The latest edition of The Prompt took our experts back to California:
California has now introduced legislation to expand California antitrust law targeting single firm conduct. One major feature of the legislation subjects individual companies to antitrust liability for engaging in "restraints of trade," regardless of whether they hold any form of market power. Another directs California courts to ignore federal jurisprudence in how to examine unlawful restraints of trade. If adopted, what would California's approach to antitrust look like in practice?
Respondents expressed deep skepticism about the practical effects of the proposed legislation. A consistent theme was unpredictability. The short answer, for most, was that nobody really knows.
The Prompt
Answering antitrust challenges one question at a time
The Chamber has assembled a range of preeminent experts in the field of antitrust from across a wide political spectrum to offer timely views on key questions of antitrust law and policy. This group brings together senior enforcers spanning seven administrations, from both the Antitrust Division at the Department of Justice and the Federal Trade Commission.
One respondent called the likely result simply "Unprincipled and Unpredictable." Another agreed it is "hard to predict or expect a rational outcome given the legislative prescriptions." A third said flatly that "it is impossible to tell what it would look like in practice. Interventions would be cabined only by the imagination of California prosecutors (and possibly by state law legislative history). This could lead to more aggressive cases than in foreign jurisdictions, absent significant guardrails. Dormant commerce clause and conflict preemption with federal cases might for the first time in modern history have a chance, since the new law would go so far beyond other state competition enactments. The worst thing is that this could undermine business innovation, slow economic growth, and reduce efficiency – the opposite of what should be happening."
One respondent cautioned that "this could be quite meaningful if this turns out to be enforced broadly and based on sort of an 'unfairness' standard along the lines of the broadest interpretations of Section 5 of the FTC Act. There are all sorts of things that may harm a competitor but not harm competition – and bringing actions on that basis would be unwise policy. But for a number of years, enforcement of Section 5 of the FTC Act has been more limited and if the California enforcement is similar, the legislation's effects could be more limited. The question of course is what kind of procompetitive conduct it deters because companies are not sure how it will be enforced."
Another warned that "if adopted, these California provisions will allow the interests of inefficient rivals and trial lawyers to run roughshod over the interests of consumers and competition on the merits. It may accelerate the departure of innovative companies from California."
One respondent echoed the concern more bluntly: "A windfall for the trial lawyers unless preempted. Not a good thing for American consumers or businesses."
Yet another predicted that "it would look like an excuse to prohibit whatever business practice a court in California decides is a 'restraint.' It would increase output in at least one industry, though: the plaintiffs' antitrust bar."
Finally, one respondent offered a measured but pointed observation: "One hopes the proponents of the legislation have a sense of how it would operate, but the rest of us can only guess until it gets fleshed out in the California courts. As the Supreme Court observed a century ago in the landmark Chicago Board of Trade case, every agreement limits the flexibility and discretion of the parties and in that sense restrains trade, but presumably Congress did not intend the antitrust laws to bar private right of contact. Presumably California doesn't, either. Much of antitrust over the past century has focused on distinguishing good agreements from bad ones, and the resulting tests work pretty well. If California thinks it can do better, well, we'll see."
