California enacts COMPETE Act, extending Cartwright Act to include single-firm conduct

What is the COMPETE Act?

On September 30, 2026, California Governor Gavin Newsom signed into law AB 1776, or the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy Act (COMPETE Act; the Act), which amends California’s primary antitrust statute, the Cartwright Act, to include single-firm conduct. Historically, the Cartwright Act did not have a right of action for single-firm or unilateral conduct, focusing instead on acts by “two or more persons” (Cal. Bus. & Prof. Code § 16720). As a result, California regulators could previously only challenge single-firm conduct under federal antitrust statutes. California legislators have long considered these types of Cartwright Act reforms, which we covered here. The COMPETE Act takes effect on January 1, 2027, and will give California regulators a new enforcement tool for such single-firm activity.

What does the final COMPETE Act include?

The final COMPETE Act includes the following principal features (Note to the Members of the California State Assembly, Office of the Governor of the State of California (September 30, 2026), available here):

• Core monopolization prohibition. The Act prohibits a single person or firm from monopolizing or monopsonizing, or attempting to monopolize or monopsonize, any part of trade or commerce through anticompetitive conduct, or from combining or conspiring with another to do so.
• Substantial market power standard. An enforcing agency must allege and prove substantial market power through direct or indirect evidence. The governor’s signing statement clarifies that “‘substantial market power’ should be understood as a necessary – but not sufficient – condition to prove unlawful conduct.” Still, the Act does not readily define “substantial,” leaving courts to develop the standard.
• Public enforcement only. The new single-firm conduct provisions may be enforced only through investigations and prosecutions by the California Attorney General or district attorneys, not private parties.

Why is this important?

Although the COMPETE Act resembles Sherman Act §2, it differs substantially from federal law. The Act emphasizes that it is not modeled on federal antitrust statutes despite its parallels to Section 2 of the Sherman Act, and states that federal interpretations are “at most instructive.” The COMPETE Act further instructs courts to “liberally interpret California’s antitrust laws to best promote free and fair competition and be mindful that California favors ‘maximizing’ effective deterrence of antitrust violations.” While prior versions of the draft law required that procompetitive justifications be evaluated within the same relevant market as the conduct alleged to be unlawful, the version signed into law defers to courts to construct a governing framework (August 13, 2026, amendments, available here). Despite its departure from federal law, the COMPETE Act provides that a business “may lawfully obtain and maintain market power or monopoly power through the superiority of its products, services or business acumen,” mirroring federal antitrust jurisprudence (September 3, 2026 version, available here).

Why does it matter?

For the first time, the Cartwright Act reaches single-firm monopolization and monopsonization conduct, which until now could only be challenged in California under federal law. The state legislature emphasized that the Act is intended to protect competition in traditional product and service markets as well as competition for labor. It directs courts to interpret California’s antitrust laws liberally, to be mindful of “maximizing” effective deterrence, and to treat federal interpretations as at most instructive.

As state courts begin defining the contours of the Act and providing guidance on navigating the evolving enforcement landscape, companies will need to monitor key developments. Open questions include how courts will apply the “substantial market power” standard, evaluate procompetitive justifications, and weigh federal antitrust precedent. As Governor Newsom acknowledged, those questions will be addressed through enforcement and litigation, and additional legislation may be required to clarify the appropriate standards (Governor’s Notes to California State Assembly). The COMPETE Act also arrives amid a nationwide trend of increasingly active state antitrust enforcement, which we have covered here.

Companies with a meaningful presence in California may wish to review their pricing, distribution, purchasing, and labor market practices, along with their existing antitrust compliance programs, in light of the new law.