On September 30, 2026 California Governor Gavin Newsom signed into law legislation amending California’s antitrust statute, the Cartwright Act, to target single-firm monopolization and monopsonization conduct. Beginning January 1, 2027, the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy Act (the “COMPETE Act” or “AB 1776”) will provide public enforcers in California with the authority to challenge conduct that falls outside of the purview of its federal analog, Section 2 of the Sherman Act. Before the COMPETE Act, the Cartwright Act covered only anticompetitive “agreements” between multiple parties. The broad framing of this new law has the potential to expand California’s (already prominent) role as a forum for firms facing antitrust allegations of single-firm conduct.
A press release issued by the office of Governor Newsom characterized the legislation as a “major update” to California’s antitrust and consumer protection laws that will allow the state government to step in when “a corporation stops competing by offering the best product or service and instead uses its power to crush competitors.”1 However, in a statement to the California State Assembly, Governor Newsom cautioned against overreach and “set[ting] the bar too low [by] dragging legitimate, superior business practices and products into the ambit of anti-competitive behavior.”2 Governor Newsom’s statement reflects pushback to the legislation from certain stakeholders in the California business community who had criticized previous iterations of the bill as potentially “chill[ing] competition and . . . lead[ing] to increased litigation that will result in inconsistent rulings among courts . . . making doing business in California more expensive, riskier, and less desirable . . .”3
The COMPETE Act
The COMPETE Act makes it unlawful for any person to take actions to monopolize or monopsonize, attempt to monopolize or monopsonize, or maintain monopoly or monopsony power through exclusionary conduct.4 In addition to these prohibitions on single-firm conduct, the law also prohibits combinations or conspiracies among persons to monopolize or monopsonize in any part of trade or commerce. The law directs the courts to “liberally interpret California’s antitrust laws to best promote free and fair competition and be mindful that California favors maximizing effective deterrence of antitrust violations.”5 The new law includes the following key aspects:
- No private right of action. Only the California Attorney General or District Attorney may bring cases under the COMPETE Act.
- Plaintiff must prove substantial market power. To bring a case under the new law, the California Attorney General or District Attorney must prove through direct or indirect evidence that a firm holds “substantial market power.” The statute does not provide a definition or threshold for what will qualify as substantial market power, leaving the courts to determine whether a plaintiff has met this condition. In his September 30 statement to the California State Assembly, Governor Newsom clarified that proving substantial market power is a “necessary – but not sufficient – condition to prove unlawful conduct.”6
- Procompetitive benefits factored into analysis. The law directs courts interpreting the COMPETE Act to apply the burden-shifting framework established in the California Supreme Court’s 2015 decision in In re Cipro Cases I & II, which considers procompetitive justifications for the alleged conduct such as superiority of its products, services, or business acumen.7
- More expansive than federal antitrust law. The statute cites California Supreme Court precedent stating that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act,8 and advises courts to consider federal antitrust case law to be “at most instructive” when interpreting the COMPETE Act. Since the statute does not define what types of exclusionary conduct are prohibited under the law, state enforcers will have flexibility to pursue creative and novel unilateral conduct theories even in the face of contrary Sherman Act precedent. This may prove analogous to Congress’s granting of broad authority to the Federal Trade Commission (FTC) to target “unfair methods of competition” under Section 5 of the FTC Act, which has led to decades of debate among Commissioners as to whether Congress intended Section 5 to include a broader competition mandate for the FTC than is available under the other federal antitrust laws.9
- Labor markets included. Unlike Section 2 of the Sherman Act, the COMPETE Act explicitly includes the same prohibitions on monopsony power as it does for monopolization, extending to single-firm conduct affecting the labor markets.
- Small business and government agency exemptions. The COMPETE Act will not apply to independently owned and operated businesses located in California that, with affiliates, have 100 or fewer employees and average annual gross receipts of $10 million or less in the three years before a complaint is filed. Conduct supervised by a government agency and authorized under state or federal law (including conduct within the scope of an exclusive franchise, contract, license, or permit granted and supervised by a government agency) is also excluded.
How did we get here?
The COMPETE Act is the product of a years-long study by the California Law Revision Commission (CLRC), which the California Legislature tasked with identifying gaps in the Cartwright Act and providing potential legislative recommendations to state lawmakers.10 The CLRC’s initial recommendation to the California legislature was a bill governing single-firm conduct that would have been a more significant departure from its federal counterpart,11 potentially casting a much wider net than the law that was ultimately signed by Governor Newsom. The final COMPETE Act is a meaningfully pared down version of the CLRC’s proposed legislation: it imposes broad-stroke prohibitions on certain single-firm conduct with minimal guidance, leaving courts to their own devices to fill in the gaps.12
Looking ahead
In addition to the COMPETE Act, another California state antirust law will come into effect on January 1, 2027. In February 2026 Governor Newsom signed into law SB 25, which requires merging parties with a principal place of business in California or annual net sales in the state of the goods or services involved in the transaction of at least 20% of the HSR filing threshold to notify their transaction to the California Attorney General.13 Other states have passed—or are considering passing—similar “mini HSR” acts requiring certain parties that submit HSR premerger filings to federal antitrust regulators to concurrently submit their HSR flings to the respective state attorney general.14
Given the broad mandate of the CLRC’s antitrust law study, additional proposed antitrust legislation may be on the horizon. The CLRC is currently considering draft language options for a potential California merger law. The most recent iteration of the CLRC’s draft merger statute language—published by the Commission in July 2026— includes options which would potentially allow state enforcers to challenge mergers that do not fall within the ambit of the federal Clayton Act.15
The New York state legislature is also considering a significant expansion to its antitrust law, the Donnelly Act, to govern conduct that falls outside of the parameters of Section 1 and 2 of the Sherman Act. The current version of the 21st Century Antitrust Act16—which was passed by the state Senate and has been pending in the assembly since May 2026—would push New York enforcement well beyond the parameters of Sections 1 and 2 of the Sherman Act that govern abuse-of-dominance and single-firm conduct.
Takeaways
Businesses operating in California should assess how the COMPETE Act could apply to their business practices before the law takes effect on January 1, 2027. While the law is clearly more expansive than federal antitrust law, its text leaves ample room for California Courts (and public enforcers) to interpret its boundaries. The law’s direction that courts should “liberally interpret California’s antitrust laws to best promote free and fair competition” and consider federal antitrust case law to be “at most instructive” is likely to create uncertainty in the near term and may incentivize the Attorney General and District Attorneys to pursue novel antitrust claims, even in the face of contrary federal precedent.
Footnotes
1. Office of the Governor of California, Governor Newsom Signs Historic Law to Stop Big Business from Shutting Out Competition, Cuts Red Tape to Speed Up Business Permitting (Sept. 30, 2026), available at
2. https://www.gov.ca.gov/2026/09/30/governor-newsom-signs-historic-law-to-stop-big-business-from-shutting-out-competition-cuts-red-tape-to-speed-up-business-permitting/.
3. Office of the Governor of California, Signing Message for Assembly Bill 1776 (Sept. 30, 2026), available at https://www.gov.ca.gov/wp-content/uploads/2026/09/SIGN-msg-AB-1776.pdf.
4. California Chamber of Commerce, Antitrust (Feb. 2025), available at https://advocacy.calchamber.com/policy/issues/antitrust/.
5. Digital Democracy, AB 1776: Cartwright Act: Violations (version dated Sept. 3, 2026), available at https://calmatters.digitaldemocracy.org/bills/ca_202520260ab1776.
6. Id. (citing Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758)).
7. Office of the Governor of California, Signing Message for Assembly Bill 1776.
8. Cal.4th 116, 148.
9. See Cianci v. Superior Court, 40 Cal.3d 903, 920 (1985); Clayworth v. Pfizer, Inc. 49. Cal.4th 758, 783 (2010).
10. As Hogan Lovells Cadwalader discussed in this September 25, 2026 alert, FTC Commissioner Mark Meador recently weighed in on the Section 5 debate in favor of a broad application of the FTC’s “standalone” Section 5 authority.
11. California Law Revision Commission, Antitrust Law - Study B-750 (last revised Sept. 17, 2026), available at https://clrc.ca.gov/B750.html.
12. AB 1776 (COMPETE Act), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260AB1776; Cal. L. Revision Comm’n, Antitrust Law: Single Firm Conduct (Mar. 30, 2026).
13. California Assembly Committee on Judiciary, AB 1776 (Aguiar-Curry) - As Amended March 23, 2026, Assembly Judiciary Committee Analysis (Apr. 7, 2026). Excised from the final version of the COMPETE Act signed by Governor Newsom was a list of factors that the CLRC considered relevant to a potential finding of anticompetitive behavior. These include evidence that: (1) the unilateral conduct of the defendant altered or terminated a prior course of dealing between the defendant and a person subject to the exclusionary conduct; (2) the defendant treated persons subject to the exclusionary conduct differently than the defendant treated other persons; (3) the defendant’s price for a product or service was below any measure of the costs to the defendant for providing the product or service required under federal antitrust law; (4) the defendant’s conduct makes no economic sense apart from its tendency to harm competition; (5) the conduct’s risk of harming competition or actual harm must be proven with quantitative evidence; (6) in a claim of predatory pricing, the defendant is likely to recoup the losses it sustains from below-cost pricing of the products or services at issue; (7) the rival whose ability to compete has been reduced or harmed is as efficient, or nearly as efficient, as the defendant; and (8) a single firm or person has or might achieve a market share or has market power at or above a threshold recognized Section 2 of the Sherman Act. The CLRC also recommended that, for cases involving multisided platforms, the harm to competition on one side of the multisided platform should outweigh any benefits to competition on any other side of the multisided platform.
14. Digital Democracy, SB 25: Antitrust: Premerger Notification (version dated Feb. 10, 2026), available at https://calmatters.digitaldemocracy.org/bills/ca_202520260sb25.
15. These “mini HSR Acts” are based on the Uniform Antitrust Premerger Notification Act (UAPNA), a model premerger notification law approved by the Uniform Law Commission (ULC). The UAPNA is meant to create “a simple, non-burdensome mechanism for a state AG to receive access to [HSR] filings at the same time as the federal agencies.” In addition to California, mini-HSR laws have taken effect in Colorado and Washington, and are being considered by the legislatures in Hawaii, West Virginia, and the District of Columbia.
16. California Law Revision Commission, Memorandum 2026-29: Draft Language Options for Mergers and Acquisitions (July 24, 2026), available at https://clrc.ca.gov/pub/2026/MM26-29.pdf.
17. New York State Senate, Senate Bill S335 (2025-2026 Legislative Session) (Twenty-First Century Anti-Trust Act), available at https://www.nysenate.gov/legislation/bills/2025/S335.
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