Staff of California Law Revision Commission Advances Far-Reaching Proposals for New Antitrust Statutes
Client Alert | June 23, 2025
The CLRC staff last week made new or revised proposals for changes to California competition law on mergers, “misuse of market power,” and single-firm conduct.
As summarized in our January 15, 2025 and March 25, 2025 Client Alerts, the California Law Revision Commission (CLRC) has been considering changes to the state’s antitrust law.[1] Over the past week, CLRC staff (1) proposed four options for a new California law to regulate mergers,[2] (2) revised its proposals for new legislation governing single-firm conduct law,[3] and (3) proposed two options for new legislation targeting alleged “misuses of market power.”[4] The staff’s favored proposals would be aggressive and far-reaching changes to existing competition law, making California law significantly broader, and more restrictive on businesses, than federal law.
The CLRC’s commissioners will now consider the staff’s recommendations. The CLRC is meeting on June 26, 2025 and September 18, 2025 to consider these issues, and the public can submit comments during this period. Gibson Dunn attorneys are monitoring these recommendations and are available to discuss the implications for your business or assist in preparing a public comment for submission to the CLRC.
Proposed Merger Language
At the federal level, Section 7 of the Clayton Act prohibits mergers whose effects “may be substantially to lessen competition, or to tend to create a monopoly.”[5] While mergers in certain industries can be challenged under state laws[6] and the California Attorney General can bring challenges to mergers under federal law, California currently lacks a broad state-level merger statute. The staff presented four options for a potential state merger provision. Each of these options are, to varying degrees, broader than federal antitrust law.
- Option 1 “largely mirrors the Clayton Act.”[7] But it would expand on federal law by also expressly prohibiting mergers that tend to create a monopsony[8] while removing analogous federal exemptions, such as those for common carriers.[9] The CLRC staff framed adopting a state analogue to the federal law as having the “downside” of importing existing federal jurisprudence on mergers.[10]
- Option 2 would adopt the modified federal analogue and (1) add a presumption that mergers which would result in a “a firm controlling an undue percentage share of the relevant market”—likely at or around 30%—and “a significant increase in the concentration of firms in that market” are inherently anticompetitive,[11] and (2) recognize the 2023 Federal Merger Guidelines as “persuasive authority” in interpreting the statute.[12]
- Option 3 would go farther than Option 2 and codify presumptions based on changes in the Herfindahl-Hirschman Index (“HHI”),[13] including a presumption of unlawfulness for mergers that result in a market with an HHI score of 1,800 or more, a market share greater than 30%, or a change in HHI of over 100 points.[14]
- Option 4 would create a “break from federal law,”[15] prohibiting mergers whose effect “may be to create an appreciable risk of lessening competition more than a de minimis amount.”[16] The practical effect would be to reduce the burden of proof required to prove the illegality of a merger.[17]
The CLRC did not present a formal recommendation for premerger notification laws, because a proposal addressing premerger notification is already pending in the Legislature.[18]
Revised Single-Firm Conduct Proposals
The CLRC staff also responded to public comments about its single-firm conduct proposals.
The staff has now recommended against adoption of two of its proposals. First, staff disapproved of the least aggressive reform proposal—to create an analogue to Section 2 of the Sherman Act[19]—in response to criticism from certain interest groups and the Single Firm Conduct Working Group, a group of economists appointed by the CLRC, who argued that this proposal would not go far enough.[20] Second, the staff recommended abandoning a proposal for a “clean break” from federal law that the Single Firm Conduct Working Group had championed.[21] Other commenters—from both sides of the antitrust bar—objected that that proposal would cause significant uncertainty and increased litigation.[22]
The staff recommended proposed legislation that would not only prohibit unlawful monopolization (as federal law does) but would also prohibit unilateral “restraints of trade.”[23] Several commenters raised concerns with this approach—noting that it conflates unilateral and joint conduct concepts;[24] that it is broad and vague, which risks creating uncertainty;[25] and that it could be construed to outlaw (and thus chill) many forms of procompetitive conduct.[26] CLRC staff largely dismissed these concerns but agreed the proposal should be limited to “prohibiting unreasonable restraints of trade.”[27]
Consistent with their recommendation for significant reform, CLRC staff had also proposed legislative declarations that California antitrust law should be broader than and not modeled on federal law—with specific language rejecting certain federal court decisions.[28] CLRC staff largely dismissed commenters’ concerns that the draft provisions would increase uncertainty and call into question procompetitive practices, like price-cutting and loyalty programs.[29]
Proposed Misuse of Market Power Language
Staff also proposed additional statutory provisions to address so-called misuses of market power—practices in which a company with more market power allegedly disadvantages its rivals or customers. This would in effect import concepts from European “abuse of dominance,” a standard that has never been adopted in any domestic competition law.
Specifically, the staff recommended that any company with thirty percent or more of the relevant market, or assets, net annual sales, or market capitalization greater than $500 billion be deemed to have significant market power.[30] They then proposed a list of conduct that would be presumed anticompetitive when practiced by a firm with such presumed power:
- Leveraging substantial market power in one market into a separate market;
- Bundling, tying, using loyalty rebates, or refusing to interoperate;
- Denying use of essential facilities or resources;
- Refusing to deal;
- Engaging in predatory pricing tactics such as pricing below costs;
- Imposing exclusivity as a condition of doing business;
- Self-preferencing; or
- Acquiring, directly or indirectly, the whole or any part of the stock, or other share capital of another person.[31]
These provisions are particularly notable because (1) they would allow for a presumption of market power based merely on a company’s size, contrary to general competition theory; (2) they significantly reduce the market share threshold generally required under federal law for unilateral conduct to be deemed anticompetitive; and (3) they presume numerous practices are anticompetitive even when economic theory and experience indicate that the practices are often procompetitive and beneficial to consumers.
Takeaways
The CLRC staff’s proposals continue to represent significant departures from existing law, with the potential to vastly expand antitrust risk, create a larger role for the California Attorney general, encourage litigation in California courts, and create uncertainty and compliance challenges for businesses, particularly those operating in multiple states.
The CLRC staff acknowledged that the mere addition of a state merger statute is itself “a significant change to California’s antitrust law.”[32] And many of the proposals would invite the courts to interpret California law differently than federal law, creating uncertainty and asymmetry where mergers or acquisitions could potentially be lawful under federal law and the laws of almost every state—but held up in California on state-law grounds.
The past week’s memoranda also indicate that the CLRC’s staff is proceeding with aggressive recommendations that, if adopted, would result in unprecedented restrictions on businesses operating in California—restrictions that could effectively bind such businesses across the United States. The CLRC staff appear to have largely dismissed concerns that a wide divergence with federal law is unwarranted and would create uncertainty. And the introduction of a “misuse of market power” prohibition would mark a dramatic change from existing state and federal law: It would deem companies to be dominant at lower levels than in the European Union or in New York’s proposed ‘Twenty-First Century Anti-Trust Act.’[33] And it would condemn a long list of conduct that is ill-defined, potentially sweeping, and often procompetitive.
The CLRC must review the staff’s recommendations, decide whether to adopt them, and then subject their own recommendations to a period of public comment before submitting them to the legislature. Because the CLRC’s final recommendations have historically been adopted into law at a high rate,[34] companies and industry associations should think carefully about how the staff’s proposals may affect their businesses and whether to provide comments for the CLRC before the June 26, 2025 and September 18, 2025 meetings at which the commissioners plan to discuss these options. Attorneys from Gibson Dunn are available to help in preparing a public comment for submission to the CLRC or to the legislature as they consider potential bills, to discuss how these proposed changes may apply to your business, or to address any other questions you may have regarding the issues discussed in this update.
[1] Minutes, Cal. L. Revision Comm’n (Jan. 23, 2025) at 4, https://www.clrc.ca.gov/pub/2025/MM25-12.pdf; Alex Wilts, California Law Revision Commission Advances Antitrust Law Study (Jan. 24, 2025), here.
[2] Memorandum 2025-31, Draft Language for Merger Provisions, Cal. L. Revision Comm’n (June 16, 2025) [henceforth “Merger Options Memo”], https://clrc.ca.gov/pub/2025/MM25-31.pdf.
[3] Memorandum 2025-30, Draft Language for Single Firm Conduct Provision and Public Comment, Cal. L. Revision Comm’n (June 17, 2025) [henceforth “SFC Public Comment Memo”], https://clrc.ca.gov/pub/2025/MM25-30.pdf.
[4] Memorandum 2025-32, Status Update: Draft Language on Misuse of Market Power, Cal. L. Revision Comm’n (June 19, 2025) [henceforth “MMP Options Memo”], https://clrc.ca.gov/pub/2025/MM25-32.pdf.
[5] 15 U.S.C. § 18.
[6] See Corp. Code §§ 5914 – 5926 (nonprofit health facilities), §§ 14700 – 14707 (retail grocery firms and retail drug firms), and Health & Safety Code §§ 127507 – 12507.6 (health care).
[7] Merger Options Memo at 3.
[8] Id. at 3-4.
[9] Id. at 3 n.20.
[10] Id. at 4.
[11] Id. at 5-6.
[12] Id. For additional detail on the 2023 Merger Guidelines, see Gibson Dunn’s December 21, 2023 Client Alert on the release of the Guidelines.
[13] The Herfindahl-Hirschman Index is a method for assessing market concentration; it takes the sum of the squares of the market shares in a given market. The greater the HHI score, the higher the concentration.
[14] Merger Options Memo at 8.
[15] Id. at 10.
[16] Id. at 10-11 (citing Senator Klobuchar’s Competition and Antirust Law Enforcement Reform Act, Sen. No. 130 119th Cong. 1st Sess. (2025)).
[17] Id. at 11.
[18] SB 25 (Umberg, 2025) is sponsored by the Uniform Law Commission (ULC) and requires a person who is
obligated to file a notification pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to file a copy of that form and any additional documentation, as specified, with the California Attorney General (AG), among other provisions under certain circumstances. SB 25 was passed by the Senate and ordered to the Assembly.
[19] Memorandum, Draft Language for Single Firm Conduct Provision, Cal. L. Revision Comm’n (Mar. 24, 2025) at 2-3 [henceforth “SFC Options Memo”], https://www.clrc.ca.gov/pub/2025/MM25-21.pdf.
[20] SFC Public Comment Memo at 5-6.
[21] Id. at 10-13.
[22] Id. at 12-13 (California Chamber of Commerce, California Life Sciences, Civil Justice Association of California, Economic Security California Action and its partners).
[23] SFC Options Memo at 3-5.
[24] SFC Public Comment Memo at 8 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association).
[25] Id. at 8-9 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association, Single Firm Conduct Working Group).
[26] Id. at 7-9 (California Chamber of Commerce, California Life Sciences).
[27] Id. at 8-9.
[28] SFC Options Memo at 9-14.
[29] SFC Public Comment Memo at 14-15.
[30] MMP Options Memo at 4-7.
[31] Id. at 3-4, 7.
[32] Merger Options Memo at 4.
[33] MMP Options Memo at 5 & nn.31-33. The legislature had these laws in mind when it directed the CLRC’s antitrust study. See 2022 Cal. Stat. Res. Ch. 147 (ACR 95).
[34] Cal. L. Revision Comm’n, https://clrc.ca.gov/ (last visited June 18, 2025).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Antitrust and Competition, Mergers and Acquisitions, or Private Equity practice groups in California:
Antitrust and Competition:
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Christopher P. Dusseault – Los Angeles (+1 213.229.7855, cdusseault@gibsondunn.com)
Caeli A. Higney – San Francisco (+1 415.393.8248, chigney@gibsondunn.com)
Julian W. Kleinbrodt – San Francisco (+1 415.393.8382, jkleinbrodt@gibsondunn.com)
Samuel G. Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)
Daniel G. Swanson – Los Angeles (+1 213.229.7430, dswanson@gibsondunn.com)
Jay P. Srinivasan – Los Angeles (+1 213.229.7296, jsrinivasan@gibsondunn.com)
Chris Whittaker – Orange County (+1 949.451.4337, cwhittaker@gibsondunn.com)
Mergers and Acquisitions:
Candice Choh – Century City (+1 310.552.8658, cchoh@gibsondunn.com)
Matthew B. Dubeck – Los Angeles (+1 213.229.7622, mdubeck@gibsondunn.com)
Abtin Jalali – San Francisco (+1 415.393.8307, ajalali@gibsondunn.com)
Ari Lanin – Century City (+1 310.552.8581, alanin@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Ryan A. Murr – San Francisco (+1 415.393.8373, rmurr@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.