California Governor Gavin Newsom signed Assembly Bill 1776 (COMPETE Act) on September 30, 2026, expanding California's antitrust law to address anticompetitive conduct by a single firm, effective January 1, 2027. Previously, California's antitrust laws primarily focused on unlawful actions by multiple firms, with monopolization claims handled at the federal level under Section 2 of the Sherman Act.
Key Provisions of the COMPETE Act
- Scope of Conduct Covered: The act makes it unlawful to monopolize or monopsonize, attempt to monopolize or monopsonize, maintain a monopoly or monopsony, or combine or conspire to do so in any part of trade or commerce. A government plaintiff must prove the defendant possesses "substantial market power."
- Analytical Framework: Courts will apply the structured rule-of-reason analysis identified by the California Supreme Court in In re Cipro Cases I & II.
- Narrowed Scope: Earlier versions of the bill, which included broader prohibitions on unilateral restraints and deviations from federal precedents, were removed in the final legislation.
Implications for Businesses
- Independent Enforcement Mechanism: California prosecutors now have a state-law mechanism to challenge unilateral conduct by firms with substantial market power, including exclusive dealing, access or interoperability restrictions, pricing practices, and other market-power-maintaining strategies.
- No Private Right of Action: The act does not create a private right of action under the new monopolization provision, and private plaintiffs generally cannot use alleged violations as the basis for claims under California's Unfair Competition Law.
- Monopsonization Coverage: The act explicitly covers monopsonization, which is significant for businesses with substantial purchasing power, potentially providing an avenue to investigate labor markets and other buyer-side markets.
- Distinctive Legal Interpretation: The act explicitly states that federal antitrust decisions are "at most instructive" and not controlling in interpreting California law, directing courts to construe California antitrust law liberally to promote competition and deterrence.
Recommendations for Businesses
Businesses with significant positions in California markets should review exclusivity provisions, distribution practices, access and interoperability restrictions, pricing strategies, and supplier/customer/worker-related practices before the law takes effect on January 1, 2027. While the absence of a private right of action may limit immediate litigation exposure, the COMPETE Act provides California prosecutors with a powerful new enforcement tool and may lead to independent development of California monopolization law distinct from federal precedent.
