California is once again testing how much punishment capital will tolerate before it packs a bag. The state’s impending ballot proposition imposing a “billionaire’s tax” has drawn plenty of attention for precisely that reason: If the tax drives enough wealth elsewhere, it could lose more revenue than it raises. But a quieter proposal now moving through Sacramento could impose an effective tax on a much broader segment of the economy.
Late last month, the California Assembly passed the COMPETE Act, based on recommendations from the California Law Revision Commission. The bill is now under consideration in the California Senate. The act would significantly expand liability under the Cartwright Act, California’s antitrust statute, to such an extent that it would likely become the most interventionist state antitrust law in the country.
As currently drafted, the statute could place a wide range of common business practices at legal risk. That would make California an antitrust outlier and could discourage investment and economic growth. At the same time, there is no assurance the statute would benefit consumers and, in some circumstances, it could even leave them worse off.
Antitrust by Guesswork
The statute’s key feature is a new cause of action that would allow suits against businesses for anticompetitive conduct by a single firm, as distinct from collusion among multiple firms, which the law already covers. The federal Sherman Act also provides a single-firm cause of action, but the California statute makes a critical change.
The statute would make firms liable for conduct that “monopolizes” or “unreasonably restrains trade,” rather than only conduct that “monopolize[s],” as the federal statute provides. That added phrase makes all the difference.
Monopolization suits inherently require courts to identify exclusionary conduct without punishing business practices that are simply part of vigorous competition. Over more than a century, federal courts have developed—through trial and error—a structured framework to meet that challenge. By contrast, there is no settled understanding of what it means to “unreasonably restrain trade” in the single-firm context.
Businesses therefore would have little guidance on compliance, especially because the statute also provides that courts should treat federal antitrust precedent as “at most, instructive.” Guess wrong, and the result could be treble damages or civil or criminal penalties, which were increased by legislation enacted in December 2025. While the statute excludes independently owned, California-based businesses with $10 million or less in annual “gross receipts” and 100 or fewer employees, it still leaves a wide range of medium and large businesses—including franchisees of large national businesses—exposed to significant liability.
The risks of overenforcement are compounded by the statute’s instruction that courts interpret the Cartwright Act “liberally” to “maximiz[e]” effective deterrence. That contrasts with the more balanced approach in federal antitrust case law, which strives to deter anticompetitive conduct without suppressing procompetitive practices.
The statute also pursues a wide range of policy objectives, such as “free and fair competition,” protecting “all trade participants,” and preserving “democratic, political, and social” institutions. That broad remit strains the rule of law and could yield enforcement actions and judicial decisions that depart from antitrust’s traditional focus on preserving competition and protecting consumers.
Taking the Guardrails Off
The risk of enforcement overreach is heightened by the statute’s unusually specific instructions that courts need not follow several doctrines developed in federal monopolization cases. These doctrines share a common purpose: reducing the risk that antitrust law mistakenly condemns procompetitive business practices. The result could be enforcement outcomes that protect certain competitors at consumers’ expense.
Predatory Pricing. The statute disclaims Supreme Court precedent—most notably, Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.—requiring predatory-pricing claims to show both below-cost pricing and a reasonable prospect that the defendant can later recoup its losses through monopoly pricing. Courts developed these requirements to avoid discouraging price cuts that benefit consumers. Without them, businesses unable to match a rival’s prices could seek relief through antitrust litigation instead.
Multi-Sided Platform Efficiencies. The statute disclaims Supreme Court precedent—specifically, Ohio et al. v. American Express Co. (2018)—requiring courts to consider whether alleged anticompetitive harms on one side of a multisided platform are offset by procompetitive benefits on another side. A multisided platform is a business that serves distinct groups of users who interact through the platform, such as advertisers and consumers using a search engine. Without that framework, a court could condemn certain practices in digital advertising markets without considering how those same practices may benefit consumers through zero-price search, messaging, or other complementary services.
The “As Efficient” Principle. The statute disclaims certain federal appellate decisions requiring plaintiffs in monopolization cases—particularly those involving bundled discounts—to show that the challenged conduct impedes rivals that are at least as efficient as the defendant. The principle reflects the view that monopolization law should not protect less efficient competitors from more efficient ones. Abandoning it could discourage practices such as bundled discounts and other package deals that often benefit consumers.
If You Can’t Win in Court…
Viewed more broadly, the statute’s interventionist approach reflects a shift from the federal to the state level of a vigorous campaign—in scholarship, advocacy, and policymaking—to move U.S. antitrust law away from protecting the competitive process and toward achieving redistributive outcomes by limiting firm size and market concentration as ends in themselves. As I have shown elsewhere, federal courts have largely rejected legal theories motivated by these redistributive principles, which generally conflict with governing case law grounded in the consumer-welfare standard and the effects-based rule-of-reason methodology. Advocates have therefore turned to state legislatures to implement this alternative model of antitrust law.
Supporters of this state legislation rely heavily on the now-popular view that purportedly lax antitrust enforcement has increased market concentration and entrenched incumbents. Yet the real world is more complicated.
There is no scholarly consensus that the U.S. economy is unusually concentrated by historical standards or that antitrust policy was the determining factor in those digital market segments where concentration is high. Sectors with high concentration can still feature intense competition on price, quality, and innovation, as the current rivalry among major cloud-computing services and artificial-intelligence model developers illustrates. Moreover, it is well-established that size and concentration within a certain range can benefit consumers when economies of scale or scope—cost savings or product improvements that come from producing more goods or offering complementary services—yield gains in cost, quality, or convenience that are passed on to consumers.
The pending statute departs from core principles of antitrust law and economics to address a competition problem that has not been soundly demonstrated. Its loosely defined cause of action, expansion of policy goals beyond protecting competition, and rejection of doctrinal guardrails against overenforcement may encourage litigation targeting practices that pose no reasonable risk of anticompetitive harm. The statute arguably goes beyond even the broader liability standards of European competition law, which antitrust reformers often laud as a model, because it is enforceable through class actions and treble damages—plus attorney’s fees—that are uncommon in Europe.
The Golden State’s Self-Inflicted Wound
The combination of expansive liability standards and private enforcement could significantly alter California’s legal environment for the medium and large businesses—and small franchisees—that fall within the statute’s scope. Capital is mobile, and competitive pressures require firms to avoid regulatory environments that place them at a disadvantage.
If enacted in its current form, the statute may lead national businesses to shift investment and employment to other states. It may also discourage discount pricing, package deals, and other business practices that benefit California consumers—especially lower-income consumers—but cannot be matched by less efficient rivals.
In the name of protecting competition, California risks making itself less competitive. The ultimate losers may be the very consumers antitrust law is supposed to protect.
