California enacted a state monopolization law on September 30, 2026, and it switches on in less than three months. Assembly Bill 1776, titled the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy Act, or COMPETE Act, takes effect on January 1, 2027.
For the first time, California’s antitrust statute reaches what a single dominant firm does on its own. Until now the Cartwright Act, the state’s century-old antitrust law, only caught conduct involving two or more parties. Prosecutors who wanted to attack unilateral conduct had to go to federal court under Section 2 of the Sherman Act, or stretch California’s Unfair Competition Law.
That matters for retail and e-commerce more than the legal trade press has acknowledged. The new section covers monopsonization as well as monopolization, which puts buyer-side power squarely in scope: supplier terms, procurement practices, slotting arrangements, and labor market conduct. California is the largest consumer market in the United States, and almost every national retailer and marketplace has a position there that a state prosecutor could call substantial.
In short
- AB 1776 is law. Governor Gavin Newsom signed the COMPETE Act on September 30, 2026. It takes effect January 1, 2027 and is not retroactive.
- New Business and Professions Code section 16731 makes it unlawful to monopolize or monopsonize, to attempt it, to maintain a monopoly or monopsony, or to combine or conspire to do so.
- Only the state can sue. Enforcement sits with the California Attorney General and district attorneys. There is no private right of action for unilateral conduct, no treble damages, and no bootstrapping into the Unfair Competition Law.
- Monopsony is the retail exposure. Buyer-side conduct in procurement, supplier terms and labor markets is covered explicitly, which is broader than how federal courts have usually run Section 2.
- Timing is the story. The law switches on 18 days before California’s price-parity trial against Amazon is scheduled to open in San Francisco Superior Court on January 19, 2027.
What the COMPETE Act actually changes
The operative change is short. A new section 16731 of the California Business and Professions Code declares it unlawful to monopolize or monopsonize any part of trade or commerce, to attempt to do so, to maintain a monopoly or monopsony, or to combine or conspire with another person toward either end.
Four verbs carry the weight: monopolize, monopsonize, attempt, and maintain. The inclusion of “maintain” is the one practitioners have flagged most. It signals that enforcement can target the preservation of an existing position, not only the acquisition of one. A retailer that already holds a strong regional share does not get a pass because the share was won years ago.
To establish a violation, the state must plead and prove that the defendant holds “substantial market power.” The statute does not define the phrase. Courts will.
The Act also directs how courts should read it. According to law firm analyses of the enacted text, the preamble states that federal antitrust interpretations are “at most instructive” when construing California’s antitrust laws, and describes the Cartwright Act as “broader in range and deeper in reach” than the Sherman Act. Courts are instructed to interpret the state’s antitrust laws liberally in favor of competition and effective deterrence.
What was stripped out before passage.
The bill that reached the governor’s desk is substantially narrower than the version first introduced, which drew on California Law Revision Commission work. Per published analyses from Morrison Foerster and Latham and Watkins, the following were removed during the legislative process:
- The private right of action, which in the original draft would have let any plaintiff sue for unilateral conduct.
- A standalone prohibition on unilateral conduct that unreasonably restrains trade, which would have reached below the monopolization threshold.
- Provisions limiting what weight courts could give United States Supreme Court decisions, and provisions allowing dismissal on the basis of federal precedent.
Two things were added: a safe harbor for market power lawfully obtained through superior products or services, and a small business exception. The liability threshold was also raised from “market power” to “substantial market power.” The net effect is a statute that is real but bounded, and one that a well-advised national retailer can plan around rather than panic about.
Why California had no monopolization law until now
The gap was structural, not accidental. The Cartwright Act was built around combinations and agreements. Its text addressed what two or more parties did together, which left unilateral conduct by a dominant firm outside state reach.
Prosecutors worked around the gap in two ways. They pleaded conspiracy theories where the facts allowed, which is why California’s marketplace cases have often been framed as agreements with third parties rather than as plain monopolization. Or they used the Unfair Competition Law, a broad statute that sweeps in unfair and unlawful business practices but carries weaker remedies and a less developed doctrinal frame for market power.
Both workarounds imposed real costs. Framing a dominance case as a conspiracy forces the state to identify agreements and prove them, which gives defendants a clean line of attack that has nothing to do with whether the underlying conduct harmed competition. The Attorney General’s office said as much in its statement on the signing: the measure lets monopolization and monopsonization claims proceed in state court instead of requiring federal proceedings.
Who can enforce it, and who cannot
This is where the final bill diverges most sharply from the draft, and where retail counsel should start.
Public enforcement only
Section 16731 claims may be brought only by the California Attorney General or by a district attorney. Private plaintiffs cannot sue for unilateral conduct under the new section. That removes the treble damages and attorney fee exposure that makes Cartwright Act conspiracy claims so expensive, and it removes the class action vehicle entirely for this theory.
The practical consequence is a smaller number of larger cases. State enforcers pick targets deliberately, build records over years, and litigate to judgment or settlement rather than to a quick fee award. A retailer facing a COMPETE Act investigation will be facing a sustained, resourced adversary, not a wave of opportunistic filings.
The Unfair Competition Law bootstrap is blocked
The Act bars using a section 16731 violation as a predicate for an Unfair Competition Law claim. This closes the obvious workaround. Without that bar, a private plaintiff could have alleged the monopolization conduct, labelled it unlawful under the UCL, and obtained restitution and injunctive relief through the back door. California’s legislature shut that route deliberately.
It is a meaningful limit, and it distinguishes California from jurisdictions where private enforcement drives dominance litigation. The United Kingdom has gone the other way, with opt-out class vehicles now certified against large platforms. Readers following that contrast can see how the private route plays out in the GBP 289 million UK class action against Apple and Amazon, where buyer classes were certified at the Competition Appeal Tribunal.
Criminal exposure is unsettled.
One open question deserves flagging rather than resolving. Cartwright Act violations can in principle carry criminal penalties, reported at up to three years of imprisonment for individuals plus substantial fines, with corporate fines available as well. Whether those provisions attach to the new section 16731 has not been settled. Baker McKenzie’s analysis treats the applicability as unresolved. No prosecutor has said they intend to charge a monopolization case criminally in California, and nothing in the signing materials suggests it.
The “substantial market power” problem
The statute’s central element is also its biggest unknown. “Substantial market power” is required, undefined, and left to judicial development.
Direct and indirect evidence both count.
The Act requires the state to plead and prove substantial market power through direct or indirect evidence, without specifying a market share threshold or a structural safe harbor. Direct proof means actual effects: demonstrated power over price, output, access, or contractual terms. Indirect proof means the familiar structural case: market share, barriers to entry, market structure, and the durability of the position.
The absence of a share threshold cuts both ways. It denies defendants the comfort of a bright line, but it also denies prosecutors a presumption. Compare that with New York’s repeatedly introduced 21st Century Antitrust Act, which would presume dominance above 40 percent share for sellers and 30 percent for buyers. California’s drafters declined to import that structure.
Governor Newsom’s signing message stressed that substantial market power is necessary but not sufficient. Anticompetitive effects still have to be shown. The message asked that the statute be construed to “penalize clear wrongdoing, without creating needless uncertainty that risks harming legitimate businesses.”
The Cipro burden-shifting framework
Courts applying the Act are directed to the structured rule of reason from In re Cipro Cases I and II, California’s own precedent. The sequence runs in three steps.
- The prosecutor shows an anticompetitive purpose or an immediate anticompetitive effect.
- The defendant may offer procompetitive justifications for the conduct.
- If justifications land, the state must show that less restrictive alternatives were available, or that the anticompetitive harm outweighs the benefit.
Step three is the step retailers should care about. A documented, contemporaneous procompetitive rationale for a challenged practice shifts the burden back onto the state and forces it to argue counterfactuals. Documentation created after an investigation opens carries much less weight.
How California now compares with federal law and other states
The COMPETE Act gives California a statute analogous to Section 2 of the Sherman Act, with several deliberate departures. The table below sets out the differences that matter for planning.
| Feature | Sherman Act Section 2 | California COMPETE Act (section 16731) |
|---|---|---|
| Conduct covered | Monopolization, attempt, conspiracy to monopolize | Monopolization and monopsonization, attempt, maintenance, conspiracy |
| Buyer-side power | Reached through case law, less developed | Named explicitly in the statute |
| Power threshold | Monopoly power, developed through precedent | “Substantial market power,” undefined by statute |
| Who may sue | Federal agencies, states, private plaintiffs, classes | California Attorney General and district attorneys only |
| Treble damages | Available to private plaintiffs | Not available for unilateral conduct claims |
| Weight of federal precedent | Binding | “At most instructive” per the preamble |
| Pleading posture | Federal plausibility standard | State standard, applied liberally in favor of competition |
| Analytical frame | Federal rule of reason case law | Burden shifting under In re Cipro Cases I and II |
| Small business carve-out | None | Yes, on a cumulative test |
Against other states, California is now the outlier that actually passed something. The comparison below reflects the position as of early October 2026.
| Jurisdiction | Single-firm conduct law | Status | Private suits | Dominance presumption |
|---|---|---|---|---|
| California | COMPETE Act, AB 1776 | Enacted September 30, 2026; effective January 1, 2027 | No | None |
| New York | 21st Century Antitrust Act (S335 / A2015) | Introduced repeatedly, including January 2025; not enacted | Proposed, with class actions | Proposed at 40% sellers, 30% buyers |
| Minnesota | Abuse of dominance bills | Introduced across sessions; not enacted | Proposed | Proposed abuse of dominance standard |
| Federal | Sherman Act Section 2 | In force since 1890 | Yes, with treble damages | None, share analysis via case law |
New York’s bill goes further than California’s on every axis that frightens defendants: an abuse of dominance standard rather than a monopolization standard, share presumptions, private class actions, premerger notification to the state Attorney General, and expanded criminal penalties. It has not passed. California chose the narrower instrument and got it signed, which is the more consequential outcome.
What this means for retailers and marketplaces
The exposure splits cleanly into seller-side and buyer-side conduct, and the second is the one most retail compliance programs are not built for.
Seller-side conduct: exclusivity, tying and platform access
Baker McKenzie’s analysis identifies the practices most likely to draw scrutiny: exclusive dealing and loyalty discounts, refusals to deal or to provide platform access, and tying arrangements. Morrison Foerster’s note adds self-preferencing and restrictive application programming interface or interoperability terms, along with predatory pricing and discounting practices.
Translate that into retail operations and the list becomes concrete. Category exclusivity demanded from a supplier as a condition of shelf placement. Loyalty rebates structured so that a buyer loses the rebate across the whole basket if it sources any volume elsewhere. Marketplace terms that condition search placement on using the operator’s fulfilment or advertising products. Seller policy changes that cut off a rival’s access to an audience the operator controls.
None of these is unlawful on its own, and most have straightforward procompetitive explanations. The change is that in California the state can now attack them as unilateral conduct without first finding an agreement to plead.
Buyer-side conduct: the monopsony clause
This is the genuinely new ground. Monopsonization is named in the statute, and the law firm analyses point to procurement practices, labor market practices, and no-poach agreements as the exposed categories.
Grocery and big-box retail run on buyer power by design. Slotting fees, promotional allowances, category captaincy, private label sourcing leverage, and pay-to-stay terms are all standard tools, and all of them involve a large buyer setting terms a small supplier cannot refuse. The mechanics of that leverage are visible in the way grocery planograms and slotting fees allocate shelf space. A prosecutor building a monopsonization theory would start exactly there.
Labor is the second front. Morrison Foerster’s note specifically raises monopsonization affecting workers through unilateral employer policies, which goes beyond the no-poach agreements that federal enforcers have pursued. A dominant regional employer’s unilateral wage or scheduling practices could, on that reading, be framed as the exercise of buyer power in a labor market.
Price discrimination is a separate but adjacent risk.
The COMPETE Act is not a price discrimination statute, and nothing in it revives the Robinson-Patman Act. But the two sit in the same enforcement climate. The Federal Trade Commission returned to Robinson-Patman enforcement this year, and the terms it accepted in the Southern Glazer’s settlement covering 26 states show how a regulator translates buyer and seller pricing disparities into binding conduct remedies. A retailer that has already mapped its pricing disparities for that purpose has done much of the work a monopsony review requires.
The same applies to personalized pricing. State enforcers inherited that file when the federal docket closed without a rule, and California has both the statute and the appetite to treat algorithmic price discrimination by a dominant firm as exclusionary conduct rather than as a consumer protection problem.
The safe harbors, and how much protection they offer
Two carve-outs and one exemption limit the Act’s reach. They are narrower than they first appear.
The first is the superior products safe harbor. The Act affirms that market power or monopoly power may be lawfully obtained through superior products, services, or business acumen. This is the standard antitrust principle that winning is not illegal, written into the statute. It protects the acquisition of power, which is useful, but the prohibition on maintaining a monopoly means the safe harbor does not immunise what a firm does once it has the position.
The second is the small business exception. It is cumulative, meaning every element must be satisfied. A business is excluded only if it is independently owned and operated, its principal office is located in California, its officers are domiciled in California, and it, together with affiliates, has 100 or fewer employees and average annual gross receipts of USD 10,000,000 or less over the three years before the complaint is filed.
Read it carefully and almost no retailer of consequence qualifies. The California domicile requirements alone exclude any national chain, any out-of-state marketplace, and any business owned by a parent elsewhere. The carve-out protects genuinely local operators, which is presumably the point.
The third is the government-authorized conduct exemption, covering exclusive franchises, contracts, licenses, and permits granted or authorized by government entities. This matters for regulated utilities, alcohol distribution under state franchise regimes, and concession arrangements, less so for general merchandise retail.
One more limit is worth stating plainly: the Act is not retroactive. Conduct before January 1, 2027 cannot be charged under section 16731.
Timing: eighteen days before the Amazon trial
The non-retroactivity point sets up the calendar collision that makes this story urgent rather than academic.
California sued Amazon in September 2022 in San Francisco Superior Court, alleging that the company’s price parity arrangements with sellers and wholesale suppliers suppressed price competition across online retail and raised prices for California consumers. The case was pleaded under the Unfair Competition Law and the Cartwright Act, using agreement-based theories, because the state had no monopolization statute to use instead.
That case has survived. The court denied Amazon’s motion for summary judgment on its seventh crossclaim, a ruling the Attorney General’s office characterised as a defeat for Amazon’s argument that California’s antitrust laws do not reach its conduct. Newly unredacted filings reported this year allege that Amazon’s terms pushed competing retailers, including Target, Walmart and Home Depot, to raise prices on everyday goods. The procedural history, including Amazon’s earlier win on an injunction application, is set out in our report on how Amazon beat California’s injunction bid and sent the price-fixing case to trial.
Trial is scheduled to open on January 19, 2027. The COMPETE Act takes effect on January 1, 2027. The new statute will not apply to the conduct at issue, because it is not retroactive and the conduct predates it by years.
The significance is forward-looking. If California wins or settles well on agreement-based theories against a marketplace, it will do so while holding, for the first time, a statute that lets it skip the agreement element next time. If it loses on the conspiracy framing, the COMPETE Act is the answer to why it lost. Either outcome strengthens the case for using section 16731 in the next marketplace matter.
What Bonta’s record suggests about the first cases
Attorney General Rob Bonta’s statement on the signing is the clearest available signal of intent. He said the COMPETE Act “will arm my office with a new, important tool to go after anticompetitive conduct by a single firm,” credited Assembly Majority Leader Cecilia Aguiar-Curry for introducing the bill, and argued that “states have proven to be a formidable and important line of defense against antitrust violations that raise costs.”
The enforcement record his office cited alongside that statement is the better predictor. It named the April 2026 jury verdict against Live Nation and Ticketmaster, a USD 700 million Google Play Store settlement in 2025, a USD 50 million settlement with gas trading firms Vitol and SK in July 2024, and ongoing matters involving Nexstar and Tegna, Amazon, and RealPage.
Four patterns stand out. The office litigates platform and intermediary conduct. It goes to verdict when it has to: the Live Nation jury found an illegal monopoly over the United States concert business and an overcharge of USD 1.72 per ticket across 22 states. It works alongside federal cases rather than waiting for them, having publicly criticised the federal settlement in the same Live Nation matter. And it has an active algorithmic pricing case in RealPage, which is the template most directly transferable to retail pricing software.
Advertising and marketplace fee structures are the other obvious candidate area, given how much of the current federal litigation against large marketplaces turns on fee opacity. The theory in the FTC’s case over Amazon’s ad auction surcharges is the kind of claim that fits neatly into a unilateral conduct statute, because it alleges a dominant platform extracting value through terms no counterparty can negotiate.
What retailers should do before January 1
The compliance work is bounded and mostly consists of reusing material that already exists. Based on the recommendations in the published law firm analyses, the sequence below is defensible.
- Map California position by market, not by revenue. Substantial market power is assessed in a relevant market. A chain with modest national share can hold a high share in a California metropolitan area or in a narrow product category.
- Re-examine exclusionary practices built around federal precedent. Conduct cleared on the basis that federal courts would not condemn it needs a second look, because California courts are told to treat federal interpretations as at most instructive.
- Audit buyer-side terms. Supplier agreements, slotting and promotional allowances, exclusivity conditions, pay-to-stay provisions, and no-poach or wage-setting practices. This is the category most programs have not reviewed through an antitrust lens.
- Document procompetitive justifications now. Under the Cipro framework, a contemporaneous business rationale shifts the burden. Create it while the practice is being adopted, not after a civil investigative demand arrives.
- Test the small business exception honestly. The cumulative California domicile, headcount, and revenue elements disqualify most operators. Do not assume coverage.
- Do not rely on Section 2 compliance. Every published analysis makes the same point: federal compliance does not resolve California risk, particularly at the margins.
There is no filing obligation, no registration, and no notification requirement attached to the COMPETE Act. The statute creates liability, not paperwork. That makes the January 1 date easy to miss and the exposure easy to underestimate.
Three questions still open
Three questions will shape how much this statute actually matters, and none can be answered yet.
The first is how courts fill in “substantial market power.” A standard set close to federal monopoly power leaves California roughly where it was, with a state forum instead of a federal one. A standard set meaningfully lower, consistent with the preamble’s instruction that the Cartwright Act reaches further than the Sherman Act, would make California a materially tougher jurisdiction. Published analyses note that California courts have historically found lower market shares actionable than federal courts. Algorithmic pricing is the likeliest test case, because state enforcers inherited the file when the FTC personalized pricing docket closed without a federal rule.
The second is whether criminal exposure attaches. Until a court addresses it or the Attorney General’s office states a position, the honest answer is that the question is open.
The third is whether other states follow. New York’s bill has been introduced four times without passing. Minnesota’s has moved through committee without enactment. California’s success may change the political calculation in both, and a second large state adopting a single-firm conduct law with a private right of action would be a different order of risk than one state with public enforcement only.
For now, retailers and marketplaces operating in California have one new statute, one undefined element, two narrow safe harbors, and 86 days. The Attorney General’s office has published its own account of the law and the enforcement record behind it, available on the California Department of Justice press release.
Frequently asked questions
When does the California COMPETE Act take effect?
January 1, 2027. Governor Gavin Newsom signed Assembly Bill 1776 on September 30, 2026. The Act is not retroactive, so conduct occurring before January 1, 2027 cannot be charged under the new section.
What conduct does the COMPETE Act prohibit?
New Business and Professions Code section 16731 makes it unlawful to monopolize or monopsonize any part of trade or commerce, to attempt to monopolize or monopsonize, to maintain a monopoly or monopsony, or to combine or conspire with another person to do so. The state must also plead and prove that the defendant holds substantial market power.
Can private plaintiffs or classes sue under the COMPETE Act?
No. Section 16731 claims may be brought only by the California Attorney General or a district attorney. There is no private right of action for unilateral conduct, treble damages and attorney fees are unavailable on this theory, and a section 16731 violation cannot be used as a predicate for an Unfair Competition Law claim.
How is “substantial market power” defined?
It is not defined in the statute. The Act requires the state to establish it through direct evidence, such as demonstrated effects on price, output, access or contractual terms, or through indirect evidence, such as market share, entry barriers, market structure and durability. No share threshold is specified, and courts will develop the standard.
Does the COMPETE Act cover buyer power and labor markets?
Yes. Monopsonization is named explicitly, which is a departure from how Section 2 of the Sherman Act has typically been applied. Published analyses identify procurement practices, supplier terms, no-poach agreements and unilateral employer policies affecting workers as exposed categories.
Which businesses are exempt?
The small business exception applies only if every element is met: independently owned and operated, principal office in California, officers domiciled in California, and together with affiliates 100 or fewer employees and average annual gross receipts of USD 10,000,000 or less over the three years before the complaint is filed. A separate exemption covers conduct under exclusive franchises, contracts, licenses or permits granted or authorized by government entities.
Does the COMPETE Act apply to California’s pending case against Amazon?
No. That case was filed in September 2022 under the Unfair Competition Law and the Cartwright Act, and it is scheduled for trial on January 19, 2027. Because the COMPETE Act is not retroactive, it does not apply to the conduct at issue. It changes what the state can plead in future marketplace cases.
How does California compare with New York and Minnesota?
California is the only one of the three to enact a single-firm conduct law. New York’s 21st Century Antitrust Act, which would add an abuse of dominance standard with presumptions at 40 percent share for sellers and 30 percent for buyers plus a private right of action, has been introduced repeatedly without passing. Minnesota’s abuse of dominance bills have also not been enacted.
Are there criminal penalties under the COMPETE Act?
Unsettled. Cartwright Act violations can carry criminal penalties, reported at up to three years of imprisonment for individuals along with fines, and corporate fines. Whether those provisions attach to the new section 16731 has not been resolved by a court or clarified by enforcers.