Antitrust and Unfair Competition Law

Competition: Spring 2020, Vol 30, No. 1


By Thomas A. Papageorge1


This outline provides a selection of substantive litigation developments that may be of particular interest to members of the Antitrust, UCL and Privacy Section. These developments include cases brought under the Cartwright Act, the Unfair Practices Act, the Consumer Legal Remedies Act, the Unfair Competition Law and False Advertising Law, California privacy laws, as well as related developments regarding covenants not to complete and public enforcement actions.


A. California Antitrust Legislation Increases Scrutiny of Drug Patent Settlements2

On October 21, 2019, Governor Newsom signed into law AB 824 (Wood), strengthening state antitrust scrutiny of patent infringement settlements between branded and generic drug companies. The legislature passed AB 824 in response to the continuing antitrust controversy over "pay for delay" agreements and similar patent settlements that have forestalled entry into pharmaceutical markets by price-competitive generic drugs.3

Overview. AB 824, codified as Health & Safety Code section 13400 et seq., creates a presumption for Cartwright Act antitrust claims regarding the anticompetitive effects of certain pharmaceutical patent settlement agreements. The new standard establishes a legal presumption that a drug patent settlement where a generic drug maker receives "anything of value" from the manufacturer of a branded drug has anticompetitive effects and violates the Cartwright Act and California’s other competition laws, absent specified conditions and exceptions.

The California Office of Legislative Counsel summarized the new standard:

"This bill would provide that an agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a pharmaceutical product, is to be presumed to have anticompetitive effects if a nonreference drug filer [i.e., generic drug maker] receives anything of value, as defined, from another company asserting patent infringement and if the nonreference drug filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the nonreference drug filer’s product for any period of time, as specified."

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Exceptions. The new legislation provides several exceptions from this presumption of anticompetitive effects. These apply where a defendant can demonstrate: (1) the settlement value received was only for other unrelated goods or services; (2) the agreement’s procompetitive benefits outweigh its anticompetitive effects; (3) the agreement allows entry of the generic product before the patent expires; or (4) the agreement is only to refrain from suing or to compensate for reasonable litigation costs.4

Remedies. In addition to other remedies provided by the Cartwright Act, the Unfair Practices Act and the UCL, the new law provides for civil penalties where a defendant received value from a violation of up to three times the valued received or $20 million, whichever is greater, and where a defendant did not receive such value, of up to three times the value to other parties or $20 million, whichever is greater.5 However, if penalties are recovered under this new provision, the State may not obtain other penalties under the Cartwright Act, UPA or UCL, although other relief or damages may be recovered.6

Conclusion. AB 824 alters California antitrust law to reverse a key aspect of FTC v. Actavis, which requires federal courts to evaluate these settlement agreements under the rule of reason and imposes on plaintiffs the difficult burden of demonstrating actual or likely anticompetitive effects. California’s standard now directs that the defendants in Cartwright Act cases involving such agreements must meet the burden of rebutting this anticompetitive presumption. Thus, this legislation creates yet another significant difference between California antitrust law and federal Sherman Act law.

B. California Attorney General Obtains Stipulated Judgments Against Drug Makers for Patent Settlements Allegedly Violating the Cartwright Act

California ex rel. Becerra v. Allergan PLC7 and similar settlements

In mid-2019, the Antitrust Law Section of the California Attorney General’s Office settled multiple antitrust actions it had brought under the Cartwright Act and Unfair Competition Law, inter alia, against manufacturers of branded pharmaceuticals for settlement agreements with generic drug makers that allegedly forestalled or delayed the entry of price-competitive generic drugs into the California marketplace. The stipulated judgments imposed permanent injunctions prohibiting "pay for delay" settlement conduct in the generic pharmaceuticals marketplace and together provided for the payment of an aggregated total of nearly $70 million in monetary relief. See also discussion of AB 824, supra. For example, in Becerra v. Allergan PLC, 2019 WL 3251470 (N.D. Cal. 2019), the AG’s complaint alleged that defendant Allergan engaged in violations of the Sherman Act, the Cartwright Act and the Unfair Competition Law by entering an agreement that foreclosed competition from generic equivalents of the brand-name drug Lidoderm and later reduced competition between sellers of generic lidocaine patches. Without admitting liability, the defendant entered into a stipulated final judgment permanently enjoining the alleged anticompetitive conduct and providing for the payment of $760,000 in monetary relief.

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C. Consumers Who Bought Apps from Apple Are "Direct Purchasers" For Antitrust Standing Purposes

Apple, Inc. v. Pepper8

State antitrust laws, including the California Cartwright Act, have often been in tension with federal standing rules under the principles of Illinois Brick Co v. Illinois9, which bars recovery by antitrust plaintiffs of damages suffered at the hands of defendants removed from the plaintiffs in the chain of distribution. The applicability of the Illinois Brick "indirect purchaser" doctrine has been superseded in California and other states by virtue of explicit "Illinois Brick repealer" legislation.

The California legislature amended the Cartwright Act after Illinois Brick in order to restore standing under California law for persons injured "regardless of whether such injured person[s] dealt directly or indirectly with defendant."10 In 1989, California’s indirect purchaser provision was upheld as a valid exercise of state police powers by the Supreme Court in California v. ARC America Corp.11

In Pepper, the U.S. Supreme Court has again addressed the indirect purchaser doctrine and the proper application of federal and state antitrust laws to these marketplace relationships. The Court summarized federal indirect purchaser doctrine and held that consumers who bought software applications from manufacturer’s electronic retail store were "direct purchasers" who could sue manufacturer for alleged monopolization (and thus would not have to rely on state indirect purchaser standing conferred by Illinois Brick repealer legislation).

The Court concluded: "The bright-line rule of Illinois Brick . . . means that indirect purchasers who are two or more steps removed from the antitrust violation in a distribution chain may not sue. By contrast, direct purchasers—that is, those who are the ‘immediate buyers from the alleged antitrust violators—may sue . . . . The iPhone owners pay the alleged overcharge directly to Apple . . . Under Illinois Brick, the iPhone owners are direct purchasers from Apple and are proper plaintiffs to maintain this antitrust suit."12

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D. Cartwright Act Suit Against Medical Marijuana Dispensary Was Not a SLAPP Action

Richmond Compassionate Care Collective v. 7 Stars Holistic Foundation, Inc.13

Plaintiff, a medical marijuana collective, sued a medical marijuana dispensary and its owner for Cartwright Act restraints of trade, alleging the defendants colluded with other dispensaries to prevent the collective from opening a new business location. The trial court denied defendants’ anti-SLAPP motion. On appeal, the First Appellate District held that the Collective’s Cartwright Act action against the dispensary and its principal was not a SLAPP.

The First District concluded: "The essence of [plaintiff’s complaint] was the private actions the group took to restrain trade and monopolize the medical marijuana market . . . That was the gravamen, the thrust, of the cause of action. Whatever the protected activity, it was at the most incidental."14

E. Allegations of Wage Suppression Conspiracy Fail in Sherman Act/Cartwright Act Lawsuit

Kelsey K. v. NFL Enterprises, LLC15

A professional cheerleader for NFL football teams brought a putative class action against the teams for violations of the Sherman Act and California’s Cartwright Act based on an alleged conspiracy to suppress wages and prevent cheerleader recruitment. The district court dismissed the action for failure to state a claim. The Ninth Circuit considered both the Sherman Act and the Cartwright Act claims in sustaining the dismissal, holding the NFL cheerleader failed to allege conspiracy sufficiently to state claims under either law for alleged wage suppression by professional football teams.

With regard to the Cartwright Act, the Ninth Circuit held: "Kelsey’s claim under California’s Cartwright Act fails for the same reasons because the requirements to plead a claim under California’s Cartwright Act are "patterned after section 1 of the Sherman Act."16 Accordingly, we affirm the district court’s ruling that the complaint fails to plausibly allege conspiracy under the Cartwright Act."17


Competitive Disadvantage Alone Is Insufficient Pleading of Required Injury: In re Dealer Management Systems Antitrust Litigation18

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In a class action brought in part under California’s secret rebates provision, Business and Professions Code section 17045, the plaintiffs, businesses using data from automotive software programs that allowed access under the dealers’ software licenses, did not sufficiently allege injury caused by any purported discount given by the developer of the software to the plaintiffs’ competitor. As a result, the plaintiffs failed to adequately state a secret rebates claim against the software developer under the Unfair Practices Act.

The federal court concluded: "Plaintiffs allege that the fee waiver given to [plaintiffs’ competitor] places Plaintiffs’ applications ‘at a severe competitive disadvantage in the market place,’ which Plaintiffs contend is sufficient to establish injury under Section 17045 of the CUPA. . . . However, a plaintiff bringing a claim under Section 17045 of the CUPA must allege an actual injury in addition to a competitive disadvantage. Am. Booksellers Ass’n, Inc. v. Barnes & Noble, Inc., 135 F.Supp.2d 1031, 1043 (N.D. Cal. 2001) (finding ‘a tendency to destroy competition’ but granting summary judgment for failure to establish ‘actual injury’); cf. Diesel Elec. Sales & Serv., Inc. v. Marco Marine San Diego, Inc., 16 Cal. App. 4th 202, 213, 20 Cal.Rptr.2d 62 (1993) (plaintiff established actual injury by showing that ‘its gross sales and profits drastically declined’). Because Plaintiffs have not done so here, Plaintiffs CUPA claim fails."19


Non-employment Covenant Not to Compete Is Not Per Se Invalid: Quidel Corporation v. Superior Court (Beckman Coulter, Inc.)20

Creating a potential conflict with other California courts, the Fourth Appellate District has held that a restriction on research and development in an exclusive dealing agreement between two biotech companies regarding the sale of a blood testing system was not per se invalid as a restraint of trade under Business and Professions Code section 16600 et seq.

Quidel, the maker of a laboratory blood analyzer, brought a Cartwright Act and section 16600 action against the manufacturer of a point-of-care blood analyzer, challenging a term of their agreement prohibiting the plaintiff from developing a test to detect specific blood markers until two years after the end of their exclusive dealing contract for defendant’s blood testing system. The trial court entered summary adjudication invalidating the contract term as a restraint of trade under section 16600 et seq.

The Fourth District reversed the summary disposition regarding the validity of the contract term, holding the provision was not invalid per se under California’s noncompetition covenant doctrine. The court distinguished the California Supreme Court’s opinion in Edwards v. Arthur Andersen LLP21, which held "[n]oncompetition agreements are invalid under section 16600 in California, even if narrowly drawn, unless they fall within the applicable statutory exceptions of sections 16601, 16602, or 166025."22 The Fourth District reasoned that the prohibition in Edwards was limited to its factual circumstances involving employment agreements.23

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The Fourth District concluded that "as long as a noncompetition provision does not negatively affect the public interests, is designed to protect the parties in their dealings, and does not attempt to establish a monopoly, it may be reasonable and valid."24 Under this analysis, the in-term covenant not to compete in an exclusive dealing contract such as this one was not per se invalid. Id. Further, the existence of factual issues concerning the alleged anticompetitive effects of the agreement precluded summary judgment on the validity of the contract provision.25

The Fourth District opinion in Quidel Corporation interpreting Edwards as applicable only to employment contracts is arguably inconsistent with the California Supreme Court’s broader and less flexible interpretation of the California prohibition on non-competition covenants, so further clarification will be needed here.


Blair v. Rent-A-Center, Inc.26 (see discussion, infra)


A. Arbitration and Unconscionability Issues in Consumer and Employment Contracts After Concepcion, Sanchez, Iskanian, and McGill

Arbitration after AT&T Mobility, LLC v. Concepcion27

The U.S. Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, holding that the Federal Arbitration Act28 preempts conflicting state law, has created a formidable barrier for many UCL or FAL actions challenging the unfair trade practices or employment policies of defendants using contracts with mandatory arbitration clauses.

Since Concepcion, the California Supreme Court has recognized in Iskanian, infra, and elsewhere the broad preemptive effect of the FAA and has abrogated several California doctrines limiting mandatory arbitration. However, the Court has also demonstrated a commitment to identifying limits to Concepcion. As a result, the relationship between arbitration provisions and contract law principles (such as unconscionability) remains the subject of extensive litigation.

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Following Iskanian and Sanchez, California plaintiffs now often seek to use alternative legal mechanisms, including the Labor Code Private Attorney General Act and unconscionability principles, in an attempt to reach beyond arbitration clauses and bring disputes over consumer contracts and employment practices before courts instead of arbitrators.

Aftermath of Sanchez v. Valencia Holding Co.29

In 2015, the California Supreme Court delivered its widely anticipated opinion in Sanchez v. Valencia Holding Co., upholding the arbitration clause in the industry-standard auto purchase/sale contract but emphasizing that unconscionability principles remain applicable to all California contracts and must be applied to each set of facts on a case-by-case basis. The Court held that Concepcion prohibits the use of unconscionability principles or other state doctrines to prohibit whole categories of arbitration (such as class-action arbitration provisions) or to otherwise interfere with the FAA’s policy promoting arbitration. But while avoiding such categorical prohibitions or interference, California courts must undertake case-by-case factual analysis of any allegations of unconscionability to determine whether unconscionable contract terms are present.

FAA Principles and the California Supreme Court Today

The California Supreme Court’s commitment to the continuing viability of contract principles such as unconscionability, and its mandate that such cases be reviewed on their specific facts, have permitted some latitude to plaintiffs challenging certain unfair arbitration terms, so long as those contract principles are not applied so as to discriminate against whole categories of arbitration or unduly interfere with the fundamental attributes of arbitration.30

Many commentators see support within the California Supreme Court for carving out exceptions to the broad sweep of Concepcion.31 While Concepcion has certainly changed arbitration doctrine in California, and while challenges to protected aspects of arbitration will often fail, it appears that the California Supreme Court will continue to seek limits on the scope of the FAA and Concepcion. Examples include:

PAGA actions: In Iskanian v. CLS Transportation32 the California Supreme Court held that Concepcion impliedly overruled Gentry v. Superior Court33, and thus mandatory arbitration provisions must be enforced even when they require arbitration of wage-and-hour issues protected by California’s labor laws. However, the Court further ruled that an arbitration agreement requiring the employee to give up the right to bring representative actions under the Labor Code Private Attorney General Act of 20 0434 is against public policy and unenforceable.

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By carving out PAGA representative actions from the realm of private arbitration governed by the FAA, Iskanian has prompted a wave of plaintiffs’ lawsuits and class actions utilizing this exception in employment and wage-and-hour disputes.35

Public injunctive relief: In McGill v. Citibank, N.A.36, analyzing an arbitration provision purporting to bar bank employees from seeking public injunctive relief, the California Supreme Court held that such relief remains available to private plaintiffs under the UCL, FAL and CLRA. The Court ruled: "[I]nsofar as the arbitration provision here purports to waive McGill’s right to request in any forum such public injunctive relief, it is invalid and unenforceable under California law."37

The Court rejected Citibank’s claim that the FAA necessarily preempts California’s public injunctive remedy. By including the FAA’s "saving clause" preserving traditional contracts defenses, Congress intended "to make arbitration agreements enforceable as other contracts, but not more so."38 The Court thus held that "the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under the UCL, the CLRA, or the false advertising law."39

The following lists some of the more prominent UCL appellate opinions applying these principles to recent factual situations in the post-Concepcion legal environment:

  1. Arbitration Clauses Enforced
  2. Sanchez v. Valencia40 (see discussion, supra)
    Iskanian v. CLS Transportation41 (see discussion, supra)

  3. Arbitration Clauses Rejected
  4. McGill v. Citibank, N.A.42 (see discussion, supra)

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Baxter v. Genworth North America Corp.43: Plaintiff alleged her employment termination was racially motivated and sought to void the arbitration term of her employment contract as unconscionable. The court summarized the procedural and substantive aspects of California unconscionability law: "[t]he former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or onesided results."44 Defendant’s arbitration provision was unconscionable under this standard. Plaintiff "had no opportunity to negotiate" and no "meaningful choice in the matter" (id. at 723), and the substantive terms were so one-sided as to plaintiff’s rights and remedies that there were "ample grounds to support a conclusion" of unconscionability.45

Blair v. Rent-A-Center, Inc.46: In a class action against a rent-to-own furniture company alleging excessive prices violating the UCL, the CLRA and state anti-usury law, the Ninth Circuit held the contract’s arbitration term invalid and unenforceable since the FAA does not preempt the rule of McGill v. Citibank, N.A.47 that a waiver of the right to seek public injunctive relief is unenforceable. "In sum, the McGill rule is a generally applicable contract defense derived from long-established California public policy. It is a ‘ground[ ] . . . for the revocation of any contract’ and falls within the FAA’s saving clause at the first step of the preemption analysis." The plaintiff class thus had the right to a trial on the public injunction claim here.48

B. UCL Preemption/Bar Arising from Federal or State Regulatory Schemes

The California and federal courts continue to wrestle with the multi-faceted issue of applying the Unfair Competition Law and similar laws to specific business practices and contexts where other regulatory schemes are involved. Claims of federal preemption, or preclusion or bar by state regulatory schemes, continue to yield important results.

1. Holdings of Preemption of or Bar to UCL/FAL Action

National Institute of Family and Life Advocates v. Becerra49 (see discussion, infra.)

Durnford v. Musclepharm Corp.50: The Ninth Circuit reviewed a UCL, FAL and CLRA challenge to the labeling practices of a nutritional supplement maker and held that the state law challenges to statements made in the FDA-mandated Nutrition Facts Panel were preempted, but challenges to claims made elsewhere were not. "The FDCA . . . preempts a misbranding theory premised on the Supplement’s use of nitrogen-spiking agents to inflate the measurement of protein for the [Nutrition Facts Panel]. It does not, however, preempt a misbranding theory premised on the label’s allegedly false or misleading implication" elsewhere about the sources of the supplement’s protein.51

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2. Holdings of No Preemption of or Bar to UCL Action

Solus Industrial Innovations, LLC v. Superior Ct.52: The California Supreme Court has unanimously held that the Orange County District Attorney’s Office UCL and FAL claims in a worker death case were not preempted by the federal Occupational Safety and Health Act of 1970.53 The Court held that the federal Occupational Safety and Health Act does not expressly or impliedly preempt the UCL/FAL action here, nor does this enforcement effort implicate obstacle preemption. "In the absence of a clear and manifest congressional purpose to preempt claims such as the UCL and FAL claims asserted in this action, such claims are encompassed in the presumption against preemption that arises upon a state’s assumption of responsibility under the federal OSH Act to regulate worker safety and health."54

This decision is important in the OSHA sphere and also as an indication of the willingness of the California Supreme Court to provide a counterweight to the U.S. Supreme Court in other arenas, particularly consumer and environmental protection, by upholding California’s authority to protect its own workers, consumers and environment with its state statutes and regulations.

Hawkins v. The Kroger Company55: A consumer plaintiff brought a putative class action against a bread crumb manufacturer alleging violations of the UCL, FAL and CLRA. The Ninth Circuit held the Nutritional Labeling and Education Act (NLEA) did not preempt the consumer’s labeling claims. The court concluded: "The ’rounding rules’ applicable to the Nutrition Facts Panel do not apply to the nutrient content claim on the face of the label. . . . Because the FDA regulations do not authorize the contested statement, Hawkins’s labeling claims are not preempted."56

Durnford v. Musclepharm Corp.57 (see discussion, supra)
CTIA v. Berkeley58 (see discussion, infra)

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C. First Amendment Principles and State Regulation of Commercial Free Speech

National Institute of Family and Life Advocates (NIFLA) v. Becerra59

In an opinion with potential impact on UCL enforcement of state-required affirmative disclosures to consumers, the Supreme Court examined a state law requiring pro-life pregnancy centers to make disclosures about available reproductive services including abortion. The Court held that even under the Zauderer intermediate scrutiny standard, the disclosures required by California would violate the First Amendment as unduly burdensome compelled speech. Exempting some clinics from the disclosure requirements fit poorly with the law’s objective of providing low-income women with information about state services. As a result, California’s law was "underinclusive" and thus defective under the First Amendment.60

Some observers have suggested that a broad reading of the Supreme Court’s opinion in NIFLA could jeopardize the constitutionality of other state-mandated affirmative disclosures, perhaps including Proposition 65 notices and other forms of required disclosure. But the Ninth Circuit has now identified substantial limits on the scope and applicability of the NIFLA opinion:

Interpipe Contracting, Inc. v. Becerra61: Here the court distinguished NIFLA, suggesting limits to its applicability: "First, National Institute expressly did not reach the issue of viewpoint discrimination. Second, the law there was underinclusive because exempting some clinics from the information requirement fit poorly with its objective of ‘providing low-income women with information about state-sponsored services.’"62

CTIA—The Wireless Association v. Berkeley63:The Ninth Circuit sustained a district court’s refusal to issue a preliminary injunction against a Berkeley ordinance requiring cell phone retailers to advise prospective purchasers of the dangers of carrying cell phones too close to the body. "But NIFLA plainly contemplates applying Zauderer to ‘purely factual and uncontroversial disclosures about commercial products’ NIFLA, 138 S. Ct. at 2376 (emphasis added). Berkeley’s ordinance falls squarely within this category . . . Based on the foregoing, we conclude that CTIA has little likelihood of success on its First Amendment claim that the disclosure compelled by the Berkeley ordinance is unconstitutional, and thus the ordinance meets constitutional standards under the intermediate scrutiny of Zauderer."64

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D. UCL Standing After Proposition 64

Allegations of Reliance Are Unnecessary for Private Standing in Unlawfulness or Unfair UCL Actions

In Re Effexor Antitrust Litigation65: In the consolidated national class action involving the antidepressant drug Effexor, the New Jersey District Court concluded that the class plaintiffs (identified as "EPPs") pleaded sufficient facts to go forward on their claims based on the "unlawful" and "unfair" prongs of the UCL. Defendants sought dismissal of the UCL claims for plaintiffs’ failure to plead reliance."[C]ontrary to Defendants’ assertion, reliance is only required ‘when a [UCL] claim is premised on allegations that the Defendants engaged in fraudulent business practices . . .’ Here, EPPs claims are predicated on unlawful and unfair business practices."66 The EPPs challenged unlawful and unfair business conduct, including "sham litigation, fraudulent procurement of the PTO, and reverse settlement agreement." As such, "at the very least, [EPPs] allege a claim premised on the unfair prong . . . Therefore, because EPPs allege sufficient facts to sustain an Unfair Competition Law claim based on unfair business practices, Defendants’ motion for judgment on the pleadings with respect to this claim is denied."67

E. Other UCL and Related Trade Regulation Developments

Robocalling Prohibition Under Parallel Federal and California Statutes Clarified

Duguid v. Facebook, Inc.68: Unsolicited telemarketing calls, including those using automatic telephone dialing systems ("robocalling"), are regulated under federal law by the Telephone Consumer Protection Act of 199169 and the federal "Do-Not-Call" Implementation Act of 200370, and under California law by Business and Professions Code sections 17590-17594, entitled "Unsolicited and Unwanted Telephone Solicitations," which harmonizes California law with the federal regulations. The TCPA and California law have now been held to "[forbid] calls using an automated telephone dialing system (ATDS), commonly referred to as a robodialer."71 The federal "Do Not Call" regulation prohibits calls of specified types to numbers registered on the federal "Do Not Call" list maintained by the Federal Trade Commission.

California’s regulations addressing unsolicited telemarketing calls, including the requirements of the state’s "Do Not Call" list, were amended in 2004 to coordinate the California regulatory scheme with the federal "Do-Not-Call" Implementation Act of 2003.72 California’s Business and Professions Code sections 17590-17594, entitled "Unsolicited and Unwanted Telephone Solicitations," conforms California law to the federal regulations, including the definition of robodialing as addressed in Duguid.73 The revised state law also adopts all California phone numbers on the federal registry as the California "do not call" list, permitting Californians to take advantage of the free federal registry and its protections, and separately prohibits specified unlawful and deceptive practices by telemarketers.74

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A. California’s Law Regulating Former Price Advertising Upheld Against Constitutional Challenges

People v. Superior Court (J.C. Penney, Inc.)75

Under a longstanding California law, codified at Business and Professions Code section 17501, it is unlawful to advertise a former price unless it was the prevailing market price within three months immediately preceding the advertisement or without adequate disclosure of when the former price did prevail.76 California enforcement authorities have used this advertising regulation sparingly in recent years in part because of uncertainties about the scope and proper application of the statute.

However, in J.C. Penny, the first contemporary appellate opinion addressing section 17501, the Second Appellate District has rejected constitutional challenges to the statute, while also noting potential issues concerning the statute’s scope.77 In J.C. Penney, the Second District upheld the constitutionality of this prohibition on deceptive former price advertising against claims that the statute improperly infringes on free speech infringement and is void for vagueness.

The Second District overturned the trial court’s grant of demurrer, holding that section 17501 regulates commercial speech but is not facially unconstitutional and is sufficiently clear to withstand vagueness challenge on these facts. "Petitioner Los Angeles City Attorney . . . alleged [defendant retailers] sold products online by means of misleading, deceptive or untrue statements regarding the former prices of those products. Real parties demurred to the claims, asserting that the statute contravenes free speech rights and is void for vagueness. . . . We conclude that real parties failed to demonstrate any constitutional defect in the statute on demurrer."78

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A. California Enacts Comprehensive Consumer Privacy Law

California Consumer Privacy Act of 2018 ("CCPA")79

In 2018, in response to the worldwide consumer privacy movement represented by the European Union’s General Data Protection Regulation (GDPR) (Regulation 2016/679; 27 April 2016) and to public demand for additional California privacy protections in the Internet Age, the state legislature passed and Governor Jerry Brown signed AB 375 (Chau), the California Consumer Privacy Act of 20 1 8.80 Effective January 1, 2020, the CCPA provides comprehensive codification of consumer privacy rights and establishes remedies for violations of those rights. Note: Amendments to the CCPA, including SB 1121 (Dodd) (Stats. 2018, ch. 735, § 9) and others pending in the state legislature, alter or clarify parts of the CCPA and will act to delay the effective dates of certain provisions. Numerous additional amendments are under consideration or have been proposed, so interested parties should continuously update research on the CCPA.

Legislative intent. In its statement of intent, the California legislature described the purpose of the CCPA as "giving consumers an effective way to control their personal information by ensuring the following rights81:

  1. The right of Californians to know what personal information is being collected about them.
  2. The right of Californians to know whether their personal information is sold or disclosed and to whom.
  3. The right of Californians to say no to the sale of personal information.
  4. The right of Californians to access their personal information.
  5. The right of Californians to equal service and price, even if they exercise their privacy rights."

Definition of personal data. The CCPA defines personal information as information that "identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household."82 This includes identifiers such as a "real name, alias, postal address, unique personal identifier, online identifier Internet Protocol address, email address, account name, social security number, driver’s license number, passport number, or other similar identifiers."83

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The CCPA provides examples of covered "personal information," including protected classifications under federal or state law, commercial information, biometric information, Internet activity, geolocation data, audio-visual information, professional or employment information, education information, and similar information used to draw a profile about a consumer.84

However, the CCPA specifies that "publicly available information" is not included in this definition, which category includes, among other exceptions, information lawfully available from government records and consumer information that is "deidentified or aggregate consumer information."85 In this regard, the CCPA definition differs from that of the GDPR, as the CCPA extends its definition to include households, while the GDPR classifies applicable personal consumer information as individual only.

Applicability. The CCPA applies to any "business," including any for-profit entity that collects consumers’ personal data, does business in California, and satisfies at least one of the following thresholds: (1) has annual gross revenues in excess of $25 million; (2) possesses the personal information of 50,000 or more consumers, households, or devices; or (3) earns more than half of its annual revenue from selling consumers’ personal information.86

Obligations of businesses. The CCPA provides a number of obligations for businesses that collect the personal information of consumers, including requirements to: (1) implement processes to obtain parental or guardian consent for minors under 13 years and the affirmative consent of minors between 13 and 16 years to data sharing for purposes87; (2) provide a "Right to Say No to Sale of Personal Information" and provide guidance on methods to opt out of the sale of that information via "reasonably accessible" means, such as links on business websites88; (3) designate methods for submitting access requests including toll-free telephone numbers89; (4) update privacy policies with new information, including a description of California residents’ rights90; and (5) implement procedures to avoid requesting opt-in consent for 12 months after a California resident opts out.91

Private remedies and public sanctions. Private remedies and public law enforcement sanctions are provided by the CCPA. Where notified businesses fail to cure violations within 30 days, the CCPA authorizes statutory damages in private civil actions for the data breach violations of $100 and $750 per California resident and per incident, or actual damages, whichever is greater, and any other relief a court deems proper, subject to the option of the California Attorney General’s Office to supersede the private actions and prosecute civil law enforcement actions against the violations.92

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Where notified businesses fail to cure violations within 30 days, the CCPA authorizes civil penalties recoverable in actions in the name of the People of the State of California by the Attorney General under the Unfair Competition Law of up to $2,500 per violation, and under the CCPA of up to $7,500 per violation for intentional violations.93

B. California Attorney General Issues Proposed CCPA Regulations

California Consumer Privacy Act Regulations [Proposed]94

On October 11, 2019, the California Attorney General’s Office released its highly anticipated proposed regulations interpreting important aspects of the California Consumer Privacy Act, as required by the Act. Designated the "California Consumer Privacy Act Regulations," these new interpretations of the CCPA, if adopted, would be codified at 20 CCR § 999.300 et seq. of the California Code of Regulations.

Civil Code section 1798.185 requires the Attorney General to adopt regulations addressing ten separate subject areas, including: updating the relevant categories of "personal information;" updating the definition of unique information identifiers; establishing exceptions needed to conform CCPA to federal or state law; establishing procedures for consumers to opt out of sales of personal information; adjusting the monetary thresholds for the CCPA definition of relevant "businesses;" and establishing rules and procedures for the required CCPA notices, financial incentive offerings, obtaining of the consumer’s own information, and verification of consumer requests, among other topics. The AG’s initial proposed regulations cover many of these required subjects, but leave others for subsequent regulations.

Of particular interest, this initial body of proposed regulations addresses the applicability of the CCPA to covered service providers (proposed § 999.314) and establishes notice obligations for passive recipients of defined types of personal information (proposed § 999.305).


A. California Attorney General Obtains Stipulated Final Judgments Against Drug Makers for Patent Settlements Violating the Cartwright Act

California ex rel. Becerra v. Allergan PLC95 and similar settlements (see discussion in Part II, supra)

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B. Fourth DCA Affirms Limits on Statewide Jurisdiction for District Attorneys

Abbott Laboratories, Inc. v. Superior Court (Rackauckas)96

A county district attorney (represented by private contingent-fee counsel) brought a UCL action against pharmaceutical manufacturers alleging a conspiracy to prevent generic versions of prescription drugs from reaching the market. On appeal after the trial court denied defendants’ motion to strike, the Fourth Appellate District held that a county district attorney does not have extraterritorial jurisdiction to recover statewide monetary relief under the UCL, a view supported by the California Attorney General and the California District Attorneys Association (CDAA).

The court concluded: "[W]ith respect to civil actions, a district attorney has no plenary power . . . Rather, it is settled that a ‘district attorney has no authority to prosecute civil actions absent specific legislative authorization. . . .’"97 Here, "[t]here is no indication the Legislature sought to write the UCL so broadly as to permit county district attorneys to collect penalties from violations occurring outside their county boundaries for their own county treasurers. To the contrary, it is reasonable to conclude the Legislature intended to prevent local prosecutors from "step[ping] outside [their] jurisdictional boundaries . . . in order to recover extraterritorial civil penalties," which would "raise . . . concerns that scarce government resources might be wasted on duplicative, overlapping, and competitive investigations of possible [violations]."98

"[T]he District Attorney is free to enter into agreements with the Attorney General or sister district attorneys to obtain a delegation of authority, or engage in joint prosecutions, where the District Attorney believes there is public benefit to a multi-jurisdictional action."99

Contingent-fee arrangements in public UCL/FAL enforcement actions. The underlying issue in Abbott Laboratories is the concern over the recent phenomenon of private contingent-fee counsel approaching unwary district attorneys or city attorneys, seeking access to public UCL/FAL authority in order to bring actions the private attorneys cannot pursue today under Proposition 64. For example, in 2015 the district attorney for Trinity County (population 13,000) was convinced to hire private contingent-fee counsel—in disregard of AG and CDAA ethical norms—and then claimed sole authority to bring the Volkswagen diesel case for the entire state of California. The California Attorney General’s Office and CDAA have consistently held such contingent-fee compensation to be improper in public enforcement actions under longstanding ethical principles (see discussion, infra).

California District Attorneys Association and Attorney General policy on prosecutorial neutrality. The ethical norms of CDAA and the Attorney General prohibit the use of outside contingent-fee counsel in three types of public enforcement actions, including cases where ongoing business activity is challenged under statutes such as the UCL and FAL. This policy is not based on due process concerns but rather on California legal and ethical principles adopted by the Supreme Court in County of Santa Clara v. Superior Court100 and People ex rel. Clancy v. Superior Court101 Thus, CDAA’s ethical manual provides: "[p]rosecutorial neutrality is required in those civil law enforcement actions where important constitutional concerns are implicated, ongoing business activity is threatened, or there is a threat of criminal liability. Private contingent fee attorneys may not appropriately represent the People in such cases.102

[Page 17]

In this regard, the California Supreme Court has cited with approval the ABA Standards for Criminal Justice, Prosecution Function [comment to former Std. 2.3(e)]: "’It is clear that [case-by-case] fee systems of remuneration for prosecuting attorneys raise serious ethical and perhaps constitutional problems, are totally unacceptable under modern conditions, and should be abolished promptly.’"103

These California ethical standards are distinct from federal due process principles and related issues. For example, the Ninth Circuit held in American Bankers Management Co., Inc. v. Heryford104 that a contingent-fee counsel arrangement in a local prosecutor’s civil case did not violate federal due process requirements. However, the court acknowledged the separate California ethical standards for such matters and refused to merge the two sets of principles: "[s]imilarly, the California Supreme Court’s decisions in People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), and County of Santa Clara v. Superior Court, 50 Cal.4th 35 (2010), were based not on federal due process principles, but on ‘the courts’general authority "to disqualify counsel when necessary in the furtherance of Justice.’"105

C. First DCA Opinion Creates Split of Authority on Jury Trial Right in UCL Actions

Nationwide Biweekly Administration, Inc. v. Superior Court (People)106

Creating a split among California courts, the First District held defendants in UCL public enforcement actions have a right to jury trial as to liability: "[T]he ‘gist’ of the statutory causes of action asserted against [defendants] are legal, thereby giving rise to a right to jury trial. However, following the approach taken by the United States Supreme Court in Tull v. United States (1987) 481 U.S. 412 . . . we also conclude the right to jury trial extends only to the issue of liability and that the amount of statutory penalties, as well as whether any equitable relief is appropriate, is properly determined by the trial court."107

[Page 18]

Numerous appellate courts over the past forty years have held that UCL actions brought by the People are primarily equitable in nature and should be decided by a trial court, not a jury.108 Nationwide Biweekly thus creates a substantial split of authority on this important procedural issue. The California Supreme Court granted review on September 19, 2018, and will now address that split.

[Page 19]



1. Thomas A. Papageorge is head of the Consumer Protection Unit of the San Diego District Attorney’s Office. The views expressed here are those of the author and do not necessarily reflect those of the San Diego District Attorney’s Office. These are a selection of developments prepared for presentation at the Golden State Institute on November 14, 2019, reflecting developments as of that date.

2. AB 824 (Wood), Cal. Stats. 2019, ch. 531, § 1; see Health & Safety Code § 13400 et seq.

3. See In re Cipro Cases I & II, 61 Cal.4th 116 (2015) and the California Attorney General’s 2019 antitrust actions in the pharmaceutical marketplace, summarized infra; see also FTC v. Actavis, 570 US 136 (2013).

4. Health and Safety Code § 134002(a)(3) and (b)(1-5).

5. Id. § 134002(e).

6. Id.

7. 2019 WL 3251470 (N.D. Cal. June 6, 2019).

8. 139 S.Ct. 1514 (2019).

9. 431 U.S. 720 (1977).

10. For a detailed history of California’s indirect purchaser provision, see Clayworth v. Pfizer, Inc., 49 Cal. 4th 758 (2010).

11. 490 U.S. 93 (1989).

12. Pepper, 139 S.Ct. at 1521 (2019).

13. 32 Cal. App. 5th 458 (1st DCA, 2019).

14. Id. at 470.

15. 757 Fed. Appx. 524 (9th Cir.2019).

16. Id. at 527 (citing Dimidowich v. Bell & Howell, 803 F.2d 1473, 1476-77 (9th Cir.1986)).

17. Id.

18. 360 F.Supp.3d 788 (N.D. Ill. 2019).

19. Id. at 807-808.

20. 39 Cal. App. 5th 530 (2019), reh’g denied (Sept. 13, 2019).

21. 44 Cal. 4th 937 (2008).

22. Id. at 955.

23. Quidel Corp., 39 Cal. App. 5th at 540-541.

24. Id. at 542.

25. Id. at 545.

26. 928 F.3d 819 (9th Cir. 2019).

27. 563 U.S. 333 (2011).

28. 9 U.S.C. § 1 et seq.

29. 61 Cal. 4th 899 (2015).

30. See, e.g., McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017) (holding that the FAA does not bar action for public injunctive relief); Carlson v. Home Team Pest Defense, Inc., 239 Cal.App.4th 619 (2015).

31. See, e.g., R. Novotny, "Gauging the Future of Iskanian and FAA Preemption in California," Los Angeles Lawyer (Mar. 2015), 10.

32. 59 Cal.4th 348 (2014).

33. 42 Cal. 4th 443 (2007).

34. Labor Code §§ 2698 et seq. ("PAGA").

35. See, e.g., Williams v. Superior Court (Pinkerton Governmental Services, Inc.), 237 Cal. App. 4th 642 (2015); Franco v. Arakelian Enterprises, Inc., 234 Cal. App. 4th 937 (2015).

36. 2 Cal.5th 945 (2017).

37. Id. at 961 (emphasis original).

38. Id. at 962.

39. Id. at 969 (emphasis original); see also Blair v. Rent-A-Center, Inc., 928 F.3d 819 (9th Cir.2019).

40. 61 Cal. 4th 899 (2015).

41. 59 Cal. 4th 348 (2014).

42. 2 Cal. 5th 945 (2017).

43. 16 Cal. App. 5th 713 (2017).

44. Id. at 721.

45. Id. at 737.

46. 928 F.3d 819 (9th Cir. 2019).

47. 2 Cal. 5th 945 (2017).

48. Blair, 928 F.3d at 828.

49. 138 S.Ct. 2361 (2018).

50. 907 F.3d 595 (9th Cir.2019).

51. Id. at 605.

52. 4 Cal. 5th 316 (2018), cert. denied sub nom. Emerson Elec. Co. v. Superior Court of California, Orange Cty., 139 S. Ct. 376 (2018).

53. 29 U.S.C. § 651 et seq.

54. Solus Industrial Innovations, LLC, 4 Cal. 5th at 347.

55. 906 F.3d 763 (9th Cir. 2018).

56. Id. at 772.

57. 907 F.3d 595 (9th Cir.2019).

58. 928 F.3d 832 (9th Cir.2019).

59. 138 S.Ct. 2361 (2018).

60. Id. at 2375.

61. 898 F.3d 879 (9th Cir. 2018).

62. Interpipe Contracting, Inc., 898 F.3d at 902, n.17 (internal citations omitted).

63. 928 F.3d 832 (9th Cir. 2019).

64. Id. at 848-49.

65. 337 F.Supp.3d 435 (D.N.J. 2018).

66. Id. at 463 (internal citation omitted).

67. Id.

68. 926 F.3d 1146 (9th Cir. 2019).

69. 47 U.S.C. § 227 ("TCPA").

70. 6 C.F.R. § 310.4 et seq.

71. See Duguid v. Facebook, Inc., 926 F.3d 1146 (9th Cir. 2019).

72. 6 C.F.R. § 310.4 et seq.

73. Duguid v. Facebook, Inc., 926 F.3d 1146 (9th Cir. 2019).

74. Bus. & Prof. Code, § 17590.

75. 34 Cal. App. 5th 376 (2019).

76. Bus. & Prof. Code, § 17501; see 30 Ops. Cal. Atty. Gen. 127 (1957).

77. J.C. Penny, 34 Cal. App. 5th at 399.

78. Id. at 384.

79. Cal. Civ. Code, § 1798.100 et seq., Stats. 2018, ch. 55, § 3.

80. Id.

81. Stats. 2018, ch. 55, § 2(i).

82. Cal. Civ. Code, § 1798.140(o)(1).

83. Id. § 1798.140(o)(1)(A).

84. Id. § 1798.140(o)(1)(A-K).

85. Id. § 1798.140(o)(2).

86. Id. § 1798.140(c).

87. Id. § 1798.120(d).

88. Id. § 1798.102.

89. Id. § 1798.130(a).

90. Id. § 1798.135(a)(2).

91. Id. § 1798.135(a)(5).

92. Id. § 1798.150.

93. Id. § 1798.155.

94. 20 CCR § 999.300 et seq.

95. 2019 WL 3251470 (N.D. Cal. June 6, 2019).

96. 24 Cal. App. 5th 1 (2018), review granted, order requesting depublication denied, 237 Cal. Rptr. 3d 178 (2018).

97. Id. at 20.

98. Id. at 28; People v. Hy-Lond Enterprises, Inc., 93 Cal.App.3d 734 (1979).

99. Id. at 20.

100. 50 Cal. 4th 35 (2010).

101. 3 Cal. 3d 740 (1985).

102. CDAA, Professionalism (2016), Ch.XI, Part IX (emphasis added, citing County of Santa Clara v. Superior Court (Atlantic Richfield), 50 Cal.4th 35 (2010); see also People ex rel. Clancy v. Superior Court, 3 Cal.3rd 740 (1985).

103. County of Santa Clara, 50 Cal. 4th at 49.

104. 885 F.3d 629 (9th Cir. 2018).

105. Heryford, 885 F.3d at 638, n. 12.

106. 24 Cal. App. 5th 438 (2018), review granted, S250047, Sept. 19, 2018.

107. Id. at 470-71.

108. See, e.g., People v. First Federal Credit Corp. , 104 Cal. App. 4th 721 (2002); People v. Bestline Products, Inc., 61 Cal. App. 3d 879 (1976); People v. Witzerman, 29 Cal. App. 3d 169 (1972); see also People v. Superior Court (Kaufman), 12 Cal. 3d 421, 431, n. 9 (1974).

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