At the request of the state legislature, the California Law Revision Commission (CLRC) has delivered recommendations from eight working groups designed to modernize and strengthen the state’s antitrust framework. ​These changes aim to address challenges posed by evolving markets and business models, paying particular attention to the tech sector, artificial intelligence, and market consolidation.

If enacted, the proposals will expand the scope of actionable conduct under California law, potentially exceeding the rigor of federal antitrust statutes.

For corporate executives and legal departments these developments signal the need to reassess competitive strategies, merger plans, business alliances, pricing schemes, loyalty plans, and the use of AI. ​Below, we summarize the recommendations from all eight working groups and their implications for businesses if they become law.

1. Single-Firm Conduct

California’s current antitrust laws lack adequate remedies to address monopolistic behavior by single firms, the group determined. ​The CLRC proposes amending California’s Cartwright Act, the state’s cornerstone competition law, to align with the anti-monopoly provisions embodied in Section 2 of the federal Sherman Act, while encouraging California courts to develop independent jurisprudence that avoids the narrower interpretations often seen at the federal level.

Key Recommendations:

• Exclusionary Conduct: Expand the definition of anticompetitive exclusionary conduct to include loyalty rebates, exclusive dealing provisions, and predatory pricing strategies. ​These practices would face scrutiny if they diminish competitive constraints without offering sufficient benefits to trading partners.
• California Unfair Practices Act (UPA): Address exemptions for privately owned utilities and challenges in proving intent in below-cost pricing cases. ​Balance enforcement with legitimate price competition.
• Legislative Guidance: Courts would be encouraged to prioritize enforcement in cases where competitive impact is uncertain, placing the burden of doubt on curbing potentially harmful practices.

2. Mergers and Acquisitions

The CLRC recommends significant changes to California’s merger review process to address industry consolidation and preserve market competition. These revisions would lower notification thresholds and expand the grounds for regulatory challenges, even in cases where conclusive evidence of harm to competition is absent.

Key Recommendations:

• Expand the Cartwright Act: Amendments should incorporate explicit merger provisions, enabling state-level enforcement and allowing cases to proceed in California courts. ​This would reduce reliance on federal standards and increase scrutiny of mergers.
• Smaller Mergers: Reporting requirements should be extended to smaller mergers that fall below federal Hart-Scott-Rodino thresholds but could impact local commerce, particularly in sectors like healthcare and retail.
• Horizontal and Vertical Mergers: The CLRC emphasizes the risks posed by mergers that raise rivals’ costs, foreclose competition, or reduce incentives for innovation. ​While some mergers create efficiencies, others may harm competition, particularly in high-tech industries.

3. Concerted Action

The CLRC aims to modernize laws addressing anti-competitive conspiracies among competitors and suppliers. ​Proposed changes focus on creating a level playing field across goods, services, and real estate, while simplifying legal frameworks to enhance enforcement. ​

Key Recommendations:

• Equal Treatment Across Goods and Services: Antitrust laws should be updated to apply uniformly across all product types, minimizing regulatory discrepancies.
• Simplify Legal Frameworks: Outdated provisions should be streamlined to sharpen the focus of antitrust enforcement, while key provisions like those addressing price-fixing would remain central.
• Ban Resale Price Controls: Resale price maintenance practices, which often lead to higher consumer costs, should be prohibited outright.
• Clarify Rules on Product Bundling: Regulations should address bundling comprehensively, balancing legitimate business strategies with the need to maintain competitive markets.

4. Consumer Welfare

The CLRC proposes a shift from the consumer welfare standard, which focuses on price and quality, to a broader competitive process that protects all market participants, including consumers, workers, suppliers, and small businesses.

Key Recommendations:

• Scope of Harm: Antitrust harm should be defined as conduct that creates, increases, or abuses market power by reducing competitive constraints provided by rivals or potential rivals. ​Harm to competitors would not be the sole measure.
• Trading Partners: Conduct that enhances welfare for trading partners—such as increasing output, lowering consumer prices, or improving wages—may be justified, even if it involves some harm to competitors.
• False Positives and Negatives: The proposed framework aims to strike a balance between avoiding over-enforcement that chills competition and under-enforcement that permits anticompetitive conduct.

5. Technology Platforms

The dominance of Big Tech platforms like Alphabet, Apple, Meta, Amazon, and Microsoft has raised concerns about anticompetitive practices, market concentration, and harm to smaller competitors. ​The CLRC recommends specific legislation to address these challenges.

Key Recommendations:

• Define Covered Platforms: Platforms with 50 million or more monthly active U.S. users, over 100,000 active U.S. business users, and sales or market capitalization exceeding $550 billion would be subject to stricter scrutiny.
• Presume Certain Conduct as Unlawful: Practices like self-preferencing, discrimination harming competition, restrictions on interoperability, tying, and using data from the platform to support another business line would be presumed unlawful unless proven pro-competitive.
• Automatic Merger Review: Any acquisition by a covered platform would require automatic review by the California Attorney General, regardless of market size or acquisition value.
• General and Tech-Specific Legislation: Broader amendments to California’s antitrust laws would be combined with new legislation specifically targeting tech platforms.

6. Enforcement and Exemptions

The CLRC has identified challenges in enforcing California’s antitrust laws, including restricted access to courts, gaps in addressing single-firm conduct, and issues with arbitration clauses and antitrust exemptions.

Key Recommendations:

• Update the Cartwright Act: Expand applicability to single-firm conduct and mergers, void arbitration clause waivers, and introduce a structured rule of reason standard for courts.
• Digital Market Oversight: Explore regulatory approaches similar to the California Consumer Privacy Act (CCPA) to address antitrust issues in Big Tech.
• Combat Noncompete Clauses: Enforce laws prohibiting noncompete agreements and provide remedies to affected workers.
• Review Exemptions: Conduct a comprehensive review of antitrust exemptions in industries like agriculture, beer distribution, and occupational licensing.

7. Market Concentration

The CLRC highlights the negative impacts of market concentration, including higher prices, reduced innovation, wage suppression, and income inequality. Key sectors of concern include labor markets, food and agriculture, healthcare, and entertainment.

Key Recommendations:

• Strengthen Antitrust Enforcement: Bolster scrutiny against anticompetitive mergers and practices in sectors like labor, healthcare, and entertainment.
• Implement Regulatory Measures: Policies targeting employer monopsony power, including bans on non-compete agreements, should promote equitable labor markets.
• Legislative Reforms: Lowering pleading standards would facilitate stronger legal recourse.
• Ensure Market Transparency: Increase visibility in pharmaceutical pricing and pharmacy benefit manager (PBM) practices to prevent exploitative price-setting.
• Create Structural Remedies: Explore potential breakup of monopolistic entities to rejuvenate competition in markets with significant concentration.
• Collaborate Across Sectors: Align antitrust enforcement with labor and intellectual property policies to create a cohesive framework for competition and economic equity.

8. Artificial Intelligence

The CLRC recognizes the growing role of artificial intelligence (AI) in shaping market dynamics and the risks it poses to competition. ​AI-driven practices, such as algorithmic collusion and autonomous pricing, present unique challenges for antitrust enforcement.

Key Recommendations:

• Algorithmic Collusion: Amend the Cartwright Act to recognize competitors using the same pricing algorithms as evidence of “concerted action,” even without direct human communication. ​This would address illegal price-fixing facilitated by AI systems.
• Market Power and Anticompetitive Practices: Strengthen laws against self-preferencing, discriminatory pricing, and tying practices enabled by AI. ​Support federal legislation like the “Preventing Algorithmic Collusion Act of 2024” to ensure transparency in algorithmic pricing systems.
• Weak Merger Enforcement in Digital Markets: Enhance monitoring of mergers in AI and cloud markets, including transactions below Hart-Scott-Rodino thresholds. Consider creating a California-specific digital regulator modeled after the EU’s Digital Markets Act (DMA) to oversee platforms with entrenched market power.

Conclusion

The proposed changes to California’s antitrust laws would be significant, with implications for businesses across industries. ​If they become law, firms operating in the state can expect heightened scrutiny of their competitive practices.

Now would be a good time for businesses to review their strategies and practices to flag anything that might run afoul of these potential changes. Companies should consider the following actions:

• Reassess Competitive Practices: Evaluate your individual competitive conduct. Identify any exclusionary practices and restrictive agreements. Examine loyalty programs and pricing strategies to ensure they align with the proposed standards.
• Revisit Merger Plans: Prepare for stricter merger review processes, including reporting requirements for smaller transactions and expanded state-level enforcement.
• Examine Business Alliances: Ensure partnerships and agreements do not run afoul of updated laws on concerted action or bundling.
• Audit AI Usage: Scrutinize AI-driven pricing, data usage, and market strategies to avoid practices that could be deemed anticompetitive, e.g., improper sharing of confidential information with competitors.

By taking these steps now, businesses can mitigate risks and position themselves for success in a more competitive and tightly regulated marketplace.

Separate from these recommendations, companies should also be aware that California Attorney General Rob Bonta and State Democratic Senator Melissa Hurtado want stiffer penalties to enforce the Cartwright Act. The bill, SB 763, would raise the maximum criminal fine for corporate offenders from $1 million to a hefty $100 million, matching federal penalties. Read the post by Dan Mogin of Mogin Law. As of this writing the bill still needs the approval of the Senate Appropriations Committee before it can move any further through the chamber.