On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1776—the “Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy (COMPETE) Act.” The statute, which goes into effect January 1, 2027, amends the Cartwright Act to reach single‑firm conduct. Although the law was amended to remove some of the initial, more controversial provisions, the bill still arms the California Attorney General’s and district attorneys’ offices with a new tool to continue ramping up antitrust enforcement efforts.
Background
As discussed in our prior post, the COMPETE Act expands the Cartwright Act to cover single-firm conduct, prohibiting monopolization and monopsonization and any attempt or conspiracy to monopolize or monopsonize any part of trade or commerce. Although this conduct is also proscribed under Section 2 of the Sherman Act and various other state laws, the expansion of the Cartwright Act presents unique challenges and uncertainty for businesses operating in California, especially given other recent amendments to, and judicial interpretations of, the Cartwright Act. In particular:
- A different pleading standard applies for stating a Cartwright Act violation under state law. Last year, California enacted AB 325, which underscored that the pleading standard adopted by the US Supreme Court in Bell Atlantic v. Twombly, 550 U.S. 544 (2007) does not apply to Cartwright Act claims filed in state court. Under the clarified standard, an antitrust plaintiff can plead a Cartwright Act violation by pleading plausible facts supporting the inference of a conspiracy and is not required to plead facts tending to exclude the possibility of independent, parallel conduct.[1]
- Last year, the California Legislature passed new laws to bolster antitrust enforcement efforts. In 2025, the California Legislature passed SB 763, which increases penalties for Cartwright Act violations from $1 million to $6 million for corporations per violation, and from $250,000 to $1 million per violation for individuals. The law also clarified that remedies and penalties under the Cartwright Act are “cumulative” of both other Cartwright Act remedies, as well as those available under other causes of action, which increases potential exposure for those who have been found to have violated the antitrust laws.
- Courts have held that the Cartwright Act is “more expansive” than federal antitrust laws. For example, unlike under federal law, indirect purchasers have standing to pursue antitrust claims under the Cartwright Act[2] and courts have condemned certain conduct as a per se violation of the Cartwright Act that can be justified by procompetitive effects under federal law.[3]
Things to Know About the COMPETE Act
- The COMPETE Act’s single‑firm conduct provisions may be enforced only by the California Attorney General or a district attorney. The final bill does not create a private right of action for unilateral conduct claims, removing (at least for now) the risk of private treble-damages cases and class actions.
- The statute adds an important clarification regarding the scope of California’s Unfair Competition Law, expressly stating that a violation of the new single‑firm section cannot be used as a predicate for claims under the UCL, Bus. & Prof. Code § 17200. This provision was added to prevent private plaintiffs from “backdooring” enforcement through UCL theories.
- The government must allege and prove that the defendant has “substantial market power” under the COMPETE Act. Although the statute does not define the term—leaving room for litigation over what qualifies, how it is measured, and what evidence is sufficient—Governor Newsom’s signing message underscores that the law should be interpreted to “penalize clear wrongdoing, without creating needless uncertainty that risks harming legitimate businesses.”[4]
- The Act directs courts to treat interpretations of antitrust laws as “at most instructive.” Although this rule of interpretation has been applied by some courts for years, the Statute makes this approach explicit.
- The law includes a small business exception tied to California location/domicile requirements and employee/revenue thresholds and excludes certain conduct that is authorized/granted and supervised by government (e.g., certain exclusive franchises, permits, or supervised conduct within granted authority)
Takeaways
Though private enforcement is currently not on the table, clients with substantial operations and market share in California that could be of particular interest to the California Attorney General or district attorneys’ offices should:
- Reassess unilateral conduct risk in California. In particular, firms with or approaching market power (either on the sell-side or buy-side) should evaluate risks inherent in any of their practices that could be characterized as exclusionary or anticompetitive—such as exclusive dealing, loyalty/conditional discounts, restrictive access or distribution rules, tying/bundling, and other conduct that could disadvantage rivals or extend a monopoly.
- Evaluate labor-market exposure through a monopsony lens. The statute’s express focus on monopsonization reinforces California’s scrutiny of conduct that could allegedly suppress competition for workers or impair worker mobility.
[1] Notably, AB 325 further modified the Cartwright Act to impose liability for (1) agreements that use or distribute a common pricing algorithm “as part of a contract, combination in the form of a trust, or conspiracy to restrain trade or commerce”; and (2) coercing another to accept a price or commercial term recommended by a common pricing algorithm for similar products.
[2] California v. ARC Am. Corp., 490 U.S. 93, 105 (1989); Union Carbide Corp. v. Superior Ct., 36 Cal. 3d 15, 19 (1984).
[3] See Morrison v. Viacom, 66 Cal. App. 4th 534, 546 (1998); Cal. Bus. & Prof. Code §§ 16720, 16727 (2026).
[4] Signing Statement of Governor Gavin Newsom (Sept. 30, 2026), https://www.gov.ca.gov/wp-content/uploads/2026/09/SIGN-msg-AB-1776.pdf.