Executive Summary
- What’s new: California Assembly Bill 1776, known as the COMPETE Act, would significantly expand the state’s antitrust statute, the Cartwright Act, to cover single-firm conduct, and expressly move away from antitrust precedent established by federal law.
- Why it matters: The bill is the latest and most significant example of California’s shift toward more robust antitrust enforcement. If enacted, the bill could make it easier for plaintiffs to bring antitrust claims under the Cartwright Act and take them to trial. The Cartwright Act might also subject businesses to liability for certain conduct that has long been considered lawful under federal antitrust law.
- What to do next: Companies with a significant market presence in California should closely monitor the progress of this bill, and begin to evaluate their pricing, distribution and other competitive strategies.
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California may be on the verge of a significant expansion of its state antitrust law. Assembly Bill 1776, known as the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy (COMPETE) Act, proposes major changes to the Cartwright Act, California’s principal antitrust statute. The COMPETE Act would extend the Cartwright Act’s coverage to the unilateral actions of businesses and a broader range of conduct than federal antitrust law, eliminate certain structural requirements for proving antitrust claims that exist under federal law, and reduce defendants’ ability to offer procompetitive justifications for their conduct.
Given the size of California’s economy, the proposed legislation presents increased legal risk in a rapidly shifting legal and compliance landscape, with the COMPETE Act exemplifying the recent trend in California toward more aggressive antitrust enforcement. Many businesses, both nationally and internationally, may be impacted by these changes, and those with a significant presence in California should closely monitor the progress of the bill.
Background: What Is the Cartwright Act?
The Cartwright Act is California’s primary antitrust statute, which authorizes both enforcement actions by government agencies and private claims. Historically, the Cartwright Act has applied only to multifirm conduct — business dealings between two or more firms, similar to Section 1 of the Sherman Act — and California courts have used decisions analyzing federal antitrust laws, such as the Sherman Act, as a key reference point when applying the Cartwright Act.
What the COMPETE Act Would Change
The COMPETE Act originated from the California Law Revision Commission’s B-750 study. The Commission is tasked with finding “defects and anachronisms” within California law, and makes recommendations for changes.1
If it passes, the COMPETE Act would make major changes to the Cartwright Act by expanding its reach to unilateral, single-firm conduct. It may also make Cartwright Act claims significantly more plaintiff-friendly than Sherman Act claims by reducing or eliminating certain requirements that must be pleaded in a complaint or established during discovery and at an eventual trial, and preventing defendants from asserting procompetitive effects in markets other than the target market.
Extending the Cartwright Act to Single-Firm Conduct
The COMPETE Act would extend the reach of the Cartwright Act to include single-firm conduct. In practical terms, this means that a company’s unilateral business actions, including its pricing strategies, distribution choices and refusals to deal with a competitor, could now give rise to liability under the Cartwright Act, in line with “monopolization” cases brought under federal law — i.e., Section 2 of the Sherman Act.
While firms have been subject to liability for this conduct under the Sherman Act, such conduct has been outside the scope of the Cartwright Act since its original passage in 1907.
Explicit Decoupling From Federal Antitrust Principles
The COMPETE Act would also expressly decouple California’s antitrust law from federal precedent and potentially make businesses liable for broader conduct than the Sherman Act. California courts have historically given weight to Sherman Act jurisprudence when analyzing Cartwright Act claims, but the bill explicitly provides that the Cartwright Act should be interpreted “liberally” and that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act.2 The bill similarly includes language stating that applications of the Sherman Act generally are not binding on California courts.3 This language may lead California courts to develop their own, potentially more expansive, body of antitrust law that may deprive defendants of well-established defenses that have provided a shield against liability under the Sherman Act.
The bill would expressly reform the standards established under the Sherman Act in the following ways:
- No prior dealing requirement for refusal-to-deal claims. Refusal-to-deal claims arise when one company refuses to sell to or otherwise transact with another company, often a competitor. After the U.S. Supreme Court’s decision in Verizon v. Trinko, refusal-to-deal claims have been difficult to prove and typically require a showing that a dominant company terminated an existing, profitable business relationship with a competitor. The COMPETE Act removes that requirement, meaning companies could face liability under the Cartwright Act for refusing to do business with a rival even absent a preexisting relationship.4
- Less strict requirements to challenge pricing practices. Courts applying the Sherman Act have established requirements for finding liability for pricing practices that result in lower prices for customers, at least in the first instance. For example, claims challenging bundled discounts — where companies offer a lower combined price for purchasing multiple products together — under the Sherman Act often require plaintiffs to demonstrate that the excluded rival is at least as efficient as the defendant. The COMPETE Act would eliminate this requirement.5 Additionally, under the Sherman Act, allegations that a defendant engaged in “predatory pricing” — deliberately charging unsustainably low prices to drive competitors out of the marketplace — require a plaintiff to show that (i) the defendant priced the goods below cost and (ii) the defendant had a realistic prospect of recouping those losses in the long run, both of which are difficult to establish in practice. The COMPETE Act would eliminate both requirements for predatory pricing claims,6 as the Commission believes that they are outdated in today’s digital economy.7
- Only need to show harm on one side of a two-sided market. Companies competing in a two-sided market often connect two distinct groups of users to facilitate a transaction. For example, credit card networks compete both for consumers to use the cards when purchasing and for the merchants to accept the card when selling. Sherman Act precedent currently requires courts to evaluate competitive effects of challenged conduct holistically on both sides of the market to assess the net competitive effects. The COMPETE Act would recognize a violation where a plaintiff can show harm only on either side of a two-sided market.8
- Softer requirements for market definition and market power. Under the Sherman Act, even when a plaintiff presents direct evidence of market power, plaintiffs may still need to define a “relevant antitrust market” — a specific product and geographic market where competition is alleged to be harmed — to establish a defendant’s liability. Plaintiffs must also show that a defendant holds market power in that market, which plaintiffs typically do by demonstrating that defendants have a high market share. Federal courts tend to treat market shares greater than 65% as evidence of monopoly power. The COMPETE Act would eliminate the need for plaintiffs to define a formal relevant market where there is direct evidence of market power.9 Additionally, in the absence of direct evidence, plaintiffs would not be required to show that a firm meets any specific market share threshold.10
- Harder for defendants to prove procompetitive justifications. Defendants in cases brought under the Sherman Act can sometimes offer procompetitive justifications for challenged practices that offset harm in one market by benefiting competition in another. The COMPETE Act would eliminate the ability of defendants to raise these types of cross-market justifications in Cartwright Act claims.11
Practical Impact: How This Changes the Litigation Landscape
Businesses should be aware that the changes within the COMPETE Act could make it easier for plaintiffs to bring claims under the Cartwright Act and to have those claims survive until trial.
In addition to expanding the type of conduct that is subject to Cartwright Act liability, the proposal removes numerous threshold requirements for antitrust claims. Coupled with the bill’s clear guidance that the Cartwright Act be interpreted more liberally than the Sherman Act, plaintiffs may face a lower bar at the pleading stage, making it more challenging for defendants to obtain dismissal early in a case, as motions to dismiss are often predicated on a failure to allege the various requirements that the COMPETE Act seeks to eliminate or reduce. This is particularly true with respect to claims alleging a refusal to deal or challenging an alleged monopolist’s pricing practices.
It is also likely that more Cartwright Act cases would survive a motion for summary judgment if the COMPETE Act is passed. Defendants often challenge a proposed market definition and their share of the relevant market at the summary judgment stage, relying on economic evidence and contemporaneous business documents that emerge in discovery to argue that the practical realities of the market are not in line with plaintiffs’ allegations. Less rigid and formalized standards may make it easier to survive these types of arguments and encourage courts to allow cases to proceed to trial.
Current Status and What Comes Next
The COMPETE Act is currently advancing through the California state legislature, where Democrats hold a supermajority. The bill cleared the Assembly Judiciary Committee on April 7, 2026, and was later referred to the Committee on Appropriations on April 13, 2026. Before advancing the bill, the Judiciary Committee suggested that the bill’s author, Rep. Cecilia Aguiar-Curry (D), make some amendments, including a “reasonable market threshold” for single-firm conduct provisions.12 The committee also expressed concern over the lack of guidance for both courts and businesses about what conduct is anticompetitive, and suggested that the authors provide “a more affirmative set of factors” for courts to consider.13
The final day for a full legislative vote on the legislation is August 31, 2026, with September 30, 2026, being the final day for a gubernatorial signing or veto. It is unclear how Gov. Gavin Newsom (D) views the bill as it is currently drafted.
The COMPETE Act in Context
The COMPETE Act is the latest and most significant example of California’s shift towards more robust antitrust enforcement. Among these other efforts is — as we’ve highlighted recently — California’s legislation prohibiting the use or distribution of “common pricing algorithms” in anticompetitive agreements, which went into effect on January 1, 2026. The new legislation also prohibits the use or distribution of a common pricing algorithm where a person coerces another person to set or adopt a recommended price or commercial term.
Two other recently proposed bills in the California state legislature, SB 1074 and SB 1365, also seek to strengthen the Cartwright Act. SB 1074 (the BASED Act) would prevent technology companies with over $1 trillion in market capitalization and over 100 million American users from promoting their own products in search results over those of smaller competitors. SB 1365 would allow, among other things, for city attorneys in cities with over 750,000 residents to prosecute on behalf of their citizens both criminal and civil violations of the Cartwright Act, specifically in the price gouging context.
Next Steps
Companies with significant operations in California should monitor the COMPETE Act’s progress closely. As the bill progresses through the legislature, businesses should evaluate their pricing, distribution and competitive practices under the new standards.
If the COMPETE Act becomes law in its present form, companies should also consider the potential for increased and prolonged antitrust litigation, especially soon after the bill’s passage as courts interpret and clarify the changes made. Even if the bill is significantly narrowed or amended before enactment, the direction of California state antitrust law appears to be clear — greater scrutiny of single-firm conduct and a stricter eye on business practices than federal antitrust law.
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1 Cal. Gov’t Code § 8289(a).
2 See Proposed Sections 16730(c), 16733.
3 Proposed Section 16730(d).
4 See Proposed Section 16732(a).
5 See Proposed Section 16732(h).
6 See Proposed Sections 16732(c), (g).
7 California Law Revision Commission, Study #B-750 Preprint Recommendation, at 5.
8 See Proposed Sections 16732(f).
9 See Proposed Section 16732(j).
10 See Proposed Section 16732(i).
11 See Proposed Sections 16731(b).
12 See Assembly Committee on the Judiciary, AB 1776 Bill Analysis, April 3, 2026.
13 Id.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.