Much ink has been spilled on a draft California antitrust bill’s treatment of single-firm conduct. Most critiques focus on its economic flaws—particularly its departure from settled federal antitrust principles and the policy costs that follow.
The bill’s constitutional vulnerabilities deserve equal scrutiny. If California lawmakers remain unmoved by the economic risks of imposing new burdens on so-called “monopolies,” they may be more receptive to the prospect that the statute would not survive judicial review.
California’s Bid to Rewrite Section 2
The California Law Revision Commission (CLRC) is an independent state agency charged with advising the Legislature and governor on potential legal reforms. Since 2022, the CLRC has been studying whether—and how—to revise California antitrust law.
Its first major output was the Recommendation on Single-Firm Conduct (RSFC), released in tentative form in 2025 and finalized in January 2026 without meaningful revision. The RSFC urges the Legislature to adopt California’s first antitrust prohibition on unilateral conduct—and to do so in terms explicitly “broader” and “deeper” than federal law. If enacted, the proposal would amend the Cartwright Act, California’s primary antitrust statute.
The RSFC would mark a sharp break from federal Section 2 doctrine. Among other things, it would:
- Lower the Market-Power Threshold: The proposal treats market shares as low as 20% as sufficient to establish market power, far below the 50% or higher thresholds typically required under federal law.
- Discard Established Proof Requirements: It rejects core federal standards governing refusals to deal and predatory pricing, eliminating requirements such as below-cost pricing or a likelihood of recoupment.
- Presume Competitive Harm: The RSFC would deem practices like self-preferencing or tying presumptively anticompetitive when undertaken by firms with “significant market power.”
- Abandon the Consumer-Welfare Framework: The proposal expressly shifts California antitrust law away from the consumer-welfare standard endorsed by the U.S. Supreme Court, recasting antitrust as a tool to protect “innocent business owners” from “cheating” by dominant rivals. It even questions whether antitrust injury should turn on prices or output at all, suggesting instead that it reflect the “personal freedom” to start and operate a business.
Public Comments: A Clean Break from Federal Antitrust
Public comments on the RSFC raised serious concerns about the proposal’s creation of legal uncertainty and its rejection of settled federal antitrust standards. The core critiques, submitted before the Jan. 12 comment deadline, fall into several broad categories.
Doctrinal Uncertainty
Commenters, including counsel for the California Chamber of Commerce, warned that the RSFC’s new single-firm “restraint of trade” offense—untethered from monopoly power—offers little guidance to courts or businesses. It risks subjecting unilateral conduct to liability standards traditionally reserved for collusion.
The proposal compounds this uncertainty by discarding the requirement to define a relevant market when it claims to rely on “direct evidence” of market power, and by treating firms with market shares as low as 20% as potentially possessing “monopolistic power,” well below the 50% or higher thresholds applied under federal law.
Barring Efficiency Tradeoffs
Critics also objected that the RSFC would bar courts from weighing harms to some parties against benefits to others, effectively foreclosing consideration of intra-market efficiencies unless every affected party benefits. The proposal goes further by prohibiting courts from considering whether out-of-market efficiencies could offset in-market harm.
Legal Risk for Innovation
Groups such as the Computer & Communications Industry Association (CCIA) and the Information Technology and Innovation Foundation (ITIF) warned that the RSFC’s untested “abuse of dominance” standard would chill innovation and growth by exposing successful firms in competitive markets to heightened legal risk.
Conflating Share and Harm
Some commenters argued that the RSFC wrongly equates high market share with anticompetitive harm, effectively penalizing firms for success achieved by meeting consumer demand with superior products.
ICLE’s Recommendations
In its May 2025 comments, the International Center for Law & Economics (ICLE) offered three core recommendations for revising the RSFC draft—none of which the CLRC adopted.
- Preserve Alignment with Federal Antitrust Law: ICLE urged California to remain anchored to the U.S. antitrust framework, including the consumer-welfare standard, effects-based analysis, and sensitivity to error costs.
- Proceed Cautiously on Monopsony: ICLE advised restraint in addressing buyer-side dominance, citing unresolved economic questions and the need for a clear, coherent analytical framework.
- Reject Stakeholder-Protection Antitrust: ICLE warned against expanding antitrust to protect “trading partners” (such as suppliers or workers) for their own sake, arguing that doing so would politicize enforcement, shield inefficient competitors, and divert antitrust from its pro-consumer focus.
Untethered from Federal Law
Many commenters warned that the RSFC expressly untethers California antitrust law from Section 2 of the Sherman Act. It discards core federal requirements, including proof of a relevant market and below-cost pricing in predatory pricing claims. The proposal goes further still, repudiating foundational principles set out in the Supreme Court’s monopolization decisions.
Rejecting Supreme Court Doctrine
Numerous commenters emphasized that the RSFC explicitly rejects core Supreme Court monopolization doctrines, creating a sharp and consequential split between federal and California antitrust law.
TechFreedom’s submission (Exhibit 110) put the point bluntly, warning that the RSFC’s proposed judicial guidance “would reverse Supreme Court case law that protects the competitive process and consumers.”
TechFreedom explained that the RSFC discards the analytic frameworks set out in Ohio v. American Express (requiring analysis of both sides of a two-sided market), Verizon v. Trinko (no general antitrust duty to deal), Brooke Group v. Brown & Williamson (below-cost pricing and recoupment as prerequisites for predatory-pricing claims), and Aspen Skiing v. Aspen Highlands (the “no economic sense” test and limits on duty-to-deal liability).
In sum, TechFreedom cautioned that ignoring these precedents and forcing California courts to construct new frameworks that conflict with federal law flouts the Supreme Court’s repeated call for “clear rules in antitrust law.”
In a similar vein, the Information Technology and Innovation Foundation (ITIF) warned that the RSFC would strip away administrable limiting principles:
By banning the use of a prior course of dealing requirement, a price-cost test, the no economic sense test, and the equally efficient competitor standard, the . . . [RSFC] both opens the door to courts condemning broad swaths of behavior that reflect competition on the merits and risks creating an administrability and legitimacy crisis in which courts are routinely required to act like regulators and weigh the costs and benefits of unilateral business decisions.
Despite these warnings, the CLRC’s final January 2026 RSFC did not meaningfully engage with—or incorporate—any of these concerns.
Antitrust Federalism Hits Its Limits
The Supreme Court has long recognized that state antitrust law need not mirror federal law. States may adopt different—and even stricter—rules under their sovereign authority. For example, some states still treat minimum resale price maintenance as per se unlawful, and most allow indirect purchasers to recover antitrust damages even though Illinois Brick bars such claims under the federal Clayton Act.
In California v. ARC America Corp., the Court confirmed that state laws authorizing indirect-purchaser suits are not preempted by federal antitrust law and that states may prohibit conduct that federal law permits. Being “broader” or “deeper” than federal antitrust does not, on its own, trigger preemption.
That said, the RSFC goes well beyond ordinary divergence. Its wholesale rejection of core federal antitrust principles creates serious constitutional risk. If enacted, the proposal could face substantial challenges under both the Dormant Commerce Clause and the Supremacy Clause.
Dormant Commerce Clause
States enjoy broad police power to regulate commerce within their borders, and state antitrust regimes often coexist with federal law. But that authority has constitutional limits. When state antitrust law overreaches, it can violate the Dormant Commerce Clause (DCC), which bars state legislation that discriminates against or unduly burdens interstate commerce.
- Extraterritorial Control
Extraterritorial regulation presents the most serious risk. A state violates the DCC when it attempts to regulate conduct that occurs wholly outside its borders. The Supreme Court has repeatedly made clear that a state may not project its regulatory policy onto transactions consummated elsewhere. Laws that seek to control prices or business practices in out-of-state transactions are generally per se invalid. For example, a statute penalizing a merger between two out-of-state firms with no meaningful in-state nexus would almost certainly fail under the DCC.
California’s experience with AB 824 illustrates the point. That statute renders “pay-for-delay” pharmaceutical settlement agreements presumptively unlawful, notwithstanding the Supreme Court’s holding in FTC v. Actavis (2013) that such agreements must be evaluated under the rule of reason. In Association for Accessible Medicines v. Becerra (2022), a federal district court issued a preliminary injunction holding that AB 824 could avoid a DCC violation only if enforced “with respect to settlement agreements negotiated, completed, or entered into within California’s borders.” The court converted that limitation into a permanent injunction in 2025.
Although the 9th U.S. Circuit Court of Appeals previously rejected a DCC challenge to AB 824 in 2020, that decision rested solely on standing grounds and carries no precedential weight on the merits of the DCC analysis.
The Supreme Court’s decision in National Pork Producers Council v. Ross (2023) does not compel a different conclusion. There, a narrow five-justice majority upheld California’s Proposition 12, which restricts the in-state sale of pork derived from animals raised under conditions inconsistent with California standards. The Court rejected a broad extraterritoriality theory that would invalidate state laws merely because they have “practical effects” on out-of-state commerce, such as raising nationwide production costs.
Importantly, four justices—including Chief Justice John Roberts—dissented, concluding that Proposition 12 imposed a substantial burden on interstate commerce and should have been remanded for application of the Pike v. Bruce Church balancing test. And in Becerra, the district court distinguished Pork Producers on precisely this ground, characterizing AB 824 as a direct regulation of out-of-state conduct rather than a sales restriction with incidental extraterritorial effects.
That reasoning could readily apply to the RSFC. Several of its provisions reject core Supreme Court monopolization doctrines—governing discounting, refusals to deal, predatory pricing, and two-sided markets—while offering no administrable way to confine their application to California alone. Because these practices routinely occur in interstate and national markets, limiting enforcement to “California-only” conduct may prove impossible. The RSFC’s potential reach into nationwide contracting and pricing arrangements could therefore present a stronger extraterritoriality problem than AB 824, given both the breadth of conduct covered and California’s economic gravity.
- Economic Protectionism (Discrimination)
Economic protectionism presents a weaker claim. The RSFC does not facially discriminate against out-of-state firms, nor does it appear designed to shield in-state businesses from interstate competition. It applies equally to similarly situated firms inside and outside California.
- ‘Undue Burden’ Risk of Inconsistent Laws or Regulations
Undue burden, however, poses a more serious concern. Even an even-handed statute can violate the DCC if it imposes burdens on interstate commerce that are “clearly excessive” in relation to its local benefits. The Supreme Court has repeatedly warned against regulatory patchworks that make nationwide compliance impossible.
If California declares common unilateral conduct unlawful—such as discounting without recoupment, refusals to deal, or conduct by firms with market shares well below federal thresholds—while other states and federal law permit it, national firms may face irreconcilable legal commands. Under Pike balancing, a court would weigh California’s asserted local benefits against the resulting disruption to interstate commerce. Given the RSFC’s sharp divergence from settled monopolization doctrine and the absence of clearly articulated local gains, regulatory inconsistency provides a substantial basis for a Dormant Commerce Clause challenge.
Supremacy Clause
The Supremacy Clause (Article VI, Section 2) declares that federal law is “the supreme Law of the Land” and prevails over conflicting state enactments. Federal antitrust law, however, rarely preempts state antitrust regimes outright, and courts have long tolerated state rules that diverge from federal doctrine.
But that tolerance has limits. As the Supreme Court reiterated in Arizona v. United States, a state law is invalid if it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” When Congress deliberately permits certain conduct to advance a national economic policy, a state may not forbid that same conduct without frustrating federal intent.
Crosby v. National Foreign Trade Council illustrates the principle. There, the Court struck down a Massachusetts statute that imposed sanctions Congress had expressly chosen not to impose, concluding that the state law undermined Congress’s calibrated approach to economic pressure.
The RSFC invites a similar challenge. It expressly rejects multiple federal limiting principles designed to shield procompetitive conduct from antitrust liability. The proposal openly seeks to “untether” California law from federal standards and repudiates Supreme Court doctrine in Brooke Group (predatory pricing), Verizon v. Trinko (refusals to deal), Aspen Skiing (the “no economic sense” test), and Ohio v. American Express (two-sided markets).
More fundamentally, the RSFC discards monopoly power—and arguably even market power—as a meaningful screen for single-firm liability. By dramatically lowering the threshold for bringing unilateral-conduct cases, it abandons the core structure of federal monopolization law and the parallel frameworks adopted by the states.
The consequences could be sweeping. The RSFC would cast doubt on countless commercial contracts long treated as ordinary business practice and expose routine conduct to antitrust challenge. Given California’s economic reach, the spillover effects would extend nationwide. Firms would likely avoid novel, welfare-enhancing arrangements for fear of enforcement actions and private suits, chilling innovation and distorting interstate commerce on a scale far exceeding that of prior state antitrust departures.
For these reasons, an implied preemption challenge to the RSFC would not be implausible. At the same time, courts have historically tolerated some divergence between federal and state antitrust law, and implied-preemption doctrine remains underdeveloped in this context. The ultimate prospects of such a challenge are therefore uncertain—but far from trivial.
When Washington Should Step In
The RSFC currently appears likely to be enacted largely as drafted. If California adopts it, other states may follow. Antitrust expansion fits the current policy zeitgeist, and both political actors and private plaintiffs have strong incentives to press for broader liability.
The Trump administration should consider responding. Federal–state cooperation has long strengthened antitrust enforcement, but the RSFC—and any state statutes modeled on it—would represent a break from that tradition. What is at stake is not marginal doctrinal disagreement, but a retreat from decades of progress that grounded antitrust in consumer welfare and administrable rules. The likely result would be more litigation, less business certainty, and weaker incentives to compete on the merits—outcomes that ultimately harm consumers.
The administration could begin by using the federal bully pulpit. Senior officials—such as Attorney General Pam Bondi, the Assistant U.S. Attorney General for Antitrust Gail Slater, and the Federal Trade Commission (FTC) Chairman Andrew Ferguson—could publicly explain why federal–state antitrust cooperation has worked, and why the RSFC departs from that model in ways that threaten consumers and competition.
If California enacts the RSFC, the U.S. Justice Department (DOJ) could also pursue litigation. At a minimum, the DOJ could challenge the statute on Dormant Commerce Clause and implied-preemption grounds, or file statements of interest in private suits where plaintiffs can establish standing.
Should judicial challenges fail, the administration could consider supporting narrowly tailored federal legislation to preempt the RSFC and similar state laws that impose comparable nationwide distortions.
State antitrust enforcement has long played a constructive role in the federal system. It would be a serious mistake if the RSFC—and its potential imitators—undermined that contribution. California policymakers should reconsider before locking in a regime that risks weakening, rather than strengthening, American competition.
