California lawmakers are weighing a contentious piece of legislation this year that could reshape how businesses and consumers hold corporations accountable for anti-competitive behavior — and it’s dividing Sacramento along unusual lines.
Assembly Bill 1776 would broaden the state’s antitrust framework, giving individuals and businesses that claim they were harmed by a single company’s efforts to squeeze out competition the ability to sue in state court. Under current California law, these kinds of cases typically require evidence that two or more parties conspired to stifle competition. Federal law already allows enforcement against a single dominant company, but supporters of what’s being called the California COMPETE Act argue that federal courts have chipped away at antitrust protections so much that the state needs its own legal standard.
The fight has created an unusual alignment of interests, pitting labor unions and trial attorneys against California’s influential business and technology lobbies. Combined, groups on both sides of the debate have poured at least $106 million into legislative campaigns since 2000, according to CalMatters’ Digital Democracy database.
Backers of the bill say it would give shoppers a legal tool to help keep independent grocery stores and pharmacies from being squeezed out, prevent single companies from dominating farm and restaurant supply chains, and expand health care choices for patients.
Assemblymember Cecilia Aguiar-Curry, the Democratic majority leader who represents the Davis area and is carrying the bill, told the Senate Judiciary Committee last month that more than 75% of American industries have undergone significant consolidation since the late 1990s.
“When companies gain that much power and abuse it, it translates into higher prices, fewer choices, fewer opportunities for entrepreneurs to start small businesses, and lower wages for working families,” Aguiar-Curry told the committee.
Business groups counter that the bill would open a new avenue for unscrupulous law firms to pressure companies into costly settlements. For years, employers have complained that California’s legal landscape already invites activists and plaintiffs’ attorneys to target businesses with demand letters and lawsuits over issues such as disability access compliance, product warning labels, wage and hour claims, and consumer privacy violations.
The California Chamber of Commerce was concerned enough about the bill that its lobbyists put up billboards near the state Capitol earlier this year calling out Aguiar-Curry by name.
“Cecilia, prices are high enough,” one billboard read. “Don’t make life more expensive for California consumers.” Chamber spokesperson John Myers declined to comment further on the billboard campaign.
Moderate Democrats remain wary
If the chamber’s goal was to pressure lawmakers into killing the bill, the tactic may have backfired. The unusually public attack on a well-regarded, senior Democrat appears to have generated sympathy and support for the legislation, even as several moderate Democrats continue to worry that it could make California a harder place to do business.
At least one legal expert says those concerns have merit. Babette Boliek, a law professor at Pepperdine University and former chief economist at the Federal Communications Commission, argues the bill’s language is so broad that it “would invite judges to pick winners and losers based on subjective sympathies rather than measurable harm.” She compared it to enforcing “a speed limit nobody knows exists.”
Aguiar-Curry’s office has responded to some of the criticism. After early pushback, she added a carve-out meant to shield small, independent California businesses — those with no more than 100 employees and average annual gross revenue under $10 million over the previous three years — from being sued under the new law.
Ben Golombek, executive vice president of the California Chamber of Commerce, said thousands of California companies would still be exposed to expensive litigation, including lawsuits from their own competitors.
“This unprecedented, massive legal liability for businesses of all sizes — small, medium and large — is why we oppose this bill so strongly,” he said.
Mark Ramos, president of the Western States Council of the United Food and Commercial Workers union, said the bill would help ensure that industry consolidation doesn’t drive down wages or push up prices for workers. As grocery chains continue to merge, he said, it’s become harder for union members to negotiate the kind of wages that once allowed workers like him to afford housing.
“With that consolidation has come the bigger challenge of not being able to negotiate a contract that allows our members to thrive in their local economy, because these retailers no longer have to compete with each other,” Ramos said.
Some Democrats remain hesitant, particularly state Sen. Tom Umberg, the Democratic chair of the Senate Judiciary Committee. Historically, Umberg has voted alongside Ramos’ union about 93% of the time, according to Digital Democracy records.
A key sticking point for Umberg is whether private citizens and businesses should be allowed to file lawsuits under what’s known as a “private right of action.” He told the committee he currently wants that authority limited to local district attorneys and the California attorney general.
“We want to make sure we’re not chilling competition through the threat of lawsuits,” Umberg said during the hearing.
Aguiar-Curry said she’s willing to make most of the changes Umberg has requested, but has not committed to restricting enforcement solely to prosecutors. She said she would keep working to make it harder to file frivolous lawsuits in the next version of the bill.
Will the measure actually deter bad behavior?
The bill cleared committee with Republicans casting the only “no” votes, but Umberg abstained when his turn came — a move that functions as a “no” vote without officially opposing the bill. Fifteen other Democrats also declined to vote when the measure narrowly passed the Assembly floor.
Abstaining is a familiar strategy among California lawmakers looking to signal discomfort with a bill without angering powerful interest groups or colleagues by voting no outright.
The COMPETE Act will go before the Senate Appropriations Committee again when lawmakers return from summer recess in early August.
Supporters are hoping the final version of the bill preserves Californians’ ability to sue companies over anti-competitive conduct. Lee Hepner, senior legal counsel at the American Economic Liberties Project, an advocacy group focused on fighting monopolistic practices, said it’s critical that ordinary Californians retain the right to bring these legal challenges themselves.
Without that option, he said, large corporations will simply lean on their financial resources and political influence to pressure regulators and lawmakers into looking the other way.
“The private right of action is a critical check against the politicization of antitrust enforcement, which threatens the entire project of policing markets to ensure fairness,” Hepner said.
Original source: CalMatters
