On September 30, 2026, California Governor Gavin Newsom signed Assembly Bill 1776, the Competition and Opportunity in Markets for a Prosperous, Equitable, and Transparent Economy Act (the “COMPETE Act” or “Act”), into law. The COMPETE Act amends the Cartwright Act to reach unilateral conduct, making it unlawful “for every person 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.” Until now, the Cartwright Act has reached only conduct involving two or more firms. The Act takes effect January 1, 2027, and can be enforced only by the California Attorney General and district attorneys.
The Cartwright Act has long reached agreements among competitors, but not a single firm acting alone. As a result, prosecutors and private plaintiffs pursuing single-firm conduct have generally filed in federal court under Section 2 of the federal Sherman Act. The COMPETE Act is designed to bring those claims into the California statute.
The COMPETE Acts’ preamble emphasizes that California antitrust law stands apart from federal law, and that federal precedent does not control. It states that the California Supreme Court has determined the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act and that federal interpretations are not conclusive. The preamble identifies areas of difference, including a broader recognition of harms, per se treatment of certain conduct, lower actionable market shares, and different burdens of proof. In the Act’s words, interpretations of federal law “are at most instructive when construing California’s antitrust laws.”
Attorney General Rob Bonta welcomed the new law, stating that the COMPETE Act “will arm my office with a new, important tool to go after anticompetitive conduct by a single firm and protect workers, consumers, and small businesses.”[1]
The bill introduced earlier this year was closely modeled on draft legislation recommended by the California Law Revision Commission. After strong opposition from the California Chamber of Commerce, it was amended in recent months, and the changes were significant. A prior version would have allowed anyone to bring claims, but under the final bill only the Attorney General and district attorneys may do so, and there is no private right of action. Provisions that would have limited California courts’ ability to consider certain U.S. Supreme Court decisions and to dismiss state claims based on federal case law were deleted. In addition, a safe harbor now protects businesses that lawfully obtain or maintain market power through superior products or services.
A small business exception, added earlier in the legislative process, limits the Act’s reach. It does not apply to “any small business, meaning an independently owned and operated business, the principal office of which is located in California, the officers of which are domiciled in California, and which, together with affiliates, has 100 or fewer employees and average annual gross receipts of ten million dollars ($10,000,000) or less over the three years before the filing of the complaint.” Because these requirements are cumulative, many businesses with out-of-state headquarters or officers will not qualify.
The Act requires prosecutors to show “substantial market power” but does not define what level of power qualifies. In his signing statement, Governor Newsom said substantial market power “should be understood as a necessary—but not sufficient—condition to prove unlawful conduct.”[2] How courts will measure that threshold, and whether it will be lower than the market power required under federal law, is among the most important open questions.
The Act also adopts the burden-shifting framework the California Supreme Court laid out in In re Cipro Cases I & II.[3] The prosecutor must first show an anticompetitive purpose or immediate anticompetitive effect, unlike a Section 2 case, which centers on defining the relevant market and proving power within it. The burden then shifts to the defendant to show procompetitive justifications for the conduct. If the defendant does so, the burden shifts back to the government plaintiff, who must prove that the defendant could have achieved those same procompetitive benefits through less restrictive means.
A defendant that establishes a genuine procompetitive justification may still lose if the enforcer can show an equally effective, less restrictive alternative existed.
The Act’s text does not identify target industries or practices, but a few areas warrant attention. Because the Act reaches monopsonization, a single employer’s policies affecting workers could draw scrutiny even without any agreement with another employer. We also expect enforcers to take interest in technology practices such as self-preferencing and restrictive API or interoperability access. And California law may diverge from federal law in its treatment of exclusive dealing, predatory pricing, and pricing and discounting more generally.
Companies that may hold substantial market power in any market, including labor markets, should begin by reviewing their unilateral conduct, including exclusive dealing arrangements, loyalty discounts, tying, self-preferencing, and access restrictions, with California in mind. Companies should be cautious about relying on federal case law alone. A practice that is likely lawful under Section 2 may still present risk, or at a minimum uncertainty, under the COMPETE Act.
Because the defense will turn on procompetitive justifications, companies should also document the business rationales for significant practices and why less restrictive alternatives would not achieve the same benefits. Companies separately may want to assess whether they could qualify as a small business under the statutory definition, and whether their market position can be supported as the product of superior products or services.
Finally, with no private right of action, the Attorney General and district attorneys will drive early interpretation, so companies should consider how their practices may look to California enforcers.
Several questions remain unresolved, including how courts will define “substantial market power” and how the anticompetitive purpose or effect standard will be applied. We expect the Attorney General’s office to be selective in its first cases, and those cases will shape the law’s reach.
We are closely tracking developments and are available to discuss how the COMPETE Act may affect your business practices and antitrust compliance strategy.
[1] Attorney General Bonta Celebrates Signing of COMPETE Act into Law: An Important, Additional Tool for Antitrust Enforcement | State of California - Department of Justice - Office of the Attorney General
[3] In re Cipro Cases I & II, (2015) 61 Cal.4th 116, 146–147.