The Source Blog

Background

In August of last year, The Source shared information about the California Law Revision Committee's (CLRC) antitrust study, spurred by the 2022 Assembly Concurrent Resolution No. 95. At its outset, the study aimed to address the U.S. monopoly problem and the "threat of market concentration" in California.  The legislature tasked the CLRC with determining the following:

• Whether California antitrust law should align itself with Section 2 of the Sherman Act, outlawing monopolies by single corporations in California?
• Whether California antitrust law should be specifically modified with respect to technology companies to recognize injuries in the form of harm to innovation and/or the harm of personal freedom to start a business, instead of only looking at whether monopolists' conduct is strictly for the purpose of raising prices?
• Whether California antitrust law should be revised in any other alternative forms so as to promote authentic free market competition in the state and reap the benefits of such a market?

Nearly four years after the initial study was begun, the first piece of legislation has been introduced.  On January 30, 2026, the CLRC approved a proposal to send to the legislature, with recommended language, to broaden California's antitrust laws by including single-firm conduct (SFC), allowing prosecution beyond what the statute provides.  The study’s mandate included addressing recent state and federal bills that seek to modernize antitrust law to broaden how injuries from monopolization can and should be defined.  This includes the New York 21st Century bill and Amy Klobuchar’s Competition and Antitrust Law Enforcement Reform Act (CALERA).

From Concept to Recommendation

In early 2025, the CLRC published its overall objectives for the study examining reform of California's antitrust laws.  These fell into three broad categories: 1.  Adoption of an SFC provision, 2.  Adoption of an abuse of dominance standard, and 3.  Adoption of the state's own merger review and approval laws.  A few months later, the CLRC released an additional objective to review and recommend options for single-firm conduct.  The Federal Trade Commission describes SFC as “The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power”.

What initially began as a multi-expert working group study exploring the relevant issues of competition in its various forms has morphed into a compilation of eight reports that are being used as the foundation for the Commission's final recommendations.  After twenty commission meetings, countless memos, and exhaustive lists of public comments, the first bill has been drafted in response to the committee’s work.  On February 9, 2026, Assembly Majority Leader Aguiar-Curry introduced Assembly Bill 1776, titled the "Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy (COMPETE) Act".

Despite the overwhelming volume of work and expertise that went into the recommendation to the legislature, AB 1776 amends a single phrase of the Cartwright Act’s Section 16720 of the Business and Professions Code, but one that carries substantial weight.  The bill modifies the definition of "trust" from being a combination of "capital, skills, or acts of two or more persons” to “of one or more persons.” This single change widens the reach of California antitrust enforcement to include the conduct of single dominant firms, which has not been traditionally recognized in the state.

AB 1776 – A Small Change That Could Have a Significant Effect

The bill aims to better identify and remedy gaps through which dominant firms have found ways to avoid liability for restricting competition.  The gaps are a result of the current legal framework in California aligning with Section 1 of the Federal Sherman Act, which defines illegal antitrust activity to be acts of “two or more persons.” California's Cartwright does not currently have a direct equivalent to Section 2 of the Sherman Act, which prohibits single-firm monopolization.  With the recommended change, a range of acts that have traditionally been viewed as legally acceptable may become subject to closer examination.

If passed, AB 1776 would alter the regulatory landscape in California allowing for increased scrutiny and investigation by expanding the "scope of activities prohibited” by the Cartwright Act.  Where certain anticompetitive conduct was permissible  under state law, single corporations could now face enforcement actions for unfair pricing regimes, vertical acquisitions, and exclusive dealing agreements.

Healthcare Implications

As discussed previously, various forms of consolidation in healthcare have resulted in outcomes such as decreased staffing, increased prices, questionable quality of care, and limitations on innovation.  Single-firm conduct by dominant healthcare firms can result in increased costs, reduced quality of care, and reduced access when market power is leveraged for financial gain.

If enacted, AB 1776 could alter the landscape of healthcare antitrust enforcement in California by expanding the reach of California authorities to entities previously outside their enforcement zone.  Single dominant corporations could be on the precipice of increased scrutiny, prompting entities to begin reassessing their business models.

The Public’s Reaction

Not surprisingly, there have been strong reactions to the bill’s tentative language, much of which has mirrored the public comments throughout the study’s lifetime.  Supporters noted the bill’s ability to address increased prices, “protect small businesses” and reinforce “workers’ bargaining power.” The bill is supported by several groups across a variety of industries, including TechEquity Action, the American Economic Liberties Project, the United Food and Commercial Workers, and the California Nurses Association.  Those in support have shared how consolidation has harmed them in the past across multiple markets and that, if passed, AB 1776 could help bring down costs and advocate for small businesses.  Assemblymember Aguiar-Curry, who introduced the bill, noted that “When there’s less competition, prices go up and people pay more for goods and services. . . The COMPETE Act updates our antitrust laws so businesses can compete fairly, ideas can succeed, and Californians aren’t stuck with higher prices and fewer options.”

In sharp contrast, a vast number of business and financial groups hastily shared their opposition to the bill's language.  The California Chamber of Commerce called on lawmakers to oppose the proposed legislation, noting that “AB 1776 would enshrine in state law the rushed and reckless proposals brought forward by the California Law Revision Commission. . . .These changes would impact nearly every business across the state, regardless of size, imposing sweeping ideas to solve problems never actually identified after months of Commission work.” Opponents are concerned the bills’ ambiguous terms and reliance on a “presumption of illegal activity" would only lead to increased rates of litigation in an effort to reach clarity.  Critics also question the lack of an economic analysis of the bill's proposal to provide evidence that single-firm conduct has resulted in any harm across the state.  Furthermore, businesses sitting at the intersection(s) of competing legal frameworks worry about how the bill will impact them, such as with patent and/or copyright law.  An array of groups in opposition includes the Motion Picture Association, California Life Sciences, the Silicon Valley Leadership, and Google.

California – The Progressive Antitrust Enforcers

California has been moving toward greater antitrust scrutiny for quite some time now.  The 2022 budget allocated funds to create the Office of Healthcare Affordability (OCHA).  OCHA has authority to analyze mergers and acquisitions of healthcare businesses by requiring notification of any change that would materially affect ownership.  If the transaction could impact competition in the state, OHCA conducts an impact review to determine the potential effect of the deal, with a discretionary submittal to the attorney general for further review.

Likewise, in 2025, the state enacted SB 763, which increased criminal fines for antitrust violations by $5 million.  Similarly, in February 2026, the Governor also signed legislation mandating California companies that are merging to submit federal corporate merger filings directly to the attorney general instead of the state having to obtain them from the federal government upon request.  AB 1776 seems well-situated among the state's newly enacted antitrust enforcement measures over the past few years, but only time will tell whether it becomes a reality.

What Comes Next

AB 1776 is still in its early stages of the legislative process.  It was sent to the Judiciary Committee for review after its introduction on February 23.  As it continues to progress, additional information will emerge from its reviews by both chambers and from public opinion.  If it advances and is signed by Governor Newsom, it would be a significant step towards California addressing improper single-firm monopolistic conduct.  It would reshape the authority of state enforcement over competitive conduct across every sector, notably healthcare.  The Source will continue to monitor AB 1776 and will keep you up to date on critical developments and how it may impact healthcare cost, quality, and access for Californians.

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