California’s COMPETE Act: The Looming Expansion of California Antitrust Law to Single-Firm Conduct

I. Introduction

On September 30, 2026, California Governor Gavin Newsom signed into effect AB 1776, also known as the COMPETE Act. The law adds a California-law framework for single-firm conduct to the Cartwright Act, California’s antitrust law, covering: (1) unlawful monopolization and monopsonization; (2) attempts to monopolize or monopsonize, separate from achieving a monopoly or monopsony by succeeding in the market; (3) unlawful maintenance of a monopoly or monopsony through anticompetitive or exclusionary conduct; and (4) combinations or conspiracies to monopolize or monopsonize.¹

Businesses should note the following about the COMPETE Act: (1) it requires a showing of “substantial market power,” which may be proven with direct or indirect evidence; (2) decisions addressing liability under federal antitrust law will be instructive, not controlling; (3) only the California Attorney General or a district attorney could bring an action under it—there is no private right of action; and (4) while expansive, the law’s reach is not as broad as initially proposed.

II. Key Takeaways for Your Business

• Assess the COMPETE Act’s reach: Businesses should now assess whether California-facing business practices could implicate single-firm seller-side (monopoly) or buyer-side (monopsony) theories of antitrust liability. Assessments should include the extent to which your business may hold substantial market power in either side of the market. The statute requires direct or indirect proof of market power, but sets no numerical market-share threshold and leaves open questions about market definition and proof.
• Public enforcement: Only the Attorney General or a district attorney may bring an action under AB 1776. Other Cartwright Act provisions that address multi-firm conduct remain subject to private litigation, but private enforcement will not apply to the single-firm conduct now prohibited under the COMPETE Act.
• Initial guidance: A prior version of the bill included 10 judicial-guidance points that would have explicitly expanded the ambit of AB 1776 considerably and, in some cases, run contrary to federal antitrust jurisprudence. However, these points were removed from the version of the bill that Governor Newsom signed. Treat them as legislative-history background, with an eye towards which departures from federal antitrust jurisprudence the California legislature chose not to adopt explicitly.
• Business planning: The California Attorney General’s enforcement priorities under the COMPETE Act are likely to become more apparent over time. In the meantime, review California-facing business strategies, including those which may have a tendency to exclude competitors; distribution and access to the company’s products or services in California; contracts that include exclusive-dealing provisions and restrictions on employee movement; and any platforms the company provides that may exclude competitors or charge significant fees to users on either side of the platform. Consider areas where the company may be pricing below cost but intends to make up the difference later.

III. The COMPETE Act

California enacted the Cartwright Act—the state’s analog to federal antitrust law, the Sherman Act—in 1907. Cal. Bus. & Prof. Code §§ 16720–16770. However, unlike the Sherman Act, the Cartwright Act has traditionally focused on concerted conduct involving two or more people or companies, and California courts have held that single-firm monopolization is not cognizable under it.² California’s Unfair Practices Act and Unfair Competition Law address other competition concerns but do not supply a clear state-law analogue to Sherman Act § 2, which prohibits unlawful monopolies.³

Although the California Supreme Court historically has described the Cartwright Act as “broader in range and deeper in reach” than the Sherman Act,⁴ the Cartwright Act’s gap in regulating single-firm conduct has been significant. The COMPETE Act attempts to address this gap by permitting California enforcers to pursue single-firm theories under California law. The COMPETE Act creates a public-enforcement path for single-firm conduct with its own market-power, interpretive, and exemption provisions.

• Enforcement power: Only the Attorney General or a district attorney may bring an enforcement action under the COMPETE Act. The statute does not create a direct private action, though other Cartwright Act provisions remain privately enforceable. At present, questions remain as to whether a violation of the Act could serve as a predicate for private lawsuits brought under California’s Unfair Practices Act and Unfair Competition Law.
• Covered conduct: The statute covers monopolization or monopsonization; attempting to monopolize or monopsonize; maintaining a monopoly or monopsony; and combining or conspiring with another person to monopolize or monopsonize, in any part of trade or commerce. It reaches seller-side (monopoly) and buyer-side (monopsony) theories, including labor markets, and both completed and inchoate conduct.
• Substantial market power: The enforcer must allege and prove substantial market power, or power sufficient to control prices or supply of goods or services, through direct or indirect evidence. The statute sets no numerical market-share threshold and does not require its showing in every case, nor does it require showing a particular duration over which a business maintained substantial market power.
• A dominant market position is not itself unlawful: Substantial market power may be lawfully obtained without violating the COMPETE Act through superior products, services, or business acumen or even by historical accident. The key question will be distinguishing competition on the merits from exclusionary conduct that creates or maintains such power.
• Unlawful conduct under Cipro: Like the burden-shifting rule-of-reason framework used to evaluate Sherman Act § 2 claims, under the COMPETE Act, an enforcer must show that the conduct is unlawful under the similar analytical framework in In re Cipro Cases I & II, 61 Cal.4th 116, 146–147 (2015) (“Cipro”), considering, in order, intent to avoid competition, anticompetitive effects, and procompetitive justifications for the conduct.
• Protections: The law exempts qualifying small businesses that: (1) are independently owned and operated; (2) have a principal office and officers domiciled in California; and (3) together with affiliates, have no more than 100 employees and average annual gross receipts of $10 million or less over the three years before the complaint is filed. It also excludes conduct required or authorized under state or federal law when granted and supervised by a governmental agency, and conduct within the scope of an exclusive franchise, contract, license, or permit granted and supervised by such an agency.

IV. Aggressive Antitrust Enforcement in California

California has been very active in antitrust enforcement recently. Two developments over the past year, in addition to the passage of the COMPETE Act, demonstrate this aggressive posture:

• California Antitrust Enforcement Funding: In June, Governor Newsom added $14.3 million to the 2026-27 state budget for antitrust enforcement and litigation. “The lack of federal oversight in this area leaves California individuals and businesses vulnerable to predatory business practices that threaten affordability and consumer rights,” Newsom said in a May 14, 2026 statement. “These resources allow (the) DOJ (California Department of Justice) to conduct independent investigations and litigation and to enforce California’s antitrust laws in these sectors of the economy.”
• Heightened Penalties (Senate Bill 763): Championed by Attorney General Rob Bonta and signed into law by Governor Newsom on October 8, 2025, this legislation, starting January 1, 2026, substantially escalates the monetary exposure for violating the Cartwright Act. It increased maximum criminal fines for corporations from $1 million to $6 million per offense, and for individuals, from $250,000 to $1 million per offense. It also grants courts the power to impose civil penalties of up to $1 million per violation.

V. Comparison Between the COMPETE Act and Sherman Act Section 2

• Section 2’s baseline: Section 2 of the Sherman Act prohibits monopolization, attempted monopolization, and combinations or conspiracies to monopolize in interstate or foreign commerce. Federal doctrine generally requires monopoly power (or a dangerous probability for an attempt) and its willful acquisition or maintenance through exclusionary conduct, rather than power gained through superior product, business acumen, or accident. Like Section 2 of the Sherman Act, AB 1776 does not create potential liability solely for market power obtained or maintained through legitimate means.
• Key differences: AB 1776 resembles Section 2 in covering monopolization, attempts, and combinations or conspiracies to monopolize, but it also expressly targets monopsonization (a judge-made claim under the Sherman Act) and applies a California-specific framework. It requires substantial market power shown directly or indirectly but does not codify all federal judge-made elements of various types of recognized Section 2 claims.
• Federal law is not irrelevant or controlling: Federal decisions may inform a court when consistent with California law, but they are not controlling. Given the law’s liberal-interpretation and deterrence directives, Section 2 cases are a comparison point, not a complete defense or liability checklist. For example, claims for predatory pricing are generally not actionable under Section 2, absent evidence of below-cost pricing and a reasonable likelihood the defendant will recoup its losses after excluding rivals. AB 1776 codifies neither requirement and does not expressly reject them; predatory pricing claims brought under the COMPETE Act will likely be assessed under Cipro, giving California courts wide latitude to adopt or modify the recognized federal standards.

VI. Proving Substantial Market Power

The final text of AB 1776 makes clear that the enforcer must plead and prove that the defendant possesses “substantial market power.” However, the Act does not define the term or set definitive or presumptive market-share thresholds or safe harbors. Nor does it expressly adopt familiar federal tests for finding monopoly power or a dangerous probability thereof, or specify the role of market definition, recoupment, or causation. As a result, businesses should not assume that a particular market share is automatically lawful or unlawful; California courts will need to determine how these concepts interact with the required showing.

The statute permits proof of substantial market power through direct or indirect evidence. Direct evidence shows actual effects on price, output, access, or trading and contractual terms. Indirect evidence may include market structure, market share, barriers to market entry, durable power, and the link between a business’s alleged conduct and competitive effects. The statute does not specify how courts should weigh these categories.

The California Law Revision Commission anticipated this debate, noting that Section 2 of the federal Sherman Act generally requires substantial market power or a dangerous probability of obtaining it, while other Cartwright Act-based theories of antitrust liability may apply at lower share thresholds.⁵

VII. Procompetitive Benefits

Because AB 1776 directs courts to apply the burden-shifting framework in Cipro, procompetitive justifications remain part of the analysis. The final text of the law does not make every claimed benefit a defense, and it does not eliminate the need to connect claimed benefits to competition as prior versions of the legislation had. It instead leaves wider discretion to California courts’ evaluation of the challenged conduct’s effects, purpose, and justifications. The Cipro framework first puts the burden on plaintiffs to show that the alleged conduct has anticompetitive effects, then on the defendant to show that the conduct produced procompetitive effects, and finally on the plaintiffs to show that the anticompetitive effects of the conduct outweigh the procompetitive effects.

VIII. Interpretive Guidance

The final text of AB 1776 directs courts to interpret California antitrust laws “liberally” to promote free and fair competition and “maximize” effective deterrence. It also reiterates that the Cartwright Act is “broader in range and deeper in reach” than the federal Sherman Act and is not modeled on it. Federal decisions are “at most instructive,” not controlling.

This language does not guarantee expansive liability. Plaintiffs must still prove substantial market power, satisfy the statutory framework, and overcome the Act’s express protections. The practical shift stemming from the COMPETE Act is from categorical federal gatekeeping rules toward California-specific analysis, with precise boundaries left to future cases.

IX. Language Removed From Earlier Versions

Earlier versions of AB 1776 contained a non-exhaustive list of acts or factual premises that “may constitute evidence of a violation,” including the following examples. At the same time, the bill made clear that none of these was required to find a violation.

• Prior course of dealing: A defendant unilaterally altered or terminated a prior course of dealing with the person subject to the exclusionary conduct.
• Differential treatment: The defendant treated persons subject to the exclusionary conduct differently from other persons.
• Below-cost pricing: The defendant’s price was below any measure of the defendant’s costs required under federal antitrust law.
• Economically irrational conduct: The defendant’s conduct made no economic sense apart from its tendency to harm competition.
• Quantitative proof: Quantitative evidence proving harm to competition (or risk of harm).
• Multi-sided-platform effects: In cases where the defendant operated a multisided platform, a finding that the defendant’s conduct harmed competition on more than one side of a platform, or that harm on one side outweighed benefits on the other side or sides.
• Equally efficient rivals: The rivals whose ability to compete was reduced or harmed were as efficient, or nearly as efficient, as the defendant.
• Market-share or market-power threshold: A single firm or person had or might achieve a market share at or above a threshold recognized to create monopoly power for purposes of the Sherman Act.
• Direct evidence of market power: A relevant market had to be defined where there was direct evidence of the defendant’s market power.

However, amendments to AB 1776 removed these guidelines and ultimately replaced them with the broad policy pronouncements noted above. The final text will require courts to work from the statutory elements, especially substantial market power and the Cipro framework. That this list of potential violations was removed from the enacted law suggests that the ambit of the COMPETE Act, while broad, may not be as broad as some stakeholders may initially have believed.

X. Conclusion

AB 1776 meaningfully broadens California antitrust law, but will likely not represent as significant an expansion as initially proposed. Businesses should prepare for a California-specific body of law rather than assuming federal antitrust laws and doctrines will control exclusively.

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For more information on the issues discussed in this Legal Update, please contact the authors or your regular contact at the firm.

¹ Under AB 1776 and more broadly, monopolization occurs when a firm acquires or maintains substantial market power over sales or production in a relevant market, while monopsonization occurs when a firm acquires or maintains substantial market power over purchasing or consumption in a relevant market.

² See Asahi Kasei Pharma Corp. v. Cotherix, Inc., 204 Cal.App.4th 1, 8 (2012); Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc., 198 Cal.App.4th 1366, 1386 (2011).

³ See Cal. Bus. & Prof. Code §§ 17000–17101, 17200–17210.

⁴ See Cianci v. Superior Court, 40 Cal.3d 903, 920 (1985); Clayworth v. Pfizer, Inc., 49 Cal.4th 758, 783 (2010)

⁵ See TR-B750 at 5, 20–21; Fisherman’s Wharf Bay Cruise Corp. v. Superior Court, 114 Cal.App.4th 309, 326 (2003).