traditional consumer-welfare analysis, as well as the more recent “America First” flavor of analysis. The transaction would combine two major cable operators to create the largest broadband provider in the United States, with approximately 35.9 million residential and business broadband subscribers, and 69.5 million “passings” across 46 states.

The communications market is undergoing significant transformation, characterized by dynamic multi-platform competition from fixed-wireless access, satellite broadband, and streaming services, which exert considerable pressure on traditional wireline providers. The proposed merger is primarily a geographic expansion, rather than a horizontal consolidation within overlapping markets—a distinction critical for antitrust analysis.

From an antitrust standpoint, the parties project to achieve approximately $500 million in annual cost synergies within three years. These efficiencies are anticipated to translate into consumer benefits through potentially lower prices, enhanced service quality, and increased investment in advanced technologies and product innovation, particularly in mobile offerings.

Regulatory bodies, including the U.S. Justice Department (DOJ) and the Federal Communications Commission (FCC), will review the merger. The DOJ will apply the Clayton Act’s “substantial lessening of competition” standard, while the FCC will use its “public interest” framework. Given the minimal geographic overlap and robust multi-modal competition, the deal should not expect major regulatory obstacles on competition grounds. But concerns arising from broader policy agendas—such as diversity, equity, and inclusion (DEI), and the potential for regulatory overreach unrelated to demonstrable competitive harms—may arise.

This brief concludes that, whether evaluated under the traditional consumer-welfare standard or under the emerging “America First” framework, the Charter/Cox merger should be approved. Under either framework, the transaction reflects a strategic adaptation to market pressures, rather than an attempt to monopolize. Under conventional antitrust principles, the absence of significant geographic overlap and the presence of verifiable, merger-specific efficiencies weigh heavily in favor of clearance. Under the newer approach, the deal’s alignment with infrastructure-investment goals, enhanced competitiveness against dominant rivals, and commitments to expand broadband access all further strengthen the case for approval.

Policymakers should focus on demonstrable, transaction-specific competitive effects and adopt a technology-neutral approach to avoid hindering beneficial innovation and investment.

I. Introduction

Charter Communications Inc. and Cox Communications announced a proposed $34.5 billion agreement to combine in May 2025.[1] The combined company would surpass Comcast to become the largest broadband provider in the United States, with approximately 35.9 million residential and business broadband subscribers and 69.5 million passings across 46 states.[2] The company would also be the largest pay-TV provider in the United States, with approximately 14.6 million subscribers.[3] The merged company will be named Cox Communications, but Charter’s Spectrum brand will be retained for consumer services.[4]

This issue brief employs a law & economics approach to evaluate the antitrust and public-policy implications of the proposed merger.

• Section II examines the ongoing transformation of the U.S. communications marketplace, emphasizing the shift from legacy, technology-specific competition to a dynamic environment shaped by platform convergence, emerging technologies, and evolving consumer preferences.
• Section III outlines the analytical frameworks used by both the U.S. Justice Department (DOJ) and the Federal Communications Commission (FCC) in merger review, highlighting the distinct legal standards and policy priorities each agency would bring to its assessment of the Charter/Cox transaction.
• Section IV provides a detailed evaluation of the specific competition issues raised by the proposed merger, including analysis of geographic overlap, product-market definition, and claims of merger-related efficiencies.
• Section V reviews the outcomes and lessons from recent major communications and media merger cases, situating the Charter/Cox transaction within a broader historical and regulatory context.
• Section VI concludes by assessing the likely competitive effects of the merger and offering policy recommendations, with particular attention to the appropriate application of antitrust principles and the need for consistent, technology-neutral regulatory treatment across the sector.

II. The Evolving Communications Marketplace

The communications industry has undergone—and continues to undergo—substantial transformation, marked by technological convergence and erosion of the boundaries that once defined separate markets for television, internet, and telephone services. Consumers now move fluidly among platforms, accessing a growing array of services through broadband, mobile networks, satellite connections, and streaming applications. These shifts have redefined both the structure of competition and the criteria by which market power is assessed. To understand the implications of the Charter/Cox merger, it is essential to examine how these industry changes have altered the competitive landscape and diminished the relevance of legacy regulatory frameworks.

A. Beyond ‘Cable Operator’: The Multi-Platform Reality

To understand this merger’s competitive significance, it should be noted that the term “cable operator” has increasingly been rendered meaningless. The communications landscape of 2025 bears little resemblance to the era when most regulatory frameworks governing the sector were established. In the 1990s, broadcast television, cable TV, landline telephone, mobile telephone, and information services (e.g., internet access) were all distinct technologies with distinct economic markets. Over time, those distinctions have blurred and overlapped to the point where many consumers today do not care—or don’t even know—what technology underlies their access to the internet, video programming, and voice communications.

Around the time the Telecommunications Act of 1996 was passed, cable TV was considered a “bottleneck monopoly.”[5] Cable operators had local monopolies over cable service to households, as only “one percent of communities [were] served by more than one cable system.”[6] In 2013, then-Judge Brett Kavanaugh noted the dramatic increase in competition over the intervening years:

But in the 16 years since the last of those cases was decided, the video programming distribution market has changed dramatically, especially with the rapid growth of satellite and Internet providers. This Court has previously described the massive transformation, explaining that cable operators “no longer have the bottleneck power over programming that concerned the Congress in 1992.” Comcast Corp. v. FCC, 579 F.3d 1, 8 (D.C.Cir.2009); see also Cablevision Systems Corp. v. FCC, 597 F.3d 1306, 1324 (D.C.Cir.2010) (Kavanaugh, J., dissenting) (“This radically changed and highly competitive marketplace — where no cable operator exercises market power in the downstream or upstream markets and no national video programming network is so powerful as to dominate the programming market — completely eviscerates the justification we relied on in Time Warner for the ban on exclusive contracts.”)… In today’s highly competitive market, neither Comcast nor any other video programming distributor possesses market power in the national video programming distribution market.[7]

In a 2015 report and order, the FCC adopted a presumption that cable systems were no longer monopolies and are subject to effective competition.[8] The agency cited increased competition from satellite providers (e.g., DirecTV and DISH) and telephone companies (e.g., Verizon FiOS and AT&T U-verse) as evidence that most cable operators face effective competition. Under the adopted presumption, local authorities could no longer regulate basic-cable rates unless they successfully rebutted the presumption by proving a lack of effective competition.

In 1996, cable TV had 63.5 million subscribers (about two-thirds of TV households)[9] and the fastest home-internet connection was less than 56 Kbs.[10] Direct broadcast satellite was less than two years old[11] and video streaming was virtually unheard of, with RealPlayer being released less than a year earlier.[12] Netflix would launch its DVD-rental service in 1997 and YouTube was nearly a decade away.

Today, the average fixed-internet connection has download speeds of 288 Mbps.[13] Fewer than 50 million households have a “traditional” (e.g., cable or satellite) pay-TV subscription[14] (36% of households) and 55% are “streaming only.”[15] More than 200 streaming platforms are available[16] and 17.2 million homes subscribe to a virtual multichannel video programming distributor (vMVPDs, such as YouTube TV, Hulu+Live, SlingTV, and Fubo).[17] Streaming services account for 46% of household viewing time, with YouTube and Netflix together accounting for a little less than half of that total.[18]

B. Dynamic Competition in Broadband and Mobile

The broadband marketplace has undergone a rapid evolution in recent years.[19] New technologies like fixed wireless access (FWA) and low-earth-orbit (LEO) satellite services have significantly expanded internet access and fostered intermodal competition among providers.[20] For example, 5G FWA has grown into a disruptive competitor, with 77% of operator locations now having 5G, and the North American market for 5G FWA is projected to expand significantly by 2030.[21] Similarly, satellite broadband, offered through networks like Starlink, doubled its subscriber base in 2024, becoming a more viable option, especially for rural consumers.[22] This emergence of diverse platforms means traditional wireline providers—including cable operators—no longer compete in isolation but instead face multifaceted pressures from these new forms of connectivity.[23]

This dynamic competitive environment has yielded tangible benefits for consumers. Broadband speeds have risen consistently across the industry, while prices have generally fallen.[24] The FCC, for instance, last year upgraded its fixed-speed benchmark to 100/20 Mbps and set an “aspirational goal” of 1 Gbps/500 Mbps, reflecting the advancements in available speeds.[25] Furthermore, a growing number of households are now served by multiple broadband providers, enhancing consumer choice and competitive intensity.[26] Despite some critics’ claims of limited competition, statistics indicate that a vast majority of U.S. homes have access to at least three fixed, mobile, or satellite broadband services.[27]

Beyond these emerging technologies, competition from other established wireline providers remains significant. For instance, AT&T has been aggressively expanding its fiber footprint, with plans to pass over 30 million premises with fiber by the end of 2025, and potentially 60 million by 2030 through new partnerships and acquisitions.[28] Verizon also continues to be a major competitor with its fiber buildout plans.[29] These extensive fiber rollouts directly compete with cable broadband services, especially for high-speed connectivity, thus necessitating strategic responses from cable operators to maintain their market position.

The mobile market also already presents a critical dimension of competition, as well as a significant growth opportunity for broadband providers. Cable-wireless services, such as Charter’s Spectrum Mobile and Comcast’s Xfinity Mobile, have rapidly evolved into significant competitive forces in the mobile-telecommunications market, leveraging existing cable infrastructure and bundled service offerings to attract customers, often at lower prices. This exerts considerable competitive pressure on traditional wireless carriers like AT&T, Verizon, and T-Mobile.[30]

The proposed Charter/Cox merger aims to capitalize on these mobile opportunities. Cox, which launched its mobile service nationally in early 2023, is relatively “underpenetrated” in this market, with an estimated 200,000 mobile lines, compared to Charter’s 10.4 million.[31] The combined entity would have the opportunity to extend Charter’s more favorable mobile virtual network operator (MVNO) terms with Verizon to Cox’s customer base, offering lower-priced converged fixed and mobile offerings that tend to increase customer retention and improve economics.[32] This strategic move would bolster mobile competition within Cox’s legacy footprint, directly benefiting consumers with more competitive options.

C. The Imperative of Scale in Capital-Intensive Industries

The modern communications industry, encompassing broadband and mobile services, is characterized by its inherent capital intensity, demanding substantial and ongoing investments for technology deployment and network upgrades, as ICLE reported in a 2024 white paper:

Investment and innovation do not solely come from new entrants, as incumbents often are important sources of innovation while they try to stay competitive and avoid disruption. In this way, providers compete through new product introductions and disruption, not just on price. Because of these dynamics, mergers and increased concentration can sometimes be associated with increased investment, in that they may allow firms to achieve greater economies of scale and scope.[33]

Providers must continually invest in infrastructure, such as fiber and the latest Data Over Cable Service Interface Specification (DOCSIS) standards, to deliver ever-increasing broadband speeds and capabilities, as well as to expand and enhance mobile networks. These capital requirements mean that achieving greater scale is an economic imperative to enable more efficient investment and sustain competitiveness in a rapidly evolving landscape.

This need for scale is amplified by the dynamic nature of competition across various platforms and technologies. Cable operators like Charter and Cox no longer operate in a siloed market. They face significant pressure from diverse competitors, including expanding fiber footprints from AT&T and Verizon, disruptive FWA services from T-Mobile and Verizon, and LEO satellite-broadband providers like Starlink. In this multi-platform reality, achieving greater scale allows companies to allocate resources more effectively across various regions and technologies, ensuring they can keep pace with innovation and consumer demand.

A crucial area where increased scale offers tangible economic benefits is in MVNO agreements. Cable companies typically offer mobile services by leveraging existing wireless infrastructure through MVNO deals with national carriers like Verizon.[34] Charter, with its substantial mobile presence of 10.4 million wireless lines, has demonstrated that it can compete effectively in this space. By combining with Cox, whose mobile service is relatively underpenetrated with only 200,000 customers, the merged entity can extend Charter’s more advantageous MVNO terms with Verizon to Cox’s customer base.[35] This not only would offer lower-priced converged fixed and mobile offerings to Cox customers, but also bolster overall mobile competition within Cox’s existing footprint by providing a stronger alternative to traditional wireless carriers.

Beyond favorable MVNO terms, increased scale also contributes to improved marketing and branding capabilities. The combined company, with 69.5 million passings and 37.6 million customers, would become the largest broadband provider in the country, surpassing Comcast. This expanded footprint and customer base would enhance the combined company’s ability to compete against national competitors through more effective branding and sales efforts. The planned rollout of Spectrum-branded products across Cox’s service area, including Advanced Wi-Fi and Spectrum Mobile with Mobile Speed Boost, aims to leverage this expanded scale to drive sales and reduce customer churn.[36]

Crucially, the Charter/Cox merger is largely considered a geographic expansion, rather than a consolidation that eliminates head-to-head competition. Charter and Cox do not significantly overlap within their service footprints. This distinction is vital for antitrust analysis under Section 7 of the Clayton Act, which prohibits mergers that may substantially lessen competition. In this case, the transaction aims to achieve greater scale across different regions without directly reducing the number of competitors in any given local market. This approach is distinct from more problematic recent mergers, such as Comcast’s attempted acquisition of Time Warner Cable (discussed below), which faced significant antitrust opposition due to overlapping concerns.

III. Competitive Review Frameworks: DOJ and FCC

The review of the proposed Charter/Cox transaction requires navigating two distinct regulatory frameworks, each grounded in unique statutory mandates and institutional priorities. The DOJ evaluates mergers primarily through the lens of antitrust law, focusing narrowly on whether a transaction may substantially lessen competition or create a monopoly, as set forth in the Clayton Act. In contrast, the FCC undertakes a broader inquiry guided by the Communications Act’s “public interest” standard, which allows consideration of an array of economic, social, and policy factors beyond pure competition.

This dual-track review not only shapes the substantive analysis of competitive effects but also influences the inquiry’s procedures, evidentiary burdens, and types of conditions or remedies that may be imposed on the merging parties. The following sections describe the distinct standards and practices applied by each agency as they assess major communications-industry transactions.

A. The Clayton Act (DOJ) and the ‘Substantial Lessening of Competition’ Standard

Section 7 of the Clayton Act reflects congressional intent to arrest anticompetitive conduct before it reaches full monopolization by forbidding mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly.”[37] The U.S. Supreme Court has characterized this language as creating “a relatively expansive definition of antitrust liability.”[38]

The DOJ’s merger-review process operates through a burden-shifting framework established in cases like Philadelphia National Bank.[39] When the government establishes a prima facie case showing a substantial lessening of competition through structural presumptions or other evidence, defendants bear the burden of rebutting this showing with evidence demonstrating that the merger will not harm competition.[40] The structural presumption creates a rebuttable inference of illegality when mergers significantly increase concentration in highly concentrated markets, as measured by tools like the Herfindahl-Hirschman Index (HHI). The DOJ’s 2023 Merger Guidelines establish presumptions for mergers creating firms with market shares exceeding 30%, or HHI increases of more than 100 points in markets with post-merger HHI levels above 1,800.[41]

Economic analysis plays a central role in modern merger review. Its application, however, remains “surprisingly elusive,” as it is constrained by legal precedent and statutory interpretation.[42] While agencies employ sophisticated analytical techniques—including merger simulation, diversion analysis, and natural experiments to assess competitive effects—these economic tools are constrained by the legal framework established by Section 7’s text and judicial interpretation. The Clayton Act does not require certainty of harm but rather assessment of risk based on the totality of available evidence.

The distinction between different merger types proves crucial for understanding DOJ enforcement patterns. Geographic expansion mergers, where companies operate in different markets, typically receive more favorable treatment than horizontal mergers that eliminate head-to-head competition. For example, the DOJ recently approved T-Mobile’s transaction with UScellular, which had a significant geographic-extension element.[43] Such transactions do not eliminate existing competition between merging parties, reducing the immediate competitive concerns that trigger structural presumptions. Geographic expansion allows firms to extend their market reach and increase scale economies without directly consolidating market share in existing territories, distinguishing these transactions from mergers that combine direct competitors in the same geographic markets.[44]

B. The ‘Public Interest’ Standard (FCC)

The FCC’s review of the proposed merger will proceed on a separate and fundamentally different track from the antitrust analysis conducted by the DOJ. While both agencies scrutinize the transaction’s competitive effects, the FCC operates under the Communications Act’s broad and ill-defined “public interest, convenience, and necessity” standard, as explained in ICLE’s comments in the FCC’s “Delete, Delete, Delete” proceeding:

The FCC’s transaction-review process, rooted in the Communications Act of 1934, has evolved into a complex, time-consuming, and often unpredictable system that frequently duplicates efforts already undertaken by antitrust authorities. The current dual-review system imposes substantial costs on merging parties without clear commensurate benefits. While the FTC and U.S. Justice Department (DOJ) focus narrowly on demonstrable competitive harms, the FCC employs a broader and more ambiguous “public interest” standard that allows for wide-ranging inquiries, and often demands conditions that extend beyond competition concerns. This expansive approach not only creates regulatory uncertainty but also significantly increases transaction costs and extends timelines for business combinations that might otherwise benefit consumers through enhanced efficiencies and innovation.[45]

The FCC’s authority is triggered by the companies’ need to transfer control of their various FCC licenses—a procedural hook the agency has long used to conduct comprehensive merger reviews. The process is managed by a dedicated FCC transaction team that establishes a public docket, inviting comments and petitions to deny from third parties.[46] The FCC established its public docket in the Charter/Cox proceeding Sept. 5, 2025, with a public comment period set to close Oct. 5, 2025.[47]

This public phase is critical, as it allows competitors, consumer advocates, and other stakeholders to introduce arguments and evidence that shape the scope of the commission’s inquiry, often extending it far beyond the transaction’s direct competitive effects. The commission’s initial analytical step will be to define the relevant product and geographic markets to assess competitive harm.

It is likely the FCC will determine that the transaction is not a conventional horizontal merger, as the firms’ cable and broadband service territories have almost no geographic overlap. For example, when the commission recently approved Verizon’s acquisition of Frontier, the competitive analysis focused on whether the transacting parties “currently provide, or are likely to provide, products or services that consumers view as substitutes within the same relevant geographic market.”[48] In addition, where there is no geographic overlap, the commission has indicated that no analysis of horizontal effects is necessary.[49]

This finding of almost no geographical overlap is significant, not because it exonerates the merger, but because it dictates the subsequent analytical pivot. With minimal direct horizontal harm to analyze at the local retail level, the commission could shift focus to national-level, nonhorizontal theories of harm. This dynamic was central to the reviews of prior major cable mergers, such as the abandoned Comcast/Time Warner Cable transaction and the approved Charter/Time Warner Cable deal, where concerns about national scale—not local overlaps—dominated the proceedings.

It is this focus on national harms unrelated to competition issues where the FCC’s unique public-interest standard becomes most potent, and potentially capricious. Unlike the Clayton Act standard used by the DOJ, the FCC’s framework effectively reverses the burden of proof. The merging parties must affirmatively demonstrate that their combination will produce tangible public-interest benefits that outweigh any potential harms.[50] The term “public interest” is capacious, allowing the commission to consider a wide array of policy goals beyond economic efficiency, including the promotion of localism, programming diversity, and the deployment of advanced services. This means a transaction that is competitively neutral, or even one with harms that fall short of being “substantial,” could be blocked or conditioned if the parties fail to make a sufficiently compelling affirmative case.

The FCC’s approach is not a sterile application of economic theory, but a process heavily influenced by precedent and political pressure. The conditions imposed in the Comcast/NBCUniversal and Charter/Time Warner Cable mergers—as well as the T-Mobile/UScellular transaction and Skydance’s recent acquisition of Paramount—serve as precedent, and hint at the FCC’s approach to the Charter/Cox deal.

Arguments and demands submitted to the public docket by influential third parties will also play a crucial role in defining the scope of perceived harms, and shaping the ultimate remedy. The commission will weigh the potential harms—both those identified by its staff and those advanced by outside parties—against the procompetitive justifications offered by Charter and Cox.

History suggests that the FCC is unlikely to block the merger outright. Instead, the agency can “slow walk” the process or identify potential harm to the “public interest” as leverage to extract a set of “voluntary” conditions that the companies must accept to win approval. This practice of “regulation by adjudication” allows the FCC to impose its policy preferences on the merging parties without undergoing a formal rulemaking process. Moreover, such conditions are not subject to the same cost-benefit analysis or judicial scrutiny as formal rules,[51] giving the agency immense discretionary power.

The FCC’s typical regulatory approach has become even more strategically important for the commission in the current legal environment. The Supreme Court’s recent decision in Loper Bright to overturn the Chevron doctrine has weakened the legal foundation for broad agency rulemakings by eliminating judicial deference to an agency’s interpretation of its governing statutes.[52] With its general rulemaking authority now more vulnerable to legal challenge, the FCC has a powerful incentive to use the merger-review process as its preferred vehicle for regulation.

C. The Trump Administration’s Approach to Mergers

The Trump administration’s approach to merger review represents a departure from the approach of past Republican administrations, embodying what officials have variously christened “America First Antitrust,” “MAGA Antitrust,” and “Hillbilly Antitrust.”[53] The framework combines populist skepticism of corporate concentration with nationalist economic priorities, creating a more interventionist enforcement posture than previous Republican administrations.

The DOJ’s antitrust review would be conducted under Assistant U.S. Attorney General Gail Slater’s “America First Antitrust” doctrine, which prioritizes protecting “America’s forgotten consumers” through targeted litigation, rather than broad regulatory schemes.[54] This approach views antitrust enforcement as a tool that uses courts as a “scalpel” to excise monopolistic behavior without burdening entire industries with preemptive rules.[55] The DOJ has retained the Biden administration’s aggressive 2023 Merger Guidelines, which establish lower concentration thresholds and expanded theories of harm beyond traditional price effects, including labor-market impacts and potential competition concerns.

The administration’s enforcement philosophy explicitly rejects what it sees as the consumer-welfare standard’s narrow focus on price.[56] Federal Trade Commissioner Mark Meador, for example, argues that antitrust enforcement should focus on the welfare of consumers as buyers, not corporate efficiency gains, effectively excluding most merger-generated cost savings from competitive analysis unless directly passed to consumers.[57] This doctrinal shift enables challenges based on broader theories of harm, including monopsony power over suppliers, elimination of potential competition, and labor-market-concentration effects.

FCC Chair Brendan Carr’s “Build America Agenda” prioritizes infrastructure deployment, spectrum efficiency, and national technological leadership over traditional competition concerns.[58] This framework views telecommunications mergers through the lens of enhancing American competitiveness against foreign rivals and accelerating next-generation network deployment.

Carr has also introduced an unprecedented element to FCC merger review by threatening to block transactions involving companies that maintain what he terms “invidious” diversity, equity, and inclusion (DEI) programs.[59] This represents a novel use of the commission’s public-interest authority to advance broader administration policy objectives beyond traditional communications regulation. The FCC has already demonstrated this approach’s practical impact: T-Mobile was required to modify its DEI policies to secure approval for its Lumos Fiber acquisition,[60] as well as its transaction with UScellular.[61] Verizon received approval for its $20 billion Frontier purchase shortly after announcing the elimination of its DEI initiatives.[62] This creates a new category of merger condition, where companies must align their employment and corporate-governance practices with administration priorities to obtain FCC clearance.

The DEI enforcement mechanism expands the FCC’s leverage in merger negotiations beyond traditional public-interest considerations such as service quality, network investment, and competitive effects. Companies seeking merger approval must now evaluate whether their corporate policies on workplace diversity could trigger regulatory opposition, with the FCC effectively using the merger-review process as a vehicle to reshape private-sector employment practices. This approach transforms telecommunications merger review into a broader policy-enforcement tool that extends well beyond the communications sector’s traditional regulatory boundaries.

The precedent set by the T-Mobile/Sprint merger approval demonstrates how Trump administration officials resolve tensions between anti-concentration principles and national policy objectives. That transaction combined two of the four national wireless carriers, creating presumptive competitive harm, yet received approval based on complementary spectrum assets that would accelerate nationwide 5G deployment.[63] The agencies imposed strict build-out commitments and engineered complex structural remedies to preserve market structure while achieving infrastructure-policy goals.[64]

For the Charter/Cox transaction, the DOJ could focus on potential monopsony effects in content-purchasing markets or labor-market-concentration concerns. The combined entity would become the largest buyer of video programming, potentially enabling it to extract lower rates from content creators. But it should be noted that the companies’ “no overlap” defense—that they operate in distinct geographic markets—significantly complicates horizontal-merger analysis. The administration’s retained 2023 Merger Guidelines provide tools to challenge the merger on national-concentration theories, but litigation risks remain substantial, given the lack of direct competitive overlap.

Critically, the enforcement agencies would likely pursue a negotiated settlement rather, than outright challenge. This reflects some of the recent agreements noted above, where the administration was not interested in blocking deals, per se, but instead in using potential deals as leverage to extract concessions that advance broader policy objectives. For example, Slater’s pragmatic approach—demonstrated in approving the Capital One/Discover merger that the Biden administration reportedly planned to block—suggests a willingness to accept deals with appropriate conditions.[65] The Charter/Cox merger’s alignment with infrastructure-investment goals and its potential to create a stronger competitor to dominant players like Comcast and vertically integrated platforms like Amazon and Apple provide pro-competitive justifications that may reduce the attractiveness of litigation, even if other ancillary demands are pursued.

Further, the FCC review should present few obstacles, as the companies’ goal for the merger is to advance a plan that is highly consistent with the “Build America Agenda” through promised infrastructure investments and expanded broadband access.[66] The companies have strategically emphasized commitments to accelerate fiber deployment, enhance rural-broadband service, and repatriate customer-service jobs to the United States. These promises align with Carr’s public-interest priorities.

Following the T-Mobile-Sprint template of extracting enforceable commitments in exchange for merger clearance, conditional approval represents the most probable outcome. Likely conditions could include aggressive build-out timelines with penalty provisions, price-protection commitments for existing customers, enhanced mobile-competition requirements, and elimination of company DEI policies.

The administration’s merger-review process reflects its broader philosophy of using government power strategically, rather than reflexively opposing corporate consolidation. Even under the populist “America First” framework, the Charter/Cox merger’s geographic complementarity, infrastructure-investment commitments, and alignment with national-competitiveness goals position it favorably for approval with conditions that transform potential competitive concerns into vehicles to achieve the administration’s policy priorities.

D. Regulatory Asymmetry

The modern communications marketplace suffers from fundamental regulatory inconsistencies. Traditional cable operators pursuing horizontal mergers, such as Charter and Cox, face intensive scrutiny from both the DOJ under Section 7 of the Clayton Act and the FCC under its “public interest” standard. Meanwhile, technology giants have vertically integrated across similar competitive spaces with minimal oversight.[67] This asymmetry distorts market outcomes by imposing differential regulatory burdens, rather than allowing economic efficiency and consumer preference to determine competitive success.

The regulatory burden imposed on traditional cable operators creates substantial transaction costs and uncertainty. The dual-review process requires significant legal fees, economic-consulting expenses, and executive attention diverted from core operations.[68] The FCC’s “public interest” standard proves particularly problematic because it lacks clear boundaries. Unlike DOJ analysis focused on demonstrable competitive harms, the FCC may extract concessions on matters unrelated to competitive effects. This transforms merger review into de-facto rulemaking, creating a permission-based system that chills pro-competitive transactions and investment.

Technology platforms have assembled vertically integrated ecosystems without equivalent regulatory oversight. For example, Google distributes programming via YouTube and YouTube TV and operates fiber infrastructure in select markets. Amazon has become a major content producer through acquisitions like MGM and the company’s extensive investment in original programming. This content reaches consumers through Prime Video, which accounts for nearly 4% of household viewing time,[69] some of which is consumed on Amazon’s Fire TV devices. Netflix transformed from a content aggregator into a dominant production studio with an annual content budget of $18 billion, rivaling traditional media companies.[70] This vertical integration fundamentally altered video-programming-market dynamics, creating a powerful content buyer and direct competitor to programmers and distributors.

The disparate treatment across technologies lacks coherent consumer-welfare justification. Subjecting one set of firms to intensive and costly review while allowing others to integrate with minimal oversight does not protect competition, but skews it. The result creates structural disadvantages for traditional providers based on legacy regulations, rather than competitive merit. This asymmetry distorts competition, discourages investment where it is most needed, and fails to address the competition posed by vertically integrated technology platforms.

A coherent regulatory framework would move beyond historical technology-driven distinctions to apply technology-neutral principles that reflect consumer behavior. Without such modernization, antitrust enforcement becomes arbitrary, penalizing incumbents for attempting to achieve scale and scope that unregulated rivals have already attained. Sound economic policy requires consistent treatment of similar competitive behaviors regardless of corporate heritage or regulatory classification.

IV. Potential Competition Issues in the Charter/Cox Merger

The competitive effects of the proposed Charter/Cox merger are best understood within the broader context of today’s rapidly evolving communications market. Effective analysis requires a careful examination of how the merger might affect competition across both fixed broadband and video services, considering the intersection of overlapping and non-overlapping geographic footprints, emerging technologies, and shifting consumer-demand patterns. This section assesses potential competition concerns by focusing first on the fixed and mobile broadband markets, where intermodal rivalry and expanded provider choice have redefined competitive dynamics, and then on the implications for video distribution in light of changing market definitions and increasing cross-platform convergence.

A. Fixed and Mobile-Wireless Broadband

Antitrust analysis of this transaction will likely focus on the fixed broadband market, as the deal would create the largest broadband provider in the United States. Even so, there is extraordinarily little geographic overlap between the areas served by Charter and Cox. Less than 0.1% of broadband serviceable locations in the combined footprints are served by both companies.[71] In addition, more than half of Charter locations and about half of Cox locations already are served by competing fiber providers.[72]

ICLE reported in 2024 that broadband competition is intense and dynamic.[73] Since the COVID-19 pandemic, more households are connected to the internet; broadband speeds have increased, while prices have fallen; more households are served by multiple providers; and newer technologies like satellite and 5G have expanded internet access and intermodal competition among providers. For example, from the end of 2019 through June 2025, while the overall Consumer Price Index increased by 24.3%, the index for internet services and electronic-information providers rose by just 9.0%.[74]

The International Technology & Innovation Foundation (ITIF) similarly reports that cable companies face increasing competition, such that “cable’s long-time dominance [in broadband] is fading due to new alternatives entering the market or existing companies expanding their footprint and capacity.”[75] For example, in the second quarter of 2025, Spectrum’s tally of internet customers fell by 117,000.[76]

From 2019 to 2024, the total number of subscribers to fixed wireless-access products from AT&T, T-Mobile, Verizon, and UScellular grew from less than 1 million to nearly 12 million, amounting to a 68% cumulative annual growth rate.[77] In the first quarter of 2025, 12.7 million subscribed to FWA.[78] At a March 2025 event, FCC Chairman Brendan Carr noted that “the evidence shows that when we get a new fixed wireless provider that comes in… prices decrease.”[79] In addition, Starlink’s satellite-broadband service has more than 2 million “active” U.S. subscribers,[80] while reaching 99.8% of broadband-serviceable locations in the United States. Another satellite service, Amazon’s Project Kuiper, plans to offer internet service with speeds of 100 Mbps to 1 Gbps by the end of 2025.[81]

An ICLE issue brief on T-Mobile’s transaction with UScellular reported that mobile-wireless services have been a growing segment of the mobile broadband market, with cable companies like Comcast and Charter exerting competitive pressure:

In less than a decade, cable-wireless providers have rapidly evolved from nascent entrants to significant competitive forces in the mobile-telecommunications market. Their market share has grown substantially, with recent estimates indicating they’ve captured more than half of new subscribers. This growth demonstrates that consumers view cable-wireless offerings as viable substitutes for traditional wireless services. Moreover, cable-wireless providers now cover a significant portion of the population, including within UScellular’s footprint. This indicates that their services are widely available, and they compete directly with traditional carriers in many local markets.[82]

Despite the growth of cable wireless, however, the largest providers combined still likely account for less than 5% of U.S. mobile subscribers.[83]

B. Video Services

For video services, a market definition narrowly confined to traditional MVPDs, such as cable and satellite providers, is economically indefensible and detached from current market realities. Consumers have demonstrated that they view traditional MVPDs as competitive substitutes with the vast array of over-the-top (OTT) services, including subscription video-on-demand (SVOD), advertising-supported video-on-demand (AVOD), and virtual MVPDs (vMVPDs).[84] “Cord-cutting,” the persistent, large-scale consumer migration from traditional pay-TV to these internet-delivered alternatives provides evidence of high demand-side substitutability and cross-elasticity of demand, the foundational criteria for market definition under established legal and economic principles.

Moreover, as noted above, the service footprints of the two cable operators are geographically distinct and do not overlap. A consumer in a Charter territory cannot choose Cox for cable service, and vice versa. Consequently, the transaction does not eliminate head-to-head competition between the two firms in the provision of their primary video offerings. This fact alone distinguishes the transaction from mergers that consolidate rivals within the same geographic area and immediately lessens the potential for the kinds of unilateral or coordinated anticompetitive effects that typically animate antitrust concern. The merger is a combination of two sets of non-competing local assets.

The U.S. video market is a fragmented and fiercely competitive space dominated by numerous well-capitalized global and national firms. For example, based on total television viewing time, YouTube and Netflix combined account for almost the same amount of household viewing time (21.1%) as all cable operators combined (23.4%).[85] Even in a narrowly defined “pay TV” market comprised of cable, satellite, and vMVPD providers, the merged company would have a market share of 23% of subscribers. This results in an HHI of 1,502, well below the 2023 Merger Guidelines thresholds for a highly concentrated market.[86]

The competitive discipline in the modern video market is further amplified by exceptionally low consumer-switching costs. Unlike the legacy cable model, which often involved annual contracts, professional installation, and equipment rental, consumers can subscribe to or cancel most OTT services in minutes with no long-term commitment. This consumer empowerment creates significant market fluidity, evidenced by high churn rates for SVOD services, which have grown substantially since 2019. The constant threat that a subscriber will switch to a rival service in response to a price increase or degradation in quality or content selection imposes a powerful constraint on the behavior of all market participants, including a post-merger Charter/Cox.

The transaction is thus best understood not as an anticompetitive move to consolidate market power, but as a pro-competitive response to growing competition from vertically integrated media conglomerates and global technology platforms. Companies like Disney, Warner Bros. Discovery, Google (YouTube), and Amazon leverage immense scale in both content production and global distribution, creating competitive challenges for regional distributors. By combining assets, Charter and Cox can achieve the necessary scale to negotiate for programming on more favorable terms, creating efficiencies that can be passed on to consumers. This rationale mirrors the logic accepted in prior vertical media mergers, such as AT&T’s acquisition of Time Warner, which was positioned as necessary to compete with the rising power of large technology firms in content distribution.

Consumer group Public Knowledge has expressed concerns that a larger combined distributor might use its position to foreclose independent programmers or limit content diversity.[87] Such concerns are misplaced in the current video-distribution market. To compete effectively against the vast and exclusive content libraries of services like Netflix, Disney+, and HBO Max, video distributors have a powerful commercial incentive to cost-effectively offer the most compelling and diverse array of programming possible in order to attract and retain subscribers.

Any attempts to limit choice would be self-defeating, as consumers would quickly migrate to other platforms. Moreover, programmers today have more routes to market than at any point in history. They are no longer dependent on a handful of cable and satellite operators for distribution and can reach audiences directly through their own apps or via partnerships with numerous national and global OTT services.

C. Efficiencies and Consumer Benefits

Unlike previous failed consolidation attempts in the cable industry—most notably, Comcast’s 2015 bid for Time Warner Cable—the Charter/Cox proposal combines largely non-overlapping geographic footprints. This distinction is crucial for antitrust analysis. As noted above, rather than eliminating head-to-head competition in local markets, this transaction resembles a geographic expansion that allows the combined company to achieve greater scale across different regions.

This scale matters for reasons beyond market share. The communications industry requires enormous capital investments to deploy advanced technologies. USTelecom estimates broadband investments have averaged $100 billion a year (inflation adjusted) over the past decade.[88] Charter and Cox project approximately $500 million in annualized cost savings within three years of the deal.[89] If realized, these savings could be invested in network upgrades (e.g., expanding gigabit and multi-gigabit capabilities, and accelerating deployment of the DOCSIS 4.0 internet-communications standard); product-offering innovations (such as converged mobile and broadband bundles, where a larger entity might secure better MVNO terms); and improved customer service.

In addition, the companies claim the merged firm’s increased scale will result in lower costs per passing or per customer.[90] Their consultants also claim the merger will result in lower programming-acquisition costs, but have not provided sufficient information to the public to evaluate the claim.[91]

Offloading is the practice of routing mobile-data traffic over Wi-Fi networks instead of traditional cellular networks. Charter claims that 87% of its Spectrum Mobile traffic flows over Wi-Fi access points.[92] The merger will increase the number of Wi-Fi access points available to support the company’s mobile services, increasing the availability to offload mobile traffic on to Wi-Fi and thereby reducing the amount of network access purchased through MVNO agreements.[93]

Charter and Cox claim the merger would create cost savings by eliminating Cox’s current syndication agreements regarding consumer premises equipment (CPE) and video services. Currently, Cox has a syndication agreement with a third party (reportedly Comcast) to provide equipment.[94] Charter has developed its own customer equipment for modems and routers. After the merger, Cox customers will transition to Charter’s equipment platform, removing the syndication fees Cox currently pays. The parties argue that these savings could then be passed on to customers through lower prices or better service quality.[95] These characteristics not only mitigate concerns under the traditional Clayton Act analysis, but also match the priorities emphasized by the “America First Antitrust” approach, which favors transactions that expand infrastructure, increase competitiveness, and deliver direct consumer benefits.

LightReading reports that Cox has currently uses the X1 and Xumo video platform through a syndication deal.[96] Charter and Cox’s consultants conclude this results in “double marginalization” in which the upstream technology provider sets syndication fees above its own marginal costs, and Cox, in turn, prices its video service above these syndicated input costs to earn a return.[97] Charter plans to move Cox customers to its own video platform, which bundles traditional TV with free ad-supported versions of popular streaming services like Disney+, HBO Max, and Paramount+.[98] This platform also includes a digital store where customers can easily add streaming apps and upgrade to ad-free versions if they want.

Charter argues that its larger scale after acquiring Cox will reduce equipment and service costs significantly. The company says it will reinvest these savings into network improvements and new services for customers. By bringing Cox’s operations in-house instead of relying on third-party syndication agreements, the merged company expects to operate more efficiently and offer customers better value through improved bundling options and lower operational costs.

V. Lessons from Past Merger Reviews

The regulatory and competitive landscape surrounding large-scale communications mergers has evolved significantly over the past decade, shaped both by shifting market dynamics and by changing enforcement priorities. To understand the likely trajectory and evaluation of the proposed Charter/Cox transaction more fully, it is instructive to examine recent precedent in U.S. telecommunications and media mergers. This section examines the Comcast/Time Warner Cable and AT&T/Time Warner merger reviews and draws out key analytical lessons from their outcomes and implications for future merger reviews.

A. Comcast/Time Warner Cable (2015)

In 2015, Comcast abandoned its plans to acquire Time Warner Cable Inc. (TWC) for approximately $45.2 billion.[99] The deal was scuttled following formal notification from both the DOJ and the FCC that their staffs intended to oppose the deal. The regulators argued that the combined entity’s national scale would make it an “unavoidable gatekeeper” with the ability and incentive to harm the then-nascent online video distributor (OVD) market to protect the companies’ legacy pay-TV business.[100] These theories of harm focused on the potential for the merged firm to leverage its market power in broadband distribution to raise costs for OVDs through interconnection fees and to restrict their access to programming content.

Today, the factual premises underlying these theories have been fundamentally altered. The OVD market is no longer nascent. Instead, the OVD business is a mature, dominant force in media, with streaming’s share of television viewership now eclipsing that of broadcast and cable combined. Concurrently, the broadband market has become more competitive, with fiber, fixed wireless, and satellite services providing increasingly viable alternatives to cable. Moreover, a merged Charter/Cox entity would lack the significant vertical integration into content production that was a key aggravating factor in the Comcast/TWC review.

Similar to the proposed Charter/Cox deal, the proposed Comcast/TWC transaction lacked direct, head-to-head competition between the two companies.[101] Comcast and TWC operated in almost entirely separate geographic territories, a common feature of the U.S. cable industry. Therefore, consumers in any given local market would not see the number of available cable or broadband providers reduced as a direct result of the merger. This absence of horizontal overlap meant that traditional antitrust metrics, such as local market concentration as measured by HHI, were largely irrelevant to the consumer-facing retail markets.

As a result, regulators shifted their analysis away from traditional theories of harm based on the elimination of a direct competitor. Instead, the DOJ and FCC focused on potential anticompetitive effects stemming from the combined entity’s substantial increase in national scale. The agencies advanced a “gatekeeper” theory, contending that the merger would make a combined Comcast/TWC an “unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.”[102]

Thus, rather than focusing on competition in the market for broadband service, the agencies turned their attention to competition on the broadband platform itself. The concern was not that the merged firm would raise prices for its own subscribers, but that it would use its control over access to those subscribers to harm other companies operating in upstream and downstream markets, particularly in the emerging online-video space.

In particular, the government’s case against the merger centered on the perceived threat to the then-nascent OVD services, such as Netflix and Hulu.[103] Regulators theorized that a larger, more powerful cable operator, seeing OVDs as a threat to its profitable legacy pay-TV business, would possess both an increased ability and a heightened incentive to disadvantage these emerging online competitors. Government reviewers articulated three specific economic theories of harm to substantiate this concern.[104]

1. Increased bargaining power in interconnection, in which it was argued that a larger internet service provider (ISP) could leverage its control over a greater number of broadband subscribers to demand higher fees from OVDs for interconnection (e., the physical exchange of traffic required to deliver video streams to consumers).[105] These higher costs would either be passed on to consumers through higher OVD subscription prices or would reduce OVDs’ margins, thereby stifling their ability to invest in content and innovation and ultimately limiting their growth and competitive viability.²
2. Increased bargaining power in programming negotiations, in which the merged firm would represent a much larger share of the national market for video distribution. The increased buyer power—or monopsony power—could be used to force television programmers like Disney, Viacom, or Discovery to accept restrictive contract terms.[106] Specifically, regulators feared the merged entity would demand alternate-distribution means (ADM) clauses that would prohibit or penalize programmers for licensing their content to OVDs. In this way, they could starve online rivals of the programming needed to compete effectively with the traditional cable bundle.[107]
3. Internalization of externalities. This more complex economic argument focused on the merged firm’s anticipated incentives. Under this theory, it was argued that, when a single cable operator takes an action that harms an OVD (g., by degrading its video quality or imposing a restrictive data cap),[108] it creates a positive externality for other cable operators, as the OVD is now a weaker competitor for all of them. The individual operator, however, only considers the benefit to its own business. A merger between two large operators would cause the new, larger firm to internalize these externalities and would account for the benefits that its anticompetitive actions confer on its newly acquired territories.[109] This internalization, in turn, would increase the firm’s overall incentive to engage in conduct harmful to OVDs, as it would now capture a larger share of the industrywide gains from such a strategy.

These theories of anticompetitive harm were advanced while the FCC was in the midst of drafting its 2015 Open Internet Order, also known as “net neutrality,” which mandated policies involving interconnection, blocking, throttling, paid priority, and data caps that were identified as necessary (or desired) to preserve a so-called “open” internet.[110]

An aggravating factor in the merger review was Comcast’s vertical integration into content through its ownership of NBCUniversal (NBCU).[111] This ownership distinguished the proposed merger from a pure horizontal combination of distribution assets. Time Warner Cable, having been spun off from Time Warner Inc. in 2009, did not own significant programming assets of its own. Comcast’s ownership of a major content studio created what regulators saw as a powerful, two-sided incentive to foreclose rivals. The merged firm could potentially harm OVDs, not only to protect its legacy cable-distribution business, but also to advantage its own content business.[112] This vertical integration amplified concerns raised by the programming-negotiation theory of harm, making the threat of anticompetitive foreclosure appear more concrete and credible to regulators.

The decade since the scuttled Comcast/TWC merger has been a period of substantial transformation in the media and communications landscape. The competitive dynamics and market structures of 2025 bear little resemblance to those of 2015.

• In 2015, regulators characterized OVDs as “nascent,” with entrants requiring protection from entrenched incumbents. By 2025, this narrative has been inverted. Today, streaming’s share of total television usage (46%) surpasses the combined share of broadcast and cable television (42%).[113] In 2015, around 50% of U.S. households held subscriptions to streaming services; in 2023, 83% of households subscribed to one or more of the major streaming providers.[114]
• The competitive landscape for broadband-internet access has also become significantly more dynamic. In 2015, 16% of households had no access to download speeds of 25 Mbps or higher and 45% only had access from a single provider. Today, a large majority of U.S. homes have access to at least three fixed, mobile, or satellite broadband services with speeds of 100 Mbps or higher.[115]
• Several net-neutrality orders have come and gone. Most recently, the 6^thS. Court of Appeals struck down the FCC’s 2024 effort to regulate broadband-internet providers as common carriers under the guise of net neutrality.

This evolution renders meaningless the main competitive concerns raised in the Comcast-TWC merger 10 years ago.

B. AT&T/Time Warner (2018)

The DOJ’s challenge to the AT&T/Time Warner merger in 2018 was the first fully litigated vertical-merger case in four decades.[116] The government’s ultimate failure to block that deal established a clear and demanding evidentiary standard for future challenges to a nonhorizontal merger, favoring evidence-based economic analysis over speculative theories of competitive harm.

The DOJ’s case rested on a vertical-foreclosure theory, arguing that the combined firm would have both the incentive and ability to leverage Time Warner’s seemingly indispensable Turner networks to raise programming costs for its distribution rivals, such as cable and satellite companies.[117] This argument was grounded in economic principles—chiefly the Nash Bargaining Theory—that posited that AT&T’s ownership of its own distributor (DirecTV) would reduce its downside risk from a programming blackout with a rival, thereby increasing its bargaining leverage in carriage negotiations.[118]

The U.S. District Court for the District of Columbia, in an opinion[119] that was unanimously affirmed by the U.S. Circuit Court of Appeals for the D.C. Circuit,[120] rejected the government’s theory. The court’s decision turned on the government’s failure to demonstrate a “reasonable probability” that the alleged theoretical harms would manifest in the real world.[121] Judge Richard Leon found the DOJ’s quantitative economic model to be unreliable and factually detached from marketplace realities, citing flawed inputs and a critical failure to account for the constraining effects of existing long-term contracts. The court concluded that the government’s case was built on a chain of assumptions and predictions that were ultimately contradicted by the factual evidence.

In contrast to the government’s theory, the court found the merging parties’ evidence more persuasive because it was rooted in empirical data and real-world experience.[122] AT&T presented a detailed econometric analysis of prior vertical mergers in the same industry, which demonstrated no statistically significant effect on content prices.[123] This historical data provided a counter-narrative to the government’s forward-looking, theoretical model. The court also credited testimony from industry executives, who affirmed that threatening or initiating content blackouts was a mutually destructive strategy that would remain an unattractive option even after the merger.[124] The testimony of the merging parties’ rivals, upon which the government heavily relied, was largely discounted by the court as self-interested and speculative.[125]

One factor guiding the court’s skepticism of the DOJ’s theory of harm was Time Warner’s voluntary, post-litigation commitment to submit to binding “no-blackout” arbitration to resolve any future carriage disputes with distributors.[126] This irrevocable offer was a practical, market-based solution that directly neutralized the government’s central theory of harm regarding the threat of programming blackouts. By providing a concrete mechanism to prevent the anticompetitive conduct the DOJ anticipated, the merging parties stifled one of the government’s chief concerns.

The D.C. Circuit’s affirmation of Judge Leon’s decision laid down a marker for future vertical-merger challenges. The appellate court reiterated that, because vertical mergers do not produce an immediate change in market concentration, the government cannot rely on structural presumptions of harm as it can in horizontal cases.[127] Instead, the government must make a “fact-specific” showing that the merger is likely to be anticompetitive.[128]

A key lesson of the AT&T-Time Warner merger is that enjoining a nonhorizontal merger requires more than economic theories or complaints from competitors. A successful challenge to a nonhorizontal merger demands concrete, credible, and compelling evidence that the transaction will likely cause substantial harm to competition in the actual marketplace.

VI. Conclusion and Policy Implications

The proposed Charter/Cox merger is best understood as a strategic response to sweeping changes in the U.S. communications market. Across fixed broadband, pay TV, and mobile, service providers now operate amid increasing platform diversity, rapid technological change, and more demanding consumer expectations.

Charter and Cox face significant and growing competition from fixed-wireless access, LEO satellites, and the growing fiber footprints of AT&T and Verizon, as well as from more than 200 streaming platforms. The market landscape bears little resemblance to the highly segmented, technology-specific markets of the past. With minimal geographic overlap, the merger does not remove a competitor from any local market—a fact with direct implications for how competitive risks should be weighed.

The evidence shows that the combined Charter/Cox entity largely represents a geographic expansion, rather than a horizontal consolidation. Fewer than 0.1% of broadband-serviceable locations are currently overlapped by both providers. Review of past mergers underscores that, in such cases, traditional antitrust concerns about increased local market concentration are substantially reduced or inapplicable. Instead, the key analytical question shifts to whether the transaction creates the capacity or incentives for anticompetitive behavior at a national level, especially in areas like programming acquisition or interconnection. These concerns have diminished, however, as the competitive balance has tilted toward multiplatform, vertically integrated giants, many of whom are not subject to the same regulatory scrutiny as legacy cable operators.

The efficiencies claimed by Charter and Cox rest primarily on scale: approximately $500 million in annual targeted cost savings within three years. These savings are expected to arise from reduced equipment costs, more favorable mobile-network access, programming-acquisition efficiencies, and the elimination of duplicative syndication agreements. The merged company projects that these savings will support faster deployment of advanced broadband and mobile technologies, lower average costs per customer, and improvements in service quality—outcomes consistent with the consumer-welfare standard. The ability to offload mobile traffic onto expanded Wi-Fi networks, in particular, could lower operational costs and deliver more competitive mobile offerings within Cox’s footprint.

Regulatory review of the Comcast/Time Warner Cable and AT&T/Time Warner mergers provides several lessons. First, while the agencies were focused a decade ago on the risk that national-level consolidation might create “gatekeeper” power over nascent online-video platforms, the market has since shifted. Online video is now the dominant modality, and vertical integration by technology platforms (e.g., Apple, Google, Amazon) has eclipsed that of most traditional providers. Regulatory asymmetry remains, in that cable operators navigating mergers undergo multi-agency review and bear the costs of legacy regulation, even as their principal competitors operate under few or no comparable obstacles.

For policymakers, the Charter/Cox transaction presents an opportunity to realign regulatory practice with economic reality. The consumer-welfare standard—focused on demonstrable, transaction-specific harms and efficiencies—remains the most reliable guide. Even under an “America First” antitrust approach, regulatory responses should be rooted in factual market effects, not abstract concerns about scale or size. Where claimed efficiencies are both merger-specific and verifiable, the burden should be on the agencies to demonstrate substantial, tangible harms to competition, rather than rely on speculative or politically motivated theories of harm.

The evolving role of the FCC, especially under recent “public interest” reinterpretations, deserves careful consideration. Conditions unrelated to competition—such as those advancing specific employment or corporate-governance policies—risk introducing regulatory unpredictability and could dampen incentives for investment and innovation. Such interventions, particularly when applied inconsistently across industry segments, threaten to bias market outcomes and discourage the very adaptation that consumers and the U.S. economy require.

Ultimately, a coherent regulatory framework should aim to treat functionally equivalent services the same, regardless of historical provider classification. As the communications marketplace continues to converge, policy must shift toward technological neutrality and consistent application of antitrust principles to all market players. By focusing on demonstrable effects and resisting the urge to intervene on grounds unrelated to competition, policymakers will best promote investment, innovation, and consumer benefit—a result well aligned with the economic evidence presented in this review. Importantly, that conclusion holds whether the transaction is examined under the traditional consumer-welfare standard or under the newer “Hillbilly Antitrust” framework: in both cases, the facts support approval.

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

[1] Press Release, Charter Communications and Cox Communications Announce Definitive Agreement to Combine Companies, Charter Commcn’s (May 16, 2025), https://corporate.charter.com/newsroom/charter-communications-and-cox-communications-announce-definitive-agreement-to-combine-companies; see also Charter Communications and Cox Communications Agree to Transformative Combination, Charter Commcn’s & Cox Commcn’s (May 16, 2025), https://ir.charter.com/static-files/17f74638-d569-448c-be88-76d00f9c6fff [hereafter “Charter/Cox presentation”].

[2] Jake Neenan, Charter-Cox Merger Provides Convergence Runway, Broadband Breakfast (May 16, 2025), https://broadbandbreakfast.com/charter-cox-merger-provides-convergence-runway.

[3] Pay TV Providers Ranked by the Number of Subscribers in the United States as of 1st Quarter 2025, Statista (May 2025), https://www.statista.com/statistics/251793/pay-tv-providers-with-the-largest-number-of-subscribers-in-the-us.

[4] Charter, supra note 1.

[5] Turner Broadcasting System v. FCC, 512 U.S. 622, 661 (1994) (“Turner I”) (the “cable medium” has “special characteristics” of “bottleneck monopoly power”).

[6] Turner Broadcasting System v. FCC, 520 U.S. 180, 197 (1997) (“Turner II”).

[7] Comcast Cable Commcn’s v. FCC, 717 F.3d 982, 993-94 (2013) (J. Kavanaugh, concurring).

[8] Report and Order, In the Matter of Amendment to the Commission’s Rules Concerning Effective Competition, Implementation of Section 111 of the STELA Reauthorization Act (MB Docket No. 15-53, FCC 15-62, Jun. 3, 2015), available at https://docs.fcc.gov/public/attachments/FCC-15-62A1.pdf.

[9] Eighth Annual Report, In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, CS Docket No. 01-129, Table B-1 (Dec. 27, 2001), available at https://docs.fcc.gov/public/attachments/FCC-01-389A1.pdf.

[10] Philip Graves, How System Requirements for Browsing the Internet Have Changed: Part 1: Internet Connection Speeds, GWS Media (Nov. 23, 2021), https://www.gwsmedia.com/articles/how-internet-system-requirements-have-changed (“In early 1993, the fastest available modem was capable of transferring data at a maximum speed of 14.4 kilobits per second (kbps), equivalent to 864kb per minute, or 51.84Mb per hour. The launch of the 28.8k modem in 1994 doubled this theoretical maximum. 33.6k modems followed in 1996, and eventually 56k ones arrived in 1998. …  However, in practice the maximum advertised speeds were never attained for any dial-up modems as a result of latencies in the infrastructure serving data to end-users.”); see also Eric Fruits, Kristian Stout, & Geoffrey A. Manne, The Economics of Broadband Data Caps and Usage-Based Pricing, Int’l Ctr. L. & Econ. (Oct. 23, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/10/Data-Caps-2024.pdf (“In the early days of the commercial internet in the 1990s, most consumers accessed the internet via dial-up connections. These connections were slow—averaging around 56 Kbps—and content was limited. It could take a minute or more for a single image file to load.”).

[11] About Us, DirecTV, https://www.directv.com/insider/corporate/company (last visited Jul. 22, 2025).

[12] Joni Blecher, The History of RealPlayer, RealPlayer Blog (Aug. 17, 2016), https://blog.real.com/realplayer-history.

[13] Speedtest Global Index: Median Country Speeds Updated June 2025, Speedtest, https://www.speedtest.net/global-index (last visited Jul. 22, 2025).

[14] US Trad Pay TV & vMVPDs, nScreen Media, https://nscreenmedia.com/us-pay-tv (last visited Jul. 24, 2025).

[15] Eugenie Park & Colleen McClain, 83% of U.S. Adults Use Streaming Services, Far Fewer Subscribe to Cable Or Satellite TV, Pew Research Center (Jul. 1, 2025), https://www.pewresearch.org/short-reads/2025/07/01/83-of-us-adults-use-streaming-services-far-fewer-subscribe-to-cable-or-satellite-tv; see also Eric Fruits, Video Competition in 2025: It’s Literally on Heebee, Truth on Mkt. (Feb. 14, 2025), https://truthonthemarket.com/2025/02/14/video-competition-in-2025-its-literally-on-heebee (“In the face of so many streaming options, millions of consumers have ‘cut the cord’ and switched from cable and DBS satellite to streaming services over the internet. Cable subscribership peaked in 2010. Since then, the number of subscribers dropped by more than 35%. The Washington Post reports that barely half of American homes pay for live TV service from a cable, satellite TV, or an internet-delivered vMVPD (virtual multichannel video programming distributor) like YouTube TV.”).

[16] 2025 Media & Entertainment Industry Predictions Report, Alix Partners (Dec. 2024), available at https://www.alixpartners.com/media/ow1n5vey/2025-media-entertainment-industry-predictions-report.pdf.

[17] Colin Dixon, TV for the Rest of Us: How Streaming Unleashed Specialty Audiences, nScreenMedia (Jun. 3, 2025), https://nscreenmedia.com/how-streaming-unleashed-specialty-audiences.

[18] The Gauge, The Nielsen Co., https://www.nielsen.com/data-center/the-gauge (last visited Jul. 22, 2025).

[19] Eric Fruits, Geoffrey A. Manne, Ben Sperry, & Kristian Stout, Dynamic Competition in Broadband Markets: A 2024 Update, Int’l Ctr. L. & Econ. (Jun. 4, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/06/Broadband-Competition-2024-Update.pdf.

[20] Andrew Long, The Proposed Charter-Cox Merger: A Pro-Consumer Response to Today’s Competitive Communications Marketplace, Free State Found. (Jun. 10, 2025), available at https://freestatefoundation.org/wp-content/uploads/2025/06/The-Proposed-Charter-Cox-Merger-061025.pdf.

[21] Eric Fruits, Ben Sperry, & Kristian Stout, The Competitive Effects of the Proposed T-Mobile/UScellular Transaction, Int’l Ctr. L. & Econ. (Dec. 16, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/12/T-Mobile-USCellular.pdf.

[22] Id.

[23] See, e.g., Drew FitzGerald & Patience Haggin, Charter, Cox Merge in Megadeal Amid Escalating War With Wireless, Wall St. J. (May 16, 2025), https://www.wsj.com/business/deals/charter-communications-to-merge-with-rival-cox-in-21-9-billion-deal-c70dcff9?st=6rQTPa&reflink=desktopwebshare_permalink (“Cellphone carriers like Verizon and T-Mobile have heightened the threat with home broadband service beamed over the air. Wireless companies have racked up millions of customers with the offerings, which use 5G technology to provide internet speeds that are competitive with fixed cable lines at lower prices.”).

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

[25] 2024 Section 706 Report, In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion (GN Docket No. 22-270, Mar. 14, 2024), available at https://docs.fcc.gov/public/attachments/DOC-400675A1.pdf.

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

[27] Id.

[28] United States Telecommunications Market Overview, Business Monitor Online (Jun. 23, 2025).

[29] Jeff Baumgartner, Verizon Doubles Down on FWA, Accelerates Fiber Buildout Plan, Light Reading (Oct. 22, 2024), https://www.lightreading.com/broadband/verizon-doubles-down-on-fwa-accelerates-fiber-buildout-plan.

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

[31] Bevin Fletcher, Charter to Acquire Cox in Deal Worth $34.5B, StreamTV Insider (May 16, 2025), https://www.streamtvinsider.com/video/charter-acquire-cox-deal-worth-345b.

[32] Id.; see also Long, supra note 20.

[33] Fruits et al., supra note 19, citing Eric Fruits, Justin (Gus) Hurwitz, Geoffrey A. Manne, Julian Morris, & Alec Stapp, Static and Dynamic Effects of Mergers: A Review of the Empirical Evidence in the Wireless Telecommunications Industry, (OECD Directorate for Financial and Enterprise Affairs Competition Committee, Global Forum on Competition, DAF/COMP/GF(2019)13, Dec. 6, 2019), available at https://one.oecd.org/document/DAF/COMP/GF(2019)13/en/pdf.

[34] Long, supra note 20.

[35] Neenan, supra note 2.

[36] Fletcher, supra note 31.

[37] 15 U.S. Code § 18 [emphasis added].

[38] California v. Am. Stores Co., 495 U.S. 271, 284 (1990), (quoting 15 U.S.C. § 18 with emphasis) (citing Brown Shoe, 370 U.S. at 323).

[39] United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963).

[40] The Use of Structural Presumptions in Antitrust (OECD Roundtables on Competition Policy Papers No. 317, 2024), available at https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/11/the-use-of-structural-presumptions-in-antitrust_27777e33/3b8c6885-en.pdf.

[41] Horizontal Merger Guidelines, Dep’t of Justice & Fed. Trade Comm’n, (2023), available at https://www.justice.gov/d9/2023-12/2023%20Merger%20Guidelines.pdf.

[42] Eric Posner, What Is the Role of Economics in Merger Review?, ProMarket (Mar. 28, 2024), https://www.promarket.org/2024/03/28/what-is-the-role-of-economics-in-merger-review.

[43] Natalie Weger, Justice Department Won’t Seek Injunction for T-Mobile Acquisition of U.S. Cellular, Wall St. J. (Jul. 10, 2025), https://www.wsj.com/business/telecom/justice-department-wont-seek-injunction-for-t-mobile-acquisition-of-u-s-cellular-b9e7abac?st=81wr98&reflink=desktopwebshare_permalink; see also Fruits et al., supra note 21 (“Despite T-Mobile’s nationwide coverage, some spots served by UScellular are not well served by T-Mobile… These are areas in which the transaction would not reduce the number of competing firms, as T-Mobile would simply replace UScellular in areas where T-Mobile lacks coverage or combine assets to create even more effective competition against other providers.”)

[44] See, e.g., G. E. Hale & Rosemary D. Hale, Expanding Enterprise: Geographical Curbs on Mergers, 51 Minn. L. R. 857, 867 (1967) (“[I]t is clear that such an acquisition may result in cost savings to the combined firm. Indeed, the merger in question would presumably never have been negotiated unless some such spreading of overhead costs were envisaged. Observers have found that there are such savings in the operation of chain stores in the grocery field. In numerous other industries similar cost reduction can be achieved through nationwide promotion and distribution of goods.”).

[45] Eric Fruits, Kristian Stout, Ben Sperry & Geoffrey A. Manne, Comments of the International Center for Law & Economics Re: Delete, Delete, Delete, GN Docket No. 25-13352, Int’l Ctr. L. & Econ. (Apr. 11, 2025), available at https://laweconcenter.org/wp-content/uploads/2025/04/2025-Delete-Delete-Delete-Comments-r3.pdf.

[46] Jon Sallett, FCC Transaction Review: Competition and the Public Interest, FCC Blog (Apr. 14, 2014), https://www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-review-competition-and-public-interest.

[47] Applications Filed for the Transfer of Control of Cox Communications, Inc. to Charter Communications, Inc., Fed. Commcn’s Comm’n (Sep. 5, 2025), available at https://docs.fcc.gov/public/attachments/DA-25-810A1.pdf.

[48] Frontier Communications Parent, Inc. and Verizon Communications, Inc. Application for Consent to Transfer Control, Memorandum Opinion and Order, DA 25-421 ¶ 16 (WCB/OIA/WTB rel. May 16, 2025).

[49] Applications of AT&T Inc. and Centennial Communications Corp., Memorandum Opinion and Order, 24 FCC Rcd 13915, 13931 ¶ 34 (2009).

[50] Sallet, supra note 46 (“Fundamental is the fact that applicants have the burden of demonstrating on the public record that their proposed transaction is in the public interest.”)

[51] Though the D.C. Circuit has suggested in dicta that conditions must be “transaction-specific” and that “non-germane conditions” are “an out-and-out plan of extortion.” See Competitive Enterprise Institute v. FCC, 970 F.3d 372, 388 (D.C. Cir. 2020) (quoting Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987)).

[52] Loper Bright Enterprises v. Raimondo, 603 US ___ (2024); see also Ben Sperry & Eric Fruits, How This Supreme Court Term Might Affect the FCC’s Digital-Discrimination Rule, Truth on Mkt. (Jul. 3, 2024), https://truthonthemarket.com/2024/07/03/how-this-supreme-court-term-might-affect-the-fccs-digital-discrimination-rule.

[53] Eric Fruits, A Hillbilly and a Hipster Walk Into a Bar, Truth on Mkt. (May 30, 2025), https://truthonthemarket.com/2025/05/30/a-hipster-and-a-hillbilly-walk-into-a-bar.

[54] Gail Slater, The Conservative Roots of America First Antitrust Enforcement, Address to University of Notre Dame Law School (Apr. 28, 2025), https://www.justice.gov/opa/speech/assistant-attorney-general-gail-slater-delivers-first-antitrust-address-university-notre.

[55] Andrew Ferguson, Keynote Speech, International Competition Network Annual Conference 2025, YouTube (May 8, 2025), https://youtu.be/yOp5__oNZ8k?si=pSitKJ3QrEvR4zsB (“My friend and colleague, Gail Slater at the U.S. Justice Department, has likened ex ante regulation to a sledgehammer, whereas ex post antitrust enforcement is a scalpel.”)

[56] Fireside with Abigail Slater, Little Tech Competition Summit, YouTube (Apr. 28, 2025), https://youtu.be/Hk6A1WcJtPs?si=EJrRe7R6v5oDTvel (“[T]he consumer welfare standard is decently broad… the variables including quality, price as a dimension of competition, innovation, things of that nature. As a matter of agency practice, often it’s been narrowed down to price… The narrow focus on price, I think, is something that is not even compatible with the consumer welfare standard construct as it exists in current precedent, and I think we need to be open… to think about it more broadly than just price.”).

[57] Mark R. Meador, Antitrust Policy for the Conservative, Fed. Trade Comm’n (May 1, 2025), available at https://www.ftc.gov/system/files/ftc_gov/pdf/antitrust-policy-for-the-conservative-meador.pdf (“Conservatives should insist that antitrust analysis credit only efficiencies that: (1) are realized in the same market as the harms they offset; (2) can only reasonably be achieved through the conduct or transaction at issue; (3) are nonspeculative (i.e., measurable in some way and likely to be realized); and (4) will directly and predominantly accrue to consumers.”)

[58] Brendan Carr, A Build Agenda for America, Fed. Commcn’s Comm’n (Jul. 2, 2025), available at https://docs.fcc.gov/public/attachments/DOC-412663A1.pdf.

[59] Jeff Green, FCC’s Carr Threatens to Block M&A for Companies With DEI, Bloomberg Law (Mar. 21, 2025), https://news.bloomberglaw.com/ip-law/fccs-carr-threatens-to-block-m-a-for-companies-with-dei-plans.

[60] Masha Abarinova, T-Mobile Updates DEI to Get Its Lumos Fiber Deal Approved, Fierce Network (Apr. 3, 2025), https://www.fierce-network.com/broadband/t-mobile-aims-high-fiber-now-lumos-bag.

[61] US FCC Approves Two T-Mobile Deals After Wireless Carrier Drops DEI Programs, Reuters (Jul. 11, 2025), https://www.reuters.com/sustainability/society-equity/fcc-approves-two-t-mobile-deals-after-wireless-carrier-drops-dei-programs-2025-07-11.

[62] Jericho Casper, Verizon Ends DEI Programs as FCC Reviews $9.6B Frontier Deal, Broadband Breakfast (May 16, 2025), https://broadbandbreakfast.com/verizon-ends-dei-programs-as-fcc-reviews-9-6b-frontier-deal.

[63] Memorandum Opinion and Order, Declaratory Ruling, and Order of Proposed Modification, In the Matter of Applications of T-Mobile US, Inc., and Sprint Corporation for Consent to Transfer Control of Licenses and Authorizations, WT Docket No. 18-197, FCC 19-103 (Oct. 19, 2019), available at https://docs.fcc.gov/public/attachments/FCC-19-103A1.pdf.

[64] Id.

[65] Robert C. Azarow, David F. Freeman, Jr., Amber A. Hay, Michael A. Mancusi, Kevin M. Toomey, & Paul Lim, Bank Regulator’s Approval of Capital One and Discover Deal Shows Path Forward for Bank M&A Deals, Arnold & Porter (Jun. 5, 2025), https://www.arnoldporter.com/en/perspectives/advisories/2025/06/bank-regulators-approval-of-capital-one-and-discover-deal.

[66] See, e.g., Public Interest Statement, In the Matter of Cox Enterprises, Inc. and Charter Communications, WC 25-233 (July 14, 2025), https://www.fcc.gov/ecfs/document/10715141122783/2 [hereafter “Public interest statement”]. See, Section IV.B. (“The Transaction Will Put America First”).

[67] Eric Fruits, Media-Ownership Regulations in a Streaming World: Time to Change the Channel, Truth on Mkt. (Mar. 5, 2025), https://truthonthemarket.com/2025/03/05/media-ownership-regulations-in-a-streaming-world-time-to-change-the-channel (“Broadcasters operate under one set of ownership regulations and cable providers operate under another set. Meanwhile, the emerging market of internet-based video distribution continues to operate almost entirely free from ownership regulations. Companies like Netflix, Amazon, and YouTube entered the market without facing the ownership limitations, public-interest obligations, or local-content requirements imposed on their legacy competitors.”).

[68] See, e.g., Fruits et al., supra note 45 (“Merging parties currently must provide substantially similar competitive analyses and market data to both antitrust authorities and the FCC. This redundancy creates unnecessary administrative burdens, without providing proportionate regulatory benefits.”).

[69] Nielsen, supra note 18.

[70] Tod Spangler, Netflix Content Spending, Set to Hit $18 Billion in 2025, Is “Not Anywhere Near a Ceiling,” CFO Says, Variety (Mar. 5, 2025), https://variety.com/2025/digital/news/netflix-content-spending-2025-ceiling-cfo-1236328510.

[71] Public Interest Statement, In the Matter of Cox Enterprises, Inc. and Charter Communications, WC 25-233, Appendix E, Declaration of Bryan Keating & Jonathan Orszag ¶ 61 (July 14, 2025), https://www.fcc.gov/ecfs/document/10715141122783/3 [hereafter “Keating & Orszag”].

[72] Keating & Orszag, supra note 70 ¶ 62 n.73 (reporting approximately 52.9 and 49.6 percent of mass market locations serviceable by Charter and Cox, respectively, are also serviceable by at least one competing FTTP provider at the end of 2024).

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

[74] Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], U.S. Bureau of Labor Statistics (retrieved from FRED, Federal Reserve Bank of St. Louis, Aug. 4, 2025), https://fred.stlouisfed.org/series/CPIAUCSL; Consumer Price Index for All Urban Consumers: Internet Services and Electronic Information Providers in U.S. City Average, U.S. Bureau of Labor Statistics, https://data.bls.gov/timeseries/CUUR0000SEEE03?output_view=data (last visited Aug. 4, 2025).

[75] Ellis Scherer & Joe Kane, Broadband Convergence Is Creating More Competition, Information Tech. & Innov. Found. (Jul. 2025), available at https://www2.itif.org/2025-broadband-convergence.pdf.

[76] Press Release, Charter Announces Second Quarter 2025 Results, Charter Commcn’s (Jul. 25, 2025), https://corporate.charter.com/newsroom/charter-announces-second-quarter-2025-results.

[77] Fitch Ratings, Fixed Wireless Access Growth Disrupts U.S. Telecom Market (Mar. 26, 2025), https://www.fitchratings.com/research/corporate-finance/fixed-wireless-access-growth-disrupts-us-telecom-market-26-03-2025.

[78] Public Interest Statement, supra note 65 at 30.

[79] Brendan Carr, Free State Foundation Seventeenth Annual Policy Conference, YouTube (Mar. 25, 2025), https://www.youtube.com/live/G33c8UlQjxE?si=vxILcpPlzXcCvj3K.

[80] Starlink Network Update, Starlink, https://www.starlink.com/updates/network-update (last visited Jul. 30, 2025),

[81] Amazon Plans to Offer Satellite Internet Service in Late 2025, PYMTS (Jul. 14, 2025), https://www.pymnts.com/amazon/2025/amazon-plans-offer-satellite-internet-service-late-2025.

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

[83] Fruits et al., supra note 21, Table 1. As a private company, Cox does not report mobile wireless subscribers. Even if all of its customers subscribed to mobile wireless service, however, Cox would account for less than 2% of total subscribers.

[84] Fruits, supra note 15.

[85] Nielsen, supra note 18.

[86] Pay TV Providers Ranked by the Number of Subscribers in the United States as of 1st Quarter 2025, Statista (May 18, 2025), https://www.statista.com/statistics/251793/pay-tv-providers-with-the-largest-number-of-subscribers-in-the-us.

[87] Press Release, Public Knowledge Warns $34.5 Billion Cox/Charter Merger Might Be Weaponized, Public Knowledge (May 16, 2025), https://publicknowledge.org/public-knowledge-warns-34-5-billion-cox-charter-merger-might-be-weaponized (quoting Public Knowledge Legal Director John Bergmayer: “As always with cable mergers, the question is as much a loss of opportunities for content creators and programmers to reach an audience, as the loss of choices to subscribers.”)

[88] 2023 Broadband Capex Report, USTelecom (Oct. 18, 2024), available at https://ustelecom.org/wp-content/uploads/2024/10/UST-1376-CAPEX-Report_2024_4-as-of-Oct-4.pdf.

[89] Charter & Cox presentation, supra note 1.

[90] Public Interest Statement, supra note 65 at 30.

[91] Keating & Orszag, supra note 70 ¶¶ 32-37.

[92] Public Interest Statement, supra note 65 at 38.

[93] Keating & Orszag, supra note 70 ¶¶ 42-45.

[94] Jeff Baumgartner, Charter and Cox State Their Case at the FCC, LightReading (Jul. 17, 2025), https://www.lightreading.com/regulatory-politics/charter-and-cox-make-their-case-at-the-fcc.

[95] Public Interest Statement, supra note 65 at 30.

[96] Baumgartner, supra note 93.

[97] Keating & Orszag, supra note 70 ¶ 48.

[98] Public Interest Statement, supra note 65 at 52.

[99] Press Release, Comcast Corporation Abandons Proposed Acquisition of Time Warner Cable After Justice Department and the Federal Communications Commission Informed Parties of Concerns, Dept. of Justice (Apr. 24, 2025), https://www.justice.gov/archives/opa/pr/comcast-corporation-abandons-proposed-acquisition-time-warner-cable-after-justice-department.

[100] Id. See also William P. Rogerson, Economic Theories of Harm Raised by the Proposed Comcast/TWC Transaction (2015), in The Antitrust Revolution (7^th ed., John E. Kwoka, Jr. & Lawrence J. White eds., 2018); Jon Sallet, The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews, Telecomms. Pol’y Rsch. Conf. (Sep. 25, 2015), available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0925/DOC-335494A1.pdf.

[101] Sallet, supra note 99 (“there was minimal horizontal overlap between the Applicants in the local markets for residential broadband and Pay TV service”).

[102] DOJ, supra note 98.

[103] Sallet, supra note 99 (“We understood that entrants are particularly vulnerable when competition is nascent. Thus, staff was particularly concerned that this transaction could damage competition in the video distribution industry by increasing both Comcast’s incentive and its ability to disadvantage OVDs and thus retard or permanently stunt the growth of a competitive OVD industry. In doing so, consumers would be denied the benefits that innovative competition could bring.”).

[104] For a critical evaluation of these theories of harm, see Geoffrey A. Manne, The FCC Distorted Market Realities to Scuttle the Comcast-TWC Merger, Truth on Mkt. (Oct. 2, 2015), https://truthonthemarket.com/2015/10/02/the-fcc-distorted-market-realities-to-scuttle-the-comcast-twc-merger.

[105] Sallet, supra note 99 (“Similarly, we also considered a national market for interconnection in which ISPs negotiate with OVDs (and their content delivery networks) over the terms by which the OVDs would reach consumers. Post-transaction, an OVD might have needed an interconnection agreement with the merged entity in order to achieve national distribution, so we also considered the ability of the merged company to impose terms that would disadvantage the OVD.”).

[106] Sallet, supra note 99 (“Alongside incentives came ability. Increased bargaining power was the central concern. The combination of distribution assets had the potential to increase the merged entity’s bargaining power in both national markets—the market where video distributors negotiate the terms and conditions to distribute video content for programmers and the interconnection market through which broadband providers provide mass-market delivery services to OVDs. Because OVDs are subject to national economies of scale, the merged company could significantly impair an OVD’s ability to compete. … But after a merger, that OVD would have to strike a bargain with only one firm, which would give that company the ability to disadvantage the OVD, or perhaps even exclude the OVD from reaching its subscribers.”).

[107] Rogerson, supra note 99 (“government reviewers were concerned that [ADM terms] could also be used simply to deny OVD competitors access to programming and that OVDs would be particularly vulnerable to such anticompetitive actions when they were just attempting to enter and had relatively small market shares.”)

[108] Sallet, supra note 99 (“we considered their competitive effect when combined with data caps and other retail broadband terms and conditions that raised the price of OVDs for consumers”).

[109] Sallet, supra note 99 (“Without the merger, a company taking action against OVDs for the benefit of the Pay TV system as a whole would incur costs but gain additional sales—or protect existing sales—only within its footprint. But the combined entity, having a larger footprint, would internalize more of the external ‘benefits’ provided to other industry members.”).

[110] Protecting and Promoting the Open Internet, 47 CFR Parts 1, 8, and 20 (GN Docket No. 14-28, FCC 15-24. Apr. 13, 2015).

[111] See, e.g., Leticia Miranda, Why Comcast Walked Away, ProPublica (Apr. 23, 2015), https://www.propublica.org/article/why-comcast-seems-to-be-walking-away (“Bloomberg complained to the FCC that Comcast placed Bloomberg TV in the outer dial away from most other business networks and its own channel, CNBC, in the lower dial with other business news where viewers would be more likely to come upon it.”)

[112] Rogerson, supra note 99 (“As part of a dispute with Netflix over interconnection fees that began in early 2013 and lasted for approximately nine months, Comcast allegedly allowed its interconnection points with Cogent and other transit providers that delivered Netflix traffic to Comcast to become congested, which severely deteriorated the ability of Comcast subscribers to view Netflix content.”)

[113] Nielsen, supra note 18.

[114] Billy Thompson, The Rise and Fall of Streaming TV?, Mich. J. Econ. (May 25, 2024), https://sites.lsa.umich.edu/mje/2024/05/25/the-rise-and-fall-of-streaming-tv; Park & McClain, supra note 15.

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

[116] Koren W. Wong -Ervin, Antitrust Analysis of Vertical Mergers: Recent Developments and Economic Teachings, Antitrust Source (Feb. 2019), available at https://www.americanbar.org/content/dam/aba/publications/antitrust/magazine/archived/2019/february/antitrust-analysis-vertical-mergers.pdf.

[117] Trial Brief of the United States, United States v. AT&T Inc., (No. 1:17-cv-02511-RJL D.D.C. 2018). (“Here, the critical question is this: Would consumers quit subscribing to AT&T’s competitors and switch to AT&T if they did not carry Time Warner content, thus allowing AT&T to increase the price of that content? If so, the merger will allow AT&T to increase its rivals’ costs—and those higher costs will, in turn, be passed on to consumers.”)

[118] Trial brief, supra note 116 (“For example, post-merger, if Turner and Charter are unable to reach a deal, the merged entity now would realize a benefit in the form of increased profits for DirecTV from new subscribers to AT&T’s service gained from Charter as subscribers switch from Charter to AT&T to ensure continuity in their reception of the desired Turner content. Accordingly, the model predicts that post-merger bargaining between Turner and Charter will result in a higher price for Turner content.”)

[119] United States v. AT&T Inc., 310 F. Supp. 3d 161 (D.D.C. 2018) [hereafter AT&T District]

[120] United States v. AT&T Inc., No. 18-5214 (D.C. Cir. 2019). [hereafter AT&T Circuit]

[121] AT&T District, supra note 118 at 198-190 n. 16.

[122] See, e.g., AT&T District, supra note 118 at 240 (“I am thus left with projections of harm for the years 2016, 2017, and 2021 that all concede have not and will not occur in the real world due to Turner’s actual affiliate agreements.”).

[123] AT&T District, supra note 118 at 207, 215-218.

[124] AT&T District, supra note 118 at 218-219.

[125] AT&T District, supra note 118 at 212.

[126] AT&T District, supra note 118 at 184.

[127] AT&T Circuit, supra note 119 at 6.

[128] Id.

ICLE Director of Innovation Policy Kristian Stout was quoted by State Scoop in a story about California’s recently approved privacy regulations for automated decision-making technology.

You can read the full article here.

Kristian Stout, Director of Innovation Policy at the International Center for Law and Economics, a nonprofit research group, said the new rules are overly broad and that their definitions could stifle innovation, particularly for small and medium-sized businesses.

“While the CPPA was reasonable in its interest in looking at these rules in light of new technologies, the core framework remains rigid and risks placing California at a competitive disadvantage in AI leadership,” Stout wrote in an emailed statement. “The compliance burdens, particularly the phased cybersecurity audits and risk assessments, are a substantial cost for businesses of all sizes, and the impact on small businesses and the digital advertising ecosystem remains a valid concern. The CPPA’s rules further divide a fractured regulatory landscape, forcing businesses to navigate complex and potentially contradictory obligations.”

Brian Albrecht, ICLE Chief Economist, was recently quoted in a RealClear Markets article discussing why the Trump FTC was right to reverse the Biden administration’s unlawful and economically unsound noncompete ban. Read the full article here.

The rule’s supposed benefits rest on shaky foundations. Economist Brian Albrecht explained in a recent post that the limited academic research on noncompetes focuses on individual states, industries, and types of jobs. The results found in this research may not generalize to the entire economy under a universal ban and such a ban might harm some workers.

The proposed ban would thus override hundreds of state laws, creating what Albrecht described as a “one-size-fits-all approach,” making it impossible to learn more about when noncompetes can and cannot benefit workers and employers alike by encouraging them to invest more fully in one another. This kind of investment fosters economic growth by encouraging worker skill acquisition and technological innovation. Likewise, employer investment in worker training leads to higher worker salaries in the long run as the more productive workers can command a higher salary from their current and future employers. Thus, in these situations, a noncompete can be a win-win for the worker and employer.

The law firm Kelley Drye cited comments by ICLE Director of Policy Ben Sperry and Director of Innovation Policy Kristian Stout in its Ad Law Access blog. The post covers the recent withdrawal of a proposed Missouri rule that would have governed social-media content moderation.

You can read the full blog post here.

The International Center for Law & Economics (“ICLE”) expressed similar concerns in their published comment, additionally targeting the technical impracticality of the “plug and play” model of the rule—stating that content moderation systems are deeply integrated into the platform’s systems, and new moderation models cannot be just plugged into a platform’s architecture.

Ian Adams, ICLE Executive Director was quoted by Ability Magazine in an article about how climate change is driving extreme weather that threatens to make parts of the U.S. “uninsurable”. Read the full story here.

But some believe that Proposition 103 has proven to be a rigid set of regulations that, instead of stabilizing the California homeowners insurance market, it has been the cause of major insurance players withdrawing or reducing coverage. Lawrence Powell, R.J. Lehmann, & Ian Adams in the paper “Rethinking Prop 103’s Approach to Insurance Regulation” (International Center for Law & Economics on November 6, 2023) conclude that “Prop 103 has created an insurance market that struggles to work efficiently even in the best of times and is virtually impossible to sustain in periods of acute stress.” They assert that Proposition 103 has become a set of strict regulations that, instead of stabilizing the California homeowner’s insurance market, has caused major insurance companies to withdraw or reduce coverage. They conclude that Prop 103 struggles in the best of times and is likely unsustainable during periods of high stress.

MLex cited comments from an International Center for Law & Economics brief filed with the FCC regarding the proposed merger between Charter Communications and Cox Communications.

You can read the full article in MLex here.

The merger between Charter and Cox would be pro-competitive and serve the public interest, the International Center for Law and Economics said in a brief to the US Federal Communications Commission. The transaction is a geographic expansion, rather than a horizontal consolidation of competitors, the brief said. “We urge the Commission to approve the applications without imposing conditions that are unrelated to the specific, demonstrable effects of the merger,” the ICLE said.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in Law360 article on lawsuits challenging Minnesota’s deepfake law, which raise Section 230 and First Amendment concerns. Read the full article here.

“For nearly three decades, courts have said platforms can’t be held liable for the speech of their users, whether it’s defamatory posts or, as will probably be the case here, deepfakes,” said Kristian Stout, director of innovation policy at the International Center for Law & Economics, a privately funded research group. 

He added that the line between exempted satire and parody and what is considered deceptive under the law “is impossible to draw in advance.”

“That uncertainty means speakers will self-censor, which is the textbook definition of a chilling effect,” he said.

Brian Albrecht, ICLE Chief Economist, was recently quoted in a Kurzycz discussing how economic models serve as tools to link individual behavior with equilibrium conditions, helping to navigate complex markets rather than mirror reality. Read the full article here.

At first glance, it looks almost insane. Economists draw curves, write equations that a normal person will never solve, and base them on bizarre assumptions, like that everyone knows everything. And then, with a straight face, they claim that this tells us something about reality. Brian Albrecht doesn’t deny this absurdity in his text. On the contrary, he accepts it as a starting point for a much deeper understanding: that economic models aren’t an attempt to be a precise mirror of the world, but rather a tool to help us navigate it…

ICLE was mentioned in this Via Satellite article covering  the ICLE/New America satellite webinar, where panelists said updating EPFD limits could expand LEO capacity, lower costs for consumers, and spur competition while protecting GEO systems. Read the full article here.

The letter was signed by individuals from the International Center for Law & Economics, the Open Technology Institute at New America, and the Digital First Project. These organizations launched the Alliance for Satellite Broadband, along with Amazonin 2023, to advocate for updating EPFD rules ahead of the World Radiocommunication Conference (WRC).

ICLE was mentioned in this Communications Daily article, covering  the ICLE/New America satellite webinar, where Patricia Cooper, former VP for satellite government affairs at SpaceX said that FCC faces growing pressure to revisit NGSO spectrum-sharing rules amid ongoing NGSO-GSO proceedings. Read the full article here.

As non-geostationary orbit (NGSO) satellite systems become more established, the FCC will face more pressure to revisit the rules, frameworks and spectrum-sharing approaches they operate under, space regulatory consultant Patricia Cooper said Thursday at a New America/International Center for Law & Economics webinar.
She and SpaceX and Amazon Kuiper representatives talked up the FCC’s pending proceeding that contemplates changing the satellite spectrum-sharing regime between NGSO and geostationary orbit (GSO) fixed satellite service in certain bands.

Daniel J. Gilman, ICLE Senior Scholar was quoted in a Healthcare Brew article discussing the uncertain future of noncompete agreements in healthcare as state-level restrictions rise despite the Federal Trade Commission dropping its proposed nationwide ban. Read the full story here.

The future. Chances for a nationwide ban on noncompetes are “slim,” but restrictions are growing state by state, Daniel Gilman, a senior scholar of competition policy at nonprofit research organization International Center for Law & Economics, told us.

Gilman said whether noncompete agreements illegally restrict competition likely depends on the market and factors like how many competitors there are.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in Mackinac Center for Public Policy article about proposed Michigan House of Representatives bills that take a heavy-handed and punitive approach to regulating artificial intelligence. Read the full article here.

HB 4667 and 4668 follow the regulatory approach of President Joe Biden’s much-criticized 2023 AI executive order, which in the words of analyst Kristin Stout, “sees dangers around every virtual corner” and imposes “regulations born of fear [that] threaten to derail beneficial innovation.” The Biden AI executive order states that the administration “places the highest urgency on governing the development and use of AI safely and responsibly.” President Donald Trump rejected this kind of government-directed approach to AI development when he repealed the Biden AI executive order in his first week in office.

ICLE President Geoffrey A. Manne is mentioned in this The Street article on the Federal Trade Commission’s decision to block the Kroger-Albertsons merger and its narrow approach to defining grocery market competition. Read the full article here.

Brian Albrecht, Dirk Auer, Eric Fruits, and Geoffrey A. Manne of the International Center for Law & Economics believed the FTC was harsh in how it viewed the merger.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in a Communication Daily article about the growing circuit split over Federal Communications Commission data privacy fines, as courts disagree on whether the FCC’s enforcement process violates the Seventh Amendment. Read the full article here.

Kristian Stout, innovation policy director for the International Center for Law & Economics, agreed that SCOTUS review is likely. “What’s especially notable is that two appellate courts have found the FCC’s process consistent with the Seventh Amendment, even after Jarkesy,” he said. “That suggests momentum behind the FCC’s position, but it also sets up exactly the kind of doctrinal conflict the court is inclined to resolve.”

ICLE was mentioned in this Missouri Independent article about former Andrew Bailey withdrawing a proposed rule that would have required social media platforms to allow third-party content moderators. Read the full article here.

“This rule is economically inefficient, technically unworkable and legally vulnerable, representing a regulatory solution that is demonstrably worse than the problems it purports to address,” the International Center for Law & Economics, a Portland, Oregon,-based think tank, said in its comments.

Brian Albrecht, ICLE Chief Economist, was recently quoted in a Manufacturing Dive article discussing how major chipmakers’ multibillion-dollar U.S. investments remain high-risk bets amid policy uncertainty and supply-chain challenges. Read the full article here.

On a micro-industry level, it also depends on factors such as competition within sectors like semiconductors, said Brian Albrecht, chief economist at the International Center for Law and Economics.

“There’s even a difference between what Texas Instruments is doing and what TSMC is doing,” Albrecht said. While large investments such as Texas Instruments’ $60 billion investment are always a big gamble, it’s too early to tell how successful it will be. In Texas Instruments’ case, it holds 15% of the global analog chips market share, according to AInvest.

A company like TSMC, for example, has mastered what it’s doing in Taiwan, Albrecht added. In March, TSMC announced it was adding $100 billion to the previously pledged $65 billion investment to expand its manufacturing footprint in Arizona.

“That’s one of the reasons that you have things like the CHIPS [and Science] Act and other investment incentives to try to encourage this, especially domestically,” Albrecht said.

“But it’s obviously not a guarantee. Otherwise, everyone would be trying to do it,” Albrecht said.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in this The NewYork Times article on Anthropic’s $1.5 Billion copyright settlement over using pirated books to train AI. Read the full article here.

Still, the Anthropic settlement ”should not be misread as a referendum against A.I. training,” said Kristian Stout, director of innovation policy at the International Center for Law and Economics. ”Rather, it underscores the distinction between transformative model training and the impermissible creation of pirated libraries.”

”The lesson for A.I. developers is clear: Respect copyright in how data sets are acquired, and follow the example Anthropic itself has now committed to,” he added.

Kristian Stout, ICLE Director of Innovation Policy, was quoted in a Defector article about the legal and ethical implications of Anthropic using pirated books to train its AI models and its $1.5 billion copyright settlement with authors. Read the full article here.

“The lesson for A.I. developers is clear,” Kristian Stout, director of innovation policy at the International Center for Law and Economics told The New York Times. “Respect copyright in how data sets are acquired, and follow the example Anthropic itself has now committed to.” That example—which Anthropic is now setting only because a court ordered it—is purchasing the books they want to use to train their AI. The example they are setting is … following the laws of the country in which they practice business.

ICLE Senior Scholar Daniel J. Gilman was quoted in a Reason article about FTC Chair Andrew Ferguson’s claims of Gmail bias against Republican emails. The piece highlight that there is a lack of clear evidence to support the allegation. Read the full story here.

Ferguson’s last piece of evidence is the notice of oral argument in Republican National Committee (RNC) v. Google Inc. (2025). In the case, which was first dismissed in 2023 and again with prejudice in 2024, the RNC alleges that Google deliberately diverted its emails to users’ spam folders. The chairman invokes the ongoing litigation as evidence of “similar concerns” to his own. Daniel J. Gilman, a senior antitrust scholar at the International Center for Law and Economics, reminds the good chairman that the RNC’s appeal “substantiates only the fact of the appeal, not the facts alleged, much less a finding of illegality under any federal or state law.”

Dirk Auer, director of competition policy at ICLE, is quoted in this Politico article on the recent U.S. court ruling that favored Google in an antitrust case, the suspension of a related EU case, and the implications for regulators attempting to contain the tech giant’s power. Read the full article here.

For these scenarios, “the Overton window had moved quite a bit,” said Dirk Auer, director of antitrust at the the tech-friendly International Center for Law & Economics, pointing to a series of Big Tech cases, including the EU’s own ad tech case, where break-up has been floated. Following Mehta’s order, a break-up, and in particular an EU-led one, has become a lot less imaginable as a scenario.

But U.S. President Donald Trump’s post on Truth Social — threatening foreign governments that impose digital rules on American firms — may ultimately have proven to be “the elephant in the room,” said Auer. It showed how “the U.S. — rightly or wrongly — will not stand by while other regulators act.”

Brian Albrecht, ICLE Chief Economist, was recently quoted in The Adweek article discussing how the court’s remedies in the Google antitrust case, which stopped short of a breakup, were justified because there wasn’t enough evidence for a stronger structural remedy, echoing the outcome of the Microsoft case. Read the full article here.

“Basically, if you’re going to have a really strong remedy, you need really strong evidence that this is the cause of the problem,” said Brian Albrecht, chief economist at the International Center for Law & Economics. “Grounding all this in Microsoft as the reason, [Mehta] found that there wasn’t enough evidence for a strong structural remedy—splitting off Chrome or something like that—but there was enough causal information to connect these default agreements to the monopolization of the market that the lighter remedies were justified.”

The question the court tried to answer, according to Albrecht, was how to open up the market to competitors. “In the Microsoft case, they pushed for big opening up of APIs and protocols and standardizations there for middleware,” Albrecht said. “In this case, they’re going to open it up by forcing the sharing of the index data. And both of those are meant to kickstart this part of the market where competition had been suffering.”

Brian Albrecht, ICLE Chief Economist, was recently quoted in Law 360 article on Judge Mehta’s U.S. v. Google ruling, which examined mixed remedies, AI’s impact on competition and structural v. conduct remedies. Read the full article here. 

Brian Albrecht, the chief economist at the International Center for Law & Economics, a think tank that’s been critical of the DOJ case, agreed that the ruling “seems more forgiving of Google’s actions and more understanding of the competitive benefits of these arrangements.” But he pushed back on the idea that the data sharing mandates in
particular amount to a slap on the wrist. “Giving your competitors the thing that made you a company is a big deal,” Albrecht said, referring in particular to the mandated provision of Google’s “search index,” the massive trove of virtually the entire open internet.

ICLE President Geoffrey A. Manne is quoted in this Reason article on a federal judge’s decision to reject the proposed breakup of Google in the search monopoly case, calling it a win for consumer welfare and market competition. Read the full article here.

Geoffrey Manne, president of the International Center for Law and Economics, says that Mehta’s refusal to enjoin Google from making payments for search access is “entirely borne out of adherence to a consumer-welfare-focused antitrust and rejection of the ‘big is bad’ vision underlying the [Justice Department’s] proposed remedies.” Likewise, Mehta’s rejection of the choice screen remedy, which would’ve required users to choose their device’s default search engine on first use and again every year thereafter, “recognized that judicial micromanagement of product design would not be beneficial for innovation or consumer welfare in the long run,” says Manne.

In his decision, Mehta rightly recognized that Google’s domination of the search engine market was not solely due to unlawful, anticompetitive behavior but in large part to its “best-in-class search quality, consistent innovations, investment in human capital, strategic foresight, and brand recognition.” Mehta’s refusal to break up Google has been called “a green light for monopolization to every big business” by some antitrust crusaders. Manne has another take; he says Mehta’s decision is “definitely a win for consumer welfare over the vision of antitrust espoused by the [Justice Department’s] proposed remedies.”

Threads from ICLE scholars on trending issues for the month of September 2025.

1/ The White House’s proposal to impose a 100% tariff on foreign-made films raises serious economic concerns. This is not just about movies—it functions as a digital services tax (DST).

— kristian stout (@kristianstout) September 29, 2025

Looking forward to speaking at VU Amsterdam on Oct. 10, for its Law & Technology & Economics lecture series. Please come if you're in the area! Organized by @ProfSchrepel & @alti_VU pic.twitter.com/aDAzJL3A9P

— Geoffrey Manne (@geoffmanne) September 25, 2025

Happy to share that the updated version of my @LawEconCenter paper on “The EU essential facilities doctrine after Android Auto: a wild card without limiting principles?” has been just published in @CMLRev https://t.co/9UJZFIb1jJ pic.twitter.com/aYeSExMnDC

— Giuseppe Colangelo (@GiuColangelo) September 23, 2025

Lots of thoughts on the situation with Jimmy Kimmel and the FCC over @TOTMblog. tl;dr: maybe we need to rethink whether broadcasters should be treated differently under the First Amendment

a ?https://t.co/G8VMN0wk2y

— Ben Sperry (@RBenSperry) September 19, 2025

Right after the Google Search case was filed in 2020, I wrote a snarky post about how these payments were a subsidy.

The logic was simple. Google's payment to Apple gets partially passed through to consumers.

This argument is somewhat vindicated now that we have the remedies. pic.twitter.com/dYzmuaZNtv

— Brian Albrecht (@BrianCAlbrecht) September 4, 2025

The Google Search remedies decision just dropped. The court rejected breakups, payment bans, and choice screens.

But it still ordered data sharing and syndication duties.

This reasoning will shape antitrust for years. My thoughts ? https://t.co/ScFNzZ7GxA

— Brian Albrecht (@BrianCAlbrecht) September 3, 2025

NEW. Over the summer, I read all of the EU’s latest digital acts (640 pages…) so you don’t have to.
I ran an empirical study to measure how adaptive these regulations are. Here are the results: https://t.co/QBpb6mqiC0.
(And yes, I’m experimenting with very short abstracts!) pic.twitter.com/HStga30mH5

— Thibault Schrepel (@ProfSchrepel) September 3, 2025