Recent Developments in the California Law Revision Commission Review of State Antitrust Law
In 2022, the California legislature passed Assembly Concurrent Resolution No. 95, mandating the California Law Revision Commission (CLRC) study specific topics relating to antitrust law and its enforcement. The bill made legislative findings that included “[t]he idea that America has a monopoly problem is now beyond dispute”, “California should be uniquely sensitive to the threat of market concentration”, and “[n]o California statute deals expressly with monopolization or attempted monopolization by one giant company”. The Resolution directed the CLRC to study three topics:
(1) Whether the law should be revised to outlaw monopolies by single companies as outlawed by Section 2 of the Sherman Act, as proposed in New York State's "Twenty-First Century Antitrust Act" and in the "Competition and Antitrust Law Enforcement Reform Act of 2021" introduced in the United States Senate, or as outlawed in other jurisdictions.
(2) Whether the law should be revised in the context of technology companies so that analysis of antitrust injury in that setting reflects competitive benefits such as innovation and permitting the personal freedom of individuals to start their own businesses and not solely whether such monopolies act to raise prices.
(3) Whether the law should be revised in any other fashion such as approvals for mergers and acquisitions and any limitation of existing statutory exemptions to the state's antitrust laws to promote and ensure the tangible and intangible benefits of free market competition for Californians.
Three years later, the result of the mandate, Study B-750 has included conducting substantial research in the area of antitrust through the work of many experts who comprised eight working groups spanning a variety of topics including: Single Firm Conduct, Mergers and Acquisitions, Concerted Action, Consumer Welfare Standard, Technology Platforms, Enforcement and Exemptions, Concentration in California, and Artificial Intelligence. While the study's staff continues to work tirelessly on crafting potential language to present to the Commission and possibly include in the language of the reform, The Source has been keeping a close eye on what the changes to the Cartwright Act could mean for health care in California. Below, we delve into the ways consolidation impacts health care and how the study's conclusions could be implemented.
California’s Creation of OHCA and Potential Shortcomings
The California budget passed in June 2022 included money for the creation of the Office of Healthcare Affordability (OHCA). OHCA has the authority to analyze mergers, acquisitions, affiliations, and other transactions among health care entities. Health care entities are required to notify OHCA of any potential transactions occurring on or after April 1, 2024, that will materially change ownership, operation, control, structure, or governance. If the Office determines the transaction could significantly impact competition, cost, or the ability of the state to meet its cost targets, OHCA must conduct a cost and market impact review (CMIR), paid for by the health care entities seeking the transaction, to determine the effect of the potential deal and may refer the matter to the attorney general's office for review of "unfair methods of competition, anticompetitive behavior, or anticompetitive effects." While OHCA remains a steady instrument in the state's arsenal, it lacks the ability to block transactions, illuminating the need for additional support. Additionally, OHCA is only charged with reviewing future transactions and has no means to address single-firm entities that have already gained overwhelming market share.
A Look into Study B-750
The legislation's mandate for the study by the CLRC is in response to similar state and federal bills that seek to modernize antitrust injuries, such as the New York 21st Century bill and Amy Klobuchar’s Competition and Antitrust Law Enforcement Reform Act (CALERA).
Beginning in 2023, the CLRC convened eight working groups to lay the foundation for the study. Each working group drafted reports culminating their research and expertise into guidance that laid the foundation for the study's proposals. The reform options are the culmination of diverse research, expertise, and input that demonstrate the manner in which the state's antitrust laws could be altered to challenge unreasonable concentration. On January 13, 2025, CLRC staff published objectives for potential reforms to California's antitrust laws. These fell into three broad categories: 1. Adoption of a single firm conduct provision, 2. Adoption of an abuse of dominance standard, and 3. Adoption of the state's own merger review and approval laws. In its recommendations, CLRC staff noted that California's Cartwright Act does not generally address single-firm conduct. On March 24, 2025, the CLRC issued an additional memo, specifically looking at options for single-firm conduct to be added to the Cartwright Act. The expert reports, together with submitted oral and written public comments, allowed for the Commission to arrive at three different single-firm conduct (SFC) reform options. 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”.
The Options
Option 1: California Should Adopt a Single-Firm Conduct Provision Similar to the Sherman Act
This option is similar to §2 of the Sherman Act, which makes it a felony to monopolize any part of trade, and would allow for ease of interpretation as it closely resembles familiar federal law. However, commentators have noted the lack of distance from the current state law that Option 1 would provide, noting that it does not go "far enough". The staff has remarked that if the Commission were to adopt this Option, it should consider inclusion of "Findings and Declarations" drafted by the staff that would "untether" California law from federal law to more "effectively control competition".
Option 2: Enhanced Single-Firm Conduct Provision
Option 2 would essentially combine the language of Option 1 regarding SFC with a “restraint of trade” (“any activity that tends to limit a party’s ability to enter into transactions") prohibition. "Restraint of trade" is in both the Cartwright and § 1 of the Sherman Act as a way to describe "restraint[t] of the free exercise of competition" or "freedom of trade". Option 2's use of language from both §1 and §2 of the Sherman Act allows for a focus more inclusive of only monopolistic behavior. The addition of the "restraints of trade" language would provide for a broader interpretation in the state. While continuing to use familiar language such as "restraint of trade" would be helpful for interpretation by the courts, the staff warns of the risk of federal courts conflating federal and state antitrust law if this language is adopted without recommended Findings and Declarations drafted. This would help avoid this conflation and would explain the legislative intent of using such language. Otherwise, federal courts may continue to interpret Option 2 as they have done previously because of the similar language to the Sherman Act.
Option 3: Exclusionary Conduct Rule
This option would completely untether California law from federal SFC law, as well as the jurisprudence that accompanies it, and is closely modeled after CALERA. As such, Option 3 would include new terminology and a legal framework as recommended by the SFC Working Group. Here, a company's conduct would be deemed unlawful if it (1) diminishes or create a meaningful risk of diminishing the competitive constraints imposed by the defendant's rivals and thereby increases (or creates a meaningful risk of increasing) the defendant's market power, and (2) does not provide sufficient benefits to prevent the defendant's trading partners from being harmed by that increased market power. Advocates for this option claim it would give courts a concrete and explicit framework to assess unlawful SFC. However, those in opposition to Option 3 have expressed concern that it would result in far too much legal uncertainty for the courts in regard to legal analysis.
This section of the proposal serves as a tool to accompany the Commission's chosen option, aiding the Legislature in understanding the law's creation and intended interpretation. In essence, it explicitly states the purpose and the scope of California's antitrust law. It would be beneficial for the courts to have such language, as it could be utilized in how the reformed law should be applied and could speak to the risks of conflating state and federal law. Current subsections include: a Basic Purpose Statement; an Enhanced Purpose Statement; a Statement Rejecting Federal Principles (which includes rejecting "the presumption that vertical arrangements and unilateral conduct are unlikely to harm competition"); and a Statement Rejecting Federal Precedents, which would free California courts to make their own interpretation of the law.
Those in Support and Those in Opposition
Based on the public comments submitted thus far, including those before and following the publication of the memo with the three SFC options spanning the last two and a half years, patterns emerge for those in support of reform. Labor unions, including the California Nurses Association, have voiced support, as have progressive advocacy organizations such as the Institute for Local Self-Reliance, and small business advocates. These groups' public comments are skeptical of the current federal law, with some claiming that it does little to protect workers. These public comments also note that industries that are already heavily concentrated should be subject to further regulation to curb problematic conduct. Professor Robin Feldman from UC Law San Francisco specifically underscored concerns about health care consolidation by highlighting how big pharma mergers have chilled research and development.
In contrast, those in opposition to any reform include major business associations such as the California Chamber of Commerce and Tech Industry groups, including Google. These groups note concerns regarding the lack of legal certainty, particularly with regard to the implementation of Option 3, as it may cause unpredictable and inconsistent rulings. Similarly, concerns relating to increased rates of litigation flooding the courts have been submitted. Business groups also argue that such reforms may chill innovation and investment, thereby limiting the ability of new businesses to enter the market. Those in opposition call for an alignment that closely follows federal law in hopes of avoiding uncertain rulings. The Information Technology & Innovation Foundation's (ITIF) public comment, submitted on May 2, 2024, claims that the increased costs and supply chain issues associated with pharmaceuticals are "exaggerated." The comment states there is "no firm basis for concluding California needs a unilateral conduct regime to complement federal law". In a later public comment submission, ITIF posits that any change to the status quo is not needed.
Specific Sectors have their own concerns, including the Motion Picture Association and the California Life Sciences. Public comments submitted by these groups present concerns with the interaction of the proposed reform language with copyright and patent law.
Where the Commission is Heading
As of June 27, 2025, the Commission took it to a vote and officially took Option 3 off the table. There had been scant public support for that option, as well as unfavorable opinions by multiple Commissioners. Similarly, many Commissioners were ready to do away with Option 1 as well, but decided to keep it, as further modifications by the staff may make it more palatable. Option 2 continues to require some massaging and edits, but appears to be closer to what the public seems to support, as well as many Commissioners. This could mean a higher level of scrutiny for hospital and physician-group consolidations in the health care sector.
Furthermore, the Commission heard presentations of the “Merger Guidance” and “Misuse of Market Power" memos, as drafted by the Executive Director, Sharon Reilly, the Chief Deputy Director, Sarah Huchel, and the study's consultant, antitrust attorney Cheryl Johnson. The Merger Provisions included four options: (1) independent California standard; (2) focus on California's legislative intent and spirit; (3) federal law not binding; and (4) federal law as persuasive only. The Source will stay updated on this topic and the final decision by the Commission, as it is closely tied to healthcare merger transactions in California and could impact access to and quality of care. The Misuse of Market Power memo explores various options for shifting the burden onto dominant firms and market thresholds of what could or should be considered too much power in a given market. The Commission did not select an option from either presentation and will continue to explore the possibility of including language from either of these memos in the final recommendation to the Legislature.
Further discussion about the proposed Findings and Declarations took place, with the Commission unable to come to a decision. Updated and additional Findings and Declarations will be presented to the Commission at the next meeting with the goal of reaching a decision. Once the Commission has confirmed the final language, the staff will draft a tentative recommendation that will be sent to the Commission for review. Additionally, the draft will be published so that the public has an opportunity to submit comments on it. Following time for public comment and Commission recommendations for final edits, if necessary, the final report that the Commission must approve will be sent to the Legislature. Once in their possession, the Legislature will review the report to decide if it will be recommended as a typical bill. If so, they can choose to accept the report in full or in part and would go through the dual-chamber state legislative process. Alternatively, the Legislature could decide to do nothing with the recommendation. For more information on the policies and procedures that CLRC follows, please access their handbook.
The Source will continue to monitor the progress of Study B-750 and keep you updated on future decisions and their potential impact on the state of health care consolidation.
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