Coast to Coast: California and New York Push to Expand State Antitrust Laws

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 power have been implemented anywhere in the United States, and thus there would be no existing legal precedent to guide courts in interpreting these provisions. An AOD standard would be modeled after existing European Union (EU) law that makes it “unlawful for a dominant entity to abuse that position to its competitive advantage.”¹⁶ Unlike the monopolization standard under the Sherman Act, which generally requires a 70% market share,¹⁷ the European Commission generally considers dominance to start around 40% market share.¹⁸ The EU also goes further than the U.S. with respect to the type of conduct that it considers to be unlawful. For example, AOD under the EU includes certain “exploitative abuses,”¹⁹ such as excessive pricing and unfair contractual terms imposed upon consumers, that are typically not considered to be exclusionary conduct under U.S. law.²⁰ It is not entirely clear what the CLRC envisions with respect to conduct that would constitute a misuse of market power, though the CLRC suggested that it might include elements of AOD.

Adoption of a California merger review and premerger notification law that departs from existing federal law and incorporates an “appreciable risk” standard

Although some states, including California, have laws that require notification of some mergers (such as mergers in the health care industry), no state in the country has a premerger notification law that impacts mergers in every sector. The CLRC is seeking to change this while also changing the legal standard for evaluating mergers. Specifically, CLRC staff recommended that California adopt a law prohibiting mergers whose effect may be “to create an appreciable risk of materially lessening competition” — i.e., the “appreciable risk” standard.²¹ This language is inspired by Sen. Amy Klobuchar’s proposed changes to federal law embodied in the Competition and Antitrust Law Enforcement Reform Act (CALERA).²² As discussed above, although the CLRC directed CLRC staff to further study this issue, CLRC staff nevertheless is expected to revert with draft language that would lower the standard for enjoining a merger, even if that draft language does not exactly mirror CALERA’s “appreciable risk” language.

Other antitrust bills currently under consideration in California

Separate and apart from the work of the CLRC, there are several bills under consideration by the California State Legislature that would expand California’s existing antitrust laws.

On February 21, 2025, Senator Hurtado introduced Senate Bill 763 (SB 763), which would amend the Cartwright Act to increase the criminal and civil fines imposed for violations of the act.²³ Specifically, the bill would increase criminal fines for corporations from $1 million to $100 million per violation, increase criminal fines for individuals from $250,000 to $1 million per violation, increase the term of imprisonment for a felony violation from one, two, or three years to two, three, or five years, and add additional civil penalties of up to $1 million per violation that courts can impose based on the nature of the misconduct.²⁴ These proposed penalties are more commensurate with antitrust penalties under federal law, giving California the ability to severely punish antitrust violations — including through criminal prosecutions — even without their federal counterparts.

Additionally, on December 2, 2024, Senator Umberg introduced Senate Bill 25 (SB 25), the Uniform Antitrust Premerger Notification Act.²⁵ This bill is modeled after the UCL’s Uniform Antitrust Premerger Notification Act, discussed above, and it would require that persons who file a premerger notification pursuant to HSR to the Federal Trade Commission (FTC) or U.S. Department of Justice (DOJ) also provide a copy of the HSR filing to the California Attorney General. The bill would apply only to companies with a “principal place of business in [California] or [] annual net sales in [California] of the goods or services involved in the transaction of at least 20% of the [HSR] filing threshold.”²⁶

New York

In January 2025, New York legislators introduced the Twenty-First Century Antitrust Act for the fourth time.²⁷ Broadly speaking, the bill would create a single-firm conduct law that uses an AOD standard, requires premerger notification of certain mergers to the New York Attorney General, creates a private right of action, empowers the attorney general to adopt, promulgate, amend, and repeal rules relating to AOD, and authorizes class actions.²⁸ According to the act’s legislative findings, the bill is designed to address “New York’s great concern with the growing accumulation of power in the hands of dominant corporations that harms our marketplace, our democracy, and that undermines the power of workers, consumers, and small businesses.”²⁹

The bill is consistent with California’s efforts to adopt an AOD-based standard for single-firm conduct. However, the bill provides more clarity by specifying that sellers with over 40% market share and buyers with over 30% market share are presumed to be dominant.³⁰ These standards are significantly lower than the standard for monopolization under federal law, where it is unlikely that market share below 70% is sufficient to establish monopoly power.³¹ The bill also specifies that refusals to deal, tying, exclusivity agreements, non-compete agreements, restraints on the prices or wages offered by another firm, and any action that the attorney general determines through rulemaking to pose a “substantial risk of harming competition” or that “serves no legitimate business purpose that cannot be achieved in some less restrictive way,” are “presumed to be illegal when engaged in by dominant firms.”³² The bill further provides that a defendant can only rebut this presumption by clear and convincing evidence demonstrating that the procompetitive benefits of the challenged conduct are achievable only through that conduct and outweigh that conduct’s harm to competition.³³

Additionally, like the federal Sherman Act, the bill would give private individuals the right to sue for violations of the act, both as individuals and members of a class.³⁴ Like actions brought by the attorney general, private enforcement of the bill would be litigated using an AOD standard. The bill also provides for treble damages and reasonable attorneys’ fees.³⁵ The bill also provides that “direct evidence” — such as a “reduction in output or in quality of goods or services, the imposition of supracompetitive prices, or the ability to force, induce, or otherwise coerce a supplier to offer a lower price, discount advertising allowance, or other service than what the supplier offers others” — can be used to prove dominance without regard to market share or even a definition of the relevant market.³⁶ In total, the act’s provisions related to single-firm conduct would diverge greatly from the existing antitrust laws in place either federally or in any state in the country.

With regard to mergers, the bill would require premerger notification of virtually any transaction by a person doing business in New York if the transaction is also reportable to the FTC and DOJ under HSR, though the bill diverges from the California approach by not including the “appreciable risk” standard for merger reviews.

Conclusion

Both California and New York are considering significant reforms to their antitrust laws that would radically change the existing antitrust legal regimes in those states. Companies doing business in these two states should stay alert to these developments and seek legal advice on how they may impact their business. Moreover, these developments would not necessarily be limited to just California and New York — several additional states, like New Jersey,³⁷ Minnesota,³⁸ and Pennsylvania,³⁹ have proposed similar legislation in recent years. These states, and others, could be emboldened to pass significant antitrust reforms if California and New York do so first.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.