California’s Digital Markets Act is a radical departure from American antitrust tradition that abandons the consumer welfare standard in favor of a “big is bad” philosophy, effectively making common business practices per se illegal based on a company’s market capitalization rather than any demonstrated harm to consumers.
Letter of Opposition to SB 1074 – The California Digital Markets Act
April 9, 2026
The Honorable Scott Wiener
California State Senate
Sacramento, CA 95814
Dear Senator Wiener,
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 SB 1074. California is a dynamic, innovative state. There is no reason that the legislature should be piecing together bad policy from the garbage disposal of Congress. In fact, the federal version of SB 1074 is itself a copy-and-paste job of Europe’s Digital Markets Act. The legislation would obliterate popular, largely free-to-use services that millions of Californians love and depend upon. Unfortunately, that is not a bug but a feature of the legislation, as it is expressly designed to undermine specific business models to the benefit of competitors. Obviously, this is a terrible impetus for legislation. More concern should be paid to California’s affordability crisis, which would be exacerbated by this ill-conceived bill. Good competition policy is based on protecting consumers, which would require SB 1074, like its federal counterpart, be rejected.
SB 1074 Abandons Consumer Welfare
The failed federal version of this bill, the American Innovation and Choice Online Act, became a lightning rod for debate, particularly around the issue of consumer harm. For roughly the past half-century, American antitrust law has been tied to something called the consumer welfare standard. It was an attempt to clarify the scope of broadly written federal antitrust statutes. Supreme Court Justice Potter Stewart famously quipped, regarding the Clayton Act that, “the sole consistency I can find is that in litigation…the Government always wins.”
The consumer welfare standard, as applied, offers an objective, empirical set of metrics for antitrust enforcers and courts to use when assessing a particular case. It ensures that economic analysis remains at the heart of antitrust. The United States does not punish large companies for growing large through innovation or competition; we hold them accountable if they harm consumers. This sounds prescriptive, but can manifest expansively. Increases in prices, degradation in service or product quality and a number of other metrics go into consumer welfare antitrust arguments. Congress endorsed this framework in the Consumer Goods Pricing Act of 1975, which rejected an earlier antitrust exemption that sought to protect businesses from vigorous price competition, and stated its purpose: “To amend the Sherman Antitrust Act to provide lower prices for consumers.” America’s adoption of the consumer welfare standard maps quite closely to the largest peacetime expansion of economic activity and GDP growth in human history. Not bad.
SB 1074 proposes that California divorce itself from consumer welfare as the guiding antitrust principle and replace it with something even more radical than Europe’s “harm to competition” standard, which in the DMA manifests as “harm to competitors”. This erroneous standard has made Europe’s economy nothing to envy. At the turn of the millennium, the European and American economies were roughly the same size. Today, on the other end of the digital revolution, the American economy is 50% larger than its European counterpart. Europe has relegated itself to an open-air museum for American and Chinese tourists and its economy runs almost exclusively on champagne bubbles and a superiority complex.
To make matters worse, a departure from consumer welfare formalizes politicized antitrust. At its core, competition will harm some competitors. Some will win, while others will lose. Under the existing consumer welfare standard, we measure based on whether consumers are better off when the competitive dust settles. In a “harm to competition” world, the dust never settles. Competitors can always argue that competition from others causes them harm, so the legal landscape is constantly active. Within this regime, businesses focus on ingratiating themselves with enforcers and politicians who can bring cases on their behalf, instead of building what consumers want. Under Europe’s DMA, the law has been exclusively weaponized against American companies. That seems to be the one perverse upside to their “harm to competition” model: Europe no longer has any businesses left worth suing.
This legislation takes another step off the path of sound economics and American tradition. SB 1074 strips out even a faulty “harm to competition” standard and replaces it with a literal “big is bad” philosophy. Now, enforcers and plaintiffs need not define a market and measure a company’s share to determine if it may be a monopolist, nor debate whether certain business practices might be in the best interest of California consumers and families. Under this bill, if a company with a large market capitalization, a speculative metric based on how the company’s stock happens to be doing, engages in common business practices, those practices become per se illegal. While SB 1074 allows for a narrow affirmative defense, it is highly restrictive and still implies guilt unless a company can prove its innocence, flying in the face of our system of justice.
The Legislation Dismantles Popular Digital Products
To make it especially clear that the primary constituency for this legislation is competitors, not consumers, we need only look at the actual effects of the bill. The bill would eliminate or significantly degrade a whole host of popular products that millions of Californians use everyday. It is hard to imagine consumers themselves crying out for the degradation of Google Search to lose its integration of Maps, or the elimination of Amazon Prime two-day shipping. It is more likely that disgruntled competitors are eager for this government intervention, as it would make their subpar offerings comparatively more attractive to consumers. No need to compete, how convenient!
One of Google’s most helpful features for consumers and businesses is Google Business Profile. This is an optional, free service where a business can fill out their information, including their hours, location and photos. When a customer searches for relevant businesses nearby, Google Search and Google Maps will “preference” those businesses that partner with Google through Google Business Profile. Under SB 1074’s new regime, such activity would be illegal. One business could not be highlighted over another due to its relationship with the covered provider. As such, Google would have to transition away from displaying information to consumers in a way that benefits both them and the small businesses who rely on digital foot traffic. While consumers and small businesses are harmed, and Google as an offering is degraded, a handful of aggregator sites might see a slight uptick in traffic as a benefit. Does that pass any reasonable legislator’s cost/benefit analysis for how to represent constituents’ interests?
Amazon Prime was a particular target during the federal debate on this legislation. Certain lawmakers found the ability of Americans to buy goods at affordable prices and the capacity of Amazon to deliver those goods quickly to be especially offensive. SB 1074 keeps the crosshairs on one of the country’s most trusted institutions by prohibiting the business model that enables the Prime badge on a product listing to promise two-day shipping. As it stands now, again on a voluntary basis, a company can make this commitment to obtain the Prime badge. Since this requires the company to move the product potentially across the country in two days or less, many companies agree to store some product in Amazon warehouses for shipping. Otherwise, the seller must do all the work of logistics, including storing products, monitoring their availability and responding to any sales made (even on weekends) by immediately shipping the product. Once this happens, the badge is placed on the seller profile and consumers have an enhanced ability to shop with delivery time in mind. Amazon cannot provide this Prime certainty unless companies store product in its warehouses or meet 2-day delivery requirements on their own. But SB 1074 would designate this behavior as “favor[ing]” sellers that use Amazon logistics or as “condition[ing]… preferred status or placement” and therefore illegal. Consumers will have less information with which to make important economic decisions and one of the most cost-saving retail innovations ever brought to market could be destroyed.
The story is much the same for Amazon Basics and Walmart Great Value. Amazon and Walmart, like most retailers, offer customers generic, store-brand items that tend to be less expensive than name-brand offerings. CVS has its Gold Emblem and Beauty 360, Costco has Kirkland Signature and Target has Up & Up, among others. Because Amazon and Walmart have higher market capitalizations than these competitors, SB 1074 would make the promotion of their store brands per se illegal, holding covered providers to an entirely different standard than all other retailers. This kind of discriminatory behavior would prevent consumers from easily accessing lower-cost, high-quality products for no particular reason, given that any other similarly situated retailer is free to promote their generics. According to SB 1074, Californians should be forced to pay a premium to shop online through trusted platforms.
All these services lower barriers for small businesses and costs for California consumers. They provide them with useful information that they can use when deciding how to spend their hard-earned money. Under SB 1074, the state government insists that consumers be stripped of that information and those tools, that they waste their time and spend more of their money needlessly, so long as it benefits other competitors in the market. That’s what it means to disregard consumer welfare: Californians will pay more and get less.
Enforcement Chaos is a Gift to Cronies and a Nightmare for Californians
The bill allows for both the Attorney General and private plaintiffs (business competitors) to sue the covered providers. This will create an explosion of litigation, with every crony capitalist in the state looking for its pound of flesh against the targets of SB 1074. Since the affirmative defense is so narrow, and the threshold to bring a case so low, it would be open season in California to sue popular providers out of the market. This also puts California at an overwhelming disadvantage to other states. These rules will only apply to California, and significant employers are already leaving the state. While some may not shed a tear over those departures, they represent a material loss for California’s economy and the employees who depend on good salaries to be able to afford rising costs. The majority of Californians cannot afford their jobs being sent out of state.
Ignoring Good Advice
The California Law Revision Commission (CLRC), when examining whether to support the overhaul of California’s antitrust law, explicitly addressed the idea of tech-specific antitrust regulation. It recommended that “any new law should not single out individual industries but apply to all.” While NetChoice takes significant issue with the finalized recommendations by the CLRC that led to the introduction of AB 1776 (a similarly disastrous piece of antitrust legislation), we cannot fault the CLRC for stating the obvious: antitrust enforcement should be industry-neutral. Ideally, it would also be built on meaningful standards and consumer welfare, but both SB 1074 and AB 1776 miss the mark entirely on those counts.
Conclusion
This bill represents one of the most radical departures from the American antitrust tradition ever proposed. It prohibits pro-consumer behavior, politicizes antitrust enforcement for the benefit of competing firms and would dramatically raise costs and degrade services for all Californians. There is no compelling justification for a bill like this, other than the preference of those unable to compete fairly in the market but able to bankroll lawsuits. Antitrust enforcement works best when there are objective criteria for enforcement agencies and judges to follow. If you untether that connection, all you have left is politics. In the back and forth that follows, California families suffer. For these reasons, NetChoice strongly opposes SB 1074 and respectfully urges you to reject this 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.