Poorly crafted antitrust reforms are the last thing California needs | Opinion

California faces serious economic challenges — including mounting private-sector job losses, stagnating consumer spending and the nation’s highest unemployment rate. In a recent analysis, the California Center for Jobs & the Economy warned of deep structural problems that, if left unaddressed, risk sending the state into extended economic decline.

Given the circumstances, California lawmakers should be working on pragmatic policies meant to attract businesses, boost employment and strengthen the economy. Instead, they’re deliberating on a radical new antitrust bill, Assembly Bill 1776, authored by Assembly Majority Leader Cecilia Aguiar-Curry, D-Winters, that’s likely to depress business investment and discourage startup formation.

According to bill analysis, the stated purpose of AB 1776 is the “promotion and protection of free and fair competition.” But if enacted, this bill could accelerate the exodus of employers and talent from California, and, by one estimate, eliminate up to 1.6 million jobs within a decade.

AB 1776, also known as the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy (COMPETE) Act, would change California’s antitrust law in two fundamental ways, making it far easier for firms doing business in California to sue one another for common competitive behaviors.

First, the bill would extend California’s foundational antitrust statute, the Cartwright Act, to include the actions of single firms. Currently, the Cartwright Act covers coordinated conspiracies — like collusion or price-fixing — between two or more firms. The proposed change would allow regulators and plaintiffs to challenge individual firm actions like price cuts or new-product rollouts.

Second, AB 1776 would dramatically alter key thresholds that distinguish competitive strategy from problematic anticompetitive behavior. Critically, the bill would allow a firm to challenge a rival’s cost-cuts without ever showing that the cuts were predatory — that is, designed to drive competitors out of a given market.

Moreover, the bill would make it harder for a firm to defend itself by arguing that conduct challenged in one market benefited consumers or boosted competition in another market. AB 1776 would also make it easier for a firm to sue another firm simply for refusing to do business with it — and, perhaps most remarkably, the bill would allow plaintiffs to accuse a rival of unfairly dominating a market, even if the rival didn’t hold a dominant market position.

Put plainly, if AB 1776 passed, a firm could sue a rival over standard competitive practices like offering promotional discounts or declining to work with the firm. The firm could have a solid case — even if the rival’s discounts weren’t predatory, or the rival had a good reason for eschewing the firm, and even if the rival held only a small share of the relevant market, and its actions benefited consumers.

That would create serious new risks for firms doing business in California. AB 1776’s expanded reach and diminished thresholds would expose companies to litigation over competitive practices that have long been legal, including offering suites of services like Microsoft 365 or Google Business Profile; lowering prices to attract customers; or integrating new features — like Amazon’s AI-powered Alexa for Shopping — into platforms.

Moreover, because many elements of AB 1776 depart from well-established federal antitrust standards, businesses would face enormous uncertainty over what conduct is permitted, how the law would be enforced and how courts would interpret the new rules. Those legal, strategic and cost uncertainties would likely chill investment in California businesses and startups — slowing innovation, economic growth and job creation.

Indeed, the California Center for Jobs & the Economy estimates that the bill’s passage could reduce economic activity by $1 trillion over a decade.

AB 1776’s proposed changes would be problematic for any U.S. state’s economy, but they’re likely to be particularly damaging to California’s. That’s because tech companies — which contribute some 30% of the state’s gross domestic product — compete, innovate and cut costs by developing proprietary products and relationships, offering integrated services and scaling through streamlined platforms. Under AB 1776, all of those activities could be deemed legally actionable. That is, AB 1776 would effectively subject California’s entire tech ecosystem to potential liability.

At best, AB 1776 would slow innovation and economic growth in California. At worst, it would devastate them. That’s a poor proposition for Californians. Lawmakers should scrap AB 1776.

Hemant Bhargava is a distinguished professor and Jerome and Elsie Suran chair in technology management at the UC Davis School of Management.