On September 30, Governor Newsom signed California AB 1776 into law, titled “The Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy” (COMPETE) Act, which, for the first time, expands California’s antitrust statute, the Cartwright Act, to now ban single-firm monopolization in the state. Effective January 1, 2027, the Act makes it unlawful “to monopolize or monopsonize, attempt to monopolize or monopsonize, maintain a monopoly or monopsony, or combine or conspire with another person to monopolize or monopsonize any part of trade or commerce.” We highlight the key takeaways for business:

• The Act authorizes the AG or a district attorney to bring an action, and does not create any private right of action. 
• The Act requires that the AG or district attorney allege and prove (statutorily undefined) “substantial market power” through direct and indirect evidence to prevail at trial.
• The Act instructs that courts shall “liberally interpret California’s antitrust laws” and be mindful that “California favors ‘maximizing’ effective deterrence of antitrust violations.”
• The Act references the fact that California courts have held that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act, and that interpretations of federal law are “at most instructive.”
• The Act affirms that a business may lawfully obtain and maintain market power or monopoly power through “the superiority of its products, services, or business acumen.”
• The Act is inapplicable to qualifying small businesses based in California with 100 or fewer employees and an average gross receipts of $10 million or less over the three years before filing of a complaint.
• The Act excludes from its ambit conduct required or authorized under exclusive franchises, contracts, licenses, or permits granted and supervised by a local, state, or federal government agency.

Lauded by AG Bonta as “an additional tool for antitrust enforcement,” the COMPETE Act represents the next piece in the continued expansion of California’s antitrust enforcement power toolbox. Last year, California enacted Senate Bill 763, co-sponsored by AG Bonta, which increased criminal fines for corporations from $1 million to $6 million per violation, increased criminal fines for individuals from $250,000 to $1 million per violation, and added civil penalties of up to $1 million per violation. The AG’s office also has more directly solicited leads to report potentially unlawful antitrust conduct for investigation by the office, launching a new online Antitrust Complaint Form for businesses and individuals to report collusion, anticompetitive mergers and acquisitions, and monopoly abuse.

As we have previously reported, the California AG’s office under AG Bonta has been particularly active in antitrust enforcement. Thus far this year AG Bonta has led multiple multistate coalitions seeking to block the Warner Bros. and Paramount merger (which a coalition of 12 AGs settled on September 21) and the Nexstar-TEGNA merger, and to require Live Nation to divest Ticketmaster. This week, AG Bonta announced a settlement by a coalition of 12 AGs and the FTC with Corteva to resolve a lawsuit alleging that the loyalty rebate programs for crop-protection chemicals unlawfully restricted competition and inflated prices. With the COMPETE Act set to go into effect in a couple of months, we expect to continue to see increased antitrust activity from the California AG’s office.

For questions regarding the COMPETE Act and its implications, please contact Milton Marquis and Ann-Marie Luciano.