On September 30, 2026, California Governor Gavin Newsom signed the COMPETE Act (AB 1776) into law, expanding California’s antitrust law to reach anticompetitive conduct by firms acting alone. Effective January 1, 2027, the law makes it illegal for dominant companies to engage in monopolistic practices unilaterally, giving state antitrust enforcers a new tool to challenge exclusionary acts and protect competition.
Although the final legislation is substantially narrower than earlier proposals, it represents one of the most significant expansions of California antitrust enforcement authority in decades.
Why the COMPETE Act Matters
For more than a century, California’s primary antitrust statute, the Cartwright Act, has largely targeted agreements, arrangements, and conspiracies that unreasonably restrict trade. Unlike federal antitrust law, however, the Cartwright Act did not prohibit unilateral conduct aimed at monopolizing a market.
The COMPETE Act brings California antitrust law closer to its federal counterpart by adding Sections 16730 and 16731 to the Business and Professions Code.
Section 16731 makes 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.”
Section 16730, meanwhile, establishes the interpretive framework for the COMPETE Act, expressly directing California courts to treat antitrust law as independent of federal antitrust law and identifying several respects in which California has historically adopted broader standards.
Together, Sections 16730 and 16731 reflect the Legislature’s intent not simply to add state-law monopolization and monopsonization claims, but to do so through a distinctly California framework. Companies’ antitrust compliance programs must now account for a new California monopolization regime that may reach conduct beyond the scope of federal antitrust law.
California Charts Its Own Antitrust Course
Federal monopolization claims have historically focused on companies’ loyalty programs, bundling, tying practices, predatory pricing, and other practices that can exclude rivals. Federal courts have also become increasingly demanding in monopolization cases, often requiring detailed proof of market power, anticompetitive effects, and the absence of legitimate business justifications.
Against that backdrop, California lawmakers have sought to give state enforcers additional tools to challenge dominant companies’ conduct without being constrained by federal antitrust law.
The COMPETE Act expressly invites California courts to develop an independent body of monopolization law. Section 16730 codifies longstanding California Supreme Court precedent that the Cartwright Act is not modeled on federal law and that federal antitrust decisions are instructive rather than controlling.
Section 16731 also requires courts deciding monopolization claims under California law to apply California Supreme Court standards, creating the possibility that California monopolization doctrine will diverge from federal precedent.
Key Differences from Federal Antitrust Law
Like Section 2 of the Sherman Act, the federal law prohibiting monopolization, the COMPETE Act targets anticompetitive conduct by firms possessing significant market power. But the new California antitrust law differs from its federal counterpart in important respects.
First, unlike Section 2 of the Sherman Act, which can be enforced by consumers and competitors, Section 16731 may be enforced only by the California attorney general and local district attorneys. Lawmakers removed a private right of action during the legislative process, eliminating the prospect of immediate private class-action litigation under the new statute.
Second, core concepts are open to interpretation, and California deliberately avoided adopting federal definitions. Section 16730 rejects automatic reliance on federal antitrust doctrine, leaving state courts free to develop their own interpretations of statutory terms such as “monopolization,” “monopsonization,” or “maintenance of a monopoly or monopsony.”
Whether courts ultimately embrace broader standards remains to be seen, but businesses should expect California enforcement agencies to test the boundaries of their new authority.
What Does “Substantial Market Power” Mean?
One of the most important unanswered questions involves the COMPETE Act’s undefined concept of “substantial market power.” The statute requires enforcers to demonstrate that a defendant possesses substantial market power but does not establish a minimum market-share requirement, safe harbor, or presumption.
An April 2026 Assembly Judiciary Committee analysis discussed these concerns, but lawmakers ultimately declined to adopt a numerical benchmark or follow federal standards. That uncertainty is heightened by the analysis’s observation that California law has historically recognized anticompetitive conduct at lower market shares than federal law.
Newsom’s signing statement provides little additional guidance. It states that substantial market power is necessary, but not sufficient, for liability, indicating that size or commercial success alone will not establish a violation.
Although it remains uncertain how courts will interpret the threshold, they will likely examine factors such as market definition, market structure, market share, competitive constraints, and direct evidence of a firm’s ability to affect competitive conditions.
The COMPETE Act could also create room for arguments based on nontraditional sources of market power. Because “substantial market power” is undefined and federal antitrust precedent is merely instructive, courts may be asked to determine whether factors such as control of unique datasets, network effects, technological advantages, or other competitive assets can establish market power even where traditional market-share metrics are less decisive.
How the Final Law Changed
Earlier versions of the legislation generated substantial concern within the business community, but the bill was narrowed considerably during the legislative process.
The enacted law contains several limitations that were not in the original version:
- No private right of action.
- Enforcement limited to public enforcers.
- Recognition of legitimate business conduct.
- Amendments preserving certain discounting and price-matching practices.
- Small-business protections.
- Removal of several of the more novel provisions that appeared in earlier drafts.
What Companies Should Do Now
Companies with significant California operations should consider reviewing their antitrust compliance programs before the law takes effect, including practices involving:
- Loyalty rebate and incentive programs.
- Exclusive dealing arrangements.
- Preferred-distributor programs.
- Most-favored-customer provisions.
- Bundling and tying strategies.
- Pricing practices involving key competitors.
- Internal documents discussing rivals, market share, or efforts to exclude competitors.
Companies should also consider these developments alongside California's broader antitrust agenda. As we discussed in our prior alert on California's algorithmic-pricing legislation, state lawmakers continue to move toward a more expansive and increasingly independent antitrust framework. These developments underscore California's increasing willingness to pursue policies that may diverge from traditional federal approaches and provide another reason for companies to review their business practices and internal materials for compliance with state antitrust law.
The greatest risk is likely to fall on firms with large market shares, strong network effects, or significant leverage over suppliers or customers, as well as businesses that rely heavily on data-driven decision-making and algorithmic tools. California antitrust enforcers may use the new statute to pursue cases previously brought only under federal law or to assert novel theories of harm based on nontraditional metrics.
The Bottom Line
For companies doing business in California, antitrust compliance can no longer be viewed solely through a federal lens. Although the final COMPETE Act is far narrower than the version originally proposed, it creates a new state-law monopolization regime, gives California’s public enforcers additional tools to challenge unilateral conduct, and allows California courts to develop monopolization doctrine that could diverge from federal Sherman Act precedent.
For now, however, enforcement authority rests exclusively with public enforcers, which may moderate the statute’s immediate impact as courts begin to define its key concepts.
If you have any questions, or would like additional information, please contact one of the attorneys on our Antitrust team.
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