In brief
On September 30, 2026, California Governor Gavin Newsom signed AB 1776 into law, also known as the Competition and Opportunity in Markets for a Prosperous, Equitable, and Transparent Economy (COMPETE) Act. Effective January 1, 2027, the law amends California’s Cartwright Act to authorize the state prosecutors to challenge unlawful single-firm conduct, such as monopolization and monopsonization. Companies with significant positions in California product, labor, procurement, or platform markets should reassess practices that may preserve or extend market power, even if those practices have been structured around federal antitrust precedent governing single-firm conduct.
Under the COMPETE Act only the California Attorney General or a district attorney may initiate an action and the government must prove substantial market power to have a viable claim. Additionally, the Act directs California courts to treat federal antitrust decisions as instructive rather than binding precedent and to “liberally interpret California’s antitrust laws.”
Key takeaways
- California now has a law analogous to Section 2 of the Sherman Act. The Act reaches monopolization and attempted monopolization, and expressly reaches the buyer-side equivalents of monopsonization and attempted monopsonization.
- Enforcement is limited to public prosecutors. Only the California Attorney General or a district attorney may bring a claim under the new provision. The Act also prevents an alleged violation from serving as a predicate under California’s Unfair Competition Law, subject to the statute’s stated exceptions.
- Substantial market power is required, but not defined. The government must plead and prove substantial market power through direct or indirect evidence. However, the Act provides no market-share threshold or safe harbor. Governor Newsom emphasized that substantial market power is necessary, but not sufficient, to establish unlawful conduct.
- California jurisprudence matters. Courts must use the analytical burden-shifting framework described in In re Cipro Cases I & II and must interpret California antitrust law liberally to promote free and fair competition and effective deterrence. Additionally, federal antitrust decisions remain relevant, but are expressly described as only instructive.
- The law protects competition for workers as well as consumers and businesses. Its express reference to monopsony makes procurement, labor-market, platform and other buyer-side practices a central compliance concern. Companies with meaningful seller- or buyer-side positions in California should review potentially exclusionary practices now, rather than waiting for the first enforcement actions to define the statute’s boundaries.
In more detail
The Cartwright Act has historically focused primarily on concerted conduct involving two or more actors. Prior California appellate decisions had made clear that the statute did not provide a cause of action for unilateral monopolization. AB 1776 addresses that gap by adding a new single-firm-conduct provision to the California Business and Professions Code.
The law makes it unlawful for a 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. The inclusion of “maintain” and the explicit inclusion of monopsonization signal that enforcement may focus not only on conduct used to acquire market power, but also on practices alleged to preserve power in product or labor markets.
The enacted text was substantially narrowed during the legislative process. Earlier versions included a broader unilateral restraint-of-trade theory and more prescriptive language addressing particular federal doctrines. Those provisions were removed from AB 1776. The Act instead centers the inquiry on substantial market power, the Cipro analytical framework, and California-specific rules of construction.
Violations of the Act are subject to the same civil remedies available for other Cartwright Act violations, including injunctive relief. Although the Cartwright Act’s existing criminal penalty provision applies to “any violation” of the Act and thus could potentially extend to the new monopolization provisions, whether courts will permit criminal enforcement of these new single-firm conduct claims remains unsettled. Individuals could face up to three years’ imprisonment and substantial fines, and corporations could face substantial criminal fines, if those provisions are ultimately deemed applicable. Because the Act creates no private right of action, however, treble damages and attorneys’ fees are unavailable.
How it works
- Covered conduct. The Act reaches completed and attempted monopolization and monopsonization, maintenance of monopoly or monopsony power, and combinations or conspiracies to monopolize or monopsonize. Market power gained or maintained through superior products, services or business acumen may remain lawful.
- Market-power showing. The government must allege and prove substantial market power, using direct or indirect evidence. Direct proof could focus on actual effects on price, output, access or contractual terms; indirect proof may involve market share, entry barriers, market structure and durability. The Act leaves the precise threshold to the courts to develop.
- Analytical framework. The Act directs California courts to apply the framework described in In re Cipro Cases I & II, which evaluates anticompetitive effects and procompetitive justifications in a structured rule of reason analysis. Under the Cipro framework, the government must first show that the challenged conduct has anticompetitive effects. Potentially scrutinized conduct could include exclusive dealing, loyalty discounts, refusals to deal or provide platform access, tying, or no-poach agreements. Once the government establishes anticompetitive effects, the burden then shifts to the defendant to demonstrate procompetitive benefits. If they do, the government may seek to show the anticompetitive harms outweigh the procompetitive benefits.
- Federal precedent. The law states that federal antitrust interpretations are at most instructive, not conclusive, when construing California antitrust law. Companies therefore should not assume that compliance with federal Section 2 doctrine will necessarily resolve California risk, particularly at the margins of refusal-to-deal, predatory-pricing, platform and exclusive-dealing principles.
- Who may enforce. Actions brought under the new single-firm provision may be initiated only by the California Attorney General or a district attorney. The Act does not create a private cause of action, and an alleged violation generally may not be repackaged as a predicate violation under the Unfair Competition Law.
- Small-business and regulated-conduct protections. The Act’s prohibition on certain single-firm conduct does not apply to qualifying independently owned and operated California businesses with no more than 100 employees and average annual gross receipts of USD 10 million or less over the preceding three years. The law also protects specified conduct authorized, granted and supervised by governmental agencies, including conduct within the scope of certain exclusive franchises, contracts, licenses, and permits.
The COMPETE Act gives California prosecutors a significant new enforcement tool while leaving important questions for courts to resolve, including the meaning of substantial market power and the application of the Cipro framework to unilateral conduct.