California Governor Gavin Newsom on September 30, 2026 signed Assembly Bill 1776 (AB 1776), the Competition and Opportunity in Markets for a Prosperous, Equitable, and Transparent Economy (COMPETE) Act. The law adds Sections 16730 through 16732 to the Business and Professions Code and takes effect January 1, 2027.
The Cartwright Act is California’s principal antitrust statute and historically has focused on agreements, combinations, and conspiracies involving two or more actors. By contrast, Section 2 of the federal Sherman Act reaches certain unilateral conduct. AB 1776 fills that gap in California law by creating a direct state-law claim for monopolization and monopsonization, including attempts to obtain and maintain monopoly or monopsony power.
AB 1776 grew out of the California Law Revision Commission’s (CLRC’s) Study B-750, undertaken after the Legislature directed the CLRC in 2022 to study potential revisions to the Cartwright Act, including whether California law should address anticompetitive single-firm conduct. The enacted law was narrowed substantially from earlier proposals. Among other changes, earlier versions included provisions that would have resulted in broader potential litigation risk and uncertainty, including a private right of action and a departure from federal monopolization doctrines.
The Legislature narrowed the bill further in August. Senate Committee on Appropriations amendments on August 13 removed the private right of action. Final Senate amendments on August 27 removed language requiring a claimed procompetitive benefit to arise in the same relevant market as the alleged harm; the Senate floor analysis described that language as duplicative of existing California case law. The August 27 amendments also prevented private plaintiffs from using an alleged violation of the new section as a predicate for a claim under California’s Unfair Competition Law (UCL) and clarified that the Cartwright Act’s recently relaxed pleading and proof rules for alleged combinations do not apply to a purely unilateral claim.
WHAT AB 1776 DOES
- Creates express monopolization and monopsonization offenses. The statute makes it unlawful to monopolize or monopsonize, attempt to do so, maintain that power, or combine or conspire with another person to do so. The law expressly states that protecting competition includes protecting competition among businesses for workers and workers’ freedom to choose employment.
- Preserves competition on the merits. The law affirms that a business may lawfully obtain and maintain market power or monopoly power through superior products, services, or business acumen. In practical terms, the focus is on whether a firm used anticompetitive conduct to acquire or preserve power, not simply whether it grew large or outperformed rivals.
- Requires “substantial market power.” A public plaintiff must allege and prove “substantial market power” through direct or indirect evidence, while federal monopolization ordinarily requires “monopoly power.” The statute does not define “substantial market power,” leaving courts to determine how this threshold applies and whether it differs from federal monopoly power. Governor Newsom stated that substantial market power should be understood as a necessary, but not sufficient, condition for unlawful conduct and cautioned against setting the liability threshold so low that it reaches legitimate, superior business practices.
- Directs courts to use a California-specific analytical framework. Courts must apply the analytical framework and guidance described by the California Supreme Court in In re Cipro Cases I & II (2015) 61 Cal.4th 116, 147, which discusses a “structured rule-of-reason” analysis in which, “[i]n lieu of an undifferentiated one-size-fits-all rule of reason, courts may ‘devise rules . . . for offering proof, or even presumptions where justified, to make the rule of reason a fair and efficient way to prohibit anticompetitive restraints and to promote procompetitive ones.’” Because Cipro involved a reverse-payment agreement between drug companies rather than unilateral conduct, applying that framework to monopolization claims may raise novel questions about burden of proof, competitive effects, and competitive justifications.
- Limits the new cause of action to public enforcement. Only the California attorney general or a district attorney may initiate an action under the new section. Private parties cannot sue directly under Section 16731 or use an alleged Section 16731 violation as the predicate for a UCL claim.
- Exempts qualifying small businesses and specified government-supervised activity. The small-business exemption applies only if each statutory requirement is met, including independent ownership and operation, a principal office in California, California-domiciled officers, no more than 100 employees when affiliates are counted, and average annual gross receipts of no more than $10 million over the preceding three years. The law also exempts certain exclusive franchises granted and supervised by a local, state, or federal governmental agency.
- Requires complex-case treatment. Any action under the new section must be designated as a “complex case,” placing it on a case-management track designed for litigation involving difficult legal questions, extensive discovery, or many pretrial motions.
POTENTIAL IMPACT
Limiting Section 16731 to public enforcement materially narrows the litigation exposure contemplated by earlier versions, but it should not be treated as a safe harbor. Customers, rivals, suppliers, or workers may still bring concerns to the attorney general or a district attorney, and an investigation can impose significant costs and business disruption before any case is filed. Existing Cartwright Act remedies available in public civil actions include injunctive relief and civil penalties of up to $1 million for each violation in an action brought by the attorney general or a district attorney.
The law is not limited to a particular industry or sector. Businesses operating in California may face scrutiny over unilateral practices allegedly harming competition. Depending on the facts and how courts develop the new standard, that scrutiny may reach single-firm theories involving exclusive dealing, tying or bundling, predatory pricing, refusals to deal, or other exclusionary conduct. None of those practices are automatically unlawful under AB 1776; the new statute requires proof of substantial market power and directs courts to assess the challenged conduct under the Cipro framework while preserving lawful competition on the merits.
Federal antitrust law will remain an important reference point, but it will not necessarily be dispositive. AB 1776 states that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act and that interpretations of federal antitrust law are “at most instructive” rather than conclusive. Together with the undefined “substantial market power” threshold, the Cipro directive, and the instruction that California antitrust laws be liberally interpreted to promote free and fair competition, those provisions leave room for California courts and enforcers to develop a distinct body of law governing single-firm conduct. Governor Newsom’s signing message also sounded a note of caution: he warned against setting the bar too low, described substantial market power as necessary but not sufficient, and observed that “additional legislation may be required to clarify the appropriate standards.”
