This post is about antitrust law, but if you’re a small business owner, it’s still worth paying attention to, because AB 1776 deals with something every business owner does every day: set prices, compete for customers, and figure out how to stand out from the business down the street.

What AB 1776 is:

AB 1776, known as the COMPETE Act, would make a significant change to California’s antitrust law, the Cartwright Act, which dates back to 1907.

Traditionally, the law has focused largely on businesses working together to restrict competition, like competitors agreeing to fix prices. AB 1776 would expand California law to regulate certain actions taken by a single business acting on its own.

AB 1776 raised some concerns for us and over 90 other business groups.

1. The original language did not clearly define what would qualify as an illegal “restraint of trade” by a single business. That left businesses and courts with a lot of room for interpretation.

2. Federal antitrust cases generally require significant market power before a company can be accused of monopolization. The original version of AB 1776 did not include a comparable threshold, meaning businesses of virtually any size could potentially face a claim.

3. The proposed “small business exception” offered less protection than the name suggested. Rather than preventing a lawsuit, it largely gave small businesses a defense they could raise after being sued, when legal costs may have already started piling up.

4. Normal competitive decisions, such as lowering prices, offering discounts, or creating loyalty programs, could potentially become the subject of litigation, with significant damages available.

For a small business without an in-house legal department, that uncertainty matters.

What The Santa Monica Chamber did to help:

In June, the Santa Monica Chamber joined a coalition of roughly 90 California business organizations, led by the California Chamber of Commerce, in submitting a letter to the Senate Judiciary Committee opposing AB 1776 as written.

We were one organization among many, but our goal was simple: make sure the concerns of Santa Monica businesses were represented while lawmakers considered a major change to California’s competition laws.

The bill has not died since the letter, it has continued moving through the Legislature.

But as it moved forward, several of the concerns raised by the business coalition were addressed:

1. The provision allowing private attorneys to bring lawsuits directly against businesses was removed. Enforcement is now limited to public prosecutors, including the Attorney General and district attorneys. That significantly reduces the risk of the opportunistic litigation the coalition warned about.

2. Lawmakers added a market power requirement. A claim now requires evidence that a business possesses “substantial” market power, addressing one of the biggest concerns with the original proposal.

3. The legislation was narrowed to focus more specifically on monopolistic conduct rather than relying on a broad “restraint of trade” standard that could potentially capture ordinary competitive behavior.

This progress is very helpful and makes this bill much more palatable in ensuring small businesses are protected from frivolous litigation. For small businesses that do not have a legal department on standby, this is a positive outcome.

Now, AB 1776 is now headed toward a vote on the State Senate floor before the Legislature’s August 31 deadline. If approved by the Legislature, it will head to Governor Newsom for consideration.

We will continue tracking the bill and, more importantly, continue making sure Santa Monica businesses have a voice when decisions in Sacramento could affect how they operate.

If you want to know what else we are watching and want to help get us involved in political issues that affect your business moving forward, join us at our next Government Affairs Committee meeting.