Coast To Coast: California And New York Push To Expand State Antitrust Laws

• Published date: 04 March 2025
• Subject Matter: orporate/Commercial Law, Antitrust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
• Law Firm: Arnold & Porter
• Author: Mr C. Scott Lent, Daniel B. Asimow, Andre Geverola and Tim Roche

Introduction

State legislatures across the country are considering legislation that would increase antitrust scrutiny for a variety of business activities. For example, in July 2024, the Uniform Law Commission (ULC), which drafts uniform laws that states may adopt, approved the Uniform Antitrust Pre-Merger Notification Act, which would give state attorneys general access to certain filings made pursuant to the federal Hart-Scott Rodino Act (HSR), increasing scrutiny of mergers and acquisitions transactions.¹ Thus far, the District of Columbia, California, Colorado, Hawaii, and Washington have introduced legislation mirroring the ULC's Uniform Antitrust Pre-Merger Notification Act.² Notably, California and New York are considering updates to their antitrust laws that would go even further than the reforms promoted by the ULC and would represent a drastic shift in antitrust enforcement in those states.

California

Today, California's three primary competition laws reach concerted conduct (e.g., price fixing, group boycotts, market allocation schemes), but provide only limited remedies for single firm conduct and mergers. The primary California antitrust law is the Cartwright Act, a 1907 statute that has been interpreted as generally consistent with Section 1 of the federal Sherman Act.³ Similar to federal antitrust law, the Cartwright Act provides for private standing and treble damages, but has been consistently interpreted not to reach single firm conduct.⁴ California's Unfair Competition Law (UCL) more broadly prohibits any "unlawful, unfair or fraudulent business practice"⁵ ' and thus may reach conduct unlawful under Section 2 of the Sherman Act ' but provides only for injunctive and equitable relief (such as restitution). Finally, California's Unfair Practices Act (UPA) prohibits, among other things, price discrimination, below-cost pricing, loyalty discrimination, and secret rebates and allowances.⁶ The UPA is analogous to the federal Robinson-Patman Act.⁷

In 2022, the California State Legislature directed the California Law Revision Commission (CLRC) ' an influential commission that recommends legal reforms to the California State Legislature ' to study and report on whether California should further expand its antitrust laws.⁸ On January 13, 2025, CLRC staff published its findings and recommendations to the CLRC.⁹ Among other things, these recommendations include that: (1) California should revise its existing antitrust laws to address single-firm conduct; (2) California should adopt elements of an "abuse of dominance" (AOD) standard for analyzing single-firm conduct; and (3) California should adopt merger approval and prenotification laws and review mergers under an "appreciable risk" standard of harm.¹⁰

At a January 23, 2025 meeting, the CLRC largely adopted its staff's recommendations, though the CLRC removed the AOD language, and instead directed staff to propose "standards ... that guard against the misuse of market power to any new single-firm conduct provision."¹¹ Additionally, the CLRC did not make a decision on the "appreciable risk" standard, and directed staff to further explore and provide "deeper legal analysis" of the appropriate standard for merger review.¹² CLRC staff is now tasked with proposing legislation to the CLRC that will incorporate the CLRC's approvals and directives from the January 23, 2025 meeting, and the CLRC expects to propose draft legislation to the California State Legislature by the end of the year.¹³

CLRC staff can be expected to propose draft legislation that is designed to make it easier for plaintiffs to prevail in claims relating to single-firm conduct and make it easier for the California Attorney General to enjoin mergers. If enacted, these reforms would represent a radical change in California antitrust law and result in inconsistencies with federal antitrust law.

Adoption of a California single-firm conduct law that incorporates an abuse of dominance, or misuse of market power, standard

Although California may file parens patriae suits under the federal Sherman Act, California does not currently have a state law that is directed at single-firm conduct. As a result, the CLRC approved the recommendation that California should adopt its own single-firm conduct law. CLRC staff further recommended that this California single-firm conduct law should utilize an "AOD-like," or "misuse of market power" standard, departing from the longstanding monopolization standard under Section 2 of the Sherman Act, which prohibits only conduct that excludes competition, rather than the exercise of monopoly power.¹⁴ The CLRC staff believes that an AOD or a misuse of market power standard will help California "balance out weak federal laws that have handicapped litigation against large [] companies over the past three decades."¹⁵

Importantly, neither AOD nor misuse of market...