AB 1776 would expand California’s antitrust authority. While the bill has been positively amended throughout the legislative process, it remains detrimental to the state’s economic health and would undermine the consumer welfare standard.
NetChoice Veto Request Letter to Gov. Newsom on The COMPETE ACT–AB 1776, An Expansion of California’s Antitrust Statute
September 1, 2026
The Honorable Gavin Newsom
Governor of California
Dear Governor Newsom,
You have a number of consequential pieces of legislation before you to consider over the coming month. Few propose to alter the economic landscape of California so fundamentally as AB 1776. The bill would shift the purview of the Cartwright Act, California’s antitrust statute, regulating single-firm conduct in addition to multi-firm conduct.
NetChoice is a trade association dedicated to free enterprise and free expression online. We have engaged throughout the legislative process in order to clarify the number of concerns that AB 1776 has been riddled with over the course of its short legislative life. Many of these problems have been moderated by the bill sponsors and the various committees that have examined the legislation. While AB 1776 has been significantly pared back in size and scope, its fundamentals still lack economic grounding, and would have California’s antitrust regime walk further afield of the national consensus.
The bill would hamper California’s already overburdened economy and make it a far less attractive place to do business. Consumer welfare, not cronyism, should be at the heart of California’s antitrust law. NetChoice opposes the legislation and respectfully requests your veto.
Zero Economic Justification
Prior to the drafting of AB 1776, the topic of competition reform was debated by the California Law Revision Commission (CLRC). The CLRC’s Study B-750 was debated fiercely by some of the state’s most significant antitrust experts. Economists at the International Center for Law and Economics frequently cited the economic writings of Carl Shapiro, a co-author of the report, as fundamentally at odds with the final version of the report. Tom Campbell, former federal representative, California state senator, director of the California Department of Finance, and director of the Bureau of Competition at the Federal Trade Commission, submitted significant comments opposing the CLRC’s efforts to eliminate market definitions, encourage overenforcement of the law, and depart from established standards set forth in the Sherman Act and clarified by a century of federal precedent.
Beyond this important debate rests a simple fact: none of it happened following a basic economic analysis. No evidence whatsoever exists to suggest a fundamental failure of the existing Cartwright Act. Sound antitrust policymaking demands a demonstrated need and rigorous cost-benefit analysis. Neither has been provided here.
The absence of economic analysis is especially concerning given the bill’s sweeping scope. Releasing a politically-charged enforcement authority on businesses in the state for seemingly no reason should anger every single California business and every single California family. Jobs will vanish and prices will soar for millions in the service of ideology, not evidence.
Innovation and the Consumer Welfare Standard
The danger AB 1776 poses to innovation cannot be overstated. Since it would be extremely challenging to know what kind of conduct violates this new law, every covered business in California would be left to worry whether or not a new product or offering is enough to trip antitrust scrutiny. While the latest version of the bill attempted to address these issues, much of the legal ambiguity remains.
Consider the practical consequences. Under AB 1776, common procompetitive business practices that benefit consumers every day—price cutting, loyalty and rewards programs, exclusive distribution arrangements designed to improve service quality, and innovation that renders legacy competitors less relevant—could all be recast as unlawful single-firm “restraints of trade.” A hotel chain’s rewards program, an airline’s frequent flyer benefits, a pharmaceutical company’s discount programs that reduce costs for patients—all of these could become the basis for government enforcement actions and private lawsuits seeking damages.
Worse still, because the definitions are only loosely tied to federal precedent, the conduct described above will become unlawful only when the government wills it so. For one company a rewards program will be permissible. For another, less politically connected company, it will mean the launch of a criminal investigation. This is the formalization of politicized antitrust.
AB 1776 also undermines the consumer welfare standard that has guided antitrust policy for half a century. This standard has nurtured American economic growth and led to a decline in costs that have allowed the American consumer to afford access to more and better products. Trading the consumer welfare standard for one focused on “restraint of trade” means the government shifts its concerns away from the affordability of everyday Californians and towards the cronyist desires of well-connected competitors.
Retention of the Lawless “Over-Enforcement” Directive
AB 1776 explicitly instructs California courts that longstanding federal antitrust precedent, developed and refined by The Supreme Court to distinguish lawful competition from anticompetitive behavior, is not binding under the Cartwright Act. This represents a wholesale rejection of the legal and economic framework that has guided antitrust enforcement in the United States for more than a century and places California entirely outside the American antitrust legal tradition and at odds with federal law.
As Professor Tom Campbell, former Director of the Bureau of Competition at the Federal Trade Commission, former U.S. Congressman serving on the antitrust subcommittee of the House Judiciary Committee, and a nationally recognized authority on antitrust law and economics, has observed during the California Law Review Commission’s development of this proposal: federal antitrust jurisprudence has carefully developed tests to distinguish unlawful conduct (CLRC, April 10, 2024, Tom Campbell). AB 1776 weakens these tests, leaving courts and businesses without workable standards to know whether their conduct violates the law.
In a later memo to the commission, Professor Campbell noted the misguided desire of part of the commission to shift California’s antitrust regime towards “over-enforcement” of the law (CLRC, June 17, 2025, Tom Campbell). Fundamentally, over-enforcement implies marshalling enforcement actions against businesses in California that have not actually broken the law, and that the state knows are innocent. Such an operating dynamic verges on lawlessness, and certainly lays bare the fact that walking away from consumer-focused antitrust enforcement has more to do with empowering the government than it does with lowering prices or enhancing competition.
Conclusion
Competition thrives when businesses and courts have clear rules distinguishing lawful competitive behavior from anticompetitive conduct. California’s economy has grown to one of the largest and most dynamic on earth under its existing antitrust framework—a framework that already often exceeds federal law in scope and reach. AB 1776 replaces workable standards with untested and undefined legal concepts, discards the economic principles that have guided antitrust enforcement for over a century, and does so without any empirical basis for concluding that change is necessary.
The bill will chill innovation, increase litigation costs for covered businesses, raise prices for consumers, and create the very market uncertainty that deters the competitive entry and investment California needs. For these reasons, NetChoice strongly opposes AB 1776 and respectfully urges you to veto the legislation (The views of NetChoice expressed here do not necessarily represent the views of all NetChoice members).
Sincerely,
Zachary Lilly
Director of Government Affairs
NetChoice
NetChoice is a trade association that works to make the internet safe for free enterprise and free expression.