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INTRODUCTION AND SUMMARY OF ARGUMENT

The Federal Trade Commission (“FTC” or “Commission”) and its supporting amici describe an opinion the district court did not write. They say the court misused the Hypothetical Monopolist Test (“HMT”) by measuring substitution from conditions already degraded by monopoly. But that objection assumes the premise that the Commission bore the burden of proving: that Meta already possessed monopoly power and had reduced the quality of its apps. The court instead asked whether a hypothetical monopolist could make Meta’s apps significantly worse “than they would be in a competitive market,” Op. 38, and found that the Commission had not established either the competitive benchmark or monopoly power.

The Commission’s purported direct evidence did not establish monopoly power either. Increased advertising load does not by itself connote a supracompetitive quality-adjusted price because advertisements differ in relevance and burden, and product quality includes all the apps’ attributes, not just ad quality. The Commission supplied neither a competitive ad-load benchmark nor an analysis of the product as a whole.

Nor do Meta’s enterprise-wide returns establish monopoly power in the alleged user-side personal social networking (“PSN”) market without evidence attributing those returns to that market and distinguishing monopoly rents from returns to superior products, efficiency, or successful risk-taking. The Commission supplied neither analysis.

The Cellophane fallacy does not rescue the Commission’s case. It warns that switching observed at a monopoly price may overstate the extent of substitution; it does not establish that prevailing terms are monopolistic, shift the burden of proof, or explain why users would rank the available alternatives differently.

Nor does the Cellophane fallacy address the question the court actually considered: which products consumers considered substitutes for Meta’s. Much of the court’s evidence involved a product’s complete removal, which the court used not as an HMT but to identify where users went when an app became unavailable. A monopoly baseline might affect the amount of switching or the characteristics of the users observed, but it does not alter the ranking of alternative products on which the district court relied. The Commission identified no mechanism or evidence that would alter the consistent ranking of TikTok and YouTube as Meta’s closest alternatives.

The Commission also cannot convert limitations in individual pieces of evidence into affirmative proof of its proposed market. It offered no measurement of a small quality reduction, diversion analysis, or study of margins that quantified the strength of the alleged constraints. Meta, by contrast, offered a payment experiment, an eighteen-week user panel, outages, TikTok’s permanent removal from India and temporary shutdown in the United States, ordinary adoption data, and evidence of defensive investment. Those sources have different limitations, but they consistently identified TikTok and YouTube as the closest alternatives.

The evidence thus repeatedly showed users substituting across products that the Commission claims were not “for the same purposes.” FTC Br. 52. But the HMT asks whether enough users would divert to make degradation unprofitable; it does not require the alternatives to be identical.

The district court rigorously evaluated what the evidence permitted. It assessed varied and imperfect evidence relevant to questions of actual and likely substitution patterns among social media platforms and held that the Commission had not met its prima facie burden of proving the willful maintenance of monopoly power in a relevant market.

The Commission and its amici, by contrast, never supply a competitive counterfactual showing that Meta could worsen quality to users or raise prices to advertisers without losing enough demand on either side of the platform to make the strategy unprofitable. They instead assume that prevailing conditions reflect monopoly, use that assumption to justify discounting substitution evidence inconsistent with their proposed market, and then treat the resulting absence of evidence as support for that market. That is not an empirical demonstration of monopoly power, much less of its unlawful exploitation.

ARGUMENT

I.              The district court correctly required the Commission to prove that Meta could profitably make its apps significantly worse than they would be under competition

The district court applied the same economically relevant question to the Commission’s market-definition theory and its purported direct evidence: whether Meta could profitably make its apps significantly worse than they would be under competition. The Commission bore the burden of proving monopoly power. It failed to do so.

The HMT ordinarily asks whether a hypothetical monopolist could profitably impose a meaningful price increase. See, e.g., U.S. Dep’t of Just. and Fed. Trade Comm’n, Merger Guidelines § 4.3.A (2023); U.S. Dep’t of Just. and Fed. Trade Comm’n, Horizontal Merger Guidelines § 4.1.1 (2010). Because Facebook and Instagram “have always charged users the same amount: nothing,” Op. 17, the equivalent inquiry concerns quality, and making a zero-price product materially worse is deemed to raise its quality-adjusted price. See Merger Guidelines §§ 4.3.A–B, at 41–42 (2023).

That was the district court’s approach—the same approach the FTC adopted at trial. It asked whether a hypothetical monopolist could profit by making Meta’s apps significantly worse “than they would be in a competitive market (say, by bloating them with ads).” Op. 38 (emphasis added).

That question requires a competitive benchmark, not the prevailing price. Yet the Commission says the court “assumed its conclusion” by treating “current market conditions” as competitive, FTC Br. 4, 17–18, while the economist amici say it measured substitution from “a post-conduct, supra-competitive equilibrium,” Econ. Br. 15. The opinion says otherwise: The court expressly used a competitive market as its benchmark. Disagreement with the court’s answer does not establish that it asked the wrong question.

The Commission’s two asserted alternatives do not adequately provide the missing proof. Increased ad load measures only one aspect of product quality, and an enterprise-wide return without attribution says nothing about power in the alleged user-side market.

A.            Increased advertising load alone does not establish a supracompetitive quality-adjusted price

The Commission’s asserted proof that Meta’s pricing exceeded the competitive baseline is that advertising load increased and that more advertisements mean a higher quality-adjusted price. FTC Br. 66–67. Consumers generally prefer fewer ads, all else equal. But ad count does not measure advertising burden: A relevant, unobtrusive advertisement imposes a different cost than a disruptive, irrelevant one. Op. 27–28. In fact, as the FTC itself has observed, it may not impose a cost at all. See Yan Lau, A Brief Primer on the Economics of Targeted Advertising 5–6 (Fed. Trade Comm’n Bureau of Econ. 2020) (“Consumers receiving targeted ads will on average find them more ‘relevant’ compared to untargeted ones. . . . Thus, targeting benefits the consumer because it effectively reduces their search costs.”).

The FTC’s inference also assumes that every other product attribute remained constant. The record shows otherwise: Meta added multiple features to Facebook (and to Instagram), ads became more relevant, and users acted on them at an increasing rate. Meta’s internal planning rule, moreover, permitted additional advertisements only as ad quality improved. Op. 27–29.

Those facts do not prove that users preferred more ads, of course. But they do show that advertising impressions were not homogeneous across time and that count alone could not measure net advertising burden, much less overall product quality. Thus, even assuming arguendo that the earlier quality-adjusted price was competitive, the district court found that Meta held that price constant by improving ad quality and product features while increasing ad load. Id. at 29.

Economic logic supports the court’s treatment. On an advertising-supported two-sided platform, advertisers purchase access to users’ attention, whose value depends on user engagement rather than simply whether they see an advertisement. Engagement, in turn, depends on ad quality and relevance: “The better the ad, the more consumers will interact with it.” Id. at 18. See David S. Evans, Attention Rivalry Among Online Platforms, 9 J. Comp. L. & Econ. 313, 313–14, 316 (2013). More ads increase inventory but may reduce the time and attention the platform can sell; the profit-maximizing ad load balances those effects. Op. 17–19, 28–29, 40; see also Attila Ambrus, Emilio Calvano & Markus Reisinger, Either or Both Competition: A “Two-Sided” Theory of Advertising with Overlapping Viewerships, 8 Am. Econ. J.: Microecon. 189 (2016). That cross-side discipline is consistent with the economic logic of the Supreme Court’s Amex decision. See Ohio v. Am. Express Co., 585 U.S. 529, 545–47 (2018): Competition cannot be assessed accurately by looking at one side in isolation.

An increase in Meta’s ad load therefore shows only that Meta displays more ads than it once did, not that it displays more than competition would permit or charges a higher quality-adjusted price. Establishing that required evidence of the ad load a competitive platform would choose. The Commission offered none. FTC Br. 66–68. Its assertion that independent firms “may have” improved ad quality “without spiking their ad load,” id. at 67–68, does not establish those firms’ profit-maximizing ad loads or whether their products were comparable to Meta’s. The observed increase therefore neither directly proves monopoly power nor supports the Commission’s Cellophane argument. Both theories assume, without demonstrating, that Meta degraded its product below the competitive level.

B.            The Commission’s enterprise-wide rate-of-return evidence does not establish monopoly power in the alleged user-side market

The Commission’s expert estimated a 36%–41.4% enterprise-wide internal rate of return (“IRR”) against a 9.8% weighted average cost of capital; the Commission describes the result as “economic profits nearly four times its cost of capital.” ; FTC Br. 64. The district court acknowledged that persistent profits may suggest monopoly power. Op. 24. But the question is whether that enterprise-wide return establishes monopoly power in the alleged PSN market. The Commission calls Meta’s profits a “strong indicator” and argues that those profits, together with its quality-degradation evidence, are “alone sufficient” to establish monopoly. FTC Br. 18, 63–68. It dismisses Meta’s technology, investments, and management as possible sources of the return, considering them, “if at all,” only under Grinnell’s second element. Id. at 64–65. That approach misreads Grinnell.

Grinnell distinguishes possession of monopoly power from its willful acquisition or maintenance by means other than superior products, business acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966). Evidence of superior products or business acumen bears on the second element once monopoly power has been shown. See Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004); United States v. Microsoft Corp., 253 F.3d 34, 50–51 (D.C. Cir. 2001) (en banc) (per curiam). It can also bear on the first element when profits are offered as evidence from which the plaintiff asks the court to infer monopoly power.

Those uses address different propositions, however. For Grinnell’s second element, the question is whether a firm with monopoly power acquired or maintained it through exclusionary conduct rather than competition on the merits. For the first, the question is what the observed returns establish about the firm’s power over price or quality. Courts accordingly distinguish profits attributable to monopoly power from returns attributable to efficiency, management, or quality, and the district court properly added successful risk-taking to the list. See Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1412 (7th Cir. 1995); Op. 25. As Judge Posner cautioned in Marshfield, however, “it is always treacherous to try to infer monopoly power from a high rate of return. . . [T]here is not even a good economic theory that associates monopoly power with a high rate of return.” 65 F.3d at 1412.

The district court expressly “decide[d] this case on the first element alone” and considered Meta’s technology, investments, and management only in assessing the direct evidence of monopoly power. Op. 22, 24–26. It neither excused a proven monopoly as the Commission suggests, FTC Br. 65, nor shifted the burden of persuasion to Meta. Microsoft’s burden-shifting framework begins with the distinct question whether conduct by a firm already shown to possess monopoly power is exclusionary. 253 F.3d at 58–59. Here, the alternative explanations were reasons the enterprise-wide estimate did not establish power in the first place, not procompetitive justifications for proven power. The Commission retained the burden of persuasion, and its experts’ failure to assess the record-supported alternatives left no basis for attributing Meta’s enterprise-wide return to monopoly power rather than those alternatives. Op. 25–26.

The Commission’s purported direct proof of monopoly also failed to satisfy Microsoft’s requirement of evidence that a firm “can profitably raise prices substantially above the competitive level.” 253 F.3d at 51 (emphasis added). An IRR above the weighted average cost of capital may indicate positive economic returns under certain assumptions, but it does not identify the competitive price or quality in the alleged market, attribute the returns to pricing power rather than superior performance, or translate profitability into the degree of pricing power monopolization requires. If the existence of profits established monopoly, ordinary returns to differentiated products would make virtually the entire competitive economy presumptively monopolistic. Cf. U.S. Football League v. Nat’l Football League, 842 F.2d 1335, 1362 (2d Cir. 1988) (warning against evidentiary inferences that would let “profitability alone provide a basis for antitrust liability”).

Drawing the inference the Commission seeks requires accounting for product differentiation, returns to valuable intangible assets, innovation risk, and compensation for failed investments. See, e.g., Michael Cragg, Patrick Holder, David Hutchings & Bin Zhou, The Proper Measure of Profits for Assessing Market Power, 37 Antitrust 49, 50–52 (2023). It also requires connecting any residual return to power in the alleged market. The Commission did neither. Op. 25–26.

An analysis comparing cash flows with the cost of capital must also identify the investments producing the returns and assess appropriate comparators. The Supreme Court has declined to infer monopoly from liberal profits “without proof of lack of comparable profits during those years in other prosperous industries.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956). The Commission offered no such comparison.

The Commission responds that it “did not need” an industry comparison because competitive markets yield no sustained economic profit. FTC Br. 65–66. But the zero-profit result is not a general implication of competition. It follows from a stationary, long-run equilibrium with homogeneous products, free entry, and freely reproducible technologies. In their absence (as here), measured positive profits may instead represent returns to scarce productive inputs. See, e.g., Louis Makowski & Joseph M. Ostroy, Perfect Competition and the Creativity of the Market, 39 J. Econ. Lit. 479, 483–84 (2001). Persistent returns may suggest some market power, but without distinguishing returns to superior capabilities from monopoly rents and attributing the residual to power in the alleged PSN market, they do not establish monopoly power.

That attribution problem is especially acute for two-sided technology platforms. See, e.g., David S. Evans & Richard Schmalensee, The Antitrust Analysis of Multi-Sided Platform Businesses, in 1 The Oxford Handbook of Int’l Antitrust Econ. 404, 420 (Roger D. Blair & D. Daniel Sokol eds., 2015) (“These linkages across the multiple groups of customers and the products and services being offered to each group have to be accounted for in the analysis of the relevant antitrust market and the assessment of market power.”). The alleged market concerns services supplied to users at a nominal price of zero, while Meta’s returns come from advertisers. The district court found that Meta’s technology made advertisements more relevant and effective and that the “vast majority” of projected revenue growth would come from improving relevance. Op. 25. The returns may therefore reflect Meta’s appeal to advertisers rather than “a tight grip on the users who pay it nothing.” Id. An enterprise-wide return that does not identify its source cannot establish power in the alleged user-side market. See Bailey v. Allgas, Inc., 284 F.3d 1237, 1252 n.21, 1255 (11th Cir. 2002) (explaining that monopoly-profit analysis concerns power over “some particular product” and rejecting company-wide returns not attributable to the alleged market).

At most, the profits evidence warranted the “high alert” the Commission invokes. FTC Br. 63, 68. But a direction to remain alert to a possibility is not proof of a fact, and the profits evidence supplied neither a competitive quality-adjusted-price benchmark nor the requisite market-specific attribution.

II.           The Cellophane fallacy neither shifts the Commission’s burden nor undermines the court’s substitution evidence

The Commission and the economist amici contend that the district court committed the Cellophane fallacy by crediting switching under conditions already degraded by monopoly. They thus argue that its market definition was flawed. FTC Br. 58–62; Econ. Br. 9–11, 15–17.

But the Cellophane fallacy does not undermine the court’s analysis. At issue was the Commission’s alleged market definition, which stood or fell on its claim that Snapchat competes with Facebook and Instagram while TikTok and YouTube do not. FTC Br. 40–42. It was, in other words, a question of the market’s composition, not the degree to which the market was or was not competitive. The fallacy warns that switching at a monopoly price may overstate the extent of substitution observed at a monopoly price. It does not explain why, when a product disappears, users would rank the remaining alternatives differently.

A.            The Cellophane fallacy does not affirmatively establish a monopoly baseline or shift the burden of proof

The Cellophane fallacy is an error of inference from observed switching at the seller’s prevailing price. Customers’ willingness to abandon a product after a further price increase does not necessarily establish that the seller lacks power, because “at a high enough price, even poor substitutes look good to the consumer.” United States v. Eastman Kodak Co., 63 F.3d 95, 105 (2d Cir. 1995); see also William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 Harv. L. Rev. 937, 960–61 (1981) (There will always be “some substitution of other products for [a monopolist’s] own when it is maximizing profits, even if it has great market power.”).

The fallacy therefore means that consumer readiness to switch products at prevailing terms cannot disprove monopoly power. It does not mean that such evidence proves the existence of monopoly. Nor does it relieve the plaintiff of proving that prevailing terms exceed competitive levels. Significant substitution at current or higher prices “does not tell us whether the defendant already exercises significant market power.” Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 471 (1992) (quoting Phillip Areeda & Louis Kaplow, Antitrust Analysis ¶ 340(b) (4th ed. 1988)) (emphases added and omitted). Evidence that does not answer the question is inconclusive, not probative, and the plaintiff bears the burden of proving monopoly power. Grinnell, 384 U.S. at 570–71; Microsoft, 253 F.3d at 51.

Nor can the mere possibility that prevailing conditions reflect monopoly leave the Commission’s narrow market standing by default. Indeed, if prevailing terms are actually competitive, observed switching may understate the substitution a true monopolist would face and may yield a market that is too narrow. See Luke M. Froeb & Gregory J. Werden, The Reverse Cellophane Fallacy in Market Delineation, 7 Rev. Indus. Org. 241, 241 (1992). Which risk exists depends on the baseline—an empirical fact the Commission bore the burden of proving.

B.            The Cellophane fallacy’s marginal mechanism does not invalidate the removal evidence

To assess which applications compete with Meta’s, the court considered two kinds of substitution evidence. A modest amount was what economists call marginal evidence, which reflects how user behavior changes when there is a small change in the effective price of the target product. Professor List’s payment experiment was evidence of this sort. Op. 44–47. But most of the evidence—and the evidence the Commission most vigorously contests—involved the complete removal of a product rather than a small change in its price. The 2021 Meta outage, TikTok permanent removal from India and temporary shutdown in the United States, and the 2018 YouTube outage were examples of this “removal” evidence. Id. at 47–52.

The Commission and its amici correctly observe that removal is not a small price increase but is analogous to a “huge” or “infinite” one. FTC Br. 56 n.9; Econ. Br. 19; AAI Br. 16. The district court said the same: bans and outages “do not impose small but significant price increases; they get rid of a product entirely.” Op. 55. But that point does not make the Cellophane-fallacy problem stronger; it makes its marginal mechanism inapplicable to the removal evidence.

Assessing substitution following a product’s removal does not measure the response to a marginal quality reduction and therefore does not itself constitute an HMT—and the court did not use removal evidence for that purpose. It nevertheless captures economically relevant substitution: When Facebook is unavailable, the applications to which users redirect their attention reveal their next-best choices among the remaining alternatives. Complete removal measures those choices across all Facebook users, not just the marginal ones. See Christopher Conlon & Julie Holland Mortimer, Empirical Properties of Diversion Ratios, 52 RAND J. Econ. 693, 699, 701–02 (2021). The district court used the outage evidence in precisely that limited way: as non-HMT evidence informing its qualitative appraisal. Op. 55–56.

The district court therefore properly observed that the fallacy “would not affect the order of substitution.” Id. at 58 (emphasis added). The Commission calls that “simply wrong,” FTC Br. 61, but it identifies no mechanism by which, or evidence showing that, a supracompetitive advertising load on Facebook would cause users deprived of Facebook to choose TikTok and YouTube over Snapchat and MeWe. Monopoly pricing may affect the number or mix of users who switch products; it cannot reorder their choice among the alternatives.

Every source of evidence in the record produced the same ranking. When Facebook and Instagram became costly or unavailable, users turned first to TikTok and YouTube; when TikTok or YouTube disappeared, users turned to Facebook and Instagram. Snapchat and MeWe trailed in every measurement. The court called this “a consistent and unmistakable story,” Op. 52. That conclusion was a factual finding reviewed for clear error, and no brief on the other side even attempts to identify record evidence to the contrary.

C.            The Commission identifies no baseline effect that would change the observed ranking

A supracompetitive advertising load could affect who remains in the observed user base and the weight assigned to different users’ choices. That possibility bears on the weighting of the removal evidence for assessing the extent of monopoly power; it does not eliminate its relevance. The Commission still had to show that the omitted users would rank Snapchat or MeWe above TikTok or YouTube, or that including them would reverse the observed user behavior. It identified no such evidence.

In fact, there is reason to think that the substitution evidence would be even more persuasive, assuming monopoly pricing. On the Commission’s theory, excessive advertising had already driven away the users most burdened by ads. So the removal evidence overrepresented the friends-and-family core around which it built its market definition. Yet even that group turned first to TikTok and YouTube, while Snapchat captured less than a third of TikTok’s gain. Op. 47. Correcting for the alleged monopoly baseline would add back users more sensitive to advertising, and the record provides no reason to think that their choices would reverse the preference for TikTok and YouTube.

The alternatives themselves might also look different in the but-for, competitive world. If the market had remained competitive, some rival might have been better funded, higher quality, and more attractive than it is today. That is theoretically possible. And the Commission’s own counterfactual identifies one specific difference: Instagram operating independently of Meta and competing against Facebook. FTC Br. 55.

But Instagram is already in the evidence, maintained as a distinct product (albeit owned by Meta). And in the payment experiment, users paid to reduce time on Facebook shifted toward Instagram more than any other product, and next most frequently to TikTok and YouTube. Op. 46. Neither the Commission nor its amici have identified any mechanism by which an independent Instagram (as opposed to one owned—and improved—by Facebook) would cause Snapchat to leapfrog TikTok and YouTube in users’ rankings.

As the one piece of evidence measuring genuinely marginal changes, the payment experiment is most directly exposed to the Cellophane fallacy. But the court used it to identify users’ alternative destinations, not as a direct application of the HMT, id. at 46, 55–56, and the Commission offers no evidence that a different baseline would change their ranking. The Cellophane fallacy is inapposite.

D.           The district court confronted the Cellophane fallacy, and its reasoning withstands the Commission’s response

The district court devoted a section of its opinion to the Cellophane argument. Id. at 58–59. The economists’ brief never cites those pages. The Commission does respond, FTC Br. 61–62, but does not refute the court’s reasoning.

First, the court explained that the fallacy “would not affect the order of substitution, which shows that the closest substitutes for Meta’s apps are YouTube and TikTok.” Op. 58. As discussed above, the Commission’s objections do not undermine this conclusion.

Second, two events measured substitution toward Facebook when TikTok became unavailable. As the court noted, if Meta’s apps carried a supracompetitive quality-adjusted price, it “would bias [substitution] rates down,” id. at 58, and understate how closely the products compete. On the Commission’s premise, those events are biased against Meta, yet they support Meta’s market definition anyway.

Third, the record did not show an advertising distortion large enough to change the ranking. Removing advertisements in their entirety correlated with a 7% increase in users’ time on Facebook, while an 80% reduction in advertising load for teenagers was projected to increase usage by 3%. Id. at 17–18. Meanwhile, “Facebook users who downloaded TikTok used Meta’s app 17–26% less.” Id. at 59. As the court noted, “[i]t is hard to believe that nudging down the ad load to whatever the FTC considers the competitive level would make substitution rates to TikTok unimportant.” Id.

The economists answer that the 7% increase is consistent with a profit-maximizing monopoly price. Econ. Br. 4, 16. But profit maximization is not diagnostic of monopoly: Every profit-maximizing firm forgoes unprofitable price cuts, whether operating in a competitive market or a monopolized one. The observation is therefore equally consistent with competition and does not disturb the court’s narrower comparison: TikTok adoption reduced adopters’ Facebook use by about three times more than removing all ads increased it. Op. 59. Those relative magnitudes support the court’s finding.

Fourth, the court observed that the fallacy “is a risk only if Meta is in fact a monopoly.” Id. at 59 (citing PepsiCo Inc. v. Coca-Cola Co., 114 F. Supp. 2d 243, 257–58 (S.D.N.Y. 2000)). The Commission calls that circular. FTC Br. 62. But the court first considered the Commission’s evidence on profits, alleged quality degradation, and price discrimination, all of which operate independently of substitution, and it rejected each for reasons unrelated to the fallacy. Op. 24–36. It then declined to presume monopoly in order to discard evidence that undermined the Commission’s market definition. If anything deserves the label “circular,” it is the Commission’s alternative, in which its principal “proof” that prevailing conditions are monopolistic assumes the narrow market contours it alleged—the very market the discounted evidence would otherwise refute.

III.        The Commission offered no measurement showing that TikTok and YouTube were too weak to constrain Meta

Whether imperfect substitute products constrain Meta turns on degree: Are the alternatives close enough, in sufficient volume, that a hypothetical monopolist of the proposed group could not profitably worsen its products or increase its quality-adjusted price? The court found no record evidence that answered that question directly, and it carefully assessed what light the available evidence did shed. Op. 41. For its part, the Commission offered no measurement of a small quality decrease, diversion analysis, or study of margins—indeed, “no empirical evidence of substitution whatsoever.” Id. at 56.

Meta, by contrast, offered several forms of evidence that consistently identified TikTok and YouTube as the closest alternatives. The Commission attacks each source in isolation and discounts those products because their functions differ—an objection that assumes the disputed market boundary. A plaintiff cannot omit the analysis its theory requires and obtain reversal because the defendant’s evidence did not perfectly disprove the case the plaintiff never made.

A.            Taken together, Meta’s substitution evidence withstands the Commission’s objections

The district court observed that, “[i]n the real world, no evidence is perfect.” Op. 56. Even so, Meta’s evidence was remarkably strong, including Professor List’s randomized payment experiment, an eighteen-week panel of roughly fifty thousand users, the 2021 Meta outage, TikTok’s permanent removal from India and temporary shutdown in the United States, and the 2018 YouTube outage. Id. at 43–52. It also included Meta’s billions of dollars in defensive investment against TikTok and YouTube, id. at 54–55, evidence of perceived competitive pressure and dynamic competition.

The design criticisms leveled by the Commission against each identify a limitation of one source that another source answers. The objection that removals are “infinite” does not reach the marginal payment experiment. The objection that outages are temporary does not apply to India’s permanent ban, where substitution grew over nine months. Op. 48–50. The payment experiment’s purported brevity does not impugn ordinary TikTok adoption evidence, which saw adopters reduce Facebook usage by 17–26%. Id. at 43. And the objection that India differs from the United States is answered by the January 2025 American shutdown, which reproduced the same result domestically. Id. at 50–52.

These six sources, imperfect in different ways, all identified the same closest alternatives and the same relative ranking. Requiring each source alone to reproduce every feature of a textbook test would disregard their corroboration and demand a perfect experiment that does not exist. The court instead applied the sensible rule: “no evidence is perfect. Nor is any single piece dispositive here.” Id. at 55–56.

B.            The Commission’s and amici’s evidentiary objections assume the disputed market boundary

In an effort to show that imperfect substitutes exert no constraint on Meta’s alleged monopoly, the Commission and its amici liken the evidence to supermarket customers buying pet food at PetSmart during a temporary closure, storm-driven moviegoers and candle buyers who are obviously not in “the electricity market,” and readers displaced by a power failure. FTC Br. 3–4; Econ. Br. 19–20; AAI Br. 17. Those analogies seem decisive only because they assume that the paired products serve different demands.

Each depends on an easy intuition—not a proven fact—about market boundaries, made plausible by the examples selected. It may be intuitive that a movie theater does not constrain home electricity, but whether an HMT separates, say, pet food sold at a supermarket from pet food sold at PetSmart in defining an antitrust-relevant market is an empirical question. The economists are right only that “[r]esponses to large price increases or outages “may not be the same as responses to a SSNIP.” Econ. Br. 19 (emphasis added). The possibility does not show that removal evidence is irrelevant.

Indeed, even imperfect substitution evidence should not be presumed irrelevant. Differentiated products routinely compete. See generally Jerry Hausman, Gregory Leonard & J. Douglas Zona, Competitive Analysis with Differentiated Products, 34 Annals of Econ. & Stat. 159 (1994). Understanding the HMT and the limitations of the varied record evidence, the court rejected the FTC’s proposed PSN product market, which depended on selected features of Facebook and other platforms rather than demonstrated limits on substitution.

The record also showed functional convergence and disproportionate diversion. Most time on Meta’s applications is now spent watching video; Reels was built to match TikTok; TikTok added friend-connection features; and users share on all four platforms primarily through private messages. Op. 8–9, 14–16, 66–68. Candles and electricity do not converge; these products did.

Second, the record evidence of indexed diversion ratios distinguished specific replacements from generic time-fillers by comparing redirected time with users’ ordinary time allocation. TikTok and YouTube absorbed two to three times their ordinary shares, while nearly everything else remained near parity. Id. at 46.

The economists object that much redirected time was recorded in web browsers, Econ. Br. 16, which are not in the same market. But a browser is a “portal to reach other uses,” not a use itself, id. at 45, and its indexed diversion ratio remained far below those of TikTok and YouTube. Id. at 45–46. The browser data therefore do not undermine the specific diversion to the leading social-media substitutes.

C.            Products need not be identical to exert competitive pressure on each other

The Commission’s remaining objection is that this evidence measures time-shifting rather than substitution “for the same purposes.” See, e.g., FTC Br. 52. On that account, users deprived of Facebook may have replaced only its entertainment function, while its friends-and-family function went unserved and unmeasured. Id. at 47–54; see also AAI Br. 11–14.

But functional equivalence between substitutes is not required. As the district court noted, “the Supreme Court has warned against any rule that would make ‘only physically identical products . . . part of the market.’” Op. 39 (quoting du Pont, 351 U.S. at 394). Rather, the operative question is whether consumers can turn to alternatives that constrain pricing, “[b]ecause the ability of consumers to turn to other suppliers restrains a firm from raising prices above the competitive level.” Microsoft, 253 F.3d at 51–52 (quoting Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986)). Microsoft’s reference to uses “for the same purposes,” id. at 52 (quoting du Pont, 351 U.S. at 395) distinguishes alternatives that exert a competitive constraint from unrelated products; it does not require—against Supreme Court precedent—that substitute uses must be identical.

For applications offered to consumers at zero monetary price, the relevant restraint on pricing occurs through diversion of advertising, which is primarily a function of where users devote their attention, regardless of whether the substitutes were physically or functionally identical. Op. 40, 82–83 (noting that “time spent is the best proxy for what drives these apps’ revenue: ads”). Functionally different applications can therefore constrain Meta if they compete for the same scarce attention. Digital firms “compete to obtain scarce time, and then they are competing to sell that time to advertisers and others who would like to have it. Importantly they are competing even if they are providing very different services to people.” Evans, Attention Rivalry, supra, at 356.

The evidence repeatedly showed substitution across products that the Commission claims were for different purposes. When American users lost TikTok in January 2025, they turned first to Facebook and Instagram, not to YouTube, even though the Commission characterizes YouTube as TikTok’s closest alternative. Op. 51. During the 2021 Meta outage—before Reels, when Facebook and Instagram remained largely friends-and-family products—users deprived of those products turned to TikTok and YouTube. Id. at 47. And experiments that withheld friend-driven Reels from Instagram saw users spending more time with “unconnected” videos. Id. at 60–61.

As the court concluded: “It is unclear whether that was because Meta’s apps are really entertainment apps, because TikTok is really a social-networking app, or because those artificial categories do not make sense. What is clear is that the FTC’s hypothesis about how people use these apps is consistently disproven by the data.” Id. at 51.

Economic analysis likewise asks whether buyers switch, not whether products share characteristics. For digital products especially, “there is a strong presumption that it is wrong to define antitrust markets by looking purely at functional substitution among products.” Evans, Attention Rivalry, supra, at 357. Indeed, an improved rival product necessarily differs from the product it displaces. It has long been understood that “[p]hysically very different products may be close substitutes for one another and thus compete heavily for the favor of the consumer. . . .” Fritz Machlup, The Political Economy of Monopoly: Business, Labor and Government Policies 8 (1952); see also Edward H. Chamberlin, The Theory of Monopolistic Competition: A Re-orientation of the Theory of Value 81 (7th ed. 1956). It is also consistent with the law. See United States v. Continental Can Co., 378 U.S. 441, 452–55 (1964) (competition is not limited “to competition between identical products” and includes “‘inter-industry competition’ . . . between products with distinctive characteristics.”).

CONCLUSION

In light of the foregoing, the opinion of the District Court should be affirmed.

[1] Hearle did not, in fact, find economic profit four times the cost of capital. He estimated an IRR, not a dollar amount of economic profit. His comparison of IRR to the weighted average cost of capital indicates a positive net present value under his assumptions, but it does not show that Meta’s economic profits were “four times” its cost of capital.

Abstract

Self-preferencing is often described as a ubiquitous feature of digital markets. The emergence of artificial intelligence (AI) services is expected to further intensify attention and concerns regarding the strategies that large online platforms may adopt to grant preferential treatment to their own products and services. As a result, policymakers and competition authorities worldwide have embarked on a hunt for this perceived new menace, launching an ever-growing array of regulatory measures and antitrust probes. Yet, at this stage, no one has been able to draw a clear profile of the wanted, as a wide range of distinct practices seem to fit the description. Like a perfect Zelig, self-preferencing appears everywhere because it resembles everything. Against this background, the paper argues that the significance of self-preferencing has been largely overstated. First, self-preferencing does not exist as a distinct legal or economic concept: it is merely a catch-all label describing a mild form of vertical integration that encompasses a variety of practices already addressed under existing competition law provisions. Second, the notion is far from novel as similar conduct and strategies have long been standard practice among traditional brick-and-mortar retailers. Finally, the economic literature provides evidence that such practices are not necessarily detrimental to consumer welfare, suggesting that blanket prohibitions would be unjustified.

Executive Summary

The International Telecommunication Union’s (ITU) equivalent power-flux density (EPFD) limits govern how much signal power non-geostationary orbit (NGSO) systems may direct toward geostationary orbit (GSO) receivers. Adopted in 2000, those limits rest on outdated reference links, antenna patterns, propagation models, and worst-case assumptions. They also treat NGSO systems as functionally subordinate even though NGSO and GSO systems generally hold co-primary rights in the relevant spectrum bands. The result is an overly conservative regime that restricts coverage, power, and spectrum reuse while leaving valuable capacity idle.

A modern framework should replace theoretical masks with performance-based standards tied to actual network effects. Existing rules for nearby frequency bands, U.S. sharing frameworks, and the interference GSO systems already tolerate from one another all point toward similar benchmarks. For systems using adaptive coding and modulation (ACM), long-term protection should focus on throughput degradation, while short-term protection should measure absolute increases in link unavailability. For systems that do not use ACM, an interference-to-noise ratio (I/N) can provide a more appropriate measure. Field tests in Romania, Colombia, Nigeria, Botswana, and Jordan show that these standards can permit far more intensive NGSO operations without materially degrading GSO service.

Reform would yield benefits well beyond the satellite industry. More efficient spectrum use would increase capacity, lower deployment costs, strengthen competition, and expand broadband access in rural and remote areas. The United States has already begun implementing performance-based rules domestically, creating a practical model for international reform. Administrations should use that operational record to build consensus before the 2027 World Radiocommunication Conference (WRC-27), reject cosmetic changes that preserve the current regime’s core defects, and modernize Article 22 around verifiable performance rather than obsolete precaution.

I. Introduction

In the final minutes of the 11th plenary meeting concluding the International Telecommunication Union’s (ITU) 2023 World Radiocommunication Conference (WRC-23), delegates issued a clear directive:

[T]o ensure the rational, equitable, efficient and economical use of the radio-frequency spectrum and associated orbit resources, with a focus on non-GSO satellite systems including compatibility among systems. . . . WRC-23 invites ITU-R to conduct technical studies on the EPFD limits in Article 22 . . . in order to ensure the continued protection of GSO FSS and BSS networks, and to inform WRC-27 of the results of the studies[.][1]

That directive followed mounting evidence before both the ITU and national regulators that critical spectrum resources remain underused and inefficiently allocated. The equivalent power-flux density (EPFD) limits exemplify the problem. These limits govern how much signal power a non-geostationary orbit (NGSO) satellite system may deliver to the receiving antennas of a geostationary orbit (GSO) system. They have remained largely unchanged since their adoption in 2000.

The limits originally sought to provide GSO operators with stable expectations about interference protection. Over time, however, they have become perhaps the largest regulatory constraint on next-generation satellite broadband. Launching, operating, and maintaining communications infrastructure hundreds of kilometers above Earth already presents formidable technical and commercial challenges. Outdated EPFD limits add an avoidable one.

Satellite technology has advanced considerably since 2000. The rules have not. The task now is to preserve appropriate protection for GSO infrastructure without unnecessarily constraining newer NGSO systems.

Some national administrations have begun that work. The United States, for example, recently adopted new interference-protection criteria for certain satellite communications within its jurisdiction. At the same time, the ITU Radiocommunication Sector’s Working Party 4A is conducting technical studies and developing recommendations for the 2027 World Radiocommunication Conference (WRC-27).

The immediate question for policymakers, regulators, and satellite operators is what to expect as the ITU completes those studies and prepares for WRC-27. The broader questions are more consequential: How should the EPFD regime change? What level of protection should GSO systems receive? And do special protections designed for an earlier satellite market remain justified as communications increasingly shift toward low-Earth orbit (LEO)?

This issue brief addresses both the immediate process and the longer-term policy stakes. Section II explains how the ITU developed the EPFD limits more than 25 years ago, including the assumptions and methods that shaped them. Section III identifies potential areas for reform, drawing on recently adopted sharing regimes in nearby frequency bands and analogous rules governing NGSO and GSO systems within national jurisdictions. Section IV examines the first real-world tests of modernized protection limits on operating satellite infrastructure and shows that updated limits can protect GSO systems while giving NGSO operators greater flexibility. Section V assesses the economic and social benefits of technically sound interference protections in core satellite bands. Section VI then maps the path to reform, from action by national administrations to the adoption of updated international limits through the ITU.

II. An EPFD Regime Built for a Vanished Satellite Market

Nearly 30 years ago, the international community adopted EPFD limits to restrict how much signal power NGSO systems could impose on GSO networks.[2] Because satellite operators share spectrum, some interference safeguards were necessary. The limits aimed to protect incumbent GSO networks in heavily used fixed-satellite service (FSS) bands from NGSO systems that, at the time, remained largely theoretical.

But the rules did more than manage interference. They created a hierarchy. Although NGSO and GSO systems generally hold co-primary status in the relevant bands, the EPFD regime effectively made NGSO operations subordinate to any GSO system using the same frequencies. No express allocation rule required that result. The methodology simply built second-class treatment into the interference limits.

That imbalance has aged poorly. Much of the satellite industry’s recent growth has occurred in LEO. NGSO systems now account for more than 90% of new satellite-broadband capacity, a share that has tripled in five years.[3] Nearly all active satellites launched in 2025 entered LEO,[4] and commercial subscriptions to NGSO broadband services now substantially exceed those to GSO services.[5]

Whatever rationale once supported treating NGSO systems as secondary no longer fits the market.[6] As the United States has observed, EPFD limits “represent the most constraining regulatory restrictions imposed on non-GSO systems” and rest on assumptions that “significantly differ from the modern satellite systems in operation and under development today.”[7]

Three features explain the disconnect. First, the regime relies on obsolete GSO reference links, antenna patterns, propagation models, and worst-case geometries that exaggerate interference risk. Second, its aggregate and single-entry limits emerged from incomplete technical analysis, arbitrary assumptions, and political compromise. Third, those flaws force NGSO operators to avoid large portions of the GSO arc, reduce transmission power, and limit the number of satellite beams that simultaneously serve a location on the same frequencies—sacrificing coverage, capacity, and service quality even where harmful interference is unlikely.

A. Outdated Assumptions Embedded in the EPFD Limits

The EPFD limits rest on a set of reference links, antenna patterns, and operating assumptions intended to approximate GSO systems at the time. More than 25 years later, many of those inputs no longer reflect how modern satellite networks operate. The result is a methodology that often overstates likely interference and unnecessarily constrains NGSO systems.

1. GSO Reference Links

Developing the EPFD limits first required selecting representative GSO links against which to simulate the aggregate interference from NGSO systems.[8] The ITU supplied those reference links through Circular Letter 116.

Subsequent analyses have identified several problems with both the reference links and their use in developing the limits. Most notably, many of the assumed power levels, noise temperatures, and other technical parameters have been obsolete for years. The links reflect an era before modern signal-filtering techniques, when GSO receivers were more vulnerable to interference.

Modern GSO systems operate under different conditions. Operators often use power levels above those assumed in the reference links and deploy advanced filtering and signal-processing tools, including adaptive coding and modulation (ACM),[9] which adjusts a signal in response to changing link conditions. The propagation models used in the current EPFD methodology are also more than 10 generations old.[10] The calculation therefore rests on a baseline that no longer resembles modern GSO operations.

2. Antenna Patterns

The EPFD methodology also relies on theoretical receive-antenna patterns developed for the parabolic antennas common at the time.[11] Those patterns assume greater sensitivity to off-axis interference than modern equipment typically exhibits.

In particular, the average sidelobes of modern antennas—the areas outside the main communications beam where unwanted signal reception may occur—are substantially lower than the theoretical patterns used in the EPFD calculations. The methodology therefore exaggerates the interference that NGSO systems are likely to cause. One estimate finds that the current antenna assumptions overstate the EPFD reaching GSO receivers by 7.7 decibels.[12]

3. Worst-Case Geometry

The ITU methodology further assumes a worst-case geometry in which a GSO system shares a frequency with the NGSO satellite nearest the GSO arc. That approach effectively presumes that an NGSO operator with several satellites in view will select the one most likely to cause harmful interference. The EPFD limits thus treat the least favorable possible alignment as though it were typical. For links that do not present this worst-case geometry, received signal power may be as much as 30 decibels—or 1,000 times—below the current short-term EPFD limits.[13]

B. Arbitrary Aggregate and Single-Entry Limits

After settling on the design assumptions described above, ITU working groups conducted studies from 1997 to 1999 to determine how much interference protection the EPFD regime should provide.[14] The resulting framework never fully resolved the underlying technical questions. Its weaknesses become clearer when the limits are separated into their aggregate and single-entry components.

1. Aggregate Interference Metrics

Interference-protection frameworks for FSS systems traditionally rely on two measures. A short-term criterion addresses sporadic, high-intensity interference that may temporarily make a communications link unavailable. A long-term criterion addresses persistent interference that raises the background noise floor and reduces data-transmission rates.[15]

Put more simply, the short-term measure limits how often a link may fall below the minimum performance needed to carry data. The long-term measure limits how much continuing interference a bandwidth-constrained communications channel must tolerate.

When the ITU developed the EPFD limits, it reached consensus only on the short-term criterion. Recommendation S.1323 had recently assigned interference from NGSO systems 10% of the aggregate unavailability allowance for FSS networks operating below 30 gigahertz.[16] The EPFD regime adopted the same figure, concluding that “[i]nterference from Non-GSO systems to GSO networks should be responsible for 10% (aggregate) of the unavailability time in a GSO network.”[17]

Later analysis has shown that the 10% relative measure—and relative interference measures more generally—lacks a sound technical basis.[18] Current ITU studies acknowledge that the record does not explain why delegates selected 10% or how they derived it.

The long-term criterion presented an even greater problem. Existing recommendations offered no benchmark, and administrations could not agree on an appropriate protection level. Yet some long-term limit was necessary to permit co-frequency operations while giving GSO operators predictable protection. Without a uniform, technically validated standard, administrations attempted to extrapolate long-term limits from the agreed short-term criterion.

That approach conflated two distinct forms of interference. Short-term and long-term criteria address different phenomena, which is precisely why both exist. Deriving one from the other required administrations to construct operating limits without a reliable technical foundation.

The resulting proposals varied dramatically. For Ku-band downlinks, the United States proposed a long-term EPFD limit 20 times more restrictive than France’s proposal.[19] In the Ka-band, France proposed a limit 30 times more restrictive than the U.S. proposal.[20] These disparities reflected the arbitrary method used to derive the limits, not meaningful differences in interference risk.

The international community nevertheless adopted both short-term and long-term EPFD limits at WRC-2000. With little technical evidence to guide the long-term standard, political bargaining filled the void. The Radio Regulations imposed different EPFD masks across frequency bands, but those distinctions did not consistently track propagation characteristics or other technical conditions. They instead reflected which GSO operators occupied each band and how much influence their administrations wielded at the ITU.

In parts of the Ku-band, delegates adopted a compromise near the median of the competing long-term proposals.[21] In the upper Ka-band, they selected the most restrictive proposal on the table.[22] Those aggregate limits remain in force. Because they emerged from uncertain calculations and political compromise, they often provide GSO networks with more protection than technical conditions warrant. The result is an overly conservative regime that constrains NGSO operations and leaves valuable satellite spectrum underused.[23]

2. Single-Entry Metrics

Aggregate limits define the total interference that a GSO system must tolerate, but they do not tell an individual NGSO operator how much interference its system may generate. The ITU therefore had to divide the aggregate allowance into single-entry limits for each constellation.

Here again, the final measure emerged from negotiations among administrations rather than a clearly demonstrated technical standard.[24] The ITU drew from Recommendation S.1323 and assumed that 3.5 homogeneous NGSO systems would operate simultaneously.[25] It then apportioned the aggregate allowance among those systems, producing an individual long-term interference-to-noise ratio (I/N) of roughly -20 decibels for 80% of the time. That threshold would be considered conservative for most secondary uses of a spectrum band.

The calculation also assumed that every NGSO system would resemble SkyBridge, the proposed constellation used as the reference model.[26] SkyBridge never became commercially viable and never launched a commercial satellite. Today’s EPFD limits therefore rest partly on the architecture of a system that never operated.

These assumptions have not aged gracefully. Combined with the framework’s broader methodological flaws, they produce limits that are excessively conservative, waste spectrum capacity, and impose unnecessary constraints on modern LEO constellations.

C. How the EPFD Limits Constrain NGSO Operations

Flawed design assumptions and an unreliable calculation methodology have produced EPFD limits that are far more conservative than modern operating conditions require. To comply, NGSO operators generally must rely on some combination of three responses: avoiding the GSO arc, reducing transmission power, and limiting the number of co-frequency beams.

1. Arc-Avoidance Angles

GSO satellites typically operate with 2 to 3 degrees of separation along the GSO arc. Yet NGSO systems may have to avoid that arc by as much as 18 degrees.

These wide exclusion zones can reduce NGSO coverage by more than 30%, particularly near the equator and at midlatitudes. Operators must then launch additional satellites to compensate for coverage that the rules, rather than any demonstrated interference risk, have taken away.[27]

2. Power Limits

NGSO operators must also reduce transmission power to limit the signal reaching GSO receivers. These restrictions can apply even when an NGSO transmission falls well outside the required arc-avoidance angle.

Lower power means lower data rates and weaker signal performance for NGSO users. The regime thus sacrifices service quality even where the risk of harmful interference may be slight.

3. Number of Co-Frequency Beams

NGSO operators may also limit the number of satellite beams that simultaneously serve a location on the same frequencies, a measure known as “Nco.” This constraint sharply reduces spectrum reuse and system capacity.

Under the current EPFD limits, operators may have to disable beams from satellites that sit well outside the GSO arc but still exceed the prescribed protection criteria. As a result, substantial portions of an NGSO constellation may remain unavailable to serve consumers even when they pose no realistic risk of harmful interference.

Taken together, these constraints underscore the EPFD regime’s growing disconnect from modern satellite operations. The limits rested on questionable assumptions when adopted and have become still less defensible as technology has advanced.

Reform should stop treating each NGSO system as though it holds secondary status in shared satellite bands. It should instead rely on verifiable metrics grounded in measured signal performance, not theoretical worst cases or arbitrary thresholds. The next section outlines a methodology for building that more modern sharing framework.

 III. Building a Modern Performance-Based Framework

Since the ITU adopted the EPFD limits in 2000, technological innovation has transformed both the economics and operation of satellite communications. The existing rules belong to an earlier era. A modern framework should reflect today’s multi-orbit satellite market and focus on measurable effects on system performance and consumers.

Reform should begin with metrics grounded in real-world evidence and modern satellite capabilities, including ACM. Three existing benchmarks offer a practical foundation: the Q- and V-band sharing regime, the FCC’s NGSO-NGSO framework, and the interference levels GSO systems already accept from one another. Together, they point toward performance-based standards for both long-term throughput degradation and short-term link unavailability.

The framework must also account for GSO systems that do not use ACM, using I/N thresholds where throughput-based metrics do not fit. And any revised standard must rest on updated reference links, antenna patterns, and simulation methods that reflect how modern constellations actually operate.

This section focuses on single-entry limits, which remain the principal concern of national administrations and the ITU. Aggregate limits raise separate questions that require further study. For now, the more urgent task is to define clear, enforceable rights and obligations for individual constellations so operators can invest and deploy with predictable expectations.

A. Performance-Based Interference Benchmarks

Modernizing the EPFD regime does not require inventing a new framework from scratch. Regulators already use performance-based sharing rules in nearby frequency bands and in analogous NGSO-NGSO and GSO-GSO settings. Each offers a practical benchmark for replacing abstract worst-case assumptions with limits tied to actual system performance.

1. Q- and V-band Sharing Regime

The shortcomings of the existing EPFD limits have been widely discussed in international forums. By 2019, the international community had identified many of the regime’s inefficiencies and counterintuitive results.[28] When the ITU turned to previously undefined FSS frequencies between 37.5 and 51.4 gigahertz, commonly known as the Q- and V-bands, it faced a basic choice: repeat the EPFD model or adopt a framework better suited to modern satellite systems.

The ITU chose the latter. It approved two resolutions that rejected the existing EPFD limits in favor of an NGSO-GSO sharing methodology tied to actual system performance.[29]

That approach reflected the widespread use of ACM, which allows a satellite link to remain connected as signal conditions deteriorate by reducing its data rate. Rather than treating any degradation as a binary loss of service, the new methodology measures how interference affects throughput over time.

More specifically, the framework calculates the time-weighted average amount of data transmitted per hertz of spectrum, using the carrier-to-noise ratio measured across GSO reference links under ITU Recommendation S.2131.[30] That process produced a consensus long-term, single-entry protection criterion of 3% degraded throughput.[31] If interference from an NGSO system reduces a GSO system’s throughput by more than 3%, the NGSO operator must adjust its operations.[32]

The growing use of ACM along the GSO arc strengthens the case for applying a similar throughput-based methodology elsewhere. Although propagation conditions differ somewhat between the Q- and V-bands and the more heavily used Ku- and Ka-bands, the newer framework provides a technically grounded benchmark for reform.

2. NGSO-NGSO Analogy

A second benchmark comes from sharing rules already used within the same Ku- and Ka-band frequencies now governed by EPFD limits.[33] In the United States, the Federal Communications Commission (FCC) has adopted a framework for sharing among NGSO systems with different access priorities based on the order in which their applications were processed.[34]

The FCC’s rules for protecting earlier-round NGSO systems from later entrants draw directly from the ITU’s Q- and V-band methodology.[35] The principal difference concerns short-term interference. After reviewing hundreds of simulations, the FCC concluded that relative short-term metrics perform poorly for ACM-enabled systems. It instead adopted an absolute increase in link unavailability of 0.4%.[36] For long-term interference, it retained the same 3% degraded-throughput threshold.

Using NGSO-NGSO sharing rules as a reference point for GSO protection rests on a straightforward premise: NGSO systems no longer warrant secondary treatment. If a performance threshold allows NGSO systems to share spectrum with one another, it offers a natural starting point for NGSO-GSO sharing as well. Receivers, after all, do not care where interference originates. A signal remains interference whether it comes from a satellite at 1,400 kilometers or 35,786 kilometers. A performance-based threshold therefore should not vary merely because the interfering system occupies a different orbit.

Nearly all satellite operators participating in the FCC proceeding agreed that the Ku- and Ka-bands should at least use the same 3% long-term throughput-degradation criterion.[37] Unless GSO receivers are materially more sensitive than NGSO receivers, the NGSO-NGSO standard offers a reasonable baseline. If GSO equipment does require exceptional protection, GSO operators should bear the burden of justifying that exception rather than shifting its cost across the NGSO ecosystem.[38]

3. GSO-GSO Analogy

The NGSO-NGSO comparison is not exact. GSO systems often use relatively static spot beams with large coverage areas, while NGSO systems use dynamic beams over much smaller footprints.[39] A third approach therefore looks to how GSO systems share spectrum with one another.

GSO systems typically account for interference from their first- and second-order neighbors, extending roughly 6 degrees in each direction along the GSO arc. Beyond that range, interference is generally considered negligible, and operators usually need not coordinate.

If satellite systems sharing the same bands should face comparable obligations, those accepted GSO-GSO conditions can help define when interference protection is no longer necessary. They can also serve as a basis for deriving appropriate NGSO obligations.

Recent studies in the ITU’s Working Party 4A have taken this approach.[40] The studies model a hypothetical GSO satellite 6.5 degrees from a victim GSO link and estimate the interference produced when both systems use the same frequency at a common terrestrial location. They then calculate the resulting short-term unavailability and long-term throughput degradation.

Those values provide de facto benchmarks for acceptable interference because GSO operators generally do not consider coordination necessary at that separation.[41] Put differently, if GSO systems routinely tolerate a given level of interference from one another, they should be able to tolerate the same level from NGSO systems using the same spectrum.

The contrast with the current EPFD regime is stark. As the studies explain, “non-GSO systems must protect GSO networks to a level nearly 30 dB more stringent than what GSO networks require from each other. This disparity becomes even more striking when we consider that both thresholds are meant to define similar regulatory concepts—the point at which interference becomes unacceptable[.]”[42] A more equitable regime would extend to all satellite systems the “interference environments that GSO networks regularly accept from other GSO networks,” regardless of orbital altitude.[43]

B. Selecting Modern Protection Metrics

The available benchmarks point toward a modern interference regime built around two performance measures for ACM-enabled systems: a long-term limit based on degraded throughput and a short-term limit based on increased link unavailability. The United States recently adopted a 3% threshold for time-weighted average throughput degradation and a 0.1% absolute increase in link unavailability.[44]

The precise values remain open to debate. But the FCC’s choices deserve close attention because they reflect technical work across the world’s largest satellite market and align closely with the benchmarks discussed above.

1. Long-Term Degraded Throughput

The long-term EPFD limits offer an obvious starting point for reform because they lack a sound technical foundation. For links using ACM, degraded throughput provides a well-established measure of persistent interference. The remaining question is where to set the threshold for unreasonable degradation.

Across the leading benchmarks, the same answer emerges: 3%.

The Q- and V-band rules now incorporated into Article 22 use a 3% long-term throughput-degradation criterion. Technical studies within Working Party 4A concluded that this threshold would preserve adequate data rates and long-term system performance in those bands.[45]

The same measure appears in the Ku- and Ka-bands. In its NGSO-NGSO proceeding, the FCC adopted a 3% threshold after reviewing technical studies of modern systems and operating conditions.[46] Those studies included 123 dynamic interference simulations.[47] In 91% of all cases—and 100% of downlink cases—long-term degradation measured 3.12% or less.[48] The FCC ultimately selected a 3% limit.[49] Working Party 4A studies applying the GSO-GSO analogy also identify 3% as a reasonable long-term threshold.[50] That convergence supports the FCC’s choice and suggests that the same measure could work beyond U.S. operations.

2. Short-Term Link Unavailability

The appropriate short-term threshold commands less consensus. Resolution 770,[51] later incorporated into Article 22 of the ITU Radio Regulations,[52] uses a 3% relative increase in instances when a link cannot meet its minimum performance requirement.

That metric performs poorly for modern ACM-enabled systems. As the FCC explained in both its NGSO-NGSO proceeding[53] and its recent NGSO-GSO order,[54] relative measures produce distorted results and invite strategic manipulation. Modern satellite systems often maintain link availability above 99%. When a link already fails less than 1% of the time under natural conditions, even a trivial increase in downtime can produce a large percentage increase relative to that small baseline. The apparent change looks dramatic even when the practical effect is negligible. The FCC therefore adopted an absolute increase in link unavailability of 0.4% for NGSO-NGSO sharing.[55] It derived that figure from hundreds of simulated operating scenarios.[56]

Studies applying the GSO-GSO analogy reach a similar result.[57] Depending on the assumed received power level, simulations of a GSO interferer operating 6.5 degrees away have produced an absolute increase in link unavailability of 0.11% or less.[58] Because GSO systems generally do not require coordination at that separation, the resulting performance offers a practical benchmark for NGSO operations.

The FCC recently adopted an even more conservative threshold for NGSO-GSO sharing: a 0.1% absolute increase in link unavailability.[59] The agency explained that this value approximates “the maximum short-term interference a GSO satellite operator in Ku-band would expect from another GSO satellite operating 6.5 degrees away on the GSO arc, a distance at which no coordination between the GSO operators would be required under the ITU Radio Regulations.”[60] Applying the same threshold to NGSO systems would “maintain a [GSO] link availability near 99.9% in the presence of an operational NGSO system.”[61]

The requirement also applies to every link in a GSO network. The most sensitive link therefore determines the NGSO operator’s system parameters and mitigation measures. Most other links will experience substantially less than a 0.1% increase in unavailability.[62]

Recent ITU studies support that conclusion. One U.S. study modeled interference from a 30,000-satellite NGSO constellation across 230 GSO reference links operating over the United States.[63] None of the customer-terminal links reached the 0.1% threshold, and 90% experienced an increase of 0.00125% or less.[64] The effects on gateway links were smaller still. The median gateway experienced an increase in unavailability of 0.0000003%, while 90% experienced an increase of 0.0000178% or less.[65]

C. Protection Metrics for Non-ACM Systems

Some GSO systems still do not use ACM for their communications. This is especially common in the Ku-band, where point-to-multipoint video services, including broadcast-satellite service (BSS) systems, remain in operation. For those links, degraded throughput is the wrong measure because the system cannot lower its data rate to preserve the connection.

Here, the GSO-GSO analogy offers a better benchmark. A single NGSO system produces roughly the same interference as two GSO satellites operating 6.5 degrees away along the GSO arc when measured against an I/N threshold of -10.5 decibels for 80% of the time. ITU coordination rules generally treat interference between GSO satellites separated by more than 6 degrees as negligible and do not require formal coordination. The same logic should apply to NGSO systems. If an I/N threshold of -10.5 decibels produces effects comparable to those already accepted among GSO operators, NGSO networks should receive the same allowance. That threshold has already been tested in several settings, including studies involving international mobile telecommunications (IMT) networks in the Ka-band.[66] More recent real-world measurement campaigns and technical studies submitted to Working Party 4A provide further support,[67] as discussed below.

D. Implementing and Updating the New Framework

Any protection metric must be practical to implement. New operators need a reliable way to demonstrate compliance, and regulators need a credible basis for enforcement. That requires simulation parameters that reflect modern satellite operations as closely as possible.

A revised NGSO-GSO sharing framework should therefore correct the flawed assumptions identified in Section II. In particular, it should:

• Update the GSO reference links to account for ACM.
• Revise GSO receive-antenna patterns to reflect the equipment used in common operating scenarios.
• Adopt simulation methods that capture how modern constellations operate, including dynamic traffic shifting that avoids worst-case geometries.

The framework should also include a process for periodically reviewing and, when warranted, updating these inputs as technologies, network architectures, and operating conditions evolve.

IV. Real-World Validation

The central flaw in the current EPFD regime is its reliance on theoretical assumptions that became obsolete decades ago—or never reflected operating systems in the first place. Reform should not repeat that mistake. Any new protection framework must account for modern conditions and demonstrate that its metrics work outside simulations and laboratory settings.

SpaceX has led several field-testing campaigns with GSO operators around the world. Taken together, these tests show that degraded throughput can serve as a workable interference metric for modern satellite systems. They also suggest that protection levels near those adopted by the FCC can expand NGSO spectrum use without materially degrading GSO service.

A. Romania

The first measurement campaign began in Romania in 2024 and examined interference to active FSS links using the Intelsat 39 satellite.[68] The tests measured desensitization caused by NGSO beams and converted those results into long-term throughput degradation under Recommendation S.2131.[69]

The campaign found that NGSO satellites could operate within 2 degrees of the GSO arc—an 89% reduction from the existing EPFD requirement—while using eight co-frequency spot beams, a 700% increase over current Nco restrictions. Even under those conditions, peak long-term spectral-efficiency loss reached only 0.7%, while the average loss was about 0.25%.[70]

B. Colombia

In Colombia, SpaceX worked with DirecTV Colombia to measure interference to a consumer dish receiving FSS signals from Intelsat 30.[71]

The tests found that an NGSO system operating with a 4-degree arc-avoidance angle—a 78% reduction from current EPFD requirements—and eight simultaneous co-frequency spot beams caused negligible long-term throughput degradation. The absolute increase in short-term link unavailability was about 0.05%.[72]

C. Nigeria

Field tests overseen by Nigeria’s telecommunications regulator examined NGSO interference to a consumer dish receiving BSS signals from Eutelsat 36.[73]

The results showed that a 7,500-satellite NGSO system could satisfy the -10.5 decibel long-term I/N threshold for non-ACM systems while using eight co-frequency spot beams and operating within 3 degrees of the GSO arc.[74] The same configuration also met a 0.1% short-term unavailability threshold.[75]

The study also considered aggregate interference. It found that a constellation with twice as many satellites operating about 2.75 degrees from the GSO arc would still remain below the NGSO-NGSO unavailability threshold and satisfy a -6 decibel long-term protection criterion.[76]

D. Botswana

Testing in Botswana similarly examined expanded NGSO operations near BSS links using Intelsat 20.[77]

The results showed that NGSO satellites operating within 4.5 degrees of the GSO arc and using eight co-frequency spot beams remained well below the -10.5 decibel long-term I/N threshold for non-ACM systems.[78] The resulting short-term link unavailability was about 0.0005%.[79]

E. Jordan

The Jordan campaign differed from the others by testing interference across four GSO satellites providing BSS coverage rather than a single GSO link.[80]

The results showed that a 7,500-satellite NGSO system could satisfy both a 0.1% short-term increase in link unavailability and the -10.5 decibel long-term I/N threshold for non-ACM systems.[81] It met those criteria under either of two configurations: a 3-degree arc-avoidance angle with six co-frequency spot beams, or a 4-degree angle with eight beams.[82]

V. The Economic and Social Gains from EPFD Reform

Modernizing the EPFD limits would correct decades of inefficient spectrum allocation. Real-world testing shows that NGSO systems can use substantially more capacity while preserving GSO service quality. Reform would therefore unlock valuable spectrum, lower the cost of satellite broadband, and reduce the infrastructure needed to compete.

Those gains would extend well beyond the satellite industry. Greater capacity and lower deployment costs would strengthen competition across satellite and terrestrial broadband markets. They would also make high-speed service more viable in rural and remote communities that conventional networks have struggled to reach.

Better connectivity, in turn, expands access to employment, education, health care, information, and civic life. EPFD reform is therefore not merely a technical adjustment. It is an opportunity to replace idle spectrum and regulatory scarcity with broader economic participation and social connection.

A. The Economic Case for EPFD Reform

The costs of the current EPFD regime extend beyond reduced NGSO coverage and capacity. By leaving usable spectrum idle and raising the infrastructure needed to compete, the rules suppress output, increase costs, and reinforce barriers to entry. Modernized limits would unlock substantial spectrum capacity while imposing little measurable harm on GSO systems.

1. Opportunity Costs

The full cost of the EPFD rules includes not only their direct constraints on NGSO operations, but also the opportunity costs—the benefits forgone under an inefficient spectrum regime.[83] Those costs are clearest in the large GSO-arc avoidance angles that NGSO systems must observe. If, as nearly every relevant technical study suggests, double-digit avoidance angles are unnecessary to protect GSO receivers, then the rules leave large portions of usable spectrum capacity dormant.

This problem is neither new nor unique to satellites. Early wireless regulation treated interference as a contaminant to eliminate[84] rather than an unavoidable feature of shared spectrum that can be managed.[85] That same instinct migrated from broadcasting and other terrestrial services to satellite communications.

When the ITU developed rules for co-frequency NGSO-GSO operations, it adopted an exceptionally cautious approach. The resulting protection masks sought to prevent even low-power NGSO signals from reaching GSO receivers.[86] That gave then-dominant GSO networks predictable protection, but it did so through blunt and technically inefficient limits that ignored the costs of foreclosing productive spectrum use.

The proper objective is not to eliminate interference, but to maximize joint efficiency. Nobel laureate Ronald Coase once made the point about pollution: “I am sure that pollution exists, I know that much; what I do not know is whether we have enough of it.”[87]

Radio interference presents the same basic tradeoff. It is a byproduct of socially valuable activity—in this case, satellite communications. Sound policy should not eliminate productive activity merely because it creates some interference. It should compare the costs of that interference with the benefits generated by greater spectrum use.[88]

Technical simulations and real-world measurement campaigns show that GSO-arc avoidance angles can fall by more than 80%, to as little as 3 to 4 degrees, without compromising reasonable protection. That change would open frequencies at geometries where NGSO transmissions are now barred.[89]

Economic studies estimate that this additional use could increase total spectrum capacity by 74% to 180%, depending on the band.[90] The average cost per unit of capacity could fall by 43% to 64%.[91] By expanding broadband access, increasing capacity, and lowering prices, reform could generate between $10 billion and $100 billion in economic gains.[92] The corresponding reduction in GSO spectral efficiency would remain below 2%.[93]

The Coasean trade is lopsided. Modernized limits would allow a rapidly growing NGSO sector to improve performance, lower prices, and generate billions of dollars in economic value. The resulting effects on GSO systems would remain largely de minimis.

2. Enhancing Competition

Lower launch and operating costs have fueled a second revolution in LEO, allowing NGSO systems to challenge established broadband providers and drive broader technological progress. EPFD reform could accelerate that competition.

Consider Nco. Under the modernized criteria examined in technical studies, the current limit of one active co-frequency satellite over a location could rise to as many as eight—a 700% increase in system capacity.[94] Other research finds that a hypothetical NGSO constellation requiring 462 satellites to provide global coverage under current EPFD rules could deliver the same performance with 360 satellites under updated limits, reducing required infrastructure by 28%.[95]

Those savings matter because satellite communications require enormous upfront investment and present formidable barriers to entry.[96] Reducing the number of satellites needed for global service lowers launch costs, eases the capital demands of large-scale manufacturing, and weakens the economies of scale that favor established operators.

Smaller constellations could then enter more readily and compete on their merits. They could target specialized markets, offer differentiated services, and compete through quality, features, and price rather than sheer fleet size. Satellite competition would become less of a contest in volume and more of a contest in value.

The gains would extend beyond competition among NGSO systems. Broadband markets are converging.[97]  A single constellation can offer fixed and mobile services to consumers and businesses while also providing backhaul between local networks and the broader internet.

As those functions converge, traditional market boundaries become less meaningful. New satellite systems can compete not only with other constellations, but also with GSO providers and terrestrial broadband networks. Stronger competition across technologies could generate billions of dollars in additional economic value and consumer benefits.

B. Closing the Digital Divide

Modernizing the EPFD rules would produce benefits far beyond existing satellite markets. Most notably, expanded NGSO deployment offers one of the most powerful tools for closing the digital divide.

For millions of Americans—and billions of people worldwide—who lack meaningful broadband choice, satellite service may be the most viable option. That is especially true in rural areas, where rugged terrain, sparse populations, and weak commercial returns make extensive terrestrial infrastructure prohibitively expensive. Satellite networks face no comparable last-mile construction problem. Once deployed, a constellation can serve remote and densely populated areas through much of the same infrastructure.

EPFD reform would make that access easier to deliver by removing outdated constraints that limit satellite coverage and capacity. In some areas, those constraints do not merely raise costs. They can prevent viable markets from emerging at all.

The United States’ long-running efforts to connect unserved communities illustrate the problem. Across several versions of the FCC’s high-cost subsidy programs, the government has struggled to persuade providers to accept available funding and build infrastructure. High deployment costs and low expected revenues often made participation uneconomical.[98]

Phase I of the Connect America Fund awarded only $115 million of the $300 million available.[99] Phase II awarded $1.49 billion of $2.15 billion.[100] The Tribal Mobility Fund distributed just $16.6 million of its $50 million allocation,[101] while the Rural Digital Opportunity Fund awarded $9.2 billion of the $16 billion initially set aside.[102] Provider demand repeatedly fell short of available subsidies because the economics of deployment remained forbidding.[103]

Satellite broadband has since reached a level of quality that makes it a credible alternative to terrestrial service and, in many places, the only practical broadband option. Modernizing NGSO-GSO sharing rules would remove technical barriers just as reusable launch systems, vertically integrated manufacturing, and falling input costs are reducing the physical and financial barriers to deployment.

Greater spectrum efficiency would allow operators to expand capacity, increase speeds, and improve reliability. The federal government has begun to recognize that shift by revising its policies for the $45 billion Broadband Equity, Access, and Deployment program to treat NGSO service as a potential source of high-speed connectivity in unserved areas.[104] The next step is to ensure that outdated interference rules do not prevent those systems from delivering the promised service. The United States’ domestic EPFD reforms move in that direction.

The welfare gains extend well beyond faster internet access. Broadband can connect workers in isolated communities to national labor markets through remote work. It can bring specialist care to areas with few medical providers through telehealth. It can expand the resources available through schools, libraries, and community institutions. On-demand instruction can make educational opportunities less dependent on geography, while online communities can give dispersed minority groups new avenues for association and expression.

Each of these gains reflects the same basic point: better connectivity creates opportunities for economic, intellectual, and social exchange that distance once foreclosed. Modernizing the NGSO-GSO sharing framework would help turn those possibilities into practical options for communities that terrestrial networks have struggled to reach.

VI. From Technical Consensus to International Reform

WRC-23 directed the ITU Radiocommunication Sector (ITU-R) to study the EPFD limits in Article 22 and report its findings to WRC-27.[105] Since then, technical studies and field tests have produced a substantial record showing that modernized protections can preserve GSO service while allowing far more efficient NGSO operations.

The United States has already acted on that evidence through domestic reform. The next task is to convert successful implementation into broader international support.[106]

That will require two things. First, the United States and other administrations should use real-world operations to demonstrate that the new framework works, then carry that evidence into WRC-27 rather than wait for another study cycle. Second, policymakers should reject narrow compromises that smooth out a few limits while leaving the EPFD regime’s obsolete assumptions and built-in hierarchy intact.

A. Prove the Model, Then Build Consensus

Procedure and politics now appear to be the main barriers to what should be a straightforward technical improvement. Critics argue that the United States has inverted the usual ITU process by testing reforms through domestic rules and real-world operations before securing international agreement.

There is little precedent for amending the Radio Regulations without a formal WRC agenda item. The closest analogue may be the late addition of global flight tracking to the WRC-15 agenda after the Malaysia Airlines disaster.[107] But that objection says more about the ITU’s process than about the merits of reform.

The ITU’s combination of preliminary studies, regional preparations, conference cycles, and implementation periods can stretch to eight years before a new rule takes effect. In a fast-moving satellite market, that timetable is less a deliberative process than a pause button.

Other areas of internet and space governance offer a more practical model: demonstrate that a system works, then formalize it.

Google followed that path with QUIC, a low-latency internet-transport protocol designed to combine the speed of the User Datagram Protocol (UDP) with reliability features traditionally associated with the slower Transmission Control Protocol (TCP).[108] Google deployed QUIC across Chrome, Search, and YouTube and studied its performance for years before submitting it to the Internet Engineering Task Force (IETF).[109]

By the time the IETF took up the proposal, QUIC’s technical viability had already been established. Commercial adoption followed quickly.[110] The protocol carried a majority of internet traffic before the IETF published its first formal Requests for Comments.[111]

International space governance has followed a similar pattern. Rather than wait for a comprehensive multilateral treaty, the United States and its partners have increasingly relied on nonbinding political commitments and state practice. The Artemis Accords, led by the National Aeronautics and Space Administration, now include 68 signatory states and seek to establish norms that may eventually harden into customary international law.[112]

These examples offer both a precedent and a playbook. Technical studies and operational experience since WRC-23 already provide substantial evidence for reform at WRC-27. Waiting for another study cycle and WRC-31 would add four years of delay without a clear technical justification.

Over the next year, the United States should encourage commercial operations under its new domestic framework. It should also press other administrations to adopt similar rules, building a record of successful implementation and a broader coalition before WRC-27 in Shanghai.

B. Reject Cosmetic Reform

As administrations debate the future of EPFD, incumbent GSO operators developing NGSO capabilities of their own have advanced a narrower proposal. It would modestly relax the most restrictive limits, particularly in the upper Ka-band, and bring greater consistency across frequency bands.[113] That is a worthwhile objective.

The problem lies in what the proposal leaves untouched. It would preserve the outdated reference links, propagation models, antenna assumptions, and improvised long-term protection criteria embedded in the current regime. It also would retain the mistaken premise that NGSO systems should receive secondary treatment in bands where they hold co-primary status.

The proposal would therefore adjust the margins while preserving the framework’s central defects. Satellite technology is moving quickly. Regulation should keep pace rather than remain tethered to assumptions made 25 years ago.

VII. Conclusion

The evidence now points in one direction. The current EPFD limits rest on obsolete design assumptions, an incomplete methodology, and political compromises that no longer reflect the satellite market. Since WRC-23, technical studies, domestic proceedings, and real-world measurement campaigns have reached the same conclusion: modern satellite systems can share spectrum far more efficiently without compromising GSO service.

The question is no longer whether reform is technically feasible. It is whether regulators will continue imposing unnecessary costs on one of the world’s fastest-growing communications technologies. The current regime leaves valuable spectrum capacity idle, raises NGSO deployment costs, weakens competition, and limits broadband access in communities that terrestrial networks struggle to reach.

Administrations should therefore pursue comprehensive reform of Article 22 rather than modest adjustments to legacy EPFD masks. Updated rules should use performance-based criteria tied to actual network effects, including degraded-throughput measures for ACM-enabled systems and validated I/N thresholds for non-ACM services. They should also update reference links, antenna patterns, and simulation methods—and establish a process for revisiting those inputs as technology evolves.

Just as important, future rules should reflect the co-primary status of NGSO and GSO systems. The goal should not be to preserve a hierarchy built for the satellite industry of 2000. It should be to define reasonable interference obligations that protect service while allowing all operators to make productive use of scarce spectrum.

Over the coming year, administrations should expand domestic implementation, continue coordinated field testing, and use that operational record to build consensus before WRC-27. The ITU need not choose between protecting incumbent networks and enabling the next generation of satellite broadband. The evidence shows it can do both. WRC-27 should replace precautionary guesswork with demonstrated performance—and turn Article 22 from a brake on innovation into a workable foundation for a multi-orbit future.

[1] See Int’l Telecomm. Union, Minutes of the Eleventh Plenary Meeting for WRC-23, Doc. 526-E, at 4–5 (Jan. 15, 2024).

[2] See Int’l Telecomm. Union, Radio Regulations No. 22.2. National regulators later incorporated these limits into domestic rules. See, e.g., 47 C.F.R. §§ 25.146, 25.289 (2025).

[3] Press Release, Euroconsult, Non-Geostationary Orbit Constellations Redefining the High Throughput Satellites Market Landscape (Apr. 25, 2024).

[4] Jonathan McDowell, Space Activities in 2025, Version 1.4, Jonathan’s Space Report (Feb. 4, 2026), https://planet4589.org/space/papers/space25.pdf.

[5] See, e.g., Mike Dano, 2025 Global Satellite Broadband Performance Report, Ookla (Feb. 4, 2026), https://www.ookla.com/articles/2025-global-satellite-broadband-performance-report; Sue Marek, Latency Is the Achilles’ Heel for HughesNet, Viasat, Ookla (July 15, 2025), https://www.ookla.com/articles/hughesnet-viasat-performance-2025.

[6] The simulations and assumptions underlying the equivalent power flux-density limits date to 1997–1999. See United States of America Contribution to Chairman’s Report, SkyBridge System Parameters Needed for Simulations of Interference Between NGSO and GSO Systems, Doc. 4-9-11/192-E (June 29, 1998).

[7] United States of America Contribution to Working Party 4A, Working Document Towards a Preliminary Draft New Report [Article 22 EPFD Limit Studies], Doc. 4A/84-E, at 1–2 (Apr. 19, 2024) [hereinafter U.S. WP 4A Proposal].

[8] Int’l Telecomm. Union Radiocommunication Bureau Contribution to Working Party 4A, GSO FSS/BSS Reference Links Used in ITU-R Studies in 1995–2000 to Derive the Existing RR Article 22 EPFD Limits, Doc. 4A/251-E (Oct. 9, 2024).

[9] For an overview of these shortcomings, see U.S. WP 4A Proposal, supra note 7, at 3–4.

[10] United States of America Contribution to Working Party 4A, Proposed Updates to Technical Studies in Response to WRC-23 Minutes on Article 22 EPFD Limits, Doc. 4A/789-E, at 13–14 (Oct. 17, 2025).

[11] United States of America Contribution to Working Party 4A, Working Document Containing Technical Work Relating to the GSO Earth Station Gain Patterns Used by Recommendation ITU-R S.1503, Doc. 4A/792-E, at 1–2 (Oct. 20, 2025).

[12] See Comments of Kuiper Systems LLC, SB Docket No. 25-157, at 6–7 (filed July 28, 2025).

[13] Id.; see also Reply Comments of Kuiper Systems LLC, SB Docket No. 25-157, at 9 (filed Aug. 27, 2025).

[14] Int’l Telecomm. Union Radiocommunication Sector, Resolution 76, Protection of GSO FSS and GSO BSS Networks from Maximum Equivalent Power Flux Density Produced by Multiple Non-GSO FSS Systems in Frequency Bands Where EPFD Limits Have Been Adopted (WRC-2000).

[15] See Claude E. Shannon, Communication in the Presence of Noise, 37 Proc. Inst. Radio Eng’rs 10, 16–18 (1949) (demonstrating how background noise affects signal strength).

[16] Int’l Telecomm. Union Radiocommunication Sector, Recommendation S.1323-0 (1997), superseded by Recommendation S.1323-2 (approved Sept. 2002).

[17] Chairman, Joint Task Group 4-9-11, Report of the Third Meeting of JTG 4-9-11, Doc. 4-9-11/367-E, at 16 (Feb. 5, 1999).

[18] See, e.g., Revising Spectrum Sharing Rules for Non-Geostationary Orbit, Fixed-Satellite Service Systems, Second Report and Order and Order on Reconsideration, FCC 24-117, IB Docket No. 21-456 (rel. Nov. 15, 2024) [hereinafter NGSO-NGSO Order].

[19] Id. ¶¶ 40–47.

[20] Id.

[21] Id.

[22] See Contribution of Tonga (Kingdom of) and Ecuador, Working Document Towards a Draft New Report on Radio Regulation Article 22 EPFD Limits Issues, Doc. 4A/971-E (June 21, 2023).

[23] Id. at 5 fig. 4.

[24] Although ITU participants know this compromise well, no formal record explains why the parties selected that figure. The record also fails to explain what real-world operations would constitute a “0.5” system or how to assess departures from that assumption.

[25] See Int’l Telecomm. Union Radiocommunication Sector, Recommendation S.1323-0, supra note 16.

[26] See United States of America, SkyBridge System Parameters Needed for Simulations, supra note 6.

[27] See U.S. WP 4A Proposal, supra note 7, at 9–10.

[28] Int’l Telecomm. Union Radiocommunication Sector, Report S.2462-0, Sharing Between 50/40 GHz Geostationary Networks and Non-Geostationary Systems (July 2019).

[29] Int’l Telecomm. Union Radiocommunication Sector, Resolution 769 (WRC-19); id., Resolution 770 (rev. WRC-23).

[30] Int’l Telecomm. Union Radiocommunication Sector, Recommendation S.2131-1, Method for the Determination of Performance Objectives for Satellite Hypothetical Reference Digital Paths Using Adaptive Coding and Modulation (Jan. 2022).

[31] The long-term protection criterion measures the annual reduction in time-weighted average spectral efficiency for generic GSO reference links using adaptive coding and modulation. Int’l Telecomm. Union, Radio Regulations, supra note 2, art. 22, Nos. 22.5L, 22.5M.

[32] Int’l Telecomm. Union, Radio Regulations, supra note 2, art. 22, No. 22.5L.

[33] NGSO-NGSO Order, supra note 18.

[34] See 47 C.F.R. § 25.261.

[35] NGSO-NGSO Order, supra note 18.

[36] Because baseline availability for systems using adaptive coding and modulation often exceeds 99%, even a slight change in link conditions can produce a large relative increase in unavailability—and, in turn, in the derived carrier-to-noise ratio. See NGSO-NGSO Order, supra note 18, ¶ 28; Letter from Jayson L. Cohen to Marlene H. Dortch, IB Docket No. 21-456, at 2, S-6–S-9 (July 25, 2024) [hereinafter Cohen Letter].

[37] NGSO-NGSO Order, supra note 18, ¶¶ 11–16.

[38] See Principles for Promoting Efficient Use of Spectrum and Opportunities for New Services, Policy Statement, FCC 23-27, ET Docket No. 23-122, ¶¶ 20–22, 33–35 (rel. Apr. 21, 2023) (recognizing that transmitting and receiving systems share responsibility for adapting to a changing RF environment and that operators should develop error-tolerant systems where technically feasible).

[39] Many modern GSO satellites nevertheless use steerable or configurable beams that largely replicate dynamic beamforming techniques.

[40] United States of America, Proposed Updates to Technical Studies, supra note 10, at 19–22; see also Contribution of Tonga (Kingdom of) and Ecuador, supra note 22.

[41] United States of America Contribution to Working Party 4A, supra note 10, at 15–18.

[42] Id. at 21.

[43] Id.

[44] See Modernizing Spectrum Sharing for Satellite Broadband, Report and Order, FCC 26-26, SB Docket No. 25-157 (rel. May 1, 2026) [hereinafter NGSO-GSO Order].

[45] Int’l Telecomm. Union Radiocommunication Sector, Resolution 770, supra note 29.

[46] NGSO-NGSO Order, supra note 18, ¶ 19.

[47] Id. ¶ 12.

[48] Cohen Letter, supra note 36, at 2, S-6–S-9.

[49] 47 C.F.R. § 25.261.

[50] United States of America, Proposed Updates to Technical Studies, supra note 10, at 15–18.

[51] Int’l Telecomm. Union Radiocommunication Sector, Resolution 770, supra note 29. WRC-23 made minor changes to the methodology for calculating interference. See Int’l Telecomm. Union Radiocommunication Sector, Recommendation S.2157-0 (WRC-23). For an assessment of those changes, see John Pahl, Resolution 770 After WRC-23, Transfinite Sys. (Apr. 26, 2024), https://www.transfinite.com/content/Resolution_770_After_WRC_23.

[52] Int’l Telecomm. Union, Radio Regulations, supra note 2, art. 22, No. 22.5L.

[53] NGSO-NGSO Order, supra note 18, ¶¶ 19–21.

[54] NGSO-GSO Order, supra note 44, ¶¶ 54–56.

[55] Id. ¶ 28.

[56] Cohen Letter, supra note 36, at 2, S-6–S-9.

[57] United States of America, Proposed Updates to Technical Studies, supra note 10, at 19–22.

[58] Id. at 20.

[59] NGSO-GSO Order, supra note 44, ¶ 54.

[60] Id. ¶ 55.

[61] Id. ¶ 56.

[62] Id. ¶ 55.

[63] See United States of America Contribution to Working Party 4A, Proposed Updates to Technical Studies in Response to WRC-23 Minutes on Article 22 EPFD Limits, Doc. 4A/1030-E, at 2–4 (Apr. 24, 2026).

[64] Id. at 4.

[65] Id.

[66] See Reply Liaison Statement from Working Party 4A to Task Group 5/1, WRC-19 Agenda Item 1.13 (IMT), Doc. TG 5/1-411 (WRC-19).

[67] See United States of America Contribution, Proposed Updates to Technical Studies, supra note 63, at 15–23.

[68] See SpaceX Contribution to Working Party 4A, Real-World Interference Measurements in Support of Studies on EPFD Limits, Doc. 4A/542-E (Apr. 23, 2025).

[69] Int’l Telecomm. Union Radiocommunication Sector, Recommendation S.2131-1, supra note 30.

[70] Id. at 11-13.

[71] See Interference Measurement Campaign on EPFD Limits in Colombia, 46th Meeting of Permanent Consultative Committee II, Inter-Am. Telecomm. Comm’n, Doc. No. 6309/25 (Aug. 21, 2025), attached to Reply Comments of Space Exploration Holdings, SB Docket No. 25-157 (Aug. 27, 2025). During the five-month campaign, researchers first measured the signal received by the GSO terminal under free-space conditions. They then measured the effects of NGSO test beams activated at 15-minute intervals under various configurations.

[72] Id.

[73] See Article 22 EPFD Studies, Info. Doc. 16 to APM27-2 (Aug. 8, 2025), attached to Reply Comments of Space Exploration Holdings, SB Docket No. 25-157 (Aug. 27, 2025).

[74] Id.

[75] Id.

[76] Id. at 9-11.

[77] See SpaceX Contribution to Working Party 4A, Interference Measurement Campaign on EPFD Limits in Botswana, Doc. 4A/624-E (Oct. 7, 2025).

[78] Id. at 13.

[79] Id.

[80] See SpaceX Contribution to Working Party 4A, Interference Measurement Campaign on EPFD Limits in Jordan, Doc. 4A/604-E (Oct. 3, 2025).

[81] Id.

[82] Id. at 12.

[83] Eric Fruits & Kristian Stout, Comments of the International Center for Law & Economics Regarding Modernizing Spectrum Sharing for Satellite Broadband, SB Docket No. 25-157, at 7–8 (July 28, 2025), https://laweconcenter.org/resources/icle-comments-re-modernizing-spectrum-sharing-for-satellite-broadband [hereinafter ICLE Comments].

[84] See Henry E. Smith, Property as the Law of Things, 125 Harv. L. Rev. 1691, 1711 (2012).

[85] See Philip J. Weiser & Dale N. Hatfield, Spectrum Policy Reform and the Next Frontier of Property Rights, 15 Geo. Mason L. Rev. 549, 558–62 (2008).

[86] U.S. WP 4A Proposal, supra note 7, at 1–2.

[87] Bruce Lehman attributed this statement to Ronald H. Coase during an April 2003 presentation at the Federal Reserve Bank of Atlanta’s Business Method Patents and Financial Services Conference. See Federal Reserve Bank of Atlanta, Business Method Patents and Financial Services Conference Program, http://www.frbatlanta.org/invoke.cfm?objectid=A6BDAC9C-384A-4C59-9096A079D324A9B7&method=display.

[88] See Ronald H. Coase, The Federal Communications Commission, 2 J.L. & Econ. 1, 28–29 (1959).

[89] See supra Section IV.

[90] See Harold Furchtgott-Roth, The Economic Benefits of Updating Regulations That Unnecessarily Limit Non-Geostationary Satellite Orbit Systems 7 (Furchtgott-Roth Econ. Enters. Aug. 11, 2023).

[91] Id. at 8 app. A.

[92] Id.

[93] Id. at 7 app. B.

[94] See supra Section IV.

[95] Furchtgott-Roth, supra note 90, at 8.

[96] See LEO Policy Working Group, Low Earth Orbit Satellites: Policies to Promote Spectrum Sharing, Foster Competition, and Close Digital Divides (Oct. 30, 2025).

[97] Id.

[98] Low expected revenue often reflected both a limited customer base and implicit rate regulation through soft price caps. See Daniel A. Lyons, Narrowing the Digital Divide: A Better Broadband Universal Service Program, 52 U.C. Davis L. Rev. 803, 834–38 (2018).

[99] See, e.g., John Pender et al., Three USDA Rural Broadband Programs: Areas and Populations Served 3–5 (U.S. Dep’t of Agric. Econ. Rsch. Serv. Oct. 2023), https://www.ers.usda.gov/media/9071/eib-258.pdf?v=78922.

[100] Id.

[101] See Lennard G. Kruger, Tribal Broadband: Status of Deployment and Federal Funding Programs 7–8 (Cong. Rsch. Serv., updated July 17, 2018), https://www.congress.gov/crs_external_products/R/PDF/R44416/R44416.10.pdf.

[102] See Rural Digital Opportunity Fund, Universal Serv. Admin. Co., https://www.usac.org/high-cost/funds/rural-digital-opportunity-fund (last visited Aug. 10, 2026).

[103] See Gregory L. Rosston & Scott Wallsten, Overhauling the Universal Service Fund: Aligning Policy with Economic Reality, Tech. Pol’y Inst. (Aug. 28, 2024), https://techpolicyinstitute.org/publications/broadband/overhauling-the-universal-service-fund-aligning-policy-with-economic-reality.

[104] U.S. Dep’t of Com., Broadband Equity, Access, and Deployment (BEAD) Program: BEAD Restructuring Policy Notice 8–11 (June 6, 2025), https://www.ntia.gov/sites/default/files/2025-06/bead-restructuring-policy-notice.pdf.

[105] Int’l Telecomm. Union, Minutes of the Eleventh Plenary Meeting for WRC-23, supra note 1, at 4–5.

[106] Modernizing Spectrum Sharing for Satellite Broadband, Notice of Proposed Rulemaking, FCC 25-23, SB Docket No. 25-157, ¶ 41 (rel. Apr. 29, 2025).

[107] See, e.g., Peter B. de Selding, In Busan, Regulators Put Global Flight Tracking on WRC-15 Agenda, SpaceNews (Oct. 31, 2014), https://spacenews.com/42385in-busan-regulators-put-global-flight-tracking-on-wrc-15-agenda.

[108] See Frederic Lardinois, Google Wants to Speed Up the Web with Its QUIC Protocol, TechCrunch (Apr. 18, 2015), https://techcrunch.com/2015/04/18/google-wants-to-speed-up-the-web-with-its-quic-protocol.

[109] See Mark Nottingham, What’s Happening with QUIC, Internet Eng’g Task Force (Oct. 29, 2018), https://www.ietf.org/blog/whats-happening-quic.

[110] See F5, QUIC Will Eat the Internet (Feb. 22, 2021), https://www.f5.com/company/blog/quic-will-eat-the-internet.

[111] See, e.g., Matt Joras & Yang Chi, How Facebook Is Bringing QUIC to Billions, Meta (Oct. 21, 2020), https://engineering.fb.com/2020/10/21/networking-traffic/how-facebook-is-bringing-quic-to-billions.

[112] See NASA, The Artemis Accords (last updated June 25, 2026), https://www.nasa.gov/artemis-accords.

[113] See, e.g., Letter from George V. John to Marlene Dortch, Modernizing Spectrum Sharing for Satellite Broadband, SB Docket No. 25-157 (filed Mar. 2, 2026).

INTRODUCTION

Does the willfulness element of a monopolization claim require proof of the defendant’s subjective purpose, or does it instead ask an objective question about the character of the challenged conduct? And when the challenged conduct is a corporate acquisition, what must be shown about the acquisition itself? The district court applied an objective standard, as stated in this Court’s most recent published decisions: the anticompetitive-conduct element of Section 2 asks whether the defendant engaged in “conduct intended to ‘exclude rivals on some basis other than efficiency.’” 2311 Racing LLC v. Nat’l Ass’n for Stock Car Auto Racing, LLC, 139 F.4th 404, 410 (4th Cir. 2025) (quoting Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 (1985) (“Aspen Ski”)); accord Duke Energy Carolinas, LLC v. NTE Carolinas II, LLC, 111 F.4th 337, 353 (4th Cir. 2024). CareFirst contends that this articulation misstates Section 2 and requires reversal.

Neither the law nor the record supports CareFirst. Applying the very standard now under attack, the court initially denied J&J summary judgment on CareFirst’s Momenta acquisition theory. CareFirst of Md. v. Johnson & Johnson, 812 F. Supp. 3d 565, 590 (E.D. Va. 2025), vacated in part on reconsideration, 2026 WL 114415 (E.D. Va. Jan. 14, 2026). Judgment for J&J came only after the court excluded evidence whose relevance depended on drawing adverse inferences from entries on J&J’s privilege log—rulings CareFirst does not assign as error, see Br. 8 (statement of issues); Br. 41 (asking that the district court be “free to revisit those evidentiary questions” on remand)—and held that the admissible record could not support characterizing J&J’s acquisition of a 500-patent portfolio as exclusionary. 2026 WL 114415, at *7–9.

Amici do not contend that Section 2 liability requires proof of subjective malice or a confession. The question is narrower and older: whether the “willful acquisition or maintenance” of monopoly power retains content distinguishing condemned conduct from ordinary commerce. 15 U.S.C. § 2; United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966).

On CareFirst’s theory it does not. According to CareFirst, general intent was satisfied because J&J knowingly acquired all of Momenta’s patents, with the acquisition’s exclusionary character supplied by later use of the patents. The district court explained why CareFirst’s argument fails: crediting it “would be to entirely collapse the intent requirement.” 2026 WL 114415, at *8.

Aspen Ski supplies the answer: it asks courts to characterize conduct and not to characterize a state of mind. That is consistent with Grinnell, which distinguishes willful acquisition from growth by merit or accident, and with Times-Picayune, Alcoa, and Griffith, which hold that no specific intent need be proved. Nothing CareFirst identifies establishes that the acquisition of Momenta was an act of exclusion when it was made. It simply asserts that the act of the acquisition is sufficient to meet Section 2’s willfulness requirement. This is incorrect as a matter of law.

The district court’s judgment should be affirmed.

Read the full brief here.

Amicus curiae the International Center for Law & Economics (“ICLE”) respectfully requests leave to file this letter in support of the petition for writ of mandate pending in Google, LLC v. Superior Court, No. H054687. (See California Rule of Court 8.487(e), advisory committee notes.) ICLE is a nonprofit, non-partisan global research and policy center focused on building the intellectual foundations for sensible, economically grounded public policy. Drawing on its background in law and economics methodologies, ICLE has longstanding expertise evaluating legal issues related to multisided platforms such as Defendant-Appellant Google. ICLE encourages the Court to grant review of Google’s writ petition, and ultimately to correct a misapplication of the Unruh Act that threatens significant, unanticipated harm to both consumers and advertisers.

The Superior Court’s decision in the underlying action, Haynie v. Google, No. 24CV446330 (Santa Clara Super. Ct.), has profound implications for online advertising and raises significant legal and practical concerns that could echo beyond the advertising industry itself. Targeted advertising is a crucial aspect of marketing, enabling advertisers to direct their messages to consumers who will actually find them useful based on demographic considerations, including age. The Superior Court’s decision would make any such targeted advertising unlawful under the Unruh Act, including socially beneficial and pro-consumer advertising, if based on age. Further, the Superior Court’s decision would do so even though it acknowledges that differential pricing based on age is not necessarily illegal under Unruh Act. If accepted, this theory of liability would make multisided platforms less useful to businesses wishing to advertise their products and services, would make advertisements less relevant to users, and would considerably increase the amount of age-inappropriate advertising reaching consumers young and old alike.

The Economics of Multisided Platforms: Google Is Free, Powered by Targeted Advertisements

Google’s search product (Google), video streaming service (YouTube), and email service (Gmail) are all what economists call multisided platforms. (See David S. Evans & Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms 10 (2016) [“Many of the biggest companies in the world, including . . . Google . . . are matchmakers . . . . [M]atchmakers’ raw materials are the different groups of customers that they help bring together. And part of the stuff they sell to members of each group is access to members of the other groups. All of them operate physical or virtual places where members of these different groups get together. For this reason, they are often called multisided platforms.]”.) On one side of the platform, Google provides answers to queries of users (Google), streaming videos (YouTube), or an email service (Gmail). On the other side of the platform, advertisers pay for access to Google’s users, and, by extension, subsidize the user-side consumption of Google’s free services. The consumer surplus generated by free access to Google’s services likely amounts to tens of billions of dollars a year to American consumers. (See Avinash Collis, Consumer Welfare in the Digital Economy, The Global Antitrust Inst. Rep. on the Digital Economy (2020), available at https://gaidigitalreport.com/2020/08/25/digital-platforms-and-consumer-surplus.)

In effect, Google brings together advertisers and users. The goal is to keep users engaged so advertisers can reach them. Advertisers then cross-subsidize access to Google’s platforms, allowing its products to remain free for users. Google is, in this sense, an “attention platform,” which supplies its services to its users while collecting data for targeted advertisements for businesses who then pay for access to those users.

To be successful on the user side, Google must serve users well to maintain demand for advertising, which includes making sure advertisements are relevant to those users. If platforms fail to provide useful services or relevant advertising, users will use the platforms less or may leave altogether. Naturally, advertisers are less likely to invest in these platforms.

On the advertising side, Google must be able to offer advertising that delivers value. This includes enabling advertisers to find their target audience better, and with more accuracy, than they could by other means. Click-through and conversion rates for targeted advertisements are significantly higher than non-targeted advertisements. As a result, advertisers generally prefer to use targeted advertising.

The United States Supreme Court has recognized that multisided platforms must balance the interests of each side to maximize the platform’s value, and has advised courts to take the nature of such platforms into consideration when engaging in an antitrust analysis. (See Ohio v. American Express Co. (2018) 585 U.S. 529, 534-537 [applying the analysis to credit card networks].) Likewise here, this Court should recognize that Google is able to offer free access to its services because of the effectiveness of its targeted advertising. This is to the benefit of users of all ages who would otherwise have to pay to access these services. Reducing the ability to target advertisements reduces the value of Google’s services to both consumers and advertisers.

For instance, an advertisement for a university is much more likely to be relevant to a person of typical college age than to a senior citizen. Conversely, an advertisement for a retirement home is much more likely to be relevant to a person of retirement age than to a younger person. An advertisement for a Medicare Part D plan will be more relevant to a Medicare-eligible person than a teenager. And an advertisement for a car insurance plan offering student discounts will be more relevant for a typical university-aged person than a retiree. There is no benefit to either the advertiser or the user in sending or receiving badly targeted advertisements. Google’s platforms would become much less valuable to both advertisers and consumers if age were prohibited from consideration under any circumstances.

A De Facto Ban on Age-Based Targeted Advertisements Under the Unruh Act Would Harm Both Consumers and Advertisers

The Unruh Act prohibits harmful discrimination. (Civ. Code, §§ 51, 51.5.) Courts have held that the Unruh Act does not bar practices “justified by ‘legitimate business interests.’” (Koebke v. Bernardo Heights Country Club (2005) 36 Cal.4th 824, 851.) Rather, the statute prohibits only discrimination that is “arbitrary, invidious or unreasonable.” (Javorsky v. Western Athletic Clubs, Inc. (2015) 242 Cal.App.4th 1386, 1395.) The “fundamental purpose of the Unruh Civil Right Act is the elimination of antisocial discriminatory practices—not the elimination of socially beneficial ones.” (Sargoy v. Resolution Trust Corp. (1992) 8 Cal.App.4th 1039, 1049.) Legislative enactments can be “evidence of public policy.” (Javorsky, supra, 242 Cal.App.4th at p. 1397.) But disparate treatment isn’t assumed to be against public policy “unless there was a statute favoring the class that was the beneficiary of disparate treatment.” (Ibid.)

In other words, while the Unruh Act provides robust protection against improper discrimination, it was not intended to forbid all differential treatment. Reasonable distinctions based on legitimate justifications remain permissible under the statute’s exceptions. This can include distinctions based on age.

Courts have repeatedly arrived at this conclusion outside the present advertising context. For example, in various contexts, age-based discounts have been deemed nonarbitrary because they advance policies like assisting those with limited incomes. (Javorsky, supra, 242 Cal.App.4th, at pp. 1401-1404; Sargoy, supra, 8 Cal.App.4th at p. 1044; Starkman v. Mann Theaters Corp. (1991) 227 Cal.App.3d at pp. 1491, 1498-99.) It is also “reasonable” to discriminate based on age to prevent minors from entering bars and adult bookstores. (Koire v. Metro Car Wash (1985) 40 Cal.3d 24, 31.)

Further, as the trial court recognized, there are California statutes that “support the proposition that businesses can treat customers differently based on age with respect to pricing.” (Order at 8.) However, the trial court went on to conclude that this principle doesn’t apply to “differential advertising based on age.” (Ibid., emphasis in original.) The court took judicial notice of the fact that “some banking, insurance, and other financial services have different products tailored for different age groups,” but concluded that this “does not foreclose Plaintiffs’ claims because Plaintiffs challenge differential advertising, not differential pricing.” (Id. at p. 9.)

This distinction makes no economic or logical sense. If it is permissible for businesses to offer different products and different prices based on age, then it cannot be “arbitrary, invidious or unreasonable” to advertise such products to the age-appropriate groups. As described above, targeting advertising based on age provides well-established benefits to both consumers and advertisers. Such age-segmented advertising is socially beneficial because it provides the advertising recipients with the more relevant and useful information compared to advertising that is not age-targeted.

Moreover, there are statutes at both the federal and state level that require treating users differently based on age when considering targeted advertising. For instance, the Children’s Online Privacy Protection Act (15 U.S.C. § 6501 et seq.) and its associated federal regulation (16 C.F.R. part 312) require verifiable parental consent for users known to be under the age of 13 before persistent identifiers used in targeted advertising can be collected. The California Age-Appropriate Design Code (“AADC”) also regulates the collection of geolocation data and tracking signals for all minors under 18 if a digital service is “likely to be accessed by children.” (Civ. Code, § 1798.99.31.) Portions of the AADC currently under injunction on unrelated grounds also require covered digital services to complete a data protection impact assessment that analyzes whether and how targeted advertising could harm children and mitigate the risk for those harms. (Ibid.) Online platforms like Google must already consider age to some degree for targeted advertising, including whether an advertisement is age appropriate.

The practical consequences of the trial court’s approach are far-reaching. Google operates its services as multisided platforms facilitating billions of interactions between users and advertisers. In this vast, complex environment, imposing liability on intermediaries like Google based on the age-differentiation choices of advertisers would amount to imposing a de facto ban on targeting generally. This would have significant practical consequences for multisided platforms beyond Google, as well as the consumers who use those platforms. The threat of overbroad liability would reduce the effectiveness of advertising in general. This means (1) less relevant advertisements for users of online services; (2) reduced value to advertising for businesses, in particular harming small businesses which have limited advertising budgets; and (3) less revenue for other online platforms which rely on advertising revenue, pressuring them to increase revenue through other means like higher advertisement prices, more obtrusive but less relevant advertisements, and subscriptions.

Advertisers may have many reasonable, nonarbitrary motivations for targeting their advertisements based on age. The trial court’s decision will lead to extensive, costly litigation about potential justification for such targeting, and in the meantime, consumers will be deprived of useful advertisements. If allowing for any segmentation of advertising based on age can trigger Unruh Act liability, multisided platforms like Google lose an essential tool for connecting people of all ages with relevant messages. The result will be to impede commerce and decrease the social utility of advertising while doing nothing to prevent truly invidious, arbitrary, or unreasonable discrimination.

To the Extent the Law Impacts Age-Based Targeted Advertising, Only Advertisers Plausibly Face Liability, Not Intermediaries

The trial court’s ruling also ignores the true role a multisided platform plays in the advertising context. Google, like other multisided platforms, is an intermediary. It provides a neutral tool. The individuals and entities placing advertisements are the primary actors choosing whether and how to use that neutral tool for targeting. As noted, under the Unruh Act, there are permissible uses of age differentiation. The focus in discouraging invidious age discrimination should be on primary actors. In this way, the Unruh Act should be read in parallel with Section 230 of the Communications Decency Act (“CDA”). (See 47 U.S.C. § 230(c)(1) [“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”].) Simply providing neutral tools for advertisers to use for targeting, including age, should not subject Google or similarly situated entities to liability. (See Fair Housing Council of San Fernando Valley v. Roommates.Com, LLC (9th Cir. 2008) 521 F.3d 1157, 1169 [“providing neutral tools to carry out what may be unlawful or illicit searches does not amount to ‘development’ for purposes of the immunity exception”], emphasis in original.)

While it is always possible that users of multisided platforms, such as advertisers, may misuse neutral criteria for harmful or discriminatory purposes, intermediaries like Google will often lack particularized ex ante knowledge of invidiously discriminatory acts or direct control over advertisers’ targeting choices. In the housing context, discrimination on the basis of protected characteristics is invariably illegal. (Cf. Roommates, 521 F.3d at 1169; Vargas v. Facebook, Inc. (9th Cir. Oct. 13, 2023) 2023 WL 6784359, at *2.) This makes it easy to know that advertisements for housing can’t use age information for targeting. But if the Unruh Act is read to make all targeted advertisements based on age illegal, Google will have to remove the ability of advertisers to use age altogether, harming both consumers and advertisers as a result. Such a blanket ban on differentiation is precisely what the Unruh Act’s focus on invidious discrimination was designed to avoid.

Further, if all age-based targeting of advertisements is impermissible under the Unruh Act, services like Google will restrict lawful advertising tools for all users to mitigate liability risks. Doing so would result in a chilling effect impacting a large amount of indisputably lawful and beneficial speech. (Cf. Counterman v. Colorado (2023) 600 U.S. 66, 75 [“Prohibitions on speech have the potential to chill, or deter, speech outside their boundaries. A speaker may be unsure about the side of a line on which his speech falls. Or he may worry that the legal system will err . . . . Or he may simply be concerned about the expense of becoming entangled in the legal system. The result is ‘self-censorship’ of speech that could not be proscribed—a ‘cautious and restrictive exercise’ of First Amendment freedoms.”].)

There is no reason to read the Unruh Act as in tension with both Section 230 of the CDA and the First Amendment’s protections for online speech, and principles of federal preemption and constitutional avoidance counsel against doing so. (See Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 231 [California law “should be construed, whenever possible, to be in harmony with federal law”].)

In sum, imposing Unruh Act liability in situations such as the present risks considerable unintended harm. The effects of such a decision would echo not only throughout the advertising ecosystem, but throughout the internet ecosystem in general, where intermediaries might provide similar neutral tools that could run afoul of such a broad theory of liability. The result is advertising and online services that are less useful for consumers and advertisers alike.

Conclusion

In light of the foregoing, ICLE respectfully urges this court to grant the pending petition for review. Careful examination of trial court’s ruling will reveal that it strays beyond the Unruh Act’s purpose. The Unruh Act should not be read to prohibit legitimate and beneficial advertising based upon age.

I. Introduction

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

We understand the consultation to cover three principal materials:

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

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

Our comments make four points:

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

II. The Market Study Shows Active Competition

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

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

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

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

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

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

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

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

III. Regulate Conduct by Its Effects

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IV. Regulation Must Be Certain and Proportionate

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

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

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

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

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

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

V. Conclusion and Recommendations

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

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

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

Introduction

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

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

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

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

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

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

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

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

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

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

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

I. Revisions That Strengthen the Draft Guidelines

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

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

A. Causation Requires a Specified Mechanism

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

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

B. Countervailing Pressure Extends Across Products

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

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

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

C. Market Shares Should Reflect Competitive Conditions

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

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

D. Limits on Customer Foreclosure

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

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

E. External Shocks and Competitive Weakness

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

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

F. Greater Flexibility in Remedies

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

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

II. A Symmetrical and Workable Efficiency Framework

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

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

A.  Efficiencies Should Not Require Greater Certainty

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

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

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

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

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

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

The JFTC has already articulated a sound evidentiary principle. Its Study Group on Innovation and Competition Policy recommended that firms claiming a transaction will promote innovation actively present objective supporting evidence. Japan Fair Trade Commission, Inob?shon to Ky?s? Seisaku ni Kansuru Kent?kai Saish? H?kokusho [Final Report of the Study Group on Innovation and Competition Policy] (June 28, 2024). We agree. The JFTC should demand comparable objective evidence for predicted harm.

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

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

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

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

B. Clarify the ‘Returned to Users’ Requirement

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

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

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

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

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

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

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

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

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

C. Merger Specificity Requires Realistic Alternatives

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

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

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

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

III. Data Accumulation and User Lock-In

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IV. Nonprice Parameters Should Reflect User Choice

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

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

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

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

Three consequences follow.

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

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

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

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

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

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

V. Distinguish Monopsony from Bargaining Power

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

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

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

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

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

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

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

VI. Clarify Diversion Ratios and Upward Pricing Pressure

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

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

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

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

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

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

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

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

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

VII. Preserve Predictability Through Clear Limits and Safe Harbors

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

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

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

A potential-competition theory should require three cumulative showings:

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

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

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

A. Reaffirm the Safe Harbors

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

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

B. Narrow the Important-Assets Exception

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

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

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

C. Link Safe Harbors to Shortened Review

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

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

VIII. Calibrate Remedies to the Identified Risk

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

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

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

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

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

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

IX. Priority Recommendations

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

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

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

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

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

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

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

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

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

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

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

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

Brief Profile of the Respondent and Their Organization

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

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

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

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

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

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

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

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

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

Response on Core Digital Services (CDS)

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

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

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

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

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

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

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

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

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

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

The Draft DCB would have four principal implications.

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

Response on Quantitative and Qualitative Thresholds

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

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

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

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

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

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

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

12.  What could be the threshold for annual revenue?

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

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

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

14.  What could be the Business User threshold?

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

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

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

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

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

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

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

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

Additional Information:

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

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

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

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

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

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

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

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

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

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

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

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

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

We recommend a three-stage process.

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

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

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

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

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

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

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

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

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

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

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

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

Yes. Several foundational issues require further examination.

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

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

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

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

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

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

I.    Introduction

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

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

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

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

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

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

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

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

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

III.    The DLT Case Is Prospective and Architectural

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

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

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

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

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

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

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

V.    Any Relief Should Be Limited and Informative

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

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

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

VI.    Conclusion

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

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

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

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

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

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

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

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

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

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

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

I.          Introduction and Statement of Interest

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IV.          The Action USTR Should Take

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

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

V.          Conclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[30] Osenga Comment, supra note 6.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Recommendations

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[11] Id. at 991.

[12] Id. at 992.

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

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

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

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

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

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

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

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

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

[22] Id.

[23] PNB, 374 U.S. at 370–71.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[39] Memorandum 2026-29 at 18.

[40] Id. at 19–20.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

I.         Introduction and Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IV.    Conclusion

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

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

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

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

[4] Supra note 2.

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

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

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

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

[9] Supra note 2.

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

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

[12] Supra note 2.

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

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

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

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

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

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

[19] Id. at 3.

[20] Id.

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

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

 

ICLE Director of Economic Research Eric Fruits joined the Committee for Justice to discuss the antitrust challenges to the Paramount-Warner Bros. merger, including market definition, consumer and labor-market concerns, the role of state attorneys general, competition from streaming services, and possible settlement remedies.

A recent Consumer Action for a Strong Economy webinar examined Linney’s Pizza LLC v. Board of Governors, a 6th Circuit challenge to the Federal Reserve’s debit-card interchange-fee rule that could affect banks’ ability to recover transaction-processing costs. ICLE Senior Scholar Ben Sperry and ICLE Academic Affiliate Todd Zywicki joined the panel to discuss the Durbin Amendment’s text; the economics of authorization, clearance, and settlement; and the constitutional problems posed by forcing issuers to process transactions below cost. The panel also reviewed evidence that the 2011 debit-fee cap primarily benefited large retailers while consumers paid through reduced access to free checking, fraud protection, and card rewards. Video of the full panel is embedded below.

Randal C. “Randy” Picker, the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, died unexpectedly on Aug. 15, 2026. In his memory, we are sharing his lecture from ICLE’s “Substance Over Slogans: Competition and the Wealth of Nations,” held in Rome on March 13, 2026. In “From Mainframes to Mandates,” Randy draws on primary sources ranging from ENIAC to Apple Silicon to trace 80 years of the computer industry and examine how antitrust, intellectual property, and firms’ design choices have opened platforms to competition—or closed them off. His lecture makes the case for skepticism toward reflexive structural remedies and close attention to what allows competition to flourish, and we share it with admiration and gratitude.

ICLE Chief Economist Brian Albrecht returned as the guest on a recent episode of the Mobile Dev Memo podcast. He explained why AI is unlikely to make human labor economically obsolete, discussing automation, productivity, labor demand, and possible policy responses. Albrecht also examined personalized pricing, arguing that data-driven discounts can benefit consumers and that bans may raise prices, reduce access, and create waste. Audio of the full episode is embedded below.

ICLE Director of Innovation Policy Kristian Stout was a panelist on a recent edition of the Washington Post‘s WP Intelligence Briefing that examined how open-weight AI models—especially increasingly capable Chinese systems—are challenging proprietary U.S. models while creating difficult tradeoffs among innovation, affordability, cybersecurity, and national security. Stout argued that businesses need both approaches, with open-weight models offering privacy, customization, and major cost savings while pressuring proprietary developers to serve customers more effectively. He cautioned against sweeping restrictions on Chinese models, contending that U.S. leadership depends on a competitive American AI industry, rigorous testing of foreign technology, and a mix of open and proprietary models capable of strengthening cyberdefenses.

Video of the full episode is embedded below.

Executive Summary

The Federal Trade Commission’s (FTC) advance notice of proposed rulemaking for online food-delivery services considers requiring platforms to display, itemize, explain, and repeatedly disclose fees throughout an order. This review examines two potential costs. Disclosure overload occurs when excessive information impairs comprehension. Crowding out occurs when mandated content consumes limited attention and screen space, displacing information consumers value more.

Research supports clear, timely disclosure of known mandatory fees. Studies of drip pricing show that concealing such fees behind low headline prices distorts choices. The evidence offers less support for early estimates of charges that depend on a customer’s cart, address, or delivery window. It also does not establish the value of separate narratives for every fee, prescribed prominence, or repetition across screens.

Additional disclosure does not always improve decisions. Consumers struggled with overlapping federal mortgage forms, while a later consolidation that cut word count by 65% improved comparison shopping and borrowing terms. Other studies find that clutter reduces compliance, numerical complexity impairs understanding, and repeated warnings lose their effect. On food-delivery screens, extensive fee displays could displace menu prices, delivery estimates, comparison tools, and allergen or nutrition information. Direct evidence from mobile ordering interfaces remains limited.

Section 18 of the Federal Trade Commission Act requires the FTC to assess a rule’s effects on consumers and small businesses. The Commission should prohibit concealed mandatory fees and false fee representations while testing more prescriptive requirements before adopting them. Tests in actual mobile ordering interfaces should compare alternative formats, measure displacement, distinguish first-time users from repeat customers, and give field results greater weight than laboratory estimates.

I.         Introduction: The Limits of Mandated Disclosure

The Federal Trade Commission (FTC) is considering rules that could require online food-delivery platforms to display extensive pricing and fee information. A platform might have to show the total price, itemize each fee, explain its purpose and refundability, estimate charges that vary by order, and repeat these disclosures throughout the ordering process. This literature review examines whether disclosures of that breadth would help consumers make better decisions.

The FTC’s advance notice of proposed rulemaking (ANPRM) asks 65 questions.1F1F[1] Many concern the content, timing, and presentation of possible disclosures. The Commission asks whether platforms should prominently display a total price, identify and explain fees excluded from that price, estimate variable charges, disclose who receives each fee, and explain how promotions, memberships, in-store prices, and personalized pricing affect what consumers pay. It also considers requiring disclosures before consumers begin an order and everywhere a platform displays a price (Questions 35, 37–38, 41–42, 44–46, 48–52, 59, and 63; Federal Trade Commission 2026a, 20,388–91).

Taken together, these questions contemplate a substantial block of required text and numbers. Much of that information would appear on a smartphone, where most food-delivery transactions occur and screen space remains scarce. A single disclosure may inform an attentive consumer. The relevant question is whether combining and repeating many disclosures would inform consumers better than a leaner design.

The International Center for Law & Economics (ICLE) reached six broader conclusions in its May 18, 2026, comments on the ANPRM (Albrecht et al. 2026):

1. The current record does not satisfy the prevalence, consumer-expectation, and benefit-cost showings that Section 18 of the Federal Trade Commission Act requires before the FTC issues a proposed rule.
2. Existing Section 5 enforcement already reaches hidden mandatory fees and false representations about fees. The enforcement record alone does not justify a sectorwide rule.
3. Any rule should distinguish drip pricing—the strategic withholding of known mandatory fees—from later disclosure of charges that cannot be calculated until the customer selects items and provides a delivery location.
4. Cost-of-service requirements would regulate fee levels, exceed disclosure regulation, and fall outside the Commission’s Section 18 authority.
5. Any rule should apply neutrally to third-party platforms and merchants operating their own delivery services, with safe harbors or model templates for small operators.
6. Requiring platforms to compress variable fees into a single figure could create a de facto price cap and reduce service in rural, low-density, and late-night markets where consumers have few alternatives.

This review addresses a narrower question that arises only if the Commission moves toward a proposed rule: Which disclosure requirements does the evidence support, and which risk repeating documented failures in other markets?

Two issues guide the review. The first is disclosure overload. Beyond some point, additional required information may reduce comprehension and decision quality. Several mechanisms can produce this result. Important information may lose salience, meaning it no longer stands out enough to attract attention. Consumers may become habituated to repeated messages or disengage and stop reading altogether.

The second issue is crowding out. Consumer attention and screen space are finite. Requiring one disclosure may divert attention from another or displace information that consumers value more, such as delivery times, allergens, or nutrition facts. This concern becomes particularly acute on mobile screens.

The literature draws an important distinction between transparent pricing and exhaustive disclosure. Evidence strongly supports requiring platforms to reveal known mandatory fees before consumers invest substantial time in an order. Research on drip pricing shows that withholding such fees until checkout distorts choices and leads consumers to spend more than they intended. Timely disclosure of known mandatory charges promotes honest comparison shopping.

That evidence does not establish that platforms should display every possible detail at every stage. Nor does it justify treating a fee that cannot be calculated until the consumer completes a cart and supplies an address as equivalent to a known fee deliberately withheld until checkout.

Research from other markets also cautions against excessive or poorly designed disclosures. Borrowers understood mortgage terms better after regulators consolidated and shortened the required forms. Visual clutter reduces compliance, repeated warnings lose effectiveness as consumers tune them out, and long lists of variable charges may confuse more than they clarify. Recognizing these limits, the Consumer Financial Protection Bureau, Federal Communications Commission, and U.S. Department of Transportation have used or endorsed layered disclosures, links, and limits on required information instead of placing every detail in a single display.

The case for crowding out has strong theoretical support, and regulators have acknowledged the problem. Empirical research has rarely measured how competing disclosures affect consumers on an actual ordering screen, though. Section 18 requires the Commission to assess a rule’s costs. The Commission therefore should not assume away the costs of overload and crowding out. It should test competing disclosure designs with real consumers before imposing a uniform mandate.

II.      Disclosure Overload: Evidence and Limits

Disclosure overload occurs when the volume, complexity, or repetition of mandated information exceeds consumers’ processing capacity and reduces decision quality. This section examines the scarcity of attention, the evidence supporting targeted disclosure of known fees, the risks posed by accumulation and clutter, and the importance of design, context, and field testing.

A.      Attention Is a Scarce Resource

The economics of attention starts with a basic constraint. Christopher Sims models decision-makers as information-processing channels with finite capacity. Greater attention to one signal leaves less capacity to track others (Sims 2003). Xavier Gabaix’s review of empirical estimates finds that consumers, on average, operate about halfway between full attention and complete inattention (Gabaix 2019). Economic research therefore treats attention as a scarce resource that consumers must allocate among competing demands.

Regulation cannot eliminate that scarcity. Omri Ben-Shahar and Carl Schneider describe the resulting “accumulation problem.” Regulators adopt each disclosure mandate in isolation, while consumers confront the combined demands of every mandate and everything else competing for their time (Ben-Shahar and Schneider 2011). Their review documents the consequences. One clickstream study, which tracked users’ online activity, found that only about one in 1,000 customers opened the terms of a software contract before purchasing. Among those who opened the terms, the median customer spent 29 seconds reading them.

Firms can exploit these limits. Petra Persson models a firm that complies with a disclosure mandate by surrounding the required fact with accurate but irrelevant information. The additional material consumes the customer’s attention and obscures the relevant fact (Persson 2018). If regulators prescribe a simpler format, the firm can complicate the product itself so the relevant information again exceeds the customer’s processing capacity. Persson calls this response “complexification.” Questions 37, 38, and 42 contemplate prominence requirements and separate explanations for each fee. Such mandates could prompt the strategic responses Persson’s model predicts.

B.       Drip-Pricing Research Supports Targeted Disclosure

The advance notice of proposed rulemaking cites two experiments showing that drip pricing harms consumers. Both concern fixed, knowable fees withheld until late in a transaction. Neither examines variable fees that depend on an address, cart, or delivery window. The studies therefore address fee concealment rather than the required timing or format for charges that cannot yet be calculated.

Alexander Rasch, Miriam Thöne, and Tobias Wenzel constructed laboratory markets in which comparing dripped fees imposed a small search cost. Sellers responded by setting the dripped component near the maximum allowed and competing on the base price. Total prices averaged 16.96 experimental units under drip pricing and 15.37 under transparent pricing. In addition, 21% of buyers mistakenly chose the more expensive option (Rasch, Thöne, and Wenzel 2020).

Shelle Santana, Steven Dallas, and Vicki Morwitz found similar effects. Consumers shown dripped add-on fees selected the lower base-price option 54.5% of the time, compared with 11.7% among consumers who saw the fees upfront. Even after seeing the final total, 24.5% of participants in the drip-pricing condition chose the more expensive option, compared with 7.8% in the upfront condition (Santana, Dallas, and Morwitz 2020).

Field evidence also supports a targeted policy against concealment. Tom Blake, Sarah Moshary, Kane Sweeney, and Steve Tadelis conducted a large randomized experiment on StubHub. Delaying mandatory fees until checkout increased revenue by roughly 21%, made buyers 14.1% more likely to complete a purchase, and shifted purchases toward more expensive tickets (Blake et al. 2021). The experiment involved a single fixed fee on a standardized ticket. Food and grocery orders present a different problem because they involve multi-item carts, variable delivery conditions, and comparisons across products and retailers.

Xavier Gabaix and David Laibson explain why competition may fail to correct concealed fees. Their theoretical model shows that firms profit from shrouding add-on charges when enough consumers overlook them. A firm gains little by educating consumers who would then purchase the discounted base product and avoid the profitable add-on (Gabaix and Laibson 2006).

Other research confirms that timely, salient disclosures can change behavior. Raj Chetty, Adam Looney, and Kory Kroft found that posting tax-inclusive prices on grocery shelves reduced demand for treated products by roughly 8%. Survey evidence showed that most consumers already knew the tax applied. Displaying it at the moment of choice made it salient (Chetty, Looney, and Kroft 2009).

Behaviorally designed disclosures have produced similar results in payday lending. Marianne Bertrand and Adair Morse found that showing borrowers the cumulative dollar cost of repeated loan rollovers reduced borrowing by 11% over the next four months (Bertrand and Morse 2011). Jialan Wang and Kathleen Burke found that a Texas mandate requiring a similar disclosure before each payday loan produced a persistent 12% decline in loan volume, with no observable increase in prices or defaults (Wang and Burke 2022).

This evidence supports preventing platforms from concealing known, mandatory fees behind misleading headline prices. It does not establish that the Federal Trade Commission should require every fee to appear at the beginning of a transaction or prescribe a single presentation format. The studies show that concealment distorts choices. They do not compare alternative formats for clearly disclosing known fees.

That distinction tracks ICLE’s comments. Fixed mandatory fees are known in advance, and delaying them can exploit the time a consumer has spent assembling an order. Contingent variable fees cannot be calculated until the consumer supplies an address, cart, or delivery window (Albrecht et al. 2026, 10–11). The evidence supports treating these two categories differently.

C.      Excessive Disclosure Can Reduce Comprehension

For decades, mortgage borrowers received overlapping disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The Federal Trade Commission’s Bureau of Economics tested those forms on 819 borrowers. Roughly 20% could not identify the annual percentage rate, cash due at closing, or monthly payment, and nearly nine in 10 could not identify the loan’s total upfront cost (Lacko and Pappalardo 2007; Lacko and Pappalardo 2010). The FTC economists warned that disclosures containing “too much, irrelevant, or unnecessary information” can cause consumers to ignore the material altogether (Lacko and Pappalardo 2007, 128).

In 2015, the Consumer Financial Protection Bureau consolidated the overlapping forms into two documents under the TILA-RESPA Integrated Disclosure rule, commonly called TRID. The change reduced the disclosures’ word count by 65%. Patrick Kielty, K. Philip Wang, and Diana Weng found that first-time homebuyers subsequently paid significantly lower interest rates than repeat buyers, with no offsetting increase in upfront points or fees. The effects were largest in areas with greater lender competition. The authors concluded that “less disclosure makes borrowers better off” when regulators eliminate duplication and complexity (Kielty, Wang, and Weng 2023, 193).

Allison Nicoletti and Christina Zhu likewise found that simplification reduced consumers’ information-processing costs and increased comparison shopping. After the rule took effect, significantly more consumers withdrew applications, apparently because they found better terms elsewhere (Nicoletti and Zhu 2023).

Questions 38 and 42 contemplate requiring platforms to disclose the nature, purpose, amount, refundability, and recipient of every fee, along with a separate explanation for each. The mortgage evidence suggests that such detail can become self-defeating. Food-delivery customers also make low-stakes purchases in minutes and repeat them frequently. Any comprehension cost would recur with each order, rather than arise once during an infrequent, high-stakes transaction.

The Commission has already rejected a similar requirement. In its January 2025 Trade Regulation Rule on Unfair or Deceptive Fees, which covers live-event ticketing and short-term lodging, the Commission declined to require affirmative disclosure of each fee’s refundability. It found that the requirement could prove impractical for businesses and confusing for consumers (Federal Trade Commission 2025, 90 Fed. Reg. 2,066, 2,102). Question 38 considers that same requirement for food delivery. The Commission should require evidence that food delivery warrants a different result.

Questions 48, 59, and 63 consider requiring fee disclosures wherever a price appears. A food-delivery app may display prices on the restaurant list, menu, item page, cart, and checkout screen. Platforms that allow searches across retailers also display prices in comparison results designed to help customers evaluate competing products. Adding a fee module could consume much of a phone screen and impair that function.

Repeating the same disclosure at each point also creates habituation, the declining neurological and behavioral response to repeated stimuli. Bonnie Brinton Anderson and her coauthors used eye tracking to show that users look at warnings less with each successive viewing (Anderson et al. 2016). Anthony Vance and his coauthors combined functional magnetic resonance imaging, eye tracking, and a three-week field experiment. Adherence to mobile security warnings fell from 87% to 64% with repeated exposure, and brain imaging showed a corresponding decline in response. Changing a warning’s appearance preserved much of its effect (Vance et al. 2018). In a field study of more than 25 million browser warnings, Devdatta Akhawe and Adrienne Porter Felt found that half of users dismissed Chrome’s most common security warning within 1.7 seconds (Akhawe and Felt 2013).

Indiscriminate repetition can also make warnings less informative. Lisa Robinson, W. Kip Viscusi, and Richard Zeckhauser report that 69% of surveyed consumers equated California’s generic Proposition 65 cancer warning on breakfast cereal with the risk of cigarette smoking. They argue that warning systems fail when they attach identical language to risks of vastly different severity, leaving consumers unable to separate the “wolf or puppy” (Robinson, Viscusi, and Zeckhauser 2019). The same evidence suggests that consumers will devote less attention to a fee notice that appears identically on every screen of every order.

Clutter and numerical density create related problems, especially on small smartphone screens. Peter Hancock and his coauthors synthesized 272 effect sizes from 30 warning studies. They found that integrating a warning into the user’s task and including text increased compliance, while visual clutter reduced it (Hancock et al. 2020).

Research involving food choices reports similar effects. Julie Downs, Jessica Wisdom, and George Loewenstein found that raw numerical calorie information had almost no effect on snack choices. Combining calorie information with a separate choice-architecture intervention sometimes reversed that intervention’s effect, showing that stacked policies can interfere with one another (Downs, Wisdom, and Loewenstein 2015). Sarah Campos, Juliana Doxey, and David Hammond’s systematic review found that labels requiring arithmetic confused consumers, while simplified interpretive formats improved their ability to identify healthier options (Campos, Doxey, and Hammond 2011). The U.S. Food and Drug Administration’s 2023 review similarly found that consumers often understood simple summary or interpretive labels better than detailed numerical systems, although results varied by design and outcome (Verrill et al. 2023).

Questions 41 and 42 implicate these findings. Itemization at checkout can provide useful information. A customer who sees a small-order fee learns that adding items may avoid it. A customer who sees a distance-based delivery fee learns that ordering from a closer restaurant may cost less. ICLE’s comments defended itemized disclosure on that ground (Albrecht et al. 2026, 12). The overload risk depends on the required level of detail and on mandates to estimate fees that cannot yet be calculated.

The Federal Communications Commission took that concern seriously when it adopted its 2022 broadband consumer label. The agency confined the label to core price terms and directed consumers to hyperlinks for additional detail. It found that expansive on-label disclosures would overwhelm consumers without helping them (Federal Communications Commission 2022, 87 Fed. Reg. 76,959, 76,966). In 2025, the agency proposed trimming the label further because itemizing location-variable fees confused consumers without improving their decisions (Federal Communications Commission 2025, 90 Fed. Reg. 55,713). ICLE’s comments in that proceeding cited behavioral research showing that decision quality declines when disclosure volume exceeds consumers’ processing capacity (Fruits and Westling 2026).

Food-delivery fees that vary by distance, time, traffic, and demand resemble location-variable broadband fees. Requiring platforms to disclose amounts or ranges before a customer provides an address forces platforms to offer either worst-case figures that overstate most customers’ costs or ranges too broad to inform a decision. Both approaches could teach consumers to disregard the disclosure, replicating the disengagement that James Lacko and Janis Pappalardo documented.

D.      Disclosure Effects Depend on Design and Context

Bryan Bollinger, Phillip Leslie, and Alan Sorensen found that mandatory calorie posting at Starbucks reduced average calories per transaction by 6% without harming profits (Bollinger, Leslie, and Sorensen 2011). Pasquale Rummo and his coauthors, analyzing nine years of Taco Bell transactions, associated menu labeling with a 24.7-calorie reduction per transaction (Rummo et al. 2023). In consumer finance, Victor Stango and Jonathan Zinman found that simply surveying consumers about overdraft fees reduced their likelihood of incurring one by 3.7 percentage points from a 26% baseline (Stango and Zinman 2014).

These studies show that a single, salient disclosure of a material fact can improve decisions. They also identify a potential crowding-out cost. A dense fee display could displace calorie and nutrition information that consumers value on the same screen. Yet these studies do not test multiple simultaneous disclosures, prominence requirements, or repetition across screens.

Even the strongest field evidence warrants modest expectations. Michael Long and his coauthors conducted a meta-analysis of menu labeling. When they limited the analysis to the six highest-quality controlled studies in actual restaurants, they found a statistically insignificant reduction of only 7.63 calories per meal (Long et al. 2015).

Several prominent disclosure failures arose from causes other than overload. Sumit Agarwal and his coauthors found that a payment disclosure required by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) had little effect because consumers who paid online rarely saw the monthly statements containing it. The failure concerned delivery rather than consumers’ ability to process the disclosure (Agarwal et al. 2015). The same study found that the CARD Act’s substantive fee limits saved consumers an annualized 1.6% of balances, or roughly $11.9 billion a year. Choosing the right remedy therefore requires identifying why a disclosure failed.

The dysfunction of European cookie-consent banners likewise reflects deliberate manipulation as much as cognitive limits. Dino Bollinger and his coauthors found potential violations on 94.7% of roughly 30,000 websites (Bollinger et al. 2022). Ahmed Bouhoula and his coauthors found that 65.4% of sites offering an opt-out continued collecting data after users refused consent (Bouhoula et al. 2024). Such conduct calls for enforcement against noncompliance and deceptive design.

Research methods also warrant caution. Stefano DellaVigna and Elizabeth Linos compared 126 government nudge trials covering 23.5 million people with results published in academic journals. The published effect sizes were roughly six times larger, and selective publication (also known as publication bias) accounted for about 70% of the gap (DellaVigna and Linos 2022). Their findings counsel caution when extrapolating from the laboratory drip-pricing experiments cited in the advance notice of proposed rulemaking.

The Commission should build its record with field evidence and consumer testing that reflect actual food-delivery interfaces. These platforms present several important categories of information at once. Evidence that a narrow disclosure improved decisions in another market does not establish that additional fee narratives, estimates, and repetition will help food-delivery customers.

The research supports truthful, timely disclosure of known mandatory fees without misleading headline prices. It provides no comparable support for granular explanations of every fee, estimates of charges that cannot yet be calculated, prescribed prominence hierarchies, or repetition on every screen. Those requirements can turn useful disclosure into clutter with measurable costs.

III.    Crowding Out: Theory, Regulatory Experience, and Evidence

Crowding out occurs when mandated content consumes finite attention and display space, displacing information consumers may value more. On food-delivery apps, the disclosures contemplated in Questions 35 through 52 would compete on smartphone screens with menu items, prices, delivery estimates, restaurant ratings, and required allergen and nutrition information. Question 23 asks what could impede disclosure of all mandatory fees before ordering begins and wherever a price appears (Federal Trade Commission 2026a, 20,389). On a mobile interface, the screen itself imposes a practical limit.

The economics of limited attention provides the theoretical basis for this concern. Federal agencies and a state supreme court have treated screen-space displacement as a genuine design constraint, and related studies show that clutter, placement, and screen size affect attention and comprehension. Direct evidence from food-delivery transaction screens remains scarce. This section reviews the theory, regulatory experience, and limits of the empirical record.

A.      Limited Attention Creates Crowding Out

Crowding out applies the same finite-capacity framework to information presented within a limited display. Christopher Sims’s model implies that adding signals reduces a consumer’s capacity to process those already present (Sims 2003). Geoffroy de Clippel, Kfir Eliaz, and Kareen Rozen likewise model consumers who can inspect only a limited number of options. Examining one option necessarily leaves less attention for another (de Clippel, Eliaz, and Rozen 2014).

Petra Persson shows how firms can exploit this constraint. A firm can surround a material disclosure with accurate but irrelevant cues, consuming the attention needed to process the important information (Persson 2018). The Organisation for Economic Co-operation and Development’s (OECD) consumer-policy committee incorporated these findings into its guidance. It advises regulators to limit the scope and prescriptiveness of disclosure mandates and expressly identifies the accumulation problem in online settings (OECD 2022, 33).

B.       Regulators Recognize Screen-Space Constraints

Three federal agencies and one state supreme court have treated limited screen space and attention as material design constraints. Each authority informs the placement and prominence requirements under consideration here.

The U.S. Department of Transportation’s 2024 airline-fee rule required upfront, passenger-specific disclosure of baggage and change fees on the first page of search results. The agency nevertheless allowed pop-ups and expandable text because rigid on-page requirements could “overcrowd web pages” and impair the presentation of fare information on small screens (U.S. Department of Transportation 2024, 89 Fed. Reg. 34,620, 34,646).

The 5th U.S. Circuit Court of Appeals later vacated the rule on Administrative Procedure Act grounds, and the Department reinstated the prior standard effective July 2, 2026 (U.S. Department of Transportation 2026, 91 Fed. Reg. 40,368). The court’s decision neither endorsed nor rejected the agency’s behavioral judgment. This brief cites the 2024 rule only for that judgment. After a full rulemaking, an agency requiring upfront fee disclosure concluded that flexible presentation was necessary to avoid crowding. Its approach also shows why rigid mandates can impede improvements as technology and consumer behavior change.

The Federal Communications Commission made a similar design choice for its broadband label. It required a compact, standardized display and placed additional detail behind hyperlinks because expansive on-label content would overwhelm consumers (Federal Communications Commission 2022).

The Federal Trade Commission’s 2013 digital-advertising guidance likewise instructs businesses to place required disclosures as close as possible to the claims they qualify. It warns that scrolling makes disclosures easier to miss and specifically addresses the constraints of mobile screens (Federal Trade Commission 2013). The Commission cannot treat mobile screen space as a binding constraint when judging disclosure placement and as costless when considering the number of required disclosures.

The California Supreme Court addressed the same concern in Dowhal v. SmithKline Beecham Consumer Healthcare. The court held that federal law preempted a state warning requirement, relying in part on the U.S. Food and Drug Administration’s concern about overwarning and the danger of “less meaningful warnings crowding out necessary warnings” (Dowhal v. SmithKline Beecham Consumer Healthcare 2004).

C.      Direct Evidence of Screen-Space Crowding Is Limited

Few studies directly measure how mandated information displaces other content on transaction screens. Related evidence nonetheless indicates that display constraints affect attention and comprehension. Peter Hancock and his coauthors found that clutter within a display reduces compliance with warnings (Hancock et al. 2020). Christine Utz and her coauthors, in field experiments involving more than 80,000 website visitors, found that a consent banner’s placement substantially affected whether users engaged with it (Utz et al. 2019). Christopher Sanchez and James Goolsbee found that small displays impair reading retention unless designers adjust the text size to fit the screen (Sanchez and Goolsbee 2010). The U.S. Food and Drug Administration’s review of front-of-package labels found that, under time pressure, labels competing with other package elements can distort consumers’ perceptions of healthfulness (Verrill et al. 2023).

These studies do not answer the precise question before the Commission. No study cited here measures whether a mandated fee module on a menu or cart screen reduces attention to delivery times, allergen information, or price comparisons across platforms. Nor does the literature quantify the resulting consumer harm. Economic theory supports the crowding-out concern, and regulators confronting similar design problems have recognized it. Direct evidence from smartphone transaction screens remains scarce. The Commission should fill that gap through consumer testing before imposing prescriptive requirements.

IV.    Applying the Evidence to the ANPRM

What the evidence supports:

• Prohibiting platforms from concealing fixed mandatory fees behind misleading headline prices would respond to Questions 15a and 48 and accord with the drip-pricing evidence.
• The same principle applies to contingent and variable fees under Questions 16, 41b, and 41c. Platforms should not advertise a price that omits fees they know will apply, even when the exact amount depends on the customer’s address, cart, or delivery window.
• False statements about fees constitute deception under settled Section 5 doctrine.

Provisions that the current record does not support:

• Requiring a total-price display that includes variable components under Questions 35, 36, and 41a forces platforms to provide either estimates or broad ranges. The Commission’s existing Fees Rule excludes analogous shipping charges from the total price because of this practical difficulty (16 C.F.R. § 464.1; Albrecht et al. 2026, 13–14). A shipping-charge exception would not fully address food delivery because the relevant fees can vary with the cart, address, and delivery window.
• Requiring the total price to dominate every other element under Question 37 imposes a prominence hierarchy. Persson’s model shows how firms can respond strategically to such format mandates, while the Federal Communications Commission’s experience demonstrates the risks of prescribing detailed label designs.
• Requiring separate narratives about each fee’s nature, purpose, refundability, and recipient under Question 38 would impose a requirement the Commission rejected in January 2025.
• Repeating disclosures wherever a price appears under Questions 48, 59, and 63 conflicts with the evidence on habituation.
• Adding in-store price-comparison and personalized-pricing disclosures under Questions 51 and 52 would compound the accumulation problem on small screens.

V.      Test Disclosure Mandates Before Adopting Them

Section 18 of the Federal Trade Commission Act requires findings on the prevalence of the targeted practices and an economic analysis of a final rule’s effects on consumers and small businesses (15 U.S.C. § 57a(b), (d)). The evidence on disclosure overload and crowding out identifies three research tasks within the Commission’s demonstrated capacity.

Format testing should precede format mandates. The Bureau of Economics’ mortgage-disclosure project provides a useful model. Researchers first conducted qualitative interviews and then ran controlled experiments comparing existing and prototype disclosures with actual consumers (Lacko and Pappalardo 2007). Here, the Commission should test proposed fee displays within mobile ordering interfaces. It should test first-time and repeat users separately because the advance notice of proposed rulemaking indicates that many customers order repeatedly and may have different baseline expectations (Federal Trade Commission 2026a, 20,381; Albrecht et al. 2026, 8). This research would respond directly to Question 63’s request for evidence that the proposed disclosures improve decision-making.

The Commission should also measure displacement. Researchers can test whether a mandated fee module on menu and cart screens reduces attention to delivery times, allergen information, or comparison tools. Eye tracking, as used by Bonnie Brinton Anderson and Anthony Vance, combined with A/B testing that compares alternative display designs, as used by Christine Utz, could answer the question at modest cost.

The Commission should give field evidence greater weight than laboratory results. Stefano DellaVigna and Elizabeth Linos found that published academic studies reported effects roughly six times larger than government trials conducted under real-world conditions (DellaVigna and Linos 2022). Michael Long and his coauthors likewise found that menu-labeling effects became statistically insignificant when they limited their meta-analysis to the highest-quality controlled studies in actual restaurants (Long et al. 2015).

VI.    Conclusion

The evidence supports a targeted response to deceptive pricing. Platforms should disclose known mandatory fees clearly and before purchase rather than use low headline prices that rise later. Fees that depend on a customer’s cart, address, or delivery window require different treatment because platforms cannot calculate them at the start of an order. The drip-pricing research supports preventing concealment. It does not establish the value of a prescribed format, estimates of unknown charges, or repetition on every screen.

The broader literature cautions against treating more disclosure as inherently better. Consumer attention is finite. Accumulated detail, visual clutter, numerical complexity, and repeated warnings can reduce comprehension and cause disengagement. The Federal Trade Commission’s own mortgage research documented those effects. The Consumer Financial Protection Bureau later cut overlapping mortgage disclosures by 65%, and borrowers received better terms. A food-delivery app offers less room and demands faster decisions than a mortgage form.

Crowding out presents a related cost. A mandated fee module can displace delivery estimates, allergen and nutrition information, restaurant ratings, and comparison tools. Economic theory supports that concern, and federal agencies and a state supreme court have recognized it. Direct evidence from food-delivery screens remains limited, which makes consumer testing necessary before the Commission adopts prescriptive requirements.

Section 18 requires the Commission to examine a rule’s effects on consumers and small businesses. The Commission should test competing designs in actual mobile ordering interfaces, measure what information they displace, distinguish first-time users from repeat customers, and give field results greater weight than laboratory estimates. That work can support rules that secure the benefits of honest pricing while avoiding the disclosure failures federal regulators have spent decades documenting and correcting.

Works Cited

• Agarwal, Sumit, Souphala Chomsisengphet, Neale Mahoney, and Johannes Stroebel. “Regulating Consumer Financial Products: Evidence from Credit Cards.” The Quarterly Journal of Economics 130, no. 1 (2015): 111–164. https://doi.org/10.1093/qje/qju037.

Approach: Peer-reviewed natural experiment using panel data.

Findings: The Credit Card Accountability Responsibility and Disclosure Act’s limits on credit card fees reduced annual borrowing costs by 1.6% of average daily balances, saving consumers $11.9 billion annually, with no offsetting increase in interest rates. By contrast, a required disclosure showing the savings from repaying balances over 36 months produced only a tiny increase in the share of accounts paying that amount. The authors found “no evidence of a change in overall payments.”

Authors’ Conclusions: Structural fee regulations reduce costs because imperfect competition and non-salient pricing prevent issuers from fully recovering lost fee revenue. The authors attribute the payoff disclosure’s negligible effect to poor delivery: Consumers who pay online rarely view their monthly statements.

Relevance to Disclosure Overload: Counterevidence. The disclosure failed because consumers rarely saw it during the payment process, rather than because excessive information overwhelmed them.

Relevance to Crowding Out: None. The study examines the delivery of credit card disclosures but does not analyze whether disclosures compete for limited screen space.

• Akhawe, Devdatta, and Adrienne Porter Felt. “Alice in Warningland: A Large-Scale Field Study of Browser Security Warning Effectiveness.” In Proceedings of the 22nd USENIX Security Symposium, 257–272. 2013.

Approach: Peer-reviewed, large-scale field study using browser telemetry data.

Findings: Across more than 25 million browser security warnings, users bypassed 33% of Mozilla Firefox’s Secure Sockets Layer (SSL) warnings and 70.2% of Google Chrome’s. They bypassed about 10% of Firefox’s malware and phishing warnings, compared with 25% of Chrome’s. Users dismissed the most common SSL errors fastest. Half bypassed Chrome’s most common SSL warning in less than 1.7 seconds, a result “consistent with the theory of warning fatigue.”

Authors’ Conclusions: Security warnings can work well when designed effectively, contrary to the assumption that users routinely ignore them. Frequent alerts can nevertheless cause warning fatigue, leading users to dismiss familiar messages without reading them.

Relevance to Disclosure Overload: Supporting. The evidence of warning fatigue suggests that repeated warnings can prompt rapid dismissal. By extrapolation, a high volume of required disclosures may produce similar overload.

Relevance to Crowding Out: None. The study examines the frequency of warnings over time, rather than whether simultaneously displayed disclosures displace other information on a screen.

• Albrecht, Brian, Eric Fruits, Daniel J. Gilman, and Geoffrey A. Manne. Comments of the International Center for Law & Economics: Rule on Unfair or Deceptive Fees in Online Food Delivery Services ANPRM, FTC Project No. P267101. International Center for Law & Economics, May 18, 2026. https://laweconcenter.org/wp-content/uploads/2026/05/FTC-Delivery-Fees-2026.pdf.

Approach: Non-peer-reviewed policy analysis and commentary.

Findings: A single “all-in” pricing rule poses different problems for food-delivery platforms than for hotels or ticket sellers because delivery fees vary with each order. Requiring platforms to disclose every potential variable upfront could force them to display hypothetical estimates or adopt inefficient pricing structures. Yet collapsing all fees into one figure would prevent consumers from identifying charges, such as small-order fees, that they could avoid by changing their carts.

Authors’ Conclusions: The Federal Trade Commission should not adopt a sectorwide food-delivery rule based on its current enforcement record. If the Commission adopts a rule, it should distinguish mandatory fixed fees from contingent variable fees. Excessive detail forces consumers to “[sort] the important points from the minor detail.”

Relevance to Disclosure Overload: Direct. The authors cite federal findings that overly detailed disclosures frustrate consumers and cause them to ignore the information altogether.

Relevance to Crowding Out: None. The comment examines the timing and level of detail of variable-fee disclosures, rather than whether disclosures compete for limited screen space or consumer attention.

• Anderson, Bonnie Brinton, Anthony Vance, C. Brock Kirwan, David Eargle, and Jeffrey L. Jenkins. “How Users Perceive and Respond to Security Messages: A NeuroIS Research Agenda and Empirical Study.” European Journal of Information Systems 25, no. 4 (2016): 364–390. https://doi.org/10.1057/ejis.2015.21.

Approach: Peer-reviewed theoretical research agenda and laboratory experiment using eye tracking.

Findings: In an eye-tracking study of 62 participants, attention to security warnings declined significantly with each successive viewing. This decline was significantly smaller for polymorphic warnings, which change their appearance between viewings.

Authors’ Conclusions: People habituate to repeated security messages and unconsciously devote less visual attention to them over time. Changing a warning’s visual presentation can substantially reduce habituation driven by “hidden (automatic or unconscious) mental processes.”

Relevance to Disclosure Overload: Supporting. The study shows that repeated warnings lose users’ attention as users become habituated and begin to ignore them unconsciously. By extrapolation, repeated disclosures may produce a similar form of overload.

Relevance to Crowding Out: None. The study measures habituation across successive warnings, rather than whether concurrently displayed information competes for limited screen space or attention.

• Ben-Shahar, Omri, and Carl E. Schneider. “The Failure of Mandated Disclosure.” University of Pennsylvania Law Review 159, no. 3 (2011): 647–749. https://home.uchicago.edu/omri/pdf/articles/Mandated_Disclosure.pdf.

Approach: Peer-reviewed literature review and policy analysis.

Findings: The authors document widespread failures of mandated disclosure in consumer credit, online contracts, and other fields. Consumers miscalculated finance charges by 200% because they misunderstood credit terms, suggesting that disclosure had no effect or made decisions worse. In one study of online boilerplate agreements, only about one in 1,000 consumers opened the pre-purchase disclosure, and those who did spent a median of 29 seconds reading it. The authors attribute these failures to cognitive overload and the accumulation of competing mandates: “[T]he accumulation problem arises because so many disclosures assail disclosees.”

Authors’ Conclusions: Mandated disclosure rests on faulty assumptions about human cognition and decision-making. The authors recommend abandoning it as a regulatory technique, rather than trying to improve it through simplification.

Relevance to Disclosure Overload: Direct. The article explains how cognitive overload impairs consumers’ comprehension of complex disclosures.

Relevance to Crowding Out: Direct. The article identifies an accumulation problem in which each additional disclosure competes for consumers’ finite attention with other disclosures and daily activities.

• Bertrand, Marianne, and Adair Morse. “Information Disclosure, Cognitive Biases, and Payday Borrowing.” The Journal of Finance 66, no. 6 (2011): 1865–1893. https://doi.org/10.1111/j.1540-6261.2011.01698.x.

Approach: Peer-reviewed randomized field experiment.

Findings: Disclosures showing payday borrowers the cumulative dollar cost of repeatedly renewing a loan reduced borrowing by 11% over the next four months. A savings-planner treatment designed to encourage self-control had no effect, either alone or combined with the information treatments. By contrast, disclosures designed around borrowers’ cognitive biases “significantly reduce[d] the frequency and amount” of borrowing.

Authors’ Conclusions: Standard mandated disclosures assume that consumers act rationally. Reframing costs to address specific cognitive biases can change behavior. These biases include narrow bracketing, or viewing each loan in isolation, and the “peanuts effect,” or treating small recurring charges as inconsequential. The authors do not claim that targeted disclosures can solve the problems associated with payday borrowing, but they stress their low implementation cost.

Relevance to Disclosure Overload: Boundary condition. The study shows that simple, behaviorally designed disclosures can improve decisions without causing cognitive overload, even when more complex disclosures might fail.

Relevance to Crowding Out: None. The study tests disclosures delivered in physical envelopes and does not examine whether information competes for limited space in a crowded visual display.

• Blake, Tom, Sarah Moshary, Kane Sweeney, and Steve Tadelis. “Price Salience and Product Choice.” Marketing Science 40, no. 4 (2021): 619–636. https://doi.org/10.1287/mksc.2020.1261.

Approach: Peer-reviewed, large-scale field experiment.

Findings: On StubHub, hiding mandatory fees until checkout increased revenue by about 21%. Buyers who saw fees only at checkout were 14.1% more likely to complete a purchase and spent 5.42% more, on average. Users who saw fees upfront often left the platform earlier, while those who encountered fees later “differentially exit[ed] at checkout.”

Authors’ Conclusions: Obscuring fees creates search friction that distorts how much consumers buy and which products they choose, steering them toward more expensive tickets. Delayed fees affect even experienced users, likely because calculating final prices imposes additional mental costs.

Relevance to Disclosure Overload: Counterevidence. Prominent upfront disclosure of mandatory fees improved consumer decision-making, undercutting the claim that additional disclosure necessarily impairs comprehension.

Relevance to Crowding Out: None. The study examines sequential price disclosure and search friction, rather than whether disclosures displace other information within a limited visual space.

• Bollinger, Bryan, Phillip Leslie, and Alan Sorensen. “Calorie Posting in Chain Restaurants.” American Economic Journal: Economic Policy 3, no. 1 (2011): 91–128. https://doi.org/10.1257/pol.3.1.91.

Approach: Peer-reviewed natural experiment using transaction data.

Findings: Mandatory calorie posting at Starbucks reduced average calories per transaction by 6%. Changes in food purchases accounted for nearly the entire reduction, while beverage choices changed little. Calories per food item fell by about 14 to 52 calories as consumers bought fewer food items and chose lower-calorie options. The policy did not reduce Starbucks’ average revenue and increased revenue at stores near competitors.

Authors’ Conclusions: Calorie posting changes consumer behavior by increasing knowledge and making calorie information more salient. The study could not directly measure the policy’s long-term effects on obesity or body mass index.

Relevance to Disclosure Overload: Counterevidence. Adding a required numerical disclosure changed consumer behavior without evidence that the additional information impaired decision-making.

Relevance to Crowding Out: None. The study measures behavioral responses to calorie posting but does not examine whether disclosures compete for limited visual space or attention.

• Bollinger, Dino, Karel Kubicek, Carlos Cotrini, and David Basin. “Automating Cookie Consent and GDPR Violation Detection.” In 31st USENIX Security Symposium (USENIX Security 22), 2893–2910. USENIX Association, 2022. https://www.usenix.org/system/files/sec22summer_bollinger.pdf.

Approach: Peer-reviewed, large-scale automated web measurement.

Findings: A scan of about 30,000 websites identified potential violations of the General Data Protection Regulation (GDPR) on 94.7% of them. Nearly 70% assumed consent before users made a choice, and 21.3% created cookies after users explicitly withheld consent. The researchers also developed a machine-learning browser extension that automatically filtered about “90% of the privacy-invasive cookies.”

Authors’ Conclusions: GDPR consent mechanisms often fail because website administrators use deceptive practices or disregard users’ choices. Client-side automation can help protect users because regulatory agencies cannot monitor the volume of potential noncompliance.

Relevance to Disclosure Overload: Context. The prevalence of defective cookie banners shows how mandated consent mechanisms can fail in practice. Attributing those failures to cognitive overload, rather than deceptive design or noncompliance, requires extrapolation.

Relevance to Crowding Out: None. The study examines compliance failures and evasion tactics, rather than spatial or attentional competition among disclosures.

• Bouhoula, Ahmed, Karel Kubicek, Amit Zac, Carlos Cotrini, and David Basin. “Automated Large-Scale Analysis of Cookie Notice Compliance.” In 33rd USENIX Security Symposium (USENIX Security 24), 1723–1740. USENIX Association, 2024. https://www.usenix.org/conference/usenixsecurity24/presentation/bouhoula.

Approach: Peer-reviewed, large-scale automated web measurement.

Findings: The researchers evaluated 97,000 websites subject to the General Data Protection Regulation (GDPR). Among sites offering an opt-out option, 65.4% still collected user data after users explicitly withheld consent. Another 73.4% set analytics or advertising cookies before users interacted with the cookie notice. The researchers also found forced-action dark patterns on 46.4% of websites with notices.

Authors’ Conclusions: Widespread noncompliance has rendered the current notice-and-consent framework ineffective. Popular websites were especially likely to display apparently compliant notices while disregarding users’ choices and continuing to collect data. Regulators need automated tools to detect deceptive designs and enforce privacy rules at scale.

Relevance to Disclosure Overload: Context. The study documents widespread failure within a mandated notice-and-consent system. It attributes that failure to deceptive design and noncompliance, rather than cognitive overload among users.

Relevance to Crowding Out: None. The study examines consent evasion and compliance failures, rather than whether disclosures displace other valuable information or compete for users’ attention.

• Campos, Sarah, Juliana Doxey, and David Hammond. “Nutrition Labels on Pre-Packaged Foods: A Systematic Review.” Public Health Nutrition 14, no. 8 (2011): 1496–1506. https://doi.org/10.1017/S1368980010003290.

Approach: Peer-reviewed systematic review.

Findings: The review examined 120 articles. Although more than 50% of consumers typically reported using nutrition labels, many struggled to apply quantitative nutrition information. Labels that required calculations involving serving sizes caused particular confusion, especially among consumers with less education. Simplified formats, such as front-of-package traffic-light labels, significantly increased “consumer ability to identify healthier food options.”

Authors’ Conclusions: Mandatory nutrition labels offer a cost-effective population-level intervention, but complex numerical formats remain inaccessible to many consumers. Regulators should simplify label content and test new formats that consumers with varying literacy levels can understand.

Relevance to Disclosure Overload: Supporting. The review finds that dense, calculation-heavy disclosures confuse consumers and impair comprehension.

Relevance to Crowding Out: None. The review examines the format and comprehensibility of individual package labels, rather than spatial competition among multiple disclosures.

• Chetty, Raj, Adam Looney, and Kory Kroft. “Salience and Taxation: Theory and Evidence.” American Economic Review 99, no. 4 (2009): 1145–1177. https://doi.org/10.1257/aer.99.4.1145.

Approach: Peer-reviewed field experiment and natural experiment.

Findings: In a grocery-store experiment, displaying tax-inclusive shelf prices reduced demand for treated products by about 8% relative to the control groups. State-level data likewise showed that increases in salient excise taxes reduced alcohol consumption substantially more than equivalent increases in less salient sales taxes. Survey data showed that the median consumer understood the tax status of most goods, indicating that “salience effects,” rather than a lack of knowledge, drove the weaker response to sales taxes.

Authors’ Conclusions: Consumers systematically underreact to less salient taxes because they focus on posted prices while shopping, contrary to the neoclassical assumption that consumers fully account for all costs. Policymakers therefore need both tax-demand and price-demand curves to estimate taxation’s welfare effects accurately.

Relevance to Disclosure Overload: Counterevidence. Making tax information salient at the point of purchase changed consumers’ choices in the expected direction, indicating that an additional upfront disclosure can improve price comprehension.

Relevance to Crowding Out: Context. The study shows that consumers often overlook less salient price information, consistent with finite attention. It does not directly examine whether disclosures physically displace one another.

• de Clippel, Geoffroy, Kfir Eliaz, and Kareen Rozen. “Competing for Consumer Inattention.” Journal of Political Economy 122, no. 6 (2014): 1203–1234. https://doi.org/10.1086/676931.

Approach: Peer-reviewed theoretical model.

Findings: The authors model consumers with limited capacity to inspect goods across multiple markets. Consumers use market leaders’ prices to decide which markets merit closer examination. This creates “cross-market competition for their inattention,” prompting market leaders to lower prices to avoid scrutiny. As a result, reducing average consumer attention—while holding constant the share of fully inattentive consumers—can increase consumer welfare by lowering average prices.

Authors’ Conclusions: Limited attention creates competition among firms in otherwise independent markets. Partially inattentive consumers may miss the best individual deals, but firms’ efforts to avoid attracting scrutiny can exert downward pressure on prices and benefit consumers overall.

Relevance to Disclosure Overload: Context. The model assumes that consumers have limited cognitive capacity. Applying that mechanism to comprehension failures caused by mandated disclosures requires extrapolation.

Relevance to Crowding Out: Direct. The model shows how multiple markets compete for finite consumer attention: Investigating one product or market leaves less capacity to examine another.

• DellaVigna, Stefano, and Elizabeth Linos. “RCTs to Scale: Comprehensive Evidence from Two Nudge Units.” Econometrica 90, no. 1 (2022): 81–116. https://doi.org/10.3982/ECTA18709.

Approach: Peer-reviewed meta-analysis and review of administrative randomized controlled trials (RCTs).

Findings: Across 126 trials involving 23.5 million people, behavioral nudges implemented at scale, such as simplified communications and reminders, increased target behaviors by an average of 1.4 percentage points. This represented an 8% improvement over the control groups. A meta-analysis of 26 published academic studies found a much larger average effect of 8.7 percentage points. Statistical modeling indicated that publication bias accounted for about 70% of the difference.

Authors’ Conclusions: Behavioral nudges in government settings produce meaningful, statistically significant improvements at low marginal cost. Their effects at scale are much smaller than the published academic literature suggests because journals disproportionately publish large, statistically significant results.

Relevance to Disclosure Overload: Context. The study finds that simplifying administrative communications can improve take-up, suggesting that reducing informational complexity aids decision-making. This provides indirect evidence for the inverse of disclosure overload.

Relevance to Crowding Out: None. The study compares the effectiveness of large-scale behavioral nudges with published academic findings but does not examine competition among simultaneous disclosures.

• Downs, Julie S., Jessica Wisdom, and George Loewenstein. “Helping Consumers Use Nutrition Information: Effects of Format and Presentation.” American Journal of Health Economics 1, no. 3 (2015): 326–344. https://doi.org/10.1162/ajhe_a_00020.

Approach: Peer-reviewed field and laboratory experiments.

Findings: Providing raw numerical calorie information had almost no effect on midday snack choices compared with providing no information. Combining calorie information with a choice-architecture nudge that placed lower-calorie items earlier in a sequence helped consumers use the information. Poorly combined interventions could backfire. In one experiment, a simple primacy nudge “is completely reversed when calorie information is posted.”

Authors’ Conclusions: Raw information produces little behavioral benefit when consumers find it difficult to process. Simpler heuristic cues, such as traffic-light labels and sequenced choices, show greater promise. Policymakers should test interventions in combination because they can trigger different psychological processes, produce nonadditive effects, or backfire.

Relevance to Disclosure Overload: Direct. Raw numerical calorie disclosures failed to improve decisions because consumers struggled to process them, while simpler formats proved more effective.

Relevance to Crowding Out: Context. The study shows that multiple interventions can interact and interfere with one another, suggesting that an added disclosure may weaken another nudge. Applying this finding to competition for visual space requires extrapolation.

• Dowhal v. SmithKline Beecham Consumer Healthcare, 32 Cal. 4th 910 (2004). https://scocal.stanford.edu/opinion/dowhal-v-smithkline-beecham-33399.

Approach: Primary legal authority from the California Supreme Court.

Provisions/Holding: The California Supreme Court held that the Federal Food, Drug, and Cosmetic Act preempted California’s Proposition 65 requirement that nicotine-replacement therapy products carry a reproductive-toxicity warning. The U.S. Food and Drug Administration (FDA) had adopted a uniform, carefully tailored warning about the products’ risks during pregnancy. The agency sought to inform pregnant women without discouraging them from using the products to stop smoking. The FDA rejected the Proposition 65 warning because it “would have the effect of misleading consumers.” The court also cited the “dangers of overwarning and of less meaningful warnings crowding out necessary warnings.”

Procedural Status: The California Supreme Court reversed the judgment of the Court of Appeal.

Relevance to Disclosure Overload: Direct. The court relied on the FDA’s determination that excessive warnings about remote risks could mislead consumers and prompt medically harmful choices, such as continuing to smoke.

Relevance to Crowding Out: Context. The court expressly recognized that less meaningful warnings can crowd out necessary ones, supporting the concept of attentional displacement.

• Federal Communications Commission. “Empowering Broadband Consumers Through Transparency.” Final rule. Federal Register 87 (December 16, 2022): 76,959–76,980. https://www.federalregister.gov/documents/2022/12/16/2022-26854/empowering-broadband-consumers-through-transparency.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: Acting under the Infrastructure Investment and Jobs Act, the Federal Communications Commission requires broadband internet service providers to display a uniform consumer label at the point of sale. The label must disclose prices, introductory rates, data allowances, and performance metrics. To limit information overload, the Commission requires links to detailed network-management practices and privacy policies instead of placing that information on the label. It concluded that detailed privacy information “would likely overwhelm consumers and not benefit them at the point of sale.”

Procedural Status: The final rule took effect January 17, 2023.

Relevance to Disclosure Overload: Direct. The Commission excluded detailed network-management and privacy information because complex disclosures could overwhelm consumers, make the label unwieldy, and impede comparison shopping.

Relevance to Crowding Out: Supporting. The Commission recognized that a label has limited space and that excessive detail could obscure more important purchasing information. Applying that conclusion to a broader theory of crowding out requires some extrapolation.

• Federal Communications Commission. “Empowering Broadband Consumers Through Transparency; Delete, Delete, Delete.” Proposed rule. Federal Register 90 (December 3, 2025): 55,713–55,716. https://www.federalregister.gov/documents/2025/12/03/2025-21807/empowering-broadband-consumers-through-transparency-delete-delete-delete.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: The Federal Communications Commission proposed eliminating several broadband-label requirements, including verbatim telephone readings, itemization of location-dependent fees, and machine-readable data. The Commission reasoned that these mandates may impose “unnecessary costs and burdens on providers” without making the labels more useful to consumers. It explained that a visual label does not translate easily into a telephone conversation and that itemizing fees that vary by location may require numerous labels for the same service.

Procedural Status: The comment period closed January 2, 2026, and the reply-comment period closed February 2, 2026. The Commission adopted a final rule on July 22, 2026. The final rule permits conversational telephone summaries and aggregated presentation of location-dependent fees, eliminates the machine-readable-data requirement, and makes other changes. Most provisions take effect September 14, 2026.

Relevance to Disclosure Overload: Direct. The proposal identifies potential confusion from requiring representatives to recite a visual label verbatim over the telephone, where consumers cannot review the information at their own pace.

Relevance to Crowding Out: Supporting. The proposal treats detailed itemization of variable fees as a potential source of consumer confusion. This concern supports the premise of competition for finite attention, though the connection remains inferential.

• Federal Trade Commission. .com Disclosures: How to Make Effective Disclosures in Digital Advertising. FTC Staff Guidance. March 2013. https://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf.

Approach: Non-peer-reviewed agency guidance and policy analysis.

Provisions/Holding: The Federal Trade Commission states that disclosures must remain clear and conspicuous across digital platforms, including mobile devices with limited screen space. Information needed to prevent deception should appear as close as possible to the claim it qualifies because scrolling increases the likelihood that consumers will miss it. The FTC also cautions that essential disclosures do not become effective merely because they appear in lengthy terms-of-use agreements. Such disclosures “should not be relegated to them.”

Procedural Status: FTC staff guidance rather than a binding regulation.

Relevance to Disclosure Overload: Direct. The guidance recognizes that burying important information in lengthy text prevents consumers from finding and understanding it.

Relevance to Crowding Out: Direct. The guidance explains how limited screen space and competing visual elements can reduce a disclosure’s prominence and divert consumers’ attention.

• Federal Trade Commission. “Trade Regulation Rule on Unfair or Deceptive Fees.” Final rule. Federal Register 90 (January 10, 2025): 2,066. https://www.federalregister.gov/documents/2025/01/10/2024-30293/trade-regulation-rule-on-unfair-or-deceptive-fees.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: Acting under 15 U.S.C. § 57a, the Federal Trade Commission declared it unfair and deceptive for live-event ticketing and short-term lodging businesses to advertise prices that omit mandatory fees. The rule requires businesses to display the total price more prominently than other pricing information, except the final payment amount. Before consumers consent to pay, businesses must disclose the nature, purpose, and amount of excluded charges, such as government and shipping fees. The Commission declined to require affirmative disclosure of each fee’s refundability because extensive qualifications could make such disclosures “impractical for businesses and confusing to consumers.”

Procedural Status: Final rule in effect since May 12, 2025.

Relevance to Disclosure Overload: Boundary condition. The Commission declined to require businesses to list the refundability conditions for every fee because extensive, itemized disclosures could confuse consumers and impede clear price communication.

Relevance to Crowding Out: None. The rule addresses the prominence and timing of total-price disclosures. The Commission rejected objections that upfront total-price disclosure would unduly constrain other price presentations, but it did not analyze attentional displacement among disclosures.

• Federal Trade Commission. “Rule on Unfair or Deceptive Fees in Online Food Delivery Services.” Advance notice of proposed rulemaking. Federal Register 91 (April 16, 2026): 20,381. https://www.federalregister.gov/documents/2026/04/16/2026-07473/rule-on-unfair-or-deceptive-fees-in-online-food-delivery-services.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: Acting under Section 18 of the Federal Trade Commission Act, the FTC requested comments on a potential rule addressing unfair or deceptive fees on online food-delivery platforms. The agency describes platforms advertising free or low-cost delivery before adding mandatory service, small-order, or other fees at checkout. Consumers may underestimate the total cost and decline to restart their search because of the “perceived futility of doing so.” The FTC asked whether a rule should require disclosure of the total price or mandatory fees earlier in the transaction.

Procedural Status: The comment period closed May 18, 2026. The proceeding remains at the advance-notice stage.

Relevance to Disclosure Overload: Context. The notice considers whether platforms should disclose variable fees upfront, which raises potential overload concerns. The document itself focuses on deception caused by drip pricing, rather than excessive disclosure.

Relevance to Crowding Out: None. The notice examines the timing of fee disclosures and deceptive pricing, rather than whether disclosures spatially displace other information.

• Fruits, Eric, and Jeffrey Westling. Comments of the International Center for Law & Economics: FCC CG Docket No. 22-2 and GN Docket No. 25-133. International Center for Law & Economics, January 2, 2026. https://laweconcenter.org/wp-content/uploads/2026/01/Broadband-Labels-Comments-2025.pdf.

Approach: Non-peer-reviewed policy analysis and commentary.

Findings: The authors support the Federal Communications Commission’s proposal to eliminate several broadband-label requirements. They cite behavioral research showing that excessive itemization imposes cognitive burdens and reduces consumer welfare. Requiring telephone representatives to read visual labels verbatim also creates a burdensome and confusing interaction. Post-sale labels in customer portals provide little value when they contain static, outdated information rather than current plan terms.

Authors’ Conclusions: Disclosures work only when they help consumers make decisions. Removing location-dependent fee itemization and verbatim telephone-reading requirements would improve the signal-to-noise ratio. Once disclosures exceed consumers’ processing capacity, “decision quality deteriorates, rather than improves.”

Relevance to Disclosure Overload: Direct. Drawing on behavioral economics, the authors argue that disclosure volumes exceeding consumers’ cognitive capacity impair decision quality.

Relevance to Crowding Out: Direct. The authors argue that itemized lists of location-dependent fees create clutter that diverts attention from the total monthly price.

• Gabaix, Xavier. “Behavioral Inattention.” In Handbook of Behavioral Economics, vol. 2, edited by B. Douglas Bernheim, Stefano DellaVigna, and David Laibson, 261–343. Elsevier, 2019. https://doi.org/10.1016/bs.hesbe.2018.11.001.

Approach: Peer-reviewed literature review and theoretical framework.

Findings: Across empirical studies, the mean attention parameter is 0.44, placing consumers roughly midway between full attention and complete inattention. The author develops a sparsity-based model in which people weigh the benefits of greater attention against its cognitive costs. They therefore systematically underweight or ignore variables they consider less important. This bounded rationality produces asymmetric Slutsky matrices and excess price volatility.

Authors’ Conclusions: Behavioral inattention is widespread and can be modeled tractably. People anchor on simplified default models and adjust only partially toward more accurate assessments. Incorporating limited attention into microeconomic theory can overturn standard results, including the symmetry of the Slutsky matrix and the efficiency of competitive equilibria.

Relevance to Disclosure Overload: Supporting. The framework explains why consumers cannot process every available piece of information and may disregard secondary attributes, causing additional disclosures to fail.

Relevance to Crowding Out: Context. The review examines how people allocate a finite attention budget among competing attributes. Applying that framework specifically to mandated disclosures requires extrapolation.

• Gabaix, Xavier, and David Laibson. “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets.” The Quarterly Journal of Economics 121, no. 2 (2006): 505–540. https://doi.org/10.1162/qjec.2006.121.2.505.

Approach: Peer-reviewed theoretical model.

Findings: When the share of myopic consumers is sufficiently large, a “Shrouded Prices Equilibrium” can arise. Competitive firms conceal add-on prices, sell base products below marginal cost, and charge high markups for add-ons. Firms have no incentive to educate myopic consumers because informed consumers will buy the loss-leading base product and avoid the expensive add-ons. Debiasing consumers therefore makes them unprofitable customers.

Authors’ Conclusions: High add-on markups can persist even in highly competitive markets with costless advertising because of a “curse of debiasing.” Firms lose money by educating myopic consumers, so competition alone will not eliminate inefficient information shrouding.

Relevance to Disclosure Overload: Context. The model explains why consumers overlook hidden add-on costs. Applying that mechanism to overload caused by mandated disclosures requires extrapolation.

Relevance to Crowding Out: Context. The article examines firms’ incentives to suppress information and exploit limited attention. This relates to the supply of salient information but does not address the displacement of mandatory disclosures.

• Hancock, P. A., A. D. Kaplan, K. R. MacArthur, and J. L. Szalma. “How Effective Are Warnings? A Meta-Analysis.” Safety Science 130 (2020): 104876. https://doi.org/10.1016/j.ssci.2020.104876.

Approach: Peer-reviewed meta-analysis.

Findings: The authors synthesized 272 effect sizes from 30 studies. Integrating a warning directly into a task substantially increased compliance. Warnings containing words also produced greater compliance than pictures alone. By contrast, “an increase in clutter on the warning induced a lower level of behavioral compliance.”

Authors’ Conclusions: Uncluttered warnings integrated into the task produce the highest compliance. Warnings should nevertheless serve as a last line of defense because their overall ability to change behavior remains limited.

Relevance to Disclosure Overload: Supporting. The finding that visual clutter reduces compliance directly supports the premise that excessive information impairs processing and decision-making.

Relevance to Crowding Out: Context. Integrating warnings into the primary task improves compliance, suggesting that competing information can reduce their effectiveness. Applying this finding specifically to competition for screen space requires extrapolation.

• Kielty, Patrick D., K. Philip Wang, and Diana L. Weng. “Simplifying Complex Disclosures: Evidence from Disclosure Regulation in the Mortgage Markets.” The Accounting Review 98, no. 4 (2023): 191–216. https://doi.org/10.2308/TAR-2021-0269.

Approach: Peer-reviewed difference-in-differences analysis using loan-level data.

Findings: The TILA-RESPA Integrated Disclosure (TRID) rule reduced mortgage-disclosure word counts by 65%. After its implementation, inexperienced first-time homebuyers obtained significantly lower interest rates relative to experienced repeat buyers. Higher points or upfront fees did not offset these savings, and the effect was strongest in areas with greater lender density. The simplified disclosures did not improve delinquency rates.

Authors’ Conclusions: Simplifying complex, duplicative disclosures lowers consumers’ processing costs, helping them comparison shop and avoid predatory lenders. By reducing information overload, “less disclosure makes borrowers better off.”

Relevance to Disclosure Overload: Direct. The study provides empirical evidence that reducing the volume and complexity of mandated disclosures improves consumer understanding and financial outcomes.

Relevance to Crowding Out: None. The study measures the effects of reducing disclosure text but does not examine whether information spatially displaces competing content.

• Lacko, James M., and Janis K. Pappalardo. Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms. Bureau of Economics Staff Report. Federal Trade Commission, June 2007. https://www.ftc.gov/sites/default/files/documents/reports/improving-consumer-mortgage-disclosures-empirical-assessment-current-and-prototype-disclosure-forms/p025505mortgagedisclosurereport.pdf.

Approach: Non-peer-reviewed agency report based on 36 qualitative interviews and quantitative testing with more than 800 mortgage customers.

Findings: Existing Truth in Lending Act (TILA) and Good Faith Estimate (GFE) forms failed to communicate essential mortgage costs. About 20% of respondents could not correctly identify the annual percentage rate, cash due at closing, or monthly payment. The authors’ prototype forms “significantly improved consumer recognition of mortgage costs” among prime and subprime borrowers, with the largest gains for complex loans.

Authors’ Conclusions: Poorly designed disclosures confuse consumers and may cause them to stop processing the information altogether. Agencies should conduct extensive consumer testing to ensure that disclosures help consumers rather than hinder them.

Relevance to Disclosure Overload: Supporting. The report shows that confusing, voluminous disclosures can cause consumers to abandon information processing, consistent with overload theories.

Relevance to Crowding Out: None. The report evaluates form design and comprehension but does not examine competition among multiple disclosures for space or attention.

• Lacko, James M., and Janis K. Pappalardo. “The Failure and Promise of Mandated Consumer Mortgage Disclosures.” American Economic Review 100, no. 2 (2010): 516–521. https://doi.org/10.1257/aer.100.2.516.

Approach: Peer-reviewed qualitative interviews and randomized controlled experiment.

Findings: In a controlled experiment with 819 borrowers, mandated mortgage forms failed to communicate key loan terms. Nearly “nine-tenths could not identify the total amount” of upfront charges. A prototype disclosure significantly improved comprehension of costs and terms, though consumers continued to struggle with highly complex loan structures.

Authors’ Conclusions: Mandated disclosures fail because of confusing, ineffective design, rather than inherent consumer irrationality or the unavoidable complexity of modern mortgages. Policymakers should consolidate duplicative forms into a single, well-tested document. This approach could strengthen consumer protection without limiting product availability.

Relevance to Disclosure Overload: Supporting. The study shows that dense, uncoordinated disclosure mandates confuse consumers and impair comprehension, though it attributes these effects primarily to poor design.

Relevance to Crowding Out: None. The experiment measures document comprehension, rather than competition for limited screen space or attention.

• Long, Michael W., Deirdre K. Tobias, Angie L. Cradock, Holly Batchelder, and Steven L. Gortmaker. “Systematic Review and Meta-Analysis of the Impact of Restaurant Menu Calorie Labeling.” American Journal of Public Health 105, no. 5 (2015): e11–e24. https://doi.org/10.2105/AJPH.2015.302570.

Approach: Peer-reviewed systematic review and meta-analysis.

Findings: Across 19 studies, menu calorie labels were associated with an average reduction of 18.13 kilocalories ordered per meal. Among the six highest-quality controlled studies conducted in restaurants, the estimated reduction fell to a statistically insignificant 7.63 kilocalories. Daily-calorie reference statements produced mixed results. One study found an additional reduction of 38 kilocalories, while another found no effect.

Authors’ Conclusions: The evidence provides “minimal evidence to support menu calorie labeling as a strategy” for substantially reducing calories purchased in restaurants. Findings from laboratory and other nonrestaurant settings may overstate the effects of disclosure policies in real-world settings.

Relevance to Disclosure Overload: Counterevidence. The restaurant studies found a null effect, rather than evidence that calorie disclosures worsened choices. The labels may fail to improve decisions substantially, but they do not appear to degrade them.

Relevance to Crowding Out: None. The meta-analysis estimates the isolated effect of menu labels and does not examine whether competing disclosures displace information or attention.

• Nicoletti, Allison, and Christina Zhu. “Economic Consequences of Transparency Regulation: Evidence from Bank Mortgage Lending.” Journal of Accounting Research 61, no. 5 (2023): 1827–1871. https://doi.org/10.1111/1475-679X.12498.

Approach: Peer-reviewed difference-in-differences analysis using administrative data.

Findings: After implementation of the TILA-RESPA Integrated Disclosure (TRID) rule, approval rates fell for covered closed-end loans relative to exempt open-end loans. The simplified disclosures appeared to facilitate comparison shopping because consumers were significantly more likely to withdraw covered applications or leave them incomplete. Covered loans also became less likely to sell on the secondary market.

Authors’ Conclusions: Simplified disclosures reduce consumers’ information-processing costs, improve comparison shopping, and constrain high bank fees. The same regulation imposes compliance costs and creates secondary-market frictions for banks, which can reduce credit availability.

Relevance to Disclosure Overload: Direct. The study shows that reducing the complexity and volume of mandated disclosures lowers processing costs and improves consumer decision-making.

Relevance to Crowding Out: None. The study examines the consumer and lender consequences of simplified disclosures, rather than spatial competition among disclosures.

• Organisation for Economic Co-operation and Development. Enhancing Online Disclosure Effectiveness. OECD Digital Economy Papers, no. 335. Paris: OECD Publishing, 2022. https://www.oecd.org/content/dam/oecd/en/publications/reports/2022/10/enhancing-online-disclosure-effectiveness_e8b230aa/6d7ea79c-en.pdf.

Approach: Non-peer-reviewed policy analysis and literature review by an intergovernmental organization.

Provisions/Holding: The Organisation for Economic Co-operation and Development advises policymakers to “limit the prescriptiveness and extensiveness” of mandated disclosures to the minimum necessary to avoid worsening information overload. The report identifies an accumulation problem in which individually defensible disclosure mandates become overwhelming when combined. Disclosures should remain clear, accessible, and conspicuous so consumers can use them effectively.

Procedural Status: Report of the OECD Committee on Consumer Policy.

Relevance to Disclosure Overload: Direct. The report identifies information overload as a major barrier that causes consumers to disregard online disclosures.

Relevance to Crowding Out: Direct. The report recognizes an accumulation problem in which concurrent disclosures compete for consumers’ finite time and attention.

• Persson, Petra. “Attention Manipulation and Information Overload.” Behavioural Public Policy 2, no. 1 (2018): 78–106. https://doi.org/10.1017/bpp.2017.10.

Approach: Peer-reviewed theoretical model.

Findings: In a model where experts compete for a decision-maker’s limited attention, lowering entry costs increases the number of experts. Beyond a certain point, the decision-maker tunes out and experiences lower expected utility. Under a mandatory disclosure rule, a single expert can strategically create “information overload” by adding irrelevant cues that conceal unfavorable required information. If regulators mandate a simple disclosure format, the expert may pursue “complexification” by disaggregating the product’s payoff structure until relevant information exceeds the consumer’s attention limit.

Authors’ Conclusions: Limited attention permits firms to manipulate consumers’ focus, making simple disclosure rules ineffective or counterproductive. Because format requirements may prompt firms to increase product complexity, policymakers may need to regulate product design directly.

Relevance to Disclosure Overload: Direct. The article models how excessive information, produced by either competition or strategic firm behavior, causes consumers to tune out and make worse decisions.

Relevance to Crowding Out: Direct. The model shows how irrelevant cues exhaust consumers’ limited attention and displace valuable mandated information.

• Rasch, Alexander, Miriam Thöne, and Tobias Wenzel. “Drip Pricing and Its Regulation: Experimental Evidence.” Journal of Economic Behavior & Organization 176 (2020): 353–370. https://doi.org/10.1016/j.jebo.2020.04.007.

Approach: Peer-reviewed theoretical analysis and laboratory experiment.

Findings: In simulated markets where comparing drip prices imposed a small search cost, sellers set drip prices near the permitted maximum and competed primarily on base prices. Relative to transparent pricing, drip pricing raised average total prices from 15.37 to 16.96, increased seller profits, and reduced buyer surplus. When the experiment randomized the maximum possible drip price, 21% of buyers mistakenly chose the more expensive option.

Authors’ Conclusions: Drip pricing discourages comparison shopping and harms consumers by causing them to underestimate final prices. Banning drip pricing promotes competition and increases consumer welfare.

Relevance to Disclosure Overload: Counterevidence. Requiring comprehensive upfront price disclosure improved decision-making, rather than impairing it.

Relevance to Crowding Out: None. The study examines sequential price disclosure and search costs, rather than concurrent competition among disclosures for space or attention.

• Robinson, Lisa A., W. Kip Viscusi, and Richard Zeckhauser. “Efficient Warnings, Not ‘Wolf or Puppy’ Warnings.” In The Future of Risk Management, edited by Howard Kunreuther, Robert J. Meyer, and Erwann O. Michel-Kerjan, 227–248. Philadelphia: University of Pennsylvania Press, 2019. https://rzeckhauser.scholars.harvard.edu/resource/efficientwarningspdf.

Approach: Peer-reviewed book chapter combining policy analysis and economic theory.

Findings: Required trans-fat labels coincided with a 78% reduction in trans-fat consumption between 2003 and 2012, though producer reformulation drove much of the decline. In the authors’ analysis of California’s Proposition 65, 69% of consumers mistakenly associated the generic cancer warning on cereal with the much greater risks of cigarette smoking. An abundance of undifferentiated warnings may cause consumers to ignore them because they cannot “separate puppies from wolves from dragons.”

Authors’ Conclusions: Warning systems fail when they use the same “wolf or puppy” language for risks of vastly different severity. Policymakers should use benefit-cost analysis to distinguish serious hazards from minor ones and prevent consumers from becoming complacent about critical warnings.

Relevance to Disclosure Overload: Direct. The chapter explains how an excess of indiscriminate warnings impairs consumer judgment and promotes complacency.

Relevance to Crowding Out: Supporting. The authors argue that proliferating low-value warnings divert attention from serious hazards, displacing more valuable information.

• Rummo, Pasquale E., Tod Mijanovich, Erilia Wu, Lloyd Heng, Emil Hafeez, Marie A. Bragg, Simon A. Jones, Beth C. Weitzman, and Brian Elbel. “Menu Labeling and Calories Purchased in Restaurants in a US National Fast Food Chain.” JAMA Network Open 6, no. 12 (2023): e2346851. https://doi.org/10.1001/jamanetworkopen.2023.46851.

Approach: Peer-reviewed quasi-experimental cohort study using difference-in-differences analysis.

Findings: Using nine years of transaction data from 2,329 Taco Bell restaurants, the researchers found that menu calorie labels were associated with 24.7 fewer calories purchased per transaction relative to control locations. Consumers bought fewer items, particularly tacos, and the decline was greatest during breakfast. Outside California, labeling was associated with an increase of 25.2 calories per in-store transaction but a decrease in calories purchased through drive-through orders.

Authors’ Conclusions: Consumers respond to calorie information on menu boards, producing small but sustained reductions in calories purchased over two years. Regional differences in consumer attitudes and ordering settings, including in-store and drive-through purchases, shape responses to the disclosures.

Relevance to Disclosure Overload: Counterevidence. Mandatory numerical disclosures modestly reduced calories purchased, rather than impairing consumer decision-making.

Relevance to Crowding Out: None. The study analyzes transaction data but does not examine how disclosure layout or competition among disclosures affects attention.

• Sanchez, Christopher A., and James Z. Goolsbee. “Character Size and Reading to Remember from Small Displays.” Computers & Education 55, no. 3 (2010): 1056–1062. https://eric.ed.gov/?id=EJ892494.

Approach: Peer-reviewed laboratory experiment.

Findings: Participants reading 12-point text on a small screen recalled substantially less information than those reading the same text on a full-size display. When the font shrank to 8 points, recall on the small screen matched recall on the full-size display. Larger characters required more scrolling and fragmented the text, reducing factual recall.

Authors’ Conclusions: Character size interacts with display size. On small screens, designers must balance legibility against the scrolling and fragmentation caused by larger text. More compact text can improve recall by keeping related information together.

Relevance to Disclosure Overload: Context. The study suggests that fragmentation and scrolling impair information processing on small screens. Connecting this effect to disclosure overload requires extrapolation.

Relevance to Crowding Out: None. The study examines text size, scrolling, and recall but does not test competition among multiple disclosures.

• Santana, Shelle, Steven K. Dallas, and Vicki G. Morwitz. “Consumer Reactions to Drip Pricing.” Marketing Science 39, no. 1 (2020): 1–23. https://doi.org/10.1287/mksc.2019.1207.

Approach: Peer-reviewed laboratory and field experiments.

Findings: Consumers exposed to drip pricing for optional add-ons initially selected the lower-base-price option at a much higher rate than consumers who saw fees upfront, 54.5% compared with 11.7%. Even after seeing the total price and receiving an opportunity to restart their search, 24.5% of consumers in the drip-pricing group stayed with the more expensive option. Only 7.8% of the upfront-pricing group made the same mistake. Consumers exposed to drip pricing also reported significantly less satisfaction with their final choices.

Authors’ Conclusions: Drip pricing makes initial choices sticky. Consumers overestimate the time needed to restart their search and mistakenly assume that competitors charge the same fees. The use of stylized online tasks and inexperienced participants limits the findings’ generalizability to experienced consumers in real markets.

Relevance to Disclosure Overload: Counterevidence. Upfront disclosure of optional fees improved price comprehension and reduced costly mistakes.

Relevance to Crowding Out: Context. The study shows that late disclosures often fail to correct consumers’ initial choices. Applying this finding to attentional or spatial crowding requires extrapolation.

• Sims, Christopher A. “Implications of Rational Inattention.” Journal of Monetary Economics 50, no. 3 (2003): 665–690. https://doi.org/10.1016/S0304-3932(03)00029-1.

Approach: Peer-reviewed theoretical model.

Findings: Applying Shannon’s information theory, the author models decision-makers as processing information through a channel with finite capacity. Under this constraint, they respond to aggregate economic variables gradually and with delay, while their individual behavior contains high-frequency noise.

Authors’ Conclusions: Replacing the assumption of unconstrained optimization with limited information-processing capacity better explains macroeconomic fluctuations and sluggish adjustment. Treating attention as a finite resource provides a common explanation for departures from classical rational expectations.

Relevance to Disclosure Overload: Context. The model establishes a finite capacity for processing information. Applying that constraint specifically to comprehension of mandated disclosures requires extrapolation.

Relevance to Crowding Out: Context. The model imposes a strict limit on processing new information but does not examine how particular disclosures compete for that capacity.

• Stango, Victor, and Jonathan Zinman. “Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees.” The Review of Financial Studies 27, no. 4 (2014): 990–1030. https://doi.org/10.1093/rfs/hhu008.

Approach: Peer-reviewed natural experiment using survey data.

Findings: Among 7,448 bank-account panelists, answering a survey with overdraft-related questions reduced the probability of incurring an overdraft fee that month by 3.7 percentage points, from a baseline rate of 26%. Repeated surveys built a “stock” of attention. Each additional survey completed over two years reduced the probability of an overdraft by 1.7 percentage points. Panelists avoided overdrafts primarily by making fewer debit-card and automatic-debit transactions, rather than by maintaining higher balances.

Authors’ Conclusions: Consumers possess a “limited, time-varying, associative, and malleable stock of attention” concerning household finance. Even uninformative prompts can focus attention and improve financial decisions, especially among consumers with less education and lower financial literacy.

Relevance to Disclosure Overload: Counterevidence. Making fee information more salient, even indirectly through surveys, reduced costly mistakes. The finding undercuts the claim that additional information necessarily impairs decision-making.

Relevance to Crowding Out: None. The study measures how attention prompts affect behavior but does not examine competition for limited screen space or displacement among disclosures.

• S. Department of Transportation. “Enhancing Transparency of Airline Ancillary Service Fees.” Final rule. Federal Register 89 (April 30, 2024): 34,620. https://www.federalregister.gov/documents/2024/04/30/2024-08609/enhancing-transparency-of-airline-ancillary-service-fees.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: Acting under 49 U.S.C. § 41712, the U.S. Department of Transportation required air carriers and ticket agents to disclose passenger-specific fees for checked bags, carry-on bags, and ticket changes or cancellations on the first page displaying fare and schedule information. The Department found that delayed fee disclosure causes substantial consumer injury. It permitted pop-ups, expandable text, and similar formats to avoid “overcrowd[ing] web pages.”

Procedural Status: The rule carried an effective date of July 1, 2024, but the 5th Circuit stayed it on July 29, 2024. The court vacated the rule on February 3, 2026, because the Department failed to provide an opportunity for public comment on a study used in the rulemaking. On July 2, 2026, the Department formally restored the disclosure rules that preceded the 2024 rule.

Relevance to Disclosure Overload: Boundary condition. The Department permitted flexible disclosure methods because rigid textual requirements could overcrowd webpages and make information harder to use.

Relevance to Crowding Out: Direct. The rule expressly addressed screen clutter and the displacement of flight options on space-constrained mobile displays.

• S. Department of Transportation. “Enhancing Transparency of Airline Ancillary Service Fees.” Final rule. Federal Register 91 (July 2, 2026): 40,368. https://www.federalregister.gov/documents/full_text/html/2026/07/02/2026-13450.html.

Approach: Primary legal authority from an agency rulemaking.

Provisions/Holding: The rule implements the 5th U.S. Circuit Court of Appeals’ vacatur of the Department’s 2024 ancillary-fee rule. The court found that the Department violated the Administrative Procedure Act by relying on a study without allowing public comment on it. The 2026 rule removes the requirement to display critical ancillary fees at the first point in an itinerary search, “reinstating the rules previously in force.” Under the restored 2011 framework, airlines and ticket agents must notify consumers on the first screen displaying a fare that baggage fees may apply and explain where consumers can find those fees. Airlines must also list ancillary fees in a central location on their websites.

Procedural Status: Final rule effective July 2, 2026, under 49 U.S.C. §§ 40113 and 41712.

Relevance to Disclosure Overload: Context. Restoring the 2011 framework reduces the information displayed during initial searches. Any reduction in cognitive burden is incidental because the rule implements a judicial vacatur based on procedural defects, rather than behavioral findings.

Relevance to Crowding Out: None. The Department issued the rule to implement the court’s procedural ruling and did not evaluate spatial or attentional competition among disclosures.

• Utz, Christine, Martin Degeling, Sascha Fahl, Florian Schaub, and Thorsten Holz. “(Un)informed Consent: Studying GDPR Consent Notices in the Field.” In Proceedings of the 2019 ACM SIGSAC Conference on Computer and Communications Security, 973–990. New York: Association for Computing Machinery, 2019. https://doi.org/10.1145/3319535.3354212.

Approach: Peer-reviewed, large-scale field experiments and online survey.

Findings: In field experiments involving more than 80,000 website visitors, a neutral binary notice offering accept-or-decline options produced significantly more active responses than complex vendor lists. When category or vendor options were not selected by default, fewer than 0.2% of users actively accepted all tracking. Banner placement also mattered. Bottom-left banners generated the most interaction, while users often ignored top-bar banners.

Authors’ Conclusions: Consent-notice design strongly affects whether users make an active choice or accept tracking because of fatigue or defaults. Opt-out banners are “unlikely to produce intentional/meaningful consent expression,” supporting a shift toward privacy by default.

Relevance to Disclosure Overload: Boundary condition. Complex vendor lists reduced engagement relative to a simple binary choice, showing how excessive detail can discourage active decision-making.

Relevance to Crowding Out: Context. Banner placement affected engagement, and banners occupied space that otherwise displayed website content. Applying these findings to broader theories of spatial crowding requires extrapolation.

• Vance, Anthony, Jeffrey L. Jenkins, Bonnie Brinton Anderson, Daniel K. Bjornn, and C. Brock Kirwan. “Tuning Out Security Warnings: A Longitudinal Examination of Habituation Through fMRI, Eye Tracking, and Field Experiments.” MIS Quarterly 42, no. 2 (2018): 355–380. https://doi.org/10.25300/MISQ/2018/14124.

Approach: Peer-reviewed laboratory studies using functional magnetic resonance imaging (fMRI) and eye tracking, combined with a field experiment.

Findings: During a three-week field experiment with 102 participants, adherence to repeated mobile-security warnings fell from 87% to 64%. Participants who saw polymorphic warnings, which changed appearance over time, rejected risky apps more accurately than those who saw static warnings, 76% compared with 55%. The fMRI results also showed declining responses in the right and left insula over successive days.

Authors’ Conclusions: Habituation is a neurobiological response marked by a “decreased response to repeated stimulation.” Repeated static warnings lose effectiveness as users unconsciously tune them out. Polymorphic warnings can sustain attention and improve adherence by changing their visual appearance.

Relevance to Disclosure Overload: Supporting. The study shows that repeated warnings produce habituation and progressively reduce attention and decision quality. Extending this finding to disclosure overload requires treating repetition as a source of overload.

Relevance to Crowding Out: None. The study measures habituation to warnings over time, rather than concurrent spatial displacement on a screen.

• Verrill, Linda, Fanfan Wu, David Weingaertner, Taiye Oladipo, Lisa Lubin, Roshni Devchand, Laura Koehler, Lauren Prowse, Caroline P. Martin, and Thea Zimmerman. Front of Package Labeling Literature Review. U.S. Food and Drug Administration, April 2023. https://www.fda.gov/media/175617/download?attachment.

Approach: Non-peer-reviewed agency report and systematic literature review.

Findings: Consumers generally prefer simple front-of-package (FOP) labels, and summary systems are often easier to understand than nutrient-specific formats such as Guideline Daily Amounts. Warning labels attract attention, require less processing time, and may discourage unhealthy purchases. The evidence on actual purchasing, diets, and health outcomes remains mixed. Some studies also found that warning labels can mitigate health halos created by nutrient-content marketing claims.

Authors’ Conclusions: Simple summary symbols and interpretive labels can help consumers identify healthier foods. Government endorsement may increase confidence in these labels. The report stresses that more research is needed to determine whether FOP labels produce healthier diets and better health outcomes.

Relevance to Disclosure Overload: Supporting. The review finds that consumers generally understand simplified summary labels more easily than detailed numerical formats. This supports overload theory, though the report does not expressly attribute the difference to information overload.

Relevance to Crowding Out: Context. The review discusses interactions among FOP labels, other package marketing, and time pressure. Applying those findings to spatial or attentional crowding requires extrapolation.

• Wang, Jialan, and Kathleen Burke. “The Effects of Disclosure and Enforcement on Payday Lending in Texas.” Journal of Financial Economics 145, no. 2 (2022): 489–507. https://doi.org/10.1016/j.jfineco.2021.09.024.

Approach: Peer-reviewed difference-in-differences analysis and event study.

Findings: A Texas mandate requiring behaviorally informed disclosures before each payday loan produced a persistent 12% decline in loan volume during its first six months. The decline occurred entirely through fewer loans, rather than smaller loan amounts. The researchers found no offsetting increase in prices, delinquencies, or defaults.

Authors’ Conclusions: Behaviorally designed disclosures can substantially affect equilibrium loan quantities and lender revenue, even for simple financial products. The targeted disclosures discouraged consumers from beginning new sequences of costly debt.

Relevance to Disclosure Overload: Counterevidence. An additional mandated disclosure reduced payday borrowing without evidence that it overwhelmed consumers, undercutting the claim that added disclosure necessarily impairs decision-making.

Relevance to Crowding Out: None. The study examines the effects of a physical disclosure sheet but does not measure competition for screen space or consumer attention.

• Weyl, E. Glen, and Michal Fabinger. “Pass-Through as an Economic Tool: Principles of Incidence Under Imperfect Competition.” Journal of Political Economy 121, no. 3 (2013): 528–583. https://doi.org/10.1086/670401.

Approach: Peer-reviewed theoretical economic modeling.

Findings: The authors extend standard tax-incidence principles to imperfectly competitive markets. Pass-through rates depend on the curvature of demand as well as the relative elasticities of supply and demand. Under monopoly, consumers and producers together bear more than the amount of the tax because the tax further reduces an already inefficiently low quantity. In symmetric imperfect competition, firms bear more of the tax relative to consumers as pricing conduct becomes less competitive, assuming a fixed pass-through rate.

Authors’ Conclusions: Tax incidence and pass-through provide a common framework for analyzing welfare and comparative statics across imperfectly competitive markets, connecting industrial organization with public finance. A principal limitation is the model’s partial-equilibrium assumption that outside alternatives are supplied competitively with no markups.

Relevance to Disclosure Overload: None. The article models tax incidence, cost pass-through, and market competition without addressing disclosure mandates, consumer comprehension, or cognitive limits.

Relevance to Crowding Out: None. The model does not examine finite attention, interface constraints, or the displacement of competing information.

[1] Rule on Unfair or Deceptive Fees in Online Food Delivery Services, 91 Fed. Reg. 20,381 (Apr. 16, 2026) (advance notice of proposed rulemaking) [hereinafter ANPRM].

The wealth and technological sophistication of modern society are readily apparent. Less visible, but no less remarkable, is its ability to coordinate the actions of billions of people who know almost nothing about one another’s circumstances.

Every day we make decisions without possessing most of the information on which those decisions ultimately depend. We purchase products whose origins we cannot trace, rely on medicines we did not test, respond to prices shaped by events occurring thousands of miles away, and invest retirement savings in companies whose operations we will never observe firsthand. Somehow, despite possessing only fragments of the relevant information, billions of independent decisions become coordinated without anyone directing the whole.

How is that possible?

Read the full piece here.

My first post at Truth on the Market—where I called myself a “Refugee from the FTC”—briefly discussed an advance notice of proposed rulemaking (ANPR) published in the Federal Register by the Federal Trade Commission (FTC) under Chair Lina Khan. This one bore the expansive title “Trade Regulation Rule on Commercial Surveillance and Data Security.”

I had more to say in a later post. I also joined my colleagues Geoffrey Manne and Kristian Stout in submitting more detailed and careful comments to the public record on behalf of the International Center for Law & Economics (ICLE). While they were more detailed and careful, those comments were no more enthusiastic. The same description fits the joint comments filed by George Mason University’s Program on Economics and Privacy and the Tech Law Program at the University of Arizona’s James E. Rogers College of Law.

We were hardly alone. Many outside the agency were surprised—if not alarmed—by the ANPR’s sweeping scope, lack of substantive clarity, and general hostility toward the digital economy. Critics included Alden Abbott, a former FTC general counsel; Jonathan Barnett of the University of Southern California; and Svetlana Gans and Natalie J. Hausknecht, writing jointly. Gans previously served as FTC chief of staff.

The concerns reached inside FTC headquarters as well. Commissioners Noah Joshua Phillips and Christine Wilson each vigorously dissented from the vote to issue the ANPR. Phillips objected, inter alia:

The Commercial Surveillance and Data Security advance notice of proposed rulemaking (“ANPR”) issued today by a majority of commissioners provides no notice whatsoever of the scope and parameters of what rule or rules might follow; thereby, undermining the public input and congressional notification processes. It is the wrong approach to rulemaking for privacy and data protection security.

What the ANPR does accomplish is to recast the Commission as a legislature, with virtually limitless rulemaking authority where personal data are concerned. It contemplates banning or regulating conduct the Commission has never once identified as unfair or deceptive. That is a dramatic departure even from recent Commission rulemaking practice. The ANPR also contemplates taking the agency outside its bailiwick. At the same time, the ANPR virtually ignores the privacy and data security concerns that have animated our enforcement regime for decades. A cavalcade of regulations may be on the way, but their number and substance are a mystery.

No notice of proposed rulemaking followed, and neither did a final rule. That was, in my view, the best possible outcome given the ANPR. If the agency had to begin a rulemaking, a more sober and restrained ANPR would have been better—one that recognized the information economy’s consumer benefits alongside its risks and avoided the skewed assumptions and loaded language of Shoshana Zuboff’s anti-tech polemic on “surveillance capitalism.” Better still would have been greater regulatory restraint from the start.

Read the full piece here.

California’s proposed antitrust fix for Hollywood needs a rewrite. Attorney General Rob Bonta calls his demand that Paramount keep its movie studio separate from Warner Bros. a structural remedy. In practice, it would make courts and regulators permanent studio supervisors. 

Read the full piece here.

OpenAI and Anthropic beef up customer data confidentiality for frontier models, but details lacking

It looks like I’m not isolated in thinking a lot about ways in which AI services can be provided not only securely, but also confidentially—even vis-à-vis the service provider (see my AI privilege and ChatGPT encryption, Trustworthy privacy for AI: Apple’s and Meta’s TEEs, and Meta AI’s Incognito Chat: a new bar for confidential AI). One thing you may have noticed in my commentary on confidential AI solutions is that I didn’t discuss the two frontier AI labs.

Read the full piece here.

Earlier this summer, my family took a vacation to Ocean City, Maryland, where the boardwalk offered ice cream, souvenirs, and an unexpected lesson in payment economics. Every retailer we visited added a surcharge of at least 3% for credit-card payments, yet not one posted a sign. I discovered the charges only later, while checking my receipts. Some merchants surcharged both debit and credit cards, while others targeted credit cards alone.

Ocean City was hardly an outlier. Over the past month, my dentist, mechanic, and a tree service have all charged me extra for using a credit card—and those are just the surcharges I noticed or someone disclosed.

Meanwhile, merchants have taken their fight against card-processing fees to state legislatures. In Illinois, they secured a law exempting state and local taxes and gratuities from interchange fees—the portion of a card-processing charge that goes to the bank that issued the card. The idea has since spread unevenly to several other states.

Colorado’s version was especially convoluted. It carved out smaller Colorado banks and imposed price controls on fees for charitable donations. The governor recently vetoed it. Meanwhile, Illinois has delayed its law’s effective date, and the Office of the Comptroller of the Currency has announced plans to preempt it.

Retailers have also turned to the courts. In North Dakota and Kentucky, they have filed federal lawsuits challenging the Federal Reserve Board’s formula for setting the maximum interchange fees that large banks may charge on debit-card transactions. Congress required those limits through the so-called Durbin Amendment to the 2010 Dodd-Frank financial-reform law.

Federal Reserve rules adopted in 2011 cut the permitted rates roughly in half. The result was higher bank fees, a sharp decline in free checking, and the disappearance of debit-card rewards. Retailers nonetheless argue that the remaining fees are still too generous because banks may recover costs associated with fraud prevention, fraud losses, dispute resolution, and other consumer protections. Cutting the fees further would not make those costs disappear. It would merely shift more of them to consumers.

Retailers have also spent millions lobbying Congress to extend some of the Durbin Amendment’s worst features to credit cards. That effort would raise costs, restrict access to credit, and weaken payment security—all in the name of lowering a fee that consumers rarely see but ultimately help pay.

Read the full piece here.

Four patents can carry a lot of antitrust baggage—especially when they come tucked inside a portfolio of more than 500. In CareFirst of Maryland v. Johnson & Johnson, health insurer CareFirst alleges that Johnson & Johnson unlawfully acquired and later asserted four patents to delay competition from biosimilars, highly similar alternatives to biologic drugs, for the autoimmune treatment Stelara. J&J acquired the patents as part of a larger portfolio in 2020. The district court granted summary judgment to J&J after reconsidering its earlier ruling, and CareFirst’s appeal is now pending before the 4th U.S. Circuit Court of Appeals.

That dispute may sound narrow. It is not. The 4th Circuit appeal presents a recurring antitrust problem in unusually clean form. How should Section 2 of the Sherman Act, which prohibits monopolization, treat conduct whose competitive significance becomes clear only in hindsight? The answer will shape not only patent acquisitions, but also the broader legal environment for investment, corporate transactions, and innovation by firms that already possess substantial market power.

The temptation is to make the case about intent. CareFirst and several amici argue that the district court’s reconsideration opinion invented a specific-intent requirement for completed monopolization. As the CareFirst opening brief and the Federal Trade Commission’s amicus brief emphasize, a monopolization claim generally does not require proof that corporate executives subjectively wanted to exclude a rival. That proposition, standing alone, should not be controversial.

It also does not answer the harder question. The Supreme Court’s 1966 decision in United States v. Grinnell Corp. requires the willful acquisition or maintenance of monopoly power, a standard that must retain objective content. When the challenged conduct is an acquisition, courts should evaluate it as an acquisition based on the circumstances at the time. A company’s later use of an acquired asset may reveal what the asset could do when the deal closed. It should not replace proof that the acquisition itself was exclusionary when it was made.

That distinction makes economic sense. It gives firms an ex ante rule they can actually follow, preserves a meaningful boundary between Section 2 and the Clayton Act’s merger rules, and reduces the risk that courts will punish efficient transactions because an asset acquired for one purpose later proves useful for another. Most importantly, it keeps monopolization law focused on protecting the dynamic competition and innovation that Section 2 should preserve, not suppress.

Read the full piece here.

The We Are What We Read series is, in part, about what defines the field of law & economics. The field’s natural home lies in applications that are, well, economic. Hence its longstanding—and now standard—role in contracts, corporations, antitrust, torts, and other areas. For this selection, I wanted to show how law & economics can illuminate something less obviously tied to economic activity: deliberation. The article also illustrates what I think defines law & economics: a set of methodological tools, rather than a collection of substantive or value commitments—or a movement.

“Deliberation as Self-Discovery and Institutions for Political Speech,” by Catherine Hafer and Dimitri Landa, is, if anything, more timely now than when it was written. The public, both in the United States and elsewhere, is deeply divided, and polarization has become a defining feature of our political moment. The article also brings together two bodies of scholarship that seldom speak to each other: deliberative democracy and formal theory, which uses mathematical models to study political behavior.

Read the full piece here.

Few antitrust investigations find their theory of harm laid out in the target’s sales brochure. Brazil’s investigation of Aprix, a startup that sells pricing software to gas stations, nearly managed the feat. One of the company’s promotional brochures introduced prospective clients to the prisoner’s dilemma, the classic game-theory example in which individually rational choices can leave everyone worse off. It explained how a price war could produce just that result for rival stations, then posed the sales pitch as a question: “Which pricing decision increases the company’s profit with the lowest risk that the whole market ends up earning less? It is to answer this question that our pricing technology exists.”

Aprix’s webinars struck the same theme. They urged clients not to chase sales volume through discounts: “Lowering price almost never pays off. Resist!” A gas station that “attacks the market,” Aprix warned, would invite retaliation until “everyone loses together.”

The brochure and a handful of promotional videos helped prompt Brazil’s leading algorithmic-pricing case. In April 2026, the Tribunal of the Administrative Council for Economic Defense (CADE) approved a settlement (known in Portuguese as a Termo de Compromisso de Cessação (TCC)) with Aprix. The case produced neither a litigated finding of collusion nor a condemnation on the merits. Still, the settlement offers a concrete guide to how CADE may handle future algorithmic-pricing cases. Aprix is not CADE’s only such case, and Brazil’s debate over whether pricing algorithms can facilitate collusion remains far from settled.

Read the full piece here.

The Federal Communications Commission’s (FCC) Build America Agenda rests on a simple premise: Stop making it so hard to build. Federal and state policymakers have spent years reducing permitting delays, resolving pole-attachment disputes, and easing access to public rights-of-way—the public corridors used for infrastructure such as roads, utility poles, and fiber lines. These obstacles slow infrastructure deployment and raise its cost. Yet even as the federal government removes regulatory barriers, local governments often march briskly in the opposite direction.

That is the story unfolding in Maple Grove, Minnesota. The city has told a fiber provider that it cannot use public rights-of-way until it signs a cable television franchise, the local authorization traditionally required to operate a cable system. Never mind that the company provides broadband over fiber, not cable television.

The city’s demand is almost certainly unlawful. By imposing these requirements to raise revenue, Maple Grove is undercutting federal policy and making it harder for residents to obtain high-speed broadband.

Read the full piece here.

Antitrust law’s usual instruction to competitors who agree on price is admirably brief: Don’t. Labor law makes a deliberate exception for employees who bargain collectively. Advocates now want that exception to cover at least some independent contractors, including rideshare drivers, truck owner-operators, consultants, and other small-business owners.

The proposal may sound like a tidy way to counter the power of large platforms. It raises much messier questions. Who qualifies for the exemption? Who represents contractors with different interests? And what happens to prices, output, market entry, and workers who prefer flexible or individually negotiated terms? Answering those questions requires examining the economics of collective bargaining, the legal and political difficulty of defining a new exemption, and the costs that protected coordination may impose on workers outside the bargaining group.

The labor-antitrust exemption reflects a durable political compromise. It should not become a blueprint for shielding collective price-setting by independent contractors from competition. A better approach would preserve competition and flexible work while addressing specific worker-welfare problems through portable benefits, clear classification rules, and fewer regulatory barriers to entry and mobility.

Read the full piece here.

dvertising’s oldest rule is simple: Know your audience. In California, following it may get an online platform sued. Show retirement-home ads to seniors and student discounts to college students, and sensible targeting can suddenly look like unlawful discrimination.

That question is now before California’s Sixth Appellate District. The dispute arises from a trial court ruling in Haynie v. Google that could turn routine age-based ad targeting into a violation of California’s Unruh Civil Rights Act. The International Center for Law & Economics (ICLE) filed an Aug. 17 amicus letter supporting Google’s petition for a writ of mandate in Google LLC v. Superior Court.

If the ruling stands, it could cause widespread, unintended harm to consumers, small businesses, and the digital economy. Multisided platforms—online services that connect businesses with users—would likely restrict advertisers’ use of age data. The predictable result would be less relevant and less age-appropriate advertising for everyone.

Read the full piece here.

Some furniture arrives as a flat box and a promise. The EU digital rulebook does just that. Its 34 main instruments sit on EUR-Lex, free, in twenty-four languages, from the eCommerce Directive of 2000 to the Health Data Space Regulation of 2025. One would expect to find the single market fully assembled, since that is what each of them announces in its opening recital. What one finds instead, on actually reading all 34, is the frame and an assembly notice. The shelves come later, by delegated act, by implementing act, by harmonized standard, drafted by other hands on another calendar. So I started cataloging the missing shelves, and ended up with 517 of them. This means the EU legislator, 517 times, decided that the rule would be written later, by someone else, under a different procedure.

Read the full piece here.

The whole country ostensibly wants America to win the artificial intelligence (AI) race. A striking number, however, would prefer someone else’s town to host the data centers, power plants, transmission lines, and cooling systems required to run it.

Adam Smith knew the type. In “The Theory of Moral Sentiments,” he warned against the “man of system,” who imagines society as a chessboard and believes he can move human beings as easily as pieces.

Today’s man of system has a data-center plan. Governors, legislators, regulators, and activists increasingly speak as though they can determine where enormous new electricity loads will locate, which power sources will serve them, how their owners will bargain with utilities, what labor terms they will accept, and how much support they will provide their communities—all while preserving low rates, grid reliability, environmental goals, and America’s lead in AI.

The chess pieces, it turns out, have a motion of their own.

In Pennsylvania, Gov. Josh Shapiro unveiled the Governor’s Responsible Infrastructure Development Standards, or GRID Standards, as the terms developers must meet to receive faster permitting, tax incentives, and coordinated state support. The Pennsylvania House voted 134-68 in June to codify them. When the Senate did not act, Shapiro told the Pittsburgh Business Times that he would consider executive action.

In Texas, Gov. Greg Abbott ordered regulators earlier this month to freeze approvals for data centers seeking grid connections until the state completes an audit. New York has imposed a one-year statewide moratorium on permits for the largest facilities.

The political pressure is clear. A July Quinnipiac poll found that 74% of Pennsylvania voters opposed an AI data center in their community. Republicans, Democrats, and independents agreed. The New York Times called the opposition perhaps “the most bipartisan issue since beer.”

Some of that resistance is exaggerated, emotional, and plainly hostile to growth. Other objections deserve a serious answer. Data centers are large industrial facilities, and residents are entitled to ask about noise, land use, water, air emissions, electricity bills, tax abatements, and the integrity of local decision-making. The secrecy surrounding some projects has deepened public distrust. A credible free-market case for data centers must acknowledge legitimate costs and concede that hyperscalers—companies that operate enormous networks of data centers—do not always strike defensible bargains.

Yet policymakers commit a grave error when they treat a project’s costs as grounds to stop an industry. That response treats scarcity as evidence of market failure, assumes public officials can identify the correct technical response in advance, and interrupts the decentralized adjustments already underway.

It also mistakes the visible building for the demand it serves. Demand for cloud computing, cybersecurity, medical research, financial services, logistics, streaming, and AI persists after a government prohibits a data center. The facility simply goes elsewhere and takes its investment, infrastructure, tax base, and accumulated knowledge with it.

Austrian economics focuses on how dispersed knowledge, prices, and entrepreneurial experimentation help people adapt to scarcity. Through that lens, the relevant question is whether moratoria and prescriptive mandates improve the process by which firms, utilities, communities, and consumers reconcile rapidly growing demand with limited supplies of electricity, water, land, labor, and capital. In reality, such policies obstruct that process.

Read the full piece here.

Transportation Secretary Sean Duffy wants to put the U.S. Department of Transportation (DOT) back in the transportation business. His July 22 letter to Senate leaders calls for consolidating duplicative grants, cutting programs outside the department’s core mission, and demanding measurable results. Then it makes one conspicuous exception: Congress should attach the Railway Safety Act to any surface-transportation bill.

Congress should leave it at the station.

Read the full piece here.

Nigeria has looked south and seen a $40 million payday for the press. The trouble is that it misread both the price tag and the fine print—and its attempt to collect may leave Nigerian publishers with fewer readers and no comparable payday.

On July 6, Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC) announced investigations into Meta, Alphabet, X, and unnamed generative artificial intelligence (AI) companies. The announcement followed a petition to the Nigerian presidency from the Nigerian Press Organization (NPO).

The FCCPC identified three concerns: market dominance, the use of copyrighted news content to train AI models, and the absence of “equitable commercial engagement.”

The press release’s final paragraph makes the FCCPC’s model explicit. It claims that a similar inquiry in South Africa ended with Google agreeing to pay South African news organizations 688 million rand ($40 million) annually for three to five years. As I explained in a previous piece, regulatory ambition has its own politics: An agency’s next move often follows the path laid by its counterparts abroad.

But the FCCPC has misread the South African precedent in two important respects. First, 688 million rand is the total Google committed over five years, not an annual payment. Second, Google negotiated that payment under a statutory market-inquiry regime, a formal process that may give the South African Competition Commission (SACC) real power to impose remedies. Nigeria has no comparable regime.

Nigeria is importing South Africa’s answer without South Africa’s legal machinery.

Read the full piece here.

The AI industry has entered its manifesto era. Executives, researchers, and employees are issuing rival plans to keep advanced models safe. The fine print contains a less advertised question: Would those plans protect the public—or protect today’s leaders from the open models gaining on them?

That competition question starts with open-source AI models. These models make their source code, training methods, and trained parameters publicly available under a permissive license, allowing others to use and modify them. As Dirk Auer and I previously wrote, citing Susan Athey, then-chief antitrust economist at the U.S. Department of Justice (DOJ), a few strong open models may be enough to constrain proprietary large language models (LLMs):

… it is important not to neglect the role that open-source models currently play in fostering innovation and competition. As former DOJ Chief Antitrust Economist Susan Athey pointed out in a recent interview, the AI industry “may be very concentrated, but if you have two or three high quality — and we have to find out what that means, but high enough quality — open models, then that could be enough to constrain the for-profit LLMs.” Open-source models are important because they allow innovative startups to build upon models already trained on large datasets—therefore entering the market without incurring that initial cost. Apparently, there is no lack of open-source models, since companies like xAI, Meta, and Google offer their AI models for free…

The same reasoning applies to open-weight models. These models make their trained numerical parameters, or “weights,” freely available for download, even if their training data, full code, and methods remain private. The weights encode what a model has learned during training.

Open-weight models allow startups to build AI products and services without bearing the substantial upfront training costs that well-resourced incumbents can more readily absorb. Open-source and open-weight models therefore offer one reason, among others, for optimism about competition in AI markets.

That competitive role has made open-weight models a central target in the industry’s new manifesto war. Legitimate concerns about safety and potentially illegal conduct have prompted several private-sector regulatory proposals. The most concrete concern involves Chinese developers’ alleged large-scale distillation of proprietary models, a process in which one model learns from another model’s outputs. The proposals range from mandatory approval before release to targeted restrictions on open-weight and open-source development.

As Kristian Stout has argued, such restrictions are more likely to create problems than solve them. This post examines the competitive consequences of the most prominent proposals. Several could distort an AI market that has proved more open and competitive than the prevailing regulatory narrative suggests. The manifestos promise safer AI. Their fine print may promise today’s leaders a safer market.

Read the full piece here.

Since the COVID-19 pandemic and the political upheavals that followed, concerns have grown that many Western democracies face authoritarian pressure and are becoming less democratic. This shift has renewed interest in one of political science’s most influential frameworks for understanding democratic and nondemocratic rule: Selectorate Theory, developed by Bruce Bueno de Mesquita, Alastair Smith, Randolph M. Siverson, and James D. Morrow in “The Logic of Political Survival” (2003).

The theory fits within the law & economics tradition because it offers an economic account of political behavior. It focuses on the incentives facing every leader and treats public law as endogenous to those incentives—that is, as the product of survival strategies operating within a given institutional framework.

Bueno de Mesquita et al.’s formal model has broad implications for public finance, yet they do not develop those implications into a positive fiscal theory, meaning a theory that explains how fiscal policy works rather than how it should work. This piece takes up that task, analyzing tax and spending laws as survival mechanisms that determine who is taxed and who receives benefits to keep the leader in power.

Read the full piece here.

Australia’s latest plan to make digital platforms pay for journalism has an unusual feature. A platform can owe money even if it carries no journalism at all. The government calls this an “incentive.”

On Aug. 3, the Australian government finalized legislation establishing the News Bargaining Incentive (NBI). The government first proposed the NBI in December 2024, then put it on hold after calling a general election a few weeks later.

The NBI seeks to encourage digital platforms to enter into commercial agreements supporting Australian journalism. Large platforms that decline to enter into or renew qualifying agreements must pay a charge based on advertising revenue attributable to the Australian market. Platforms with qualifying agreements may reduce their liability through a nonrefundable offset.

The NBI’s unusual reach is deliberate. It applies to large platforms that provide significant social-media or search services, regardless of whether they carry news content. According to the government, this approach closes a major gap in Australia’s existing bargaining code, which allows platforms to avoid payment obligations by removing news.

The government has openly expressed frustration that the code has failed to secure the desired transfer of revenue from large platforms to news publishers, despite its mandatory bargaining process and binding final-offer arbitration. The NBI responds by compelling payment even when a platform makes no use of news content.

This latest change to Australia’s legal framework warrants attention for two main reasons.

Read the full piece here.

At its August 6 open meeting, the Federal Communications Commission (FCC) is scheduled to vote on a notice of proposed rulemaking (NPRM) titled “Unleashing Unlicensed Spectrum for Direct-to-Device.” This proceeding will examine whether devices operating across more than 225 megahertz of unlicensed spectrum in the 902-928 MHz, 2400-2483.5 MHz, and 5725-5850 MHz bands should be authorized for satellite communications. The item represents a commendable step in the Commission’s already-productive spectrum work.

Read the full piece here.

Every field has its stock complaint, the one you can serve at any conference without fear of contradiction. In EU digital law it is this. The rulebook lacks a coherent conceptual vocabulary. The same person is a data subject in one instrument and an end user in the next, the same platform changes costume from article to article.

This summer I decided to check it, and to open the series with the result, because definitions are position zero for what this newsletter studies. Everything a regulation requires runs through its defined terms, so a gap or an incompatibility in the vocabulary reappears in every provision built on the affected terms, and nothing downstream repairs it. Firms inherit the residue as legal uncertainty. They spend on advice rather than on products, and where the words are widest they over-comply. The burden of establishing what the law asks shifts, in practice, onto the regulated, and a market that works this way taxes its own competitiveness.

Read the full piece here.

Threads from ICLE scholars on trending issues for the month of August 2026.

This is just simply wrong on the economics.

Suppose an online retailer offers a lower price to new customers. I'm assuming this is a net benefit, as the FTC is doing here.

Disclosing => repeat customers log out => system unravels => kill benefits of price discrimination. https://t.co/VGFNt6Ejd7 pic.twitter.com/eomSpURUmZ

— Brian Albrecht (@BrianCAlbrecht) August 20, 2026

I think this is a fair summary of what it does. But it's trying to push one elasticity too far.

They stress markdowns and labor-supply elasticities aren't the same thing. But then repeatedly turn finite elasticity into "the amount of market power." https://t.co/4mwncTNGvw pic.twitter.com/bzA77Relsg

— Brian Albrecht (@BrianCAlbrecht) August 18, 2026