California Expands Antitrust Law With New Powers to Target Monopolies

Gov. Gavin Newsom signed Assembly Bill 1776, known as the COMPETE Act, on Wednesday, according to Bloomberg Government. The legislation expands California’s Cartwright Act beyond its traditional focus on anticompetitive conduct involving agreements or coordination among multiple businesses.

Under the measure, California’s attorney general and district attorneys may pursue claims alleging that a single company monopolized, attempted to monopolize or maintained a monopoly in a market. The statute also covers monopsony conduct, which concerns excessive market power on the buying side of a market, including markets in which businesses compete for workers.

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The change could make it easier for state and local prosecutors to pursue cases involving major technology companies, including Apple, Alphabet. and Nvidia, Bloomberg Government reported. Previously, the Cartwright Act primarily addressed conduct involving two or more companies, limiting its usefulness in cases focused on unilateral behavior by a dominant business.

The legislation nevertheless sets limits on the expanded enforcement authority. A prosecutor bringing a case must allege and ultimately prove that the defendant possesses substantial market power, either through direct or indirect evidence, according to the bill text published by the California Legislature. Private plaintiffs cannot initiate claims under the new monopolization provisions; those cases are reserved for the state attorney general and district attorneys.

Small businesses are exempt. The law defines an eligible small business as an independently owned and operated company based in California that, together with its affiliates, has no more than 100 employees and average annual gross receipts of $10 million or less during the three years preceding a complaint. Certain government-authorized or supervised franchises, contracts, licenses and permits are also protected from liability under the new provisions.

The measure directs California courts to apply an antitrust framework developed by the state Supreme Court and requires judges to interpret the state’s competition laws broadly in favor of promoting free and fair competition. At the same time, the legislation acknowledges that obtaining or retaining substantial market power through superior products, services or business skill is lawful.

The expansion underscores California’s decision to maintain an antitrust framework that can diverge from federal doctrine. The legislation states that federal antitrust interpretations are instructive rather than controlling when California courts interpret the Cartwright Act, citing previous state Supreme Court decisions.

AB 1776 was introduced by Assembly Member Cecilia Aguiar-Curry and passed both chambers of the Legislature on Aug. 30 before being enrolled in early September, according to the Legislature’s official record.

Source: Bloomberg