Big changes to California’s state antitrust law, called the Cartwright Act, may be in the works. These changes, if enacted, would represent a significant departure from current antitrust law, prohibiting otherwise lawful conduct and expanding the regulatory costs and potential legal liability for all companies that do business or have customers in California. The latest proposal is part of a broader effort to increase antitrust enforcement in California, including the March 2024 announcement that the California Attorney General’s Office intends to begin charging criminal violations of the Cartwright Act.

In 2022, the California Legislature authorized the California Law Revision Commission (the Commission) to study whether the state’s antitrust laws should be revised 1) to prohibit monopolization similar to prohibitions under Section 2 of the Sherman Act and the laws of other states; 2) in the context of technology companies, to place greater weight on reductions in innovation and an individual’s freedom to start their own businesses in analyzing antitrust injury; and 3) to promote the tangible and intangible benefits of free market competition for Californians in other contexts, such as when analyzing mergers and acquisitions.

The Commission has organized its work around seven topics: single-firm conduct; mergers and acquisitions; concerted action; the consumer welfare standard (and alternatives to it); technology platforms; enforcement and exemptions; and “concentration in California.” For each of these topics, the Commission appointed a panel of professors and practitioners to study potential reforms and provide a written report identifying options and—when warranted—recommendations.

Working Group Reports Consider Radical Changes to California Antitrust Law

On April 1, the working groups completed their reports and recommendations.¹ These reports collectively consider many potential changes to California antitrust law, including:

• Expanding the scope of the Cartwright Act to cover single-firm conduct, whether by adopting an analog to Section 2 of the Sherman Act or a novel approach;
• Taking a more skeptical approach to vertical agreements, and particularly those involving resale price maintenance;
• Replacing the current consumer welfare standard, which condemns practices that harm consumers, with a broader one that would also cover harm to suppliers, including “workers, growers, . . . fabricators, and retailers, among others.”²
• Expanding state merger review, including the possibility of requiring merging parties to make a separate merger notification in California;
• Considering special competition legislation related to the technology industry, although the relevant working group did not reach any consensus on whether such legislation was necessary or what form it should take;
• Loosening the antitrust standing requirements for state law claims, particularly relative to more stringent federal standards, and nullifying contractual waivers for treble damages, attorneys’ fees, and the statute of limitations; and
• Endorsing prior studies asserting that concentration ratios have increased in California over the past several decades.

Commission Seeks Input from Affected Stakeholders

The working groups’ reports are just the first step in what will likely be a lengthy legislative process. The reports identify a wide range of potential revisions, from importing Section 2 of the Sherman Act into the Cartwright Act to more radical proposals. Notably, most reports do not consider preserving the status quo as preferable to various alternatives.

Given that the Commission is still in the early stages of its analysis, affected stakeholders should consider providing their views on these options to the Commission. The Commission encourages interested commenters to submit written comments to sreilly@clrc.ca.gov or make oral comments on a specific topic at the meeting where the report on that topic will be considered.

[1] One report was released in January 2024; the remaining six reports were all released on April 1.

[2] Jorge Contreras, Warren Grimes, Doug Melamed, Heather Nyong’o, and Barak Orbach, The Consumer Welfare Standard Working Group, California Law Review Commission [for the] Study of Antitrust Law, Jan. 26, 2024, available at http://www.clrc.ca.gov/pub/Misc-Report/ExRpt-B750-Grp4.pdf.