California State Assembly Passes Bill Expanding The Cartwright Act

On Wednesday, May 27, 2026, the California State Assembly passed Assembly Bill 1776 (AB 1776), sending the bill to be voted on by the California State Senate.¹ The bill would substantially expand the scope and enforcement mechanisms of the Cartwright Act, California’s state antitrust law.

The Cartwright Act currently prohibits coordinated conduct of two or more firms, such as collusion among competitors, that unreasonably restrains trade.² If enacted, AB 1776 would reform the Cartwright Act to reach unilateral conduct, such as unilateral pricing decisions, refusals to deal, and restrictions on distribution. It also would instruct California state courts to view federal precedent as “persuasive authority to the extent [it is] consistent with California law,” however, federal precedent would not be “conclusive.”³ Such changes could expose businesses operating in California to new and potentially heightened scrutiny than they face under federal law.

Key Features of AB 1776

The bill states that the Cartwright Act’s purpose is to promote free and fair competition to protect workers, consumers, and democratic institutions, expressly treating labor-market competition as part of competition policy. Its “hybrid approach” to regulating single-firm conduct will prohibit unilateral conduct that unreasonably restrains trade and provide interpretive guidance to courts that departs from federal case law.⁴ Most notably, the bill includes provisions that would:

• expand the reach of the Cartwright Act to both unilateral and coordinated conduct that unreasonably restrains trade;
• codify California case law holding that the Cartwright Act is “broader in range and deeper in reach” than the Sherman Act.⁵
• alter burdens of proof for alleging specific forms of anticompetitive conduct, including refusal to deal, predatory pricing, and conduct on multisided platform markets;
• consider the following as evidence of a violation under the statute, however, a finding would not be required to establish liability:
  • “the defendant’s conduct makes no economic sense apart from its tendency to harm competition;”
  • “[a] single firm or person has or might achieve a market share or has market power at or above a threshold recognized under Section 2 of Title 15 of the United States Code;”
  • “[a] definition of ‘relevant market’ where there is direct evidence of market power.”

The bill also contains a small-business exemption for qualifying small businesses that are independently owned and operated, California-based, have California-domiciled officers, and meet the 100-employee and $10 million gross-receipts thresholds.

Next Steps

If the Senate votes in favor of the bill on or before August 31, it will be sent to Governor Gavin Newsom’s desk. The governor must sign the bill on or before September 30 for the bill to become effective in 2027.

If enacted, the bill’s expansion of liability to unilateral conduct could expose businesses to increased antitrust enforcement and substantial financial liability from private suits. We will continue to monitor developments on the proposed changes to the Cartwright Act.

Broader State Antitrust Enforcement

This bill reflects a broader trend toward increased antitrust enforcement at the state level. As tracked in our updated Healthcare Merger Matrix, the number of states expanding, or considering expanding, antitrust laws or industry-focused transaction approval laws targeting proposed deals continues to rise.⁶ For example, in February, Governor Newsom signed the California Uniform Antitrust Pre-Merger Notification Act, which requires a “Mini HSR” filing with the state Attorney General, and in May, increased the state’s budget for antitrust enforcement.⁷ And last October, Governor Newsom signed AB 325, which altered the pleading standard for Cartwright Act violations and added a new type of antitrust violation targeting pricing algorithms.⁸

*Caroline Tichenor is a law clerk in the firm's Washington, D.C. office.

Footnotes

1. A.B. 1776, 2026 Cal. Assemb., Reg. Sess. (Cal. 2026).

2. Cartwright Act, Cal. Bus. & Prof. Code §§ 16700–16770 (2025).

3. Cal. A.B. 1776 § 1(d) (citing Aryeh v. Canon Bus. Sols., Inc.. 55 Cal.4th 1185, 1195 (2013)).

4. Assembly Third Reading, Cal. Assembly 2026 Reg. Sess., at 3 (2026).

5. Cianci v. Superior Court, 40 Cal.3d 903, 920 (1985).

6. State Healthcare Transaction Laws, Sheppard, https://discover.sheppard.com/state-healthcare-transaction-laws-new/p/1.

7. Jordan E. Grushkin et al., California Enacts Uniform Antitrust Pre-Merger Notification Act, Sheppard (Feb. 17, 2026), https://www.sheppard.com/insights/blogs/california-enacts-uniform-antitrust-pre-merger-notification-act. Gov. Gavin Newsom, May Revisions (2026-27), https://ebudget.ca.gov/FullBudgetSummary.pdf.

8. Ann O’Brien, Leo Caseria & T.J. Benedict, California Passes Broad Limits on “Common Pricing Algorithms”, Sheppard (Oct. 14, 2025), https://www.sheppard.com/insights/blogs/california-passes-broad-limits-on-common-pricing-algorithms.