California’s COMPETE Act Passes Into Law

California Assembly Bill 1776, the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy Act (the “COMPETE Act”), has been enacted and will take effect on January 1, 2027. The bill was signed into law by Governor Gavin Newsom on September 30, 2026. The COMPETE Act significantly expands California’s antitrust statute, the Cartwright Act. It also expands the California attorney general’s enforcement authority beyond the claims available under federal antitrust law, creating uncertainty for companies that conduct business in California.

The passage of the COMPETE Act signals continued expansion of antitrust scrutiny by state enforcers, including state attorneys general and district attorneys. In recent years, state enforcers have increasingly pursued cases independently of federal agencies such as the Federal Trade Commission (FTC) and the Department of Justice (DOJ). These state-led efforts have included a multistate jury verdict against Live Nation and a preliminary injunction—a court order temporarily blocking a transaction—against the Nexstar–TEGNA integration despite federal clearance. 

The COMPETE Act also follows a recent surge in state “mini-HSR” laws, which require notice to one or more state attorneys general for transactions that meet specified thresholds.¹ Colorado and Washington’s mini-HSR laws are in full effect, and California’s own mini-HSR law is set to take effect in January 2027. Several other states, including New York and the District of Columbia, have pending legislation that would establish state premerger notification regimes.

Scope of the bill as enacted

The COMPETE Act, first introduced in February 2026, makes the following major changes to California’s Cartwright Act:

• Extension to single-firm conduct. The bill expands the Cartwright Act beyond coordinated conduct among multiple firms to reach potential monopolization claims. This would target conduct by a single firm that unlawfully maintains or acquires monopoly power and monopsony claims based on conduct by a single buyer that unlawfully exercises buying power. 
• Relationship to federal law. The bill expressly provides that federal antitrust case law is not conclusive in interpreting the Cartwright Act. The California Supreme Court has recognized that the Cartwright Act differs in certain respects from the Sherman Act, the principal federal law governing restraints of trade. The bill further states that federal antitrust law is “at most instructive,” meaning courts may consider it but are not required to follow it, because California’s antitrust laws are not uniformly modeled on federal statutes.
• New power threshold. The bill applies to companies with “substantial market power,” an undefined term under current law. By contrast, federal law generally requires complaints to demonstrate “monopoly power”—the ability to control market prices or exclude competition in a relevant market. The bill therefore may create uncertainty as to conduct by firms that do not have monopoly power under the standards of federal antitrust law.
• Reduced evidentiary burdens. The bill does not enumerate evidence of anticompetitive conduct that could violate the Act. Earlier versions, however, identified facts that plaintiffs could use to show a violation, including exclusionary conduct, quantitative evidence of harm to competition, and evidence that defendants recouped losses caused by that harm.² Under the enacted bill, a plaintiff must prove “substantial market power” through direct or indirect evidence, which will invite litigation over what is sufficient. 
• Rule of reason framework. Courts must use the rule-of-reason framework from In re Cipro Cases I & II, 61 Cal. 4th 116 (2015). This framework asks whether a restraint’s overall effects on competition are unreasonable, rather than condemning the restraint automatically. It recognizes that a business may legitimately obtain and maintain market power or monopoly power through superiority of its products, services, or business acumen. Under Cipro, only “unreasonable restraints of trade are prohibited,” and courts must consider the “circumstances, details, and logic of a restraint” when deciding whether a restraint is unreasonable. Because nothing in the Cartwright Act prescribes the details for applying the rule-of-reason or per se approaches, courts may tailor the rul3
• No private right of action. The bill authorizes enforcement only through actions brought by the California attorney general or district attorney. 

Opposition

The bill has drawn opposition from the California Chamber of Commerce (“Chambers”) and technology trade associations, which argue that the bill’s uncertainty could harm California industries.⁴ Chambers submitted a letter to the California Senate Appropriations Committee arguing that the COMPETE Act is “out of step with state and federal antitrust standards and modern economic thinking.” Chambers identified five potential effects:

1. The bill allows claims against companies with “substantial market power,” which is untested under federal law.
2. The bill encourages plaintiffs to file lawsuits challenging common business practices based on relaxed pleading standards.
3. The bill will spark litigation driven by uncertainty in the legislation, increasing costs for businesses and consumers.
4. Courts cannot evaluate the impact of a company’s behavior across multiple markets.
5. There are no meaningful protections for small businesses.⁵

Tech trade association opposition follows that of Chambers, emphasizing potential risks to small businesses and innovation from imposing expanded, untested antitrust liability.⁶

Operating under the new enforcement regime

The new California antitrust regime leaves businesses to operate with uncertainty until courts develop additional guidance. Businesses should monitor state enforcement actions and future litigation, review potentially affected practices before the effective date, and consult antitrust counsel as the new regulatory framework develops. Further, companies should consult with antitrust counsel before implementing high-risk changes or closing a potentially reportable transaction even for unilateral conduct and plan to document pro-competitive justifications for such changes.

Footnotes

1. See Cheng, et al., The HSR rollercoaster: form revisions, unexpected reversals, reportability considerations, and the road ahead (June 22, 2026), https://www.aoshearman.com/en/insights/the-hsr-rollercoaster-form-revisions-unexpected-reversals-reportability-reconsiderations-and-the.

2. A.B. 1776, as amended on June 16, 2026, 2026 Senate (Ca. 2026), https://legiscan.com/CA/text/AB1776/id/3448815.

3. See In re Cipro Cases I & II, 61 Cal. 4th 116, 147 (2015).

4. See CalChamber, CalChamber to Senate Committee: Reject Risky Antitrust Plan (last visited: October 1, 2026), https://advocacy.calchamber.com/2026/08/05/calchamber-to-senate-committee-reject-risky-antitrust-plan/.

5. The bill as enacted does not prohibit defendants from offering procompetitive justifications based on effects in different markets. It also includes limited protections for certain “small businesses,” defined as independently owned and operated businesses whose principal office and officers are located in California and which, together with affiliates, have 100 or fewer employees and average annual gross receipts of USD10 million or less over the three years before the complaint is filed.

6. See Association for Competitive Technology, Letter to Governor Newsom to Request a Veto on COMPETE Act (last visited October 1, 2026), https://actonline.org/post/association-for-competitive-technologys-letter-to-governor-newsom-to-request-a-veto-on-compete-act/.

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