California Extends the Cartwright Act to Reach Single-Firm Conduct

On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1776 (AB 1776), also known as the Competition and Opportunity in Markets for a Prosperous, Equitable, and Transparent Economy (COMPETE) Act. Effective January 1, 2027, the law expands California’s existing antitrust statute and, for the first time, authorizes California public enforcers to challenge single-firm conduct under the Cartwright Act.

Governor Newsom stated, “Today we’re leveling the playing field for small businesses by making it easier to open and expand businesses, cutting red tape, and protecting competition. We’re taking on predatory practices that drive up costs and shut entrepreneurs out — making sure California’s economy works for everyone, not just the biggest and best-connected.”

For more than a century, the Cartwright Act has focused on anticompetitive agreements among multiple firms, leaving California to rely on the federal Sherman Act to address unilateral conduct. AB 1776 changes that framework, making it unlawful under California law for a single firm to monopolize or monopsonize a market.

AB 1776 is part of a broader shift in California antitrust law. The state recently adopted rules addressing common pricing algorithms and changed the pleading standard for Cartwright Act conspiracy claims. California and other state attorneys general have also pursued major antitrust cases independently, even when federal agencies declined to act.

Businesses with a significant presence in California should evaluate their practices and competitive strategies to prepare for this change. AB 1776 expressly states that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act.

A New State Prohibition on Single-Firm Conduct

The Cartwright Act, enacted in 1907, is California’s principal antitrust statute. Like Section 1 of the Sherman Act, the Cartwright Act prohibits multifirm conduct that unreasonably restrains trade. But until now, the Cartwright Act contained no counterpart to the unilateral-conduct provisions of Section 2 of the Sherman Act.

AB 1776 closes that gap, making it unlawful for a person to “monopolize or monopsonize, attempt to monopolize or monopsonize, maintain a monopoly or monopsony, or combine or conspire with another person to monopolize or monopsonize any part of trade or commerce.” The statute plainly targets labor market practices, noting the importance of protecting competition for workers and freedom for workers to choose employment.

The COMPETE Act was first introduced in the California Assembly on February 9, 2026, but the original bill was narrowed in scope in response to opposition. Notably, a recent amendment limited enforcement to the California attorney general and district attorneys, substantially reducing the litigation exposure that earlier versions would have created by allowing private plaintiffs to sue.

The bill was also amended to specify how courts should analyze claims under the new section. As enacted, it directs courts to use the analytical framework and guidance described by the California Supreme Court in In re Cipro Cases I & II (2015) 61 Cal.4th 116, 146-47. The amendments also removed a proposed judicial-guidance section that would have displaced several federal antitrust requirements. That section would have instructed courts that liability did not depend on satisfying certain federal tests governing refusals to deal and predatory pricing, evaluating competitive effects on both sides of a multisided platform, or defining a relevant market when direct evidence establishes market power. The law retains broader interpretive guidance: Interpretations of federal antitrust laws are “at most instructive” because California’s antitrust laws “are not modeled on federal antitrust statutes.” Without the deleted, doctrine-specific guidance, however, courts will have greater latitude to determine whether and how federal Section 2 principles should inform California law.

Part of a Broader Shift in California Antitrust Law

The COMPETE Act follows several other developments that require businesses to analyze California antitrust law separately from federal law.

Assembly Bill 325 (AB 325) took effect on January 1, 2026, making it unlawful to use or distribute a “common pricing algorithm” as part of a contract, combination, or conspiracy restraining trade. It also prohibits specified coercive uses of common pricing algorithms.

AB 325 also changed the pleading standard for Cartwright Act conspiracy claims. A plaintiff need only plead facts showing that the alleged contract, combination, or conspiracy is plausible, not facts tending to exclude the possibility of independent action. That standard departs from the federal approach to pleading conspiracy claims based on parallel conduct.

On February 10, 2026, Governor Newsom signed into law Senate Bill 25 (SB 25), enacting the California Uniform Antitrust Premerger Notification Act. Effective January 1, 2027, SB 25 will require certain deal parties that submit premerger filings to the federal government under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 to provide the HSR form to the California attorney general.

These statutes, coupled with recent state-led antitrust challenges, point toward a California antitrust regime that is increasingly independent of federal doctrine and priorities.

Key Takeaways

The COMPETE Act significantly expands California’s Cartwright Act and equips the California attorney general with additional antitrust enforcement tools. Companies — especially those with substantial market power — should reevaluate business practices that could be viewed as exclusionary under the new statute before it takes effect.

• Apply a California-specific analysis. Review pricing, distribution, exclusivity, loyalty, refusal-to-deal, and product design practices under AB 1776’s text and California antitrust principles, not just federal Section 2 precedent.
• Review buyer-side and labor-market conduct. The statute expressly reaches buyer-side conduct, including monopsonization and attempted monopsonization, and recognizes competition for workers as part of the competitive process. Businesses with substantial purchasing or labor-market power should examine procurement and employment practices as well as seller-side conduct.
• Prepare for state and local enforcement. The attorney general and district attorneys have exclusive authority to initiate actions under AB 1776. Companies should account for California enforcement priorities even when federal agencies take a different approach.
• Confirm whether an exemption applies. Businesses should evaluate the small-business exemption and the exclusions for specified government-granted or government-authorized conduct but should not assume that compliance with federal law supplies a broader safe harbor.

Please contact Margaret Webb at mwebb@goodwinlaw.com with any questions.