When we speak of “U.S. antitrust law,” we nearly always mean the unitary body of federal law encompassed by the Sherman and Clayton Acts and enforced by the federal government, state attorneys general, and private plaintiffs. The states have their own antitrust laws as well, but these mostly adopt the same substantive rules that the federal courts have developed over more than a century of Sherman and Clayton Act jurisprudence. With fairly limited exceptions, private conduct that complies with federal antitrust law also complies with state antitrust law. This makes abundant sense. In our globally interconnected economy, the same basic rules of competitive conduct should apply consistently across the United States.
But this longstanding feature of U.S. competition policy may soon come to an end. A few months ago, California’s Law Revision Commission proposed far-reaching changes to the state’s antitrust statute (see here, here, and here). California’s legislature has now taken up that proposal in a bill dubbed the Competition and Opportunity in Markets for a Prosperous, Equitable and Transparent Economy (COMPETE) Act. The bill stands a fair chance of passage: California’s legislature has historically ratified more than 90% of the Law Revision Commission’s recommendations. And if enacted, the COMPETE Act would force many U.S. companies with national operations to rethink how they do business, whether they are based in California or not.
Advocates of this change argue that “decades of federal jurisprudence” have imposed too many limiting principles on antitrust liability based on “outdated thinking.” And they accordingly propose not to supplement federal competition policy, but to supplant it, condemning as anticompetitive a wide variety of conduct that federal law deems procompetitive.
Consider California’s proposed new approach to predatory pricing. Suppose you’re a large business that hopes to gain additional market share by lowering your prices well below those of your smaller rivals. Federal law allows such low prices unless they fall below your costs, threaten to exclude your rivals from the market, and enable you to recoup your losses by charging monopoly prices thereafter. Although reasonable people can disagree about the doctrinal details, some such limiting principles are needed for sound competition policy. Then-Judge Stephen Breyer put it best when he observed in 1983 that “the consequence of a mistake here is not simply to force a firm to forego legitimate business activity it wishes to pursue; rather, it is to penalize a procompetitive price cut, perhaps the most desirable activity (from an antitrust perspective) that can take place in a concentrated industry where prices typically exceed costs.”
The proposed California legislation would reject that federal policy choice. It would impose state-level liability for price cuts that easily comply with the federal standard, and it would impose no alternative limiting principles instead. Without such principles, California would leave it to the subjective intuitions of California judges or juries about whether price cuts are excessive or unfair to rivals. Unlucky defendants in such cases would have to pay treble damages for the rivals’ lost business. And to avoid that fate, well-counseled companies would pull their punches and err on the side of charging consumers more—precisely the anticompetitive outcome that Breyer warned about.
Or consider another example of outright conflict between the proposed California legislation and federal competition policy. Federal law sharply limits when a firm can face liability for refusing to let rivals use its assets, such as factory capacity or proprietary digital platforms. Here, too, these limiting principles embody a deliberate policy choice. As the Supreme Court has held, compelling a large firm “to share the source of their advantage is in some tension with the underlying purpose of antitrust law, since it may lessen the incentive for the [firm], the rival, or both to invest” in innovation, and “compelling negotiation between competitors” to implement any legally imposed duty to deal “may facilitate the supreme evil of antitrust: collusion.”
California’s proposed legislation rejects that policy judgment: it would eliminate the federal limiting principles on duties to deal and substitute none in their place. Here, too, California judges and juries would decide cases based on subjective, context-specific intuitions about fairness. Potential defendants would be unable to predict how such intuitions might play out in courtrooms across California, and they would start cooperating with their rivals in a range of new circumstances to avoid the risk of treble damages. California’s initiative would thus raise the very concerns that federal law seeks to prevent: reduced investment incentives and heightened risks of collusion.
The effects of California laws, moreover, are rarely limited to California. Many U.S. firms headquartered in other states have nationwide business plans that apply consistently to operations in all fifty states. Such firms tend to conform their practices to the most restrictive legal regime found anywhere they operate. And for such firms, the new California law on predatory pricing, refusals to deal with rivals, and a wide range of other issues would effectively replace the federal regime as the controlling rulebook for permissible competitive strategies.
Other states, too, might well follow California’s lead and impose yet more restrictive requirements, which national firms in turn will conclude they must follow as well. This state-level experimentation in novel antitrust rules would generate liability in an ever-increasing range of circumstances and eliminate more and more of the limiting principles that federal law deems necessary to promote basic antitrust objectives, such as low prices and sound investment incentives.
Although reasonable minds can differ, I am skeptical that California’s proposed legislation would succumb to a legal challenge under federal law. True, courts often find that a federal regime preempts state laws if it is comprehensive and detailed, as federal antitrust law is, and if the state regime embodies contrary policy judgments, as California’s proposed legislation does. But preemption defenses rarely succeed in antitrust litigation, in part because courts have concluded that Congress originally enacted the Sherman and Clayton Acts against the backdrop of state antitrust laws and did not intend to displace them.
That said, existing discrepancies between federal and state law have generally been modest in scope and involve matters of remedy (e.g., indirect purchaser liability), procedure (e.g., antitrust standing), or modes of analysis (per se prohibitions vs. the rule of reason). Courts might be somewhat more willing to entertain preemption challenges to aggressive state laws that, like this one, would fundamentally transform major substantive rules of conduct. But such challenges would remain longshots.
Some critics have separately suggested (see here and here) that the proposed legislation would violate the “dormant commerce clause,” a constitutional principle that bars states from unduly hindering interstate commerce. These arguments, while plausible, seem like an uphill battle too. In a recent fractured decision, the Supreme Court indicated that the dormant commerce clause focuses primarily (though perhaps not quite exclusively) on protectionist state laws that discriminate against out-of-state interests. The proposed California legislation, whatever one might think of it, is hardly protectionist. To the contrary, it is motivated in large part to rein in big technology companies, which are disproportionately located in California.
If federal legal challenges are likely to fail, what can keep individual states from unilaterally knocking down the limiting principles that federal antitrust law has erected precisely to promote federal competition objectives? The answer lies, if not in the states themselves, then in Congress, which has plenary authority to preempt state laws regarding interstate commerce.
Will Congress take that step, despite populist support on both the right and the left for more aggressive antitrust enforcement? It’s hard to say. But Congress will likely consider such preemption proposals, if at all, only as part of a larger legislative compromise that would adjust federal antitrust law itself in favor of greater market intervention. Whatever one’s substantive perspective on antitrust policy, that would be a conversation well worth having. The alternative would be to cede national competition policy to the most restrictive of fifty state-law regimes.
Jon Nuechterlein is a Washington, DC-based attorney and writer with broad experience in government and the private sector. He is a Distinguished Scholar at George Washington University’s Competition Law Center, an adjunct professor at Georgetown Law School, where he teaches seminars in antitrust and telecommunications law, and a Nonresident Senior Fellow at the Technology Policy Institute. In December 2024, he retired from Sidley Austin LLP after nearly nine years as a partner and co-leader of the firm’s Telecom and Internet Competition practice. From 2013 to 2016, Jon served as General Counsel of the Federal Trade Commission, where he oversaw the Commission’s appellate litigation activities and provided legal counsel on a range of antitrust and consumer protection issues. Jon’s extensive government experience also includes positions as Deputy General Counsel of the FCC (2000-2001), as Assistant to the Solicitor General (1996-2000), and as law clerk to D.C. Circuit Judge Stephen Williams (1990-91) and Supreme Court Justice David Souter (1991-92). He is a graduate of Yale Law School (1990) and Yale College (1986). Jon is the author, with Phil Weiser, of the first two editions of Digital Crossroads: Telecommunications Law and Policy in the Internet Age (MIT Press 1st ed. 2005 & 2d ed. 2013). He and Georgetown Law Professor Howard Shelanski are finishing work on the third edition of that book, which is scheduled for publication in early 2026.
