Using a new approximate strong-randomness renormalization group (RG), we study the many-body localized (MBL) phase and phase transition in one-dimensional quantum systems with short-range interactions and quenched disorder. Our RG is built on those of Zhang $textit{et al.}$ [1] and Goremykina $textit{et al.}$ [2], which are based on thermal and insulating blocks. Our main addition is to characterize each insulating block with two lengths: a physical length, and an internal decay length $zeta$ for its effective interactions. In this approach, the MBL phase is governed by a RG fixed line that is parametrized by a global decay length $tilde{zeta}$, and the rare large thermal inclusions within the MBL phase have a fractal geometry. As the phase transition is approached from within the MBL phase, $tilde{zeta}$ approaches the finite critical value corresponding to the avalanche instability, and the fractal dimension of large thermal inclusions approaches zero. Our analysis is consistent with a Kosterlitz-Thouless-like RG flow, with no intermediate critical MBL phase.
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