Client Alert: California Law Revision Commission Staff Propose Changes to State Antitrust Laws
In 2022, the Legislature authorized the California Law Revision Commission (“CLRC”)—a state agency tasked with examining California law and recommending reforms—to study potential revisions to California’s antitrust laws. The CLRC has formed working groups around eight major topics: (1) single firm conduct, (2) mergers and acquisitions, (3) concerted action, (4) the consumer welfare standard, (5) technology platforms, (6) enforcement and exemptions, (7) concentration in California, and (8) artificial intelligence.
On January 13, 2025, CLRC staff (“Staff”) released recommendations that would, in many respects, constitute a major overhaul of California’s antitrust laws. California’s antitrust laws would likely end up being much more aggressive than existing federal law. As a result, if these changes are adopted, firms should expect to see broad antitrust claims brought under California law and in California state courts.
More information on the recommendations is available below. Please reach out to Rohit Singla and Rebecca Sciarrino to learn more.
Next Steps
Staff’s recommendations will be reviewed by the CLRC, which will choose whether to adopt these recommendations. The CLRC will then draft recommendations for the Legislature. The CLRC welcomes public comments at any time during its study process. Comments must be received 5 business days before a meeting for consideration at the meeting. The CLRC’s next meeting is scheduled for April 3, 2025. MTO lawyers will continue to monitor the development of this study.
Recommendations
Recommendation re: Single Firm Conduct
California’s main antitrust statute, the Cartwright Act, is presently directed only to concerted action between different firms and does not reach single firm conduct. The Unfair Competition Law (“UCL”) can reach single firm conduct, but it does not permit recovery of compensatory damages. The Unfair Practices Act (“UPA”) addresses specific forms of single-firm conduct, but in Staff’s view, it lacks a focus on overall competition. As a result, Staff view California’s existing statutory scheme as inadequate for policing single firm conduct. Staff therefore recommend that California adopt a single firm conduct provision. This provision would largely be based on Section 2 of the Sherman Act. However, Staff also believe that federal precedent has made enforcement against monopolists too difficult. For example, Staff believe the burden to prove monopolization and attempted monopolization is too high, and that the Sherman Act does not necessarily reach certain types of conduct, such as self-preferencing. Staff thus recommend that the CLRC consider adopting statements that courts should analyze single-firm conduct under California’s statute without absolute deference to federal law that has recognized important limits on antitrust liability for single-firm conduct.
Recommendation re: Abuse of Dominance Standard
Staff recommend that California adopt an “abuse of dominance” (“AOD”) standard. The AOD standard derives from European law that prohibits abuse of a dominant position within a market or a substantial part of a market to a firm’s own competitive advantage. Examples include predatory pricing, self-preferencing, and exclusionary contracting. If adopted, an AOD standard could lead to broader enforcement against single firms that have “misuse[d]” their market power to benefit themselves but without harming consumers or competition in the market as a whole, which usually is required to prove a monopolization claim under Section 2 of the Sherman Act. California is not on its own in considering an AOD standard. New York State Senate Bill 2025-S335, for example, would impose such a standard and, if adopted, would prevent dominant firms from leveraging their power to extract power in a separate market, or from imposing restraints on employees’ mobility.
Recommendation re: Large Technology Firms
Staff has analyzed whether California should adopt provisions specific to large technology firms. Rather than adopt any provisions specific to these companies, Staff recommend that any proposed changes to the law be drafted with sufficient breadth to encompass large technology companies as well as other industries.
Recommendation re: Merger Laws
To enable the state to independently review and challenge mergers affecting California, reducing reliance on federal agencies, Staff recommend that California adopt its own premerger notification and merger approval laws, much like the Hart-Scott-Rodino Act. However, Staff recommend adopting a different standard for merger approval than the standard under federal law. The federal Clayton Act prohibits mergers whose effect “may be substantially to lessen competition or tend to create a monopoly….” 15 U.S.C. § 13. In Staff’s view, this language has been interpreted to impose a “probability” standard that has deterred federal agencies from challenging mergers. To encourage merger challenges, Staff recommend enacting a statute that prohibits mergers that may “create an appreciable risk of materially lessening competition.”
More Information
For those who want to follow closely, materials related to the CLRC’s antitrust study are collected at https://clrc.ca.gov/B750.html.