California's COMPETE Act: Extending the Cartwright Act to Monopoly Enforcement

Background

On September 30, 2026, California Governor Newsom signed Assembly Bill 1776 (AB 1776), the COMPETE Act, into law. The COMPETE Act takes effect on January 1, 2027, and extends California’s antitrust enforcement powers under the Cartwright Act to unilateral, single-firm monopolization and monopsonization claims related to business conduct within California.

Prior to the COMPETE Act, the Cartwright Act provided for state-law based antitrust claims alleging unlawful restraints of trade, specifically those involving more than one actor. Cal. Bus. & Prof. Code §§ 16700–16770. Effectively, the Cartwright Act’s scope was that of a rough state-law counterpart to Sherman Act § 1, as both prohibit anticompetitive concerted action. However, the Cartwright Act did not provide for comparable state enforcement of single-firm conduct prohibited under Sherman Act § 2, monopolization. Reflective of this legislative gap, the California Law Revision Commission recommended in 2025, among other changes, that California’s antitrust laws be amended to “outlaw anticompetitive conduct by single companies[.]” Cal. L. Revision Comm’n, Tentative Rec. – Antitrust Law: Single Firm Conduct (Dec. 2025). Subsequently, Assembly Majority Leader Cecilia Aguiar-Curry authored AB 1776, basing it on the Commission’s recommendations, which extended the Cartwright Act to reach single-firm monopolization and monopsonization. AB 1776 came on the heels of a broader push in California to enhance the scope of state antitrust enforcement. For example, SB 763 raised corporate criminal fines to $6 million and added civil penalties of up to $1 million per violation in actions brought by the California AG or a DA under the Cartwright Act; AB 325 targeted common pricing algorithms; and Governor Newsom’s California State Budget for 2026-27 included $14.3 million in special funds for 2026-27 to handle an expected rise in antitrust workload.

Majority Leader Aguiar-Curry introduced AB 1776 in February 2026. In early drafts, the COMPETE Act cast a broad enforcement net, initially providing for a private right of action and no exemptions for small businesses or government-regulated conduct. Following steep opposition from industry and business, such as the Software & Information Industry Association and the California Chamber of Commerce, and several drafting amendments, AB 1776’s purview significantly narrowed and clarifying limiters were added, though it remains broad in its overall reach. 

Key Provisions of the COMPETE Act

• The COMPETE Act provides that the Cartwright Act “is broader in range and deeper in reach” than the Sherman Act and not modeled after it, so federal antitrust precedent is “at most instructive” in California courts and not conclusive. AB 1776, § 16730(c)-(d). Courts are directed to construe California antitrust law liberally, with an eye toward maximizing deterrence. Id. at § 16732.
• The COMPETE Act reaches unilateral conduct: it prohibits any person from monopolizing or monopsonizing, attempting to do so, or maintaining a monopoly or monopsony, as well as conspiring with another person to do so. Id. at § 16731(a). Plaintiffs must allege and, to prevail, prove the defendant has substantial market power. Id. at §16731(c).
  • Similar language in Sherman Act § 2 has been interpreted to only prohibit unfair, unreasonable, or exclusionary practices to obtain or maintain a monopoly. It remains to be seen if California’s enforcement of this Act will adopt a similar requirement. 
• Courts are directed to use the analytical framework for evaluating antitrust claims under the rule of reason set forth in In re Cipro Cases I & II, 61 Cal. 4th 116, 146-47 (2015). § 16731(b). 
  • While this case was discussing antitrust claims in the context of reverse payment patent settlements, the general framework outlined was as follows: (1) plaintiffs must state a prima facie case that a challenged agreement is an unlawful restraint of trade; (2) defendants then bear the burden of providing evidence that explains the procompetitive basis for the challenged agreement; and (3) if that is done, plaintiffs must dispel those justifications. 
• Small California businesses (100 or fewer employees, $10 million or less in average annual gross receipts, with affiliates) are exempt. AB 1776, §16731(d). Conduct under government-granted and supervised franchises, licenses or permits, and conduct required or authorized by law is also exempt. Id. at §16731(e).
• Monopolization and monopsonization claims under the COMPETE Act can only be initiated by the California Attorney General or a district attorney. Id. at § 16731(f)(1). 

Key Takeaways for Companies Operating in California

• Consistent with the general trend of increased State Attorney General enforcement nationwide—and in California specifically—companies should expect the California Attorney General and District Attorneys to quickly begin utilizing this new enforcement tool.
• Time will show us how much broader California prosecutors choose to interpret the scope of this enforcement authority as compared to the Sherman Act, but companies should expect California prosecutors will seek to enforce a broader scope of conduct and make business decisions accordingly. 
• Companies should endeavor to document procompetitive reasons for business strategies that might be within the scope of this statute so that if California prosecutors ever inquire about certain conduct, companies can point to ordinary course evidence to show the legitimate business reasons for the conduct. 
• Looping in antitrust counsel often and early to help evaluate the risks of conduct that might be considered actual or attempted monopolization and monopsonization is encouraged. Counsel can help evaluate the risks of any such conduct and recommend strategies for mitigating this risk while helping you achieve your business goals.