Business groups push back on bill to expand California's antitrust law

A proposed law to expand the scope of California's main antitrust law has prompted backlash from the business community. The proposal is based on recommendations from the California Law Revision Commission -- though the California Chamber of Commerce called the commission's study "unfinished" and warned the bill could "deepen the affordability crisis."

AB 1776 would change the definition of a trust under the Cartwright Act. The 1907 state law parallels the federal Sherman Act of 1890 but is interpreted independently by California courts. It prohibits agreements that restrain trade, including price-fixing, bid rigging and market allocation.

"Markets have changed," said the bill's author, Assembly Majority Leader Cecilia Aguiar-Curry, D-Winters, at a news conference Tuesday. "Industries have consolidated. When competition dries up, our families pay more; our small businesses struggle to compete. Our workers have fewer options and innovation slows down."

The bill would make a seemingly innocuous change that both supporters and opponents say would have an outsized effect. The current version of the venerable law defines a "trust" as "a combination of capital, skill, or acts by 2 or more persons for certain prohibited purposes." The new bill would change this to "one or more persons."

This matches the language of the Sherman Act and would incorporate it into California law for the first time. The law also has teeth, allowing for treble damages and attorney fees when a plaintiff can prove harm from a company's violations.

The Cartwright Act was aimed at industries such as oil, rail and agriculture. Modern California has a new class of companies that can grow so large that a single entity might act like a monopoly, especially in areas such as social media and artificial intelligence. In a recent public appearance, Assembly Member Josh Lowenthal, D-Long Beach, warned that money from the current batch of tech giants could swamp regulation efforts within three years.

In 2022, the Legislature ordered the commission to examine potential changes, including whether the Cartwright Act should be expanded to adopt the Sherman Act's single-company approach. After convening a working group, the commission's 2024 report recommended new rules governing "single-firm conduct," but warned California should develop its own guidelines.

The state Chamber of Commerce quickly issued a news release opposing AB 1776, with dozens of local chambers and other business groups signing on.

"AB 1776 would enshrine in state law the rushed and reckless proposals brought forward by the California Law Revision Commission," the release stated. "These changes would impact nearly every business across the state, regardless of size, imposing sweeping ideas to solve problems never actually identified after months of Commission work."

It continued: "We also believe legislators should ask why no economic analysis was conducted. ... AB 1776 disappointingly adopts the Commission's unfinished work by relying on poorly defined terms, an absence of standardized tests for wrongdoing, and a presumption of illegal activity when it comes to a number of business practices that are widely considered typical and benefit consumers by offering better services and prices."

Stanford Law School professor Mark A. Lemley dismissed these arguments.

"This is advocacy, not a real concern," Lemley, the William H. Neukom professor and a partner with Lex Lumina LLP, said in an email. "Enhancing antitrust enforcement is important for California consumers, particularly given the uncertainty this week about how federal enforcement will continue. The bill is a reasonable way to improve California law, which right now doesn't prohibit monopolization."

Lemley added, "Nor does there seem to be a plausible legal challenge. The U.S. Supreme Court has confirmed California's power to pass antitrust laws that are broader than federal law."

A coalition of labor and small business groups backs the bill. Some of those entities cited a perceived lack of antitrust enforcement under the Trump administration.

"Big companies are monopolizing industries, and their profits are attempting to also dominate the workforce by flexing loopholes and gaps in the law to undercut good-paying union jobs and threatening the rights of workers across California," Dale Wentz, secretary-treasurer of Teamsters Local 150, said in a statement shared by Aguiar-Curry's office. "Enough is enough. California should not be a playground for corporations to bully their way towards rapid expansion in a vacuum while working people are left behind."

Federal antitrust claims can be brought in state courts under the principle of concurrent jurisdiction. But in practice, most federal antitrust cases are litigated in federal court, often because defendants remove them there.

Defendants can also remove Cartwright claims to federal courts. But they can face a higher bar, especially when plaintiffs do not cite claims under federal laws such as the Sherman Act or the Clayton Act.