California Regulators Contemplate Potential State-Level Action on Antitrust

At an upcoming June 26 meeting, The California Law Revision Commission (CLRC) will discuss proposed draft language to introduce state-level merger control provisions into California antitrust law via amendments to the Cartwright Act. This represents a significant potential shift for business clients across all sectors, particularly health care and technology, where consolidation is common and innovation can be rapidly scaled or suppressed through acquisition.

Currently, California lacks a comprehensive state merger review statute and relies on federal enforcement under the Clayton Act. As federal jurisprudence has grown more lenient over the years—especially regarding vertical and nascent mergers—California is exploring whether to reclaim enforcement authority with a lower burden of proof and potentially stricter scrutiny on deals affecting state markets.

The CLRC has presented four options for review:

Option 1: Federal Mirror: This first option would mirror the Clayton Act closely—familiar and conservative but retains the same high evidentiary threshold that has weakened federal merger enforcement, as the CLRC notes in their report.

The legislature has already worked on adding sections or provisions into the Cartwright Act this session. AB 325 by Assembly Majority Leader Cecilia Aguiar-Curry (D-Winters) is awaiting a Senate Judiciary Committee hearing and seeks to amend California's antitrust laws to address the alleged threat of algorithmic price fixing, where multiple businesses use shared pricing algorithms—often powered by AI or machine learning—to coordinate prices. The bill proposes a revision to the state's Cartwright Act to prohibit the distribution and use of certain shared pricing algorithms and would clarify the legal standards for bringing enforcement actions under state law. SB 763 by Sen. Melissa Hurtado (D-Sanger), sponsored by Attorney General Rob Bonta, proposes increases to the existing criminal penalties and would permit the attorney general or a district attorney to seek civil penalties of up to $1 million for a violation of the Cartwright Act.

Option 2: Structural Presumption: The second option would include the first’s base language and add the presumption established in United States v. Philadelphia National Bank. This would presume mergers are harmful if they significantly increase market concentration. This option also incorporates the 2023 Merger Guidelines of the U.S. Department of Justice and the Federal Trade Commission to guide the court’s analysis

Option 3: Codified Federal Merger Guidelines: This option codifies Guideline 1 from the 2023 Merger Guidelines, which specifically address mergers in concentrated markets as was the case in Philadelphia Bank, using a measurement called the Herfindahl-Hirschman Index (HHI). The option Introduces quantitative triggers (e.g., HHI greater than 1,800 with a 100+ point increase or market share greater than 30%) to establish a presumption of illegality. As the CLRC’s report notes, this option provides clear standards but risks rigidity.

Option 4: Appreciable Risk Standard (CALERA-Inspired): Option 4 adopts a progressive and state-specific standard that prohibits mergers creating “an appreciable risk of lessening competition more than a de minimis amount.” The report notes that this proposal will likely see opposition from business who will argue that creating a new standard will cause significant disruption to businesses, creating uncertainty until a solid base of jurisprudence is built.
 

WHAT IT ALL MEANS FOR BUSINESS

Health Care Sector

• Risk: Even non-horizontal mergers (e.g., between hospital systems and software firms) could be challenged under lower state thresholds.
• Impact: Deal teams may face additional disclosure, timing and legal hurdles, especially for acquisitions of local/regional facilities or care platforms.
• Opportunity: A clearer state standard could benefit independent providers and those investing in open, competitive service delivery models.

Technology Sector

• Risk: California could now challenge nascent or vertical mergers where one party holds data or market access and the other provides a disruptive product.
• Impact: Firms acquiring startups or competitors may need to submit Hart-Scott-Rodino-type filings to California or face new scrutiny.
• Opportunity: Smaller and mid-sized innovators may be protected from early acquisition, preserving space for growth and competition.

Cross-Sector Implications

• Dual Compliance Regimes: Businesses operating nationally would need to track both federal and California-specific standards, which could diverge significantly.
• Transaction Planning: M&A strategy will need to account for California risk independently—particularly for any transaction with material market impact in the state.

Now is a critical time to shape how California defines harm, concentration and market impact—especially before the September public comment window closes. We recommend the following:

• Review Memorandum 2025-31 for specific language and thresholds.
• Evaluate current or planned transactions for potential risk under Options 3 or 4.
• Prepare to submit public comment or participate in the process by the Sept. 18, 2025, deadline.
• Schedule internal legal or executive briefings to anticipate compliance shifts if legislation follows.

We are tracking this process closely and will provide a more detailed impact analysis following the June 26 meeting.

This document is intended to provide you with general information regarding California antitrust policy. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.