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A contentious bill lawmakers are debating this year has them asking the question: Should Californians have the right to sue if a company is using unfair tactics to strangle its competition?
Assembly Bill 1776 would expand California’s antitrust law to allow people and businesses that claim they’re harmed by a company’s attempts to stifle competition to sue in state court.
Under longstanding California law, such cases typically can only be brought when two or more parties are suspected of working together to smother competitors. Federal law allows for single-party enforcement, but proponents of California’s COMPETE Act say federal courts have watered down antitrust law to the point the state needs to chart its own course.
The fight is pitting some of the state’s biggest political spenders — labor unions and trial lawyers — against the lobbying might of California’s business and tech industries. Combined, the groups fighting over the bill have given at least $106 million to lawmakers’ campaigns since 2000, according to the CalMatters’ Digital Democracy database.
Proponents say the measure would give consumers a way to fight to keep independent grocery stores and pharmacies open, prevent supply chains for farms and restaurants from being controlled by single firms and give patients more options for their medical care.
The measure’s author, Democratic Assembly Majority Leader Cecilia Aguiar-Curry, told the Senate Judiciary Committee late last month that more than 75% of U.S. industries have experienced consolidation since the late 1990s.
“When companies gain that much power and abuse it, that means higher prices, less choice, fewer opportunities for job creators to start small businesses and suppressed wages for working families,” said Aguiar-Curry, who represents the Davis area.
Business groups say if the measure were signed into law it would open up a new way for predatory law firms to shake down companies. Business owners have complained for years about California laws allowing activists and a cottage industry of lawyers to bombard them with cash demands and lawsuits over disability access, product warning labels, labor complaints and consumer privacy.
The California Chamber of Commerce was so alarmed by this latest attempt to increase companies’ legal risks, its lobbyists placed billboards near the Capitol earlier this year. They targeted Aguiar-Curry by name.
“Cecilia, prices are high enough already,” one billboard read. “Don’t make life more expensive for California consumers.” Chamber spokesperson John Myers declined to discuss the billboards.
Moderate Democrats remain leery
If the group’s goal was to pressure lawmakers to drop the measure, it may have backfired.
The rare public attack on a popular, high-ranking Democrat appears to have galvanized support for the bill, despite concerns from several moderate Democrats that the legislation could make it harder to do business in California.
At least one antitrust expert says those concerns are valid.
Babette Boliek, a law professor at Pepperdine University and a former chief economist for the Federal Communications Commission, argues the bill is so vague it would “invite judges to pick winners and losers based on subjective sympathies rather than measurable harm.”
She likened it to having “a speed limit that no one knows exists.”
Aguiar-Curry’s team has been receptive to some concerns. After pushback, she added an exemption intended to protect small, independently owned California businesses, provided they have no more than 100 employees and averaged $10 million or more in gross annual receipts over the previous three years.
Ben Golombek, an executive vice president at Cal Chamber, said thousands of California businesses would still be vulnerable to costly litigation, including from their competitors.
“This unprecedented and massive legal liability for businesses of every size — small, medium, and large — that this bill creates is why we’re so opposed to it,” he said.
Mark Ramos, president of United Food and Commercial Workers Western States Council, said the legislation would ensure consolidation doesn’t drive down wages while raising the price of goods for workers. As grocery chains merge, it’s also been harder for his members to bargain for living wages that once allowed workers like him to afford their own homes, he said.
“With that consolidation has come the larger challenge of not … being able to negotiate a contract that allows our members to kind of thrive in their local economy because these grocers no longer have to compete against each other,” he said.
Some Democrats, notably Sen. Tom Umberg, the Democratic chairperson of the judiciary committee, are leery.
A major sticking point for Umberg is whether private citizens and businesses could sue in what’s known as a “private right of action.” Umberg told the committee that he wants only local prosecutors and the California attorney general to have that authority for now.
“We want to make sure that we are not stifling competition by virtue of the threat of lawsuits,” Umberg told the committee.
Aguiar-Curry said she would make most of Umberg’s requested changes, but she wouldn’t commit to limiting enforcement to just prosecutors. She said she’d continue work on making “it harder to bring a meritless suit” in the next version of the bill.
Will measure act as a deterrent?
The bill passed the committee with only Republicans voting against it, but Umberg did not vote when it was his turn, which counts the same as voting “no.”
Not voting is a common tactic California lawmakers use to express discomfort with a bill while avoiding a firm “no” that could anger powerful interest groups or legislative colleagues. Umberg was joined by 15 other Democrats who did not vote when it narrowly passed the Assembly.
The COMPETE Act will next be heard by the Senate Appropriations Committee when lawmakers return from their summer recess in early August.
Supporters hope the final version doesn’t end up preventing Californians from suing a company over anticompetitive behavior.
Lee Hepner, senior legal counsel at the American Economic Liberties Project, an anti-monopolization activist group, said it’s imperative that ordinary Californians have the right to pursue legal action.
Otherwise, he said, wealthy corporations will use their lobbying cash and political clout to pressure politicians and regulators into giving them a free pass.
“The private right of action is a critical backstop to the politicization of antitrust enforcement, which threatens the entire project of policing markets for fairness,” he said.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
