On September 30, 2026, Governor Gavin Newsom signed Assembly Bill 1776, nicknamed the COMPETE Act, into law. The new law, which takes effect on January 1, 2027, significantly expands California’s Cartwright Act — the state’s principal antitrust statute that currently covers only agreements or joint conduct — by prohibiting unilateral conduct, including monopolization and monopsonization of any part of trade or commerce. The new law requires courts adjudicating such claims to use the structured rule of reason analytical framework laid out in the Supreme Court of California case In re Cipro Cases I & IIn re Cipro Cases I & II, 61 Cal.4th 116 (2015). (In re Cipro).
The enactment of this new law reflects a broader trend within California to expand state antitrust enforcement, following recent amendments to the Cartwright Act that cover certain algorithmic pricing systems and lower pleading standards, as well as the passage of a Senate bill that established a state-level premerger notification regime.
The COMPETE Act adds several new sections to the California Business and Professions Code, including Section 16731, which will make it unlawful to monopolize or monopsonize any part of trade or commerce, or to attempt, maintain, combine, or conspire to do so. However, the law affirms that market power or monopoly power can be lawfully obtained or maintained through the superiority of products, services, or business acumen, as protected by existing California caselaw.
A plaintiff bringing an action under the new Section 16731 will be able to allege and, to prevail at trial, must prove substantial market power through either direct or indirect evidence. Courts adjudicating a claim brought under this new section will be required to use the analytical framework and guidance of the Supreme Court of California in In re Cipro. In that case, the justices adopted the federal courts’ “rule of reason” inquiry to assess whether challenged conduct promotes or suppresses competition by looking at “the facts peculiar to the business in which the restraint is applied, the nature of the restraint and its effects, and the history of the restraint and the reasons for its adoption.”61 Cal.4th 116, 146. In addition, In re Cipro also recognizes that the per se illegal rule and the “quick look rule of reason analysis” — both available under the federal courts’ anticompetitive analytical toolbox — are also available under the Cartwright Act.Id. at 147. The new Section 16731 will require courts to apply this framework in a monopoly or monopsony analysis.
Small businesses with fewer than 100 employees and less than $10 million in annual gross receipts will be exempted from the new provisions. Exclusive franchises, contracts, licenses, permits, and other conduct that are granted, authorized, and supervised by a local, state, or federal government entity will also be exempted.
Enforcement of the new Section 16731 will be limited to the Attorney General of California or district attorneys, which means that private plaintiffs will not be able bring claims under the new provisions. In addition, except in an action brought by the Attorney General or a district attorney, an alleged violation of this section will not serve as a predicate violation under the California Unfair Competition Law (the UCL). This means that private plaintiffs will not be able bootstrap a Section 16731 violation into a UCL claim, which can be used to challenge allegedly monopolistic conduct.
The COMPETE Act also memorializes important judicial interpretations of the Cartwright Act and its relationship with federal antitrust laws, paving the way for a more expansive state antitrust enforcement regime.
The legislation specifically requires that courts “liberally interpret California’s antitrust laws to best promote free and fair competition” and to “be mindful that California favors ‘maximizing’ effective deterrence of antitrust violations,” codifying existing California caselaw.See, e.g., Ahn v. Stewart Title Guar. Co., 93 Cal. App. 5th 168 (2023).
The COMPETE Act also codifies existing California caselaw that holds the Cartwright Act is “broader in range and deeper in reach” than the federal Sherman Act and that interpretations of federal antitrust laws are “at most instructive” when construing California’s antitrust laws. The COMPETE Act goes on to enumerate specific issues where California courts have recognized that the Cartwright Act departs from the Sherman Act, including indirect purchaser recovery, the use of a proximate cause test for standing and antitrust injury, recognition of broader harms and per se conduct, lower actionable market shares, structured rule of reason analysis, and differing burdens of proof.
In addition, the new law states that protecting competition includes prohibiting anticompetitive business practices that impede workers’ freedom to choose employment. This may allow for increased enforcement of the Cartwright Act in labor markets.
These provisions signify the California legislature’s goal to codify that the Cartwright Act goes beyond federal antitrust jurisprudence.
The California Legislature significantly narrowed the COMPETE Act since the Act was originally introduced. Notably, the original version of the bill did not limit enforcement to the California Attorney General and district attorneys nor offer a safe harbor for government-regulated conduct.
In addition, an earlier version of the bill would have repudiated certain legal elements often required in federal antitrust jurisprudence, and would have no longer required them to show monopoly conduct or monopolization.Compare April 9, 2026, version of AB 1776 to September 3, 2026, version of AB 1776. https://leginfo.legislature.ca.gov/faces/billVersionsCompareClient.xhtml?bill_id=202520260AB1776&cversion=20250AB177697AMD. The enacted version, rather, codifies the In re Cipro rule of reason framework, memorializes that the Cartwright Act is more expansive than federal antitrust law, and proclaims that federal jurisprudence is at most instructive, but leaves the details of particular elements up to the courts.
However, the new law still represents the latest in a series of expansions to California’s antitrust enforcement toolkit. Combined with the premerger notification requirements and the 2025 amendments addressing algorithmic pricing, the COMPETE Act underscores California’s commitment to reinforce and expand its competition laws and the likelihood that it may be more willing and able to bring such enforcement cases.
In particular, the COMPETE Act’s express declaration that the Cartwright Act is broader than the Sherman Act, combined with the mandate for courts to liberally interpret California’s antitrust laws, continues to signal that California is open to potentially novel antitrust theories and increased enforcement. However, the restriction of enforcement to the Attorney General and district attorneys — and the express prohibition on using a violation of the law as a predicate UCL violation — may limit the immediate impact on private litigation.
Latham & Watkins will continue to monitor developments related to the COMPETE Act. For more information, contact our Antitrust & Competition Practice.