The COMPETE Act abandons over a century of established federal antitrust precedent by exposing every California business — regardless of size — to unlimited antitrust liability. Without market share thresholds or economic justification, the bill threatens to chill innovation, spike litigation costs and raise prices for California consumers and businesses alike.
NetChoice Letter of Opposition to California’s AB 1776 – The “COMPETE” Act
April 2, 2026
The Honorable Cecilia Aguiar-Curry
California State Assembly
1021 O Street, Suite 8210
Sacramento, CA 95814
Assemblymember Aguiar-Curry,
On behalf of NetChoice, a trade association representing leading internet businesses committed to free expression and free enterprise online, we write in strong opposition to AB 1776, the COMPETE Act. While we share your interest in robust competition, this bill, as written, would harm the very consumers and innovators it purports to protect. AB 1776 rejects over a century of established federal precedent, and does so without any empirical economic analysis demonstrating that California’s existing antitrust regime is failing. The result will be catastrophic litigation costs, diminished innovation and skyrocketing prices for California consumers and businesses. The bill represents a full-on assault on California families’ and small businesses’ ability to stay in the state.
NetChoice has long advocated that antitrust enforcement should be grounded in sound economics and focused on protecting consumers—not on expanding legal liability at the expense of the competitive dynamism that has made California’s economy the fourth largest in the world. AB 1776 fails this test on every front.
AB 1776 Abandons Proven Federal Standards Without Justification
AB 1776 amends the Cartwright Act, which addresses concerted conduct by two or more firms, to impose sweeping prohibitions on single-firm behavior. Rather than adopt the established language of Section 2 of the federal Sherman Act, which prohibits “monopolization,” the bill instead prohibits single-firm “restraints of trade,” an entirely meaningless term within the context of this new bill.
More troubling, the bill explicitly instructs California courts that longstanding federal antitrust standards, developed and refined by the U.S. Supreme Court over decades to distinguish lawful competition from anticompetitive behavior, are not required 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 discards 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.
This is particularly alarming given the California Supreme Court’s own recognition, in State of California ex. Rel. Van de Kamp v. Texaco, Inc (1988), that federal antitrust case law is “helpful” in interpreting the Cartwright Act. AB 1776 severs this longstanding relationship, leaving California courts adrift with novel legal standards that no court anywhere in the world has ever interpreted or applied and no business has ever navigated.
The Bill Threatens Innovation and Consumer Welfare
The danger AB 1776 poses to innovation cannot be overstated. Since it would be impossible to know what kind of conduct violates this new law, every business in California would be left to worry whether or not a new product or offering is enough to trip antitrust scrutiny.
Consider the practical consequences. Under AB 1776, common pro-competitive 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 treble damages.
Worse still, because the definitions are essentially meaningless, 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.
No Economic Analysis Supports This Overreach
The California Law Review Commission–from whose work this legislation is derived–performed no economic study or analysis to justify the severing of California and federal antitrust law or the obliteration of California’s market economy. 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 each business 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.
AB 1776 Creates Legal Liability for Every Business in California
Unlike federal law, which applies single-firm liability only to businesses with approximately 60 to 65 percent of a relevant market, AB 1776 contains no market share thresholds. The bill explicitly provides that a plaintiff need not show that a firm has or might achieve market power at or above any threshold recognized under Section 2 of the Sherman Act. This means the bill applies to every business in California, regardless of size—from a local small business to a multinational enterprise.
For decades, courts and economists have recognized the basic economic principle that an individual business with a small share of the market is far less able to harm competition than businesses with large market shares. As Professor Campbell has explained, market definition and market share are essential for putting firms on notice of how their conduct will be evaluated (CLRC, April 10, 2024, Tom Campbell). Without market share thresholds, businesses have no way of knowing whether their ordinary competitive decisions—setting prices, choosing distribution partners, investing in product improvements—might expose them to antitrust liability under AB 1776.
Moreover, the bill eliminates the requirement that plaintiffs demonstrate harm in a defined relevant market. Professor Campbell has observed that this approach is practically unworkable: the bill’s own test for anticompetitive conduct requires showing an increase in “market power,” yet market power cannot be determined without first defining a market (Ibid). The U.S. Supreme Court unanimously held in Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), that market definition is essential to proving attempted monopolization. AB 1776’s abandonment of this requirement places California law in direct conflict with settled constitutional and antitrust principles.
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 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 businesses of all sizes, 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 reject this legislation. (The views of NetChoice expressed here do not necessarily represent the views of 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.