State bill to expand antitrust law advances despite business opposition

California has moved a step closer to strengthening its century-old antitrust law, amid growing concerns over the technology industry and federal inaction.

AB 1776 passed the Assembly Judiciary Committee on Tuesday after a contentious, hourlong debate, though a final vote count was not available by press deadline.

The bill's author, Assembly Majority Leader Cecilia Aguiar-Curry, D-Winters, began by acknowledging the concerns business groups have raised. But she expressed her frustration that despite saying she "will have conversations with anyone who is willing to come to the table," some stakeholders have not attempted to speak with her.

"The issue with corporate economic power imbalance has become so compelling, I feel the conversation must happen now, regardless of the outcome of any individual bill," Aguiar-Curry said. "Consolidation has touched nearly every part of California's economy."

The bill would amend the 1907 Cartwright Act to make it illegal for "one or more persons" to engage in anticompetitive behavior. The change is an attempt to adapt to a world where a single company can sometimes create a virtual monopoly, such as an online marketplace or other technology platform.

AB 1776 quickly incited alarm in the business community when Aguiar-Curry introduced it in February. Addressing the committee on behalf of the California Chamber of Commerce, Eric P. Enson told lawmakers he had "three core concerns with the bill." These include exposing businesses to potential legal liability and a lack of analysis of the economic effects of the bill. The chamber has argued the bill could punish price cuts and other consumer-friendly behavior.

But the antitrust attorney with Crowell & Moring LLP in Los Angeles began by saying the bill would cause "unprecedented legal uncertainty."

"Competition thrives when there are well-settled antitrust rules that guide businesses and courts," Enson said. "AB 1776 upends California's Cartwright Act by prohibiting what are called single-firm restraints of trade, which is a standard that no court has ever interpreted, analyzed, or defined."

But Aguiar-Curry argued her bill would better align California with federal law and other states.

"For a long time, courts and legislators have recognized that one large company can be just as harmful as two companies acting together," she said. "Federal antitrust law applies to single companies, and 45 other states have laws that apply to anti-competitive activity by single companies."

This includes New York's 1899 Donnelly Act, passed in the same era as California's law. The Cartwright Act was introduced to rein in trusts of the day, including rail, oil and agriculture, all of which featured multiple large players that sometimes colluded. Parties can still sue individual companies under California's Unfair Competition Law, but they can only win restitution and statutory relief, not damages. The Cartwright Act allows for treble damages and attorney fees.

AB 1776 grew out of a proposal by the California Law Revision Commission. Aguiar-Curry said the commission held 18 public meetings over three years on the idea.

Abiel Garcia is a Los Angeles-based antitrust attorney and partner at Kesselman Brantly Stockinger LLP who serves as an expert working group member for the commission. He said technology has helped lead to a wave of mergers across most industries going back to the 1990s.

"We've seen mass consolidation across almost every industry in our state and nation, leading to higher prices and greater reliance on a handful of mega companies," Garcia told the committee. "Assembly judiciary analysis is correct that the opposition's doom and gloom arguments are overstated and without evidence."

But the president of a Bay Area biotech startup warned the law would create confusion that would make it difficult for his company. Nadir Mahmood leads Nkarta Inc., a South San Francisco company that focuses on autoimmune diseases. He said the company has a particular focus on lupus, which disproportionately affects "women of color." These warnings come amid wide concerns about technology companies fleeing the state amid regulatory concerns and a proposed initiative for a one-time wealth tax on billionaires.

"Developing a single therapy takes years, significant capital, and deep collaboration," Mahmood said. "AB 1776 would fundamentally change the rules by introducing legal uncertainty. Today, antitrust law requires real evidence of harm to competition. This bill removes that clarity."