The proposed COMPETE Act would expand California’s antitrust laws to target dominant corporations. Supporters say it will protect small businesses, while opponents warn it could raise costs and trigger more lawsuits.
California lawmakers are considering one of the biggest changes to the state’s competition laws in more than a century, and supporters say it could reshape how some of the largest corporations do business.
Assembly Bill 1776, known as the COMPETE Act, would expand California’s antitrust laws to make it easier to challenge large companies accused of using their market power to squeeze out competitors, suppress wages or limit consumer choice.
Supporters describe the measure as a way to give independent businesses a fair chance to compete. Critics argue it could create uncertainty, increase litigation and ultimately raise costs for businesses and consumers.
Here’s what California business owners need to know.
What is AB 1776?
AB 1776 is authored by Assembly Majority Leader Cecilia Aguiar-Curry and would modernize California’s 119-year-old Cartwright Act, the state’s primary antitrust law.
Under current law, proving illegal anti-competitive behavior often requires showing that two or more companies worked together.
The COMPETE Act would expand that framework by allowing legal action against a single dominant company accused of using its market power to unfairly eliminate competition.
Supporters say today’s economy is dominated by a handful of powerful corporations that can influence entire markets without coordinating with competitors, making the existing law outdated.
If approved by the Legislature and signed by Gov. Gavin Newsom, the measure would become one of the most significant changes to California competition law in decades.
Supporters argue that market concentration has accelerated across many industries.
They contend that dominant companies can use their size and financial resources to:
- Undercut smaller competitors with predatory pricing.
- Block smaller businesses from reaching customers.
- Pressure suppliers into exclusive agreements.
- Reduce competition for workers, leading to wage suppression.
- Limit consumer choices while increasing prices over time.
Labor organizations, independent business advocates and several consumer groups say stronger state antitrust laws are necessary because federal enforcement alone has not kept pace with today’s economy.
One of the biggest concerns raised after the bill was introduced involved whether small businesses themselves could become targets.
Lawmakers later amended the proposal to include a specific exemption.
Under the current version of the bill, independent California businesses generally would be exempt from the new single-firm provisions if they have:
- Fewer than 100 employees, and
- Average annual gross receipts below $10 million during the previous three years.
Supporters say the exemption ensures the legislation focuses on dominant corporations rather than neighborhood businesses.
How supporters say AB 1776 could help small businesses
Backers argue the proposal would help level the playing field for independent businesses that struggle to compete against companies with enormous market power.
Among the potential benefits they cite are:
More protection against unfair competition
Supporters say dominant corporations sometimes use pricing strategies or exclusive agreements that make it difficult for smaller competitors to survive.
The bill would give businesses another legal tool to challenge those practices.
Stronger supply chain protections
Independent grocers, pharmacies and suppliers have argued that large corporations can use their buying power to limit access to products or negotiate terms that smaller businesses cannot match.
Supporters believe the bill would discourage those practices.
More legal options
Small businesses that believe they were harmed by anti-competitive conduct could have greater ability to seek damages in California courts.
Why opponents are concerned
Business organizations, technology companies and several industry groups argue the proposal could have unintended consequences.
Their concerns include:
More lawsuits
Opponents argue the bill creates legal uncertainty and could encourage expensive litigation, particularly for businesses that fall just above the exemption threshold.
Higher operating costs
Industry groups warn that manufacturers and distributors facing additional legal compliance costs could pass those expenses through the supply chain, increasing costs for smaller retailers.
Changes to digital business tools
Technology companies argue some integrated online services could become more difficult to offer if certain business practices are challenged under the law.
Critics say businesses could eventually lose convenient features that help customers discover local companies online.
Supporters dispute those claims and argue the legislation targets anti-competitive conduct rather than useful consumer services.
Five industries watching the bill closely
Although the legislation would apply broadly across California’s economy, several industries have emerged as the center of the debate.
Technology
Large digital platforms face scrutiny over whether they favor their own products and services over competitors.
Healthcare and pharmaceuticals
Supporters say stronger competition could reduce practices that keep drug prices high or limit healthcare choices.
Grocery and retail
Independent grocery stores and neighborhood retailers say dominant chains can make it difficult for smaller competitors to survive in certain markets.
Agriculture
Family farmers and agricultural suppliers are watching closely because the proposal could affect relationships with dominant buyers and food distributors.
Entertainment and media
Streaming services and major media companies could face greater scrutiny over how they distribute content and compete within digital markets.
AB 1776 has cleared the Assembly and advanced through the Senate Judiciary Committee.
The proposal is currently before the Senate Appropriations Committee, where lawmakers will evaluate its fiscal impact before deciding whether it moves to a vote of the full Senate.
If the bill passes both chambers, it would head to Gov. Gavin Newsom, who could sign it into law or veto it.
Because the measure continues to move through the legislative process, its language could still change before reaching the governor’s desk.
What California business owners should watch
Regardless of where business owners stand on the proposal, the debate reflects a larger shift in how California policymakers view competition and corporate power.
For entrepreneurs, independent retailers, contractors, restaurants and family-owned businesses, the key question is whether stronger antitrust enforcement would create fairer opportunities—or whether new legal requirements would introduce additional costs and uncertainty.
The answer may not become clear immediately if the bill is enacted. Much will depend on how courts interpret the law and how businesses adapt to the new legal landscape.
For now, AB 1776 remains one of the most closely watched business proposals in Sacramento, with potentially significant implications for California’s economy and the thousands of small businesses that compete every day against much larger rivals.
