COMPETITION: SPRING 2023, VOL 33, NO. 1
By Anupama K. Reddy1
In this edition of Competition, we showcase articles from an impressive line-up of antitrust thought leaders who share their views on the topics the California Law Review Commission (CLRC) is currently studying. Broadly, the CLRC is evaluating whether the Cartwright Act should be revised: to outlaw monopolies by single companies; in the context of technology companies; or in any other fashion. This volume is organized by topic, starting off with four articles that discuss whether California law should be revised to outlaw monopolies by single companies. We then move into a robust discussion on the second topic—whether the Cartwright Act should be revised in the context of technology companies— in the next four articles. The third section includes five articles that cover a range of other ways it might be suitable to amend (or not amend) specific provisions of the Cartwright Act, including merger regulation and restrictive employment contracts.
SHOULD THE CARTWRIGHT ACT BE REVISED TO OUTLAW MONOPOLIES BY SINGLE COMPANIES?
To provide necessary context, Susannah Torpey, Brandon Annettee and Quinlan Cummings detail New York’s Senate Bill S933A, CALERA, European antitrust standards, and other developments in monopoly regulation to help the CLRC make informed recommendations regarding potential revisions to California antitrust law addressing single-firm conduct. They caution that while the legislature has an opportunity to update the Cartwright Act, it must think carefully about the extent to which it wants to diverge from existing standards into novel, but perhaps justified, revisions to the antitrust laws. We then hear from Joshua Davis and Julie Pollock who propose that California chart its own course in regulating unilateral anticompetitive conduct. The authors
highlight that California’s doctrine already diverges from federal law in some important ways, including, for example, by permitting indirect purchasers to recover damages and by condemning vertical price restraints as per se unlawful. They suggest that time may have come for California to broaden its scope from concerted conduct to unilateral anticompetitive behavior.
Next, Jordan Elias comments on why California is overdue for its new antimonopoly law. The author suggests that rather than focusing on the conduct of a firm, the new law should establish a presumption of illegality upon a showing that the defendant holds monopoly power in a relevant product market within the state. The author goes on to offer suggestions around how courts should review such cases, and what remedial tools should be made available to courts.
We then hear from Kendall MacVey and Wendy Wang, who survey the legislative history of the Cartwright Act, relevant caselaw, earlier legislative attempts to prohibit conducts and agreements leading to monopolies, and the growing concerns over monopolies. They argue that California should amend the Cartwright Act to address single-firm monopolization. The authors caution that while recent press coverage has focused on Big Tech and large national companies, the California legislature should not lose sight of monopolization in regional, geographic markets that are unique to California.
SHOULD THE CARTWRIGHT ACT BE REVISED IN THE CONTEXT OF TECHNOLOGY COMPANIES?
Christopher Young, kicks off the discussion with a view that California’s antitrust laws should be stiffened to account for single-firm conduct by large technology firms. The author notes that advances in AI and large language models represent a potential new inflection point for competition: an opportunity for the Cartwright Act to be sharpened to address digital markets without necessitating any balancing of procompetitive benefits.
This piece is followed by Lin Kahn, David Kiernan, Alyxandra Vernon, and Maya Baumer’s article. The authors examine the role of innovation in case law and enforcement actions, and assess whether the antitrust statutes should be revised to provide ex ante rules for digital markets to account for harm to innovation. Their analysis shows that the existing Rule of Reason framework protects innovation benefits. They conclude that dismantling the current approach–where courts apply a case-by-case, non-sector specific framework–and imposing new ex ante rules at this juncture for technology companies is unnecessary and would risk harming the vigorous competition the antitrust laws were enacted to protect.
Next, we hear from Madhu Pocha and Patrick Jones about why the state should not revise its antitrust laws to ban single-firm monopolization. The authors believe Section 2—which can be enforced by the California Attorney General, private individuals and businesses in California—will likely be enough to address any reasonable monopolization concerns regarding Big Tech platforms. They go on to
argue that Section 2 is robust and flexible enough to proscribe conduct that stifles competition, including conduct by Big Tech firms. And that adopting a broader prohibition on unilateral firm conduct would introduce uncertainty into the marketplace and potentially stifle the very competition it is intended to promote.
We then hear from Beatriz Mejia, Dee Bansal, and Alexander J. Kasner, who contend that more regulation is unnecessary, counterproductive, and introduces uncertainty into California competition law. They caution that the legislature should be careful to both guard against a myopic understanding of antitrust injury and create liability that only applies to one industry or type of business. Instead, in their view, there is far more promise in continuing to refine the application of the existing antitrust laws to the challenges of new industries such as technology markets and digital platforms.
SHOULD THE CARTWRIGHT ACT BE REVISED IN ANY OTHER MANNER?
Abiel Garcia, starts us off with the first piece on a California specific merger regulation. The author maintains that California should adopt its own state law equivalent to the HSR Act or Section 7 of the Clayton Act—one that empowers the California Attorney General to review and challenge mergers, while also granting California citizens the right to challenge mergers. In the author’s view, the lack of a state-law equivalent hinders California’s ability to promote innovation while protecting its citizens from abuses of market power and higher prices.
Next, Ausra Deluard, writes an informative piece about adapting antitrust merger review to address market realities. The article begins with the history of antitrust merger policy and a discussion of the merger review reform currently underway. It then presents an examination of the current approaches to merger review and additional factors that one may consider for an enhanced assessment of whether a transaction would substantially lessen competition in today’s economy. The author concludes that legal error takes a long time to course correct while concerns with underenforcement can be addressed by challenging consummated transactions with evidence of actual anticompetitive effects.
Sarah Melanson and Megan Yeates then shine a light on merger control, which requires a delicate balance between protecting competition and enabling welfareenhancing transactions. This article submits that any form of state specific merger control regime in California would create significant public and private costs, including by increasing divergent outcomes and discouraging innovation, that would outweigh any potential benefits.
Rounding out this edition’s slate of articles focused on unilateral conduct, Big Tech, and merger regulation is a comprehensive piece by Don Polden which suggests that California should reexamine its laws concerning restrictive provisions in employment contracts for their impacts on labor markets, job mobility, and wages. The author surveys recent California Supreme Court
holdings, and recommends that lawmakers provide clearer guardrails on restrictive covenants in employment relations and increase penalties for the use of certain restrictive provisions.
As the state legislature considers expanding the reach of state antitrust laws, Shira Liu’s article cautions that they should do so with an awareness of potential dormant Commerce Clause challenges. While federal antitrust laws do not preempt state antitrust laws, that does not give states unlimited authority to expand their antitrust laws. When drafting an antitrust law that extends beyond the reach of federal antitrust law, the author offers helpful suggestions for the drafters to consider.
I hope you enjoy reading this volume as much as we have enjoyed stitching it together. For the past year, it has been my honor to serve as Editor-in-Chief of Competition. This edition of Competition would not have been possible without the many individuals who invested their time soliciting and refining the terrific range of articles being published here. My special thanks to Dana Cook Milligan and Jessica Leal for serving on the editorial board and for their help in the production of this issue. I would also like to thank our excellent Standing Committee, composed of brilliant legal minds and economists: Beatriz Mejia, Dillon Kellerman, Hitesh Makhija, Kerry Klein, Margaret Webb, and Stephen McIntyre, for their indispensable contribution and support.
It is worth noting that this Volume is rich in diversity of thought. The authorship includes attorneys, academics, students and ex-enforcers; those in plaintiffs’ firms, defense firms, and private industry; seasoned practitioners, attorneys from traditionally underrepresented groups, and early career attorneys. The standing committee was also constituted intentionally with attorneys and economists from both sides of the bench to create a balanced volume.
Finally, I congratulate Jessica Leal, who will be serving as Editor-in-Chief of Competition in the coming year. I look forward to reading Volume 35.
1. Anupama Reddy is Associate Competition Counsel at Google Inc. She serves on the Executive Committee of the California Lawyers Association Antitrust and Unfair Competition Section, and is Editor in Chief of Competition.