California’s COMPETE Act: May the Best Firm Lose
Gov. Gavin Newsom has signed Assembly Bill 1776, the so-called COMPETE Act, making California the first state to add a general prohibition on anticompetitive conduct by individual firms to its principal antitrust statute. Newsom’s announcement casts the law as a way to help small businesses and stop large companies from “shutting out competition.”
The law launches a significant experiment in antitrust federalism—the division of antitrust authority between federal and state governments. It is also one that risks replacing economically disciplined analysis with political suspicion and litigation pressure. The likely result is less innovation, less investment, and more uncertainty for firms whose markets extend well beyond California.
The final enrolled text of AB 1776 adds Sections 16730 through 16732 to California’s Business and Professions Code and takes effect Jan. 1, 2027. The Legislature softened earlier versions by removing the provision allowing private parties to sue under the new prohibition, deleting the separate ban on “unreasonable restraints of trade,” and requiring plaintiffs to allege and prove “substantial market power” through direct or indirect evidence. Those changes deserve credit.
But that credit goes only so far. The statute declares federal antitrust interpretations “at most instructive,” directs courts to interpret California antitrust law liberally, and tells them to keep “maximizing” deterrence in mind. It covers monopolization, attempted monopolization, maintenance of a monopoly or monopsony—market power on the buying side—and conspiracies to monopolize or monopsonize. In effect, California has announced plans to enact a competing body of antitrust law with national significance.