California’s 2025 Abuse of Dominance Proposal: Redefining State-Level Antitrust Enforcement In The Fourth-Largest Economy on Earth

On January 13, 2025, CLRC staff released recommendations that, if adopted, would constitute a major overhaul of California antitrust law.² The most dramatic change would be the proposed adoption of an Abuse of Dominance (AOD) standard for single-firm conduct—a shift that would make California’s competition laws more aggressive and interventionist than those of any jurisdiction in the U.S., including the federal antitrust framework after which the state’s primary antitrust statute, the Cartwright Act, is patterned. Current California antitrust law sits at the opposite end of that spectrum, as the Cartwright Act has been interpreted not to reach single-firm conduct at all. This proposed change would have major consequences for companies operating or transacting in the state.

What is the AOD Standard?

The AOD recommendation aims to address perceived limitations of current federal antitrust laws, particularly Section 2 of the Sherman Act, which some commentators argue is insufficient to constrain harmful single-firm conduct. The AOD standard—which derives not from the federal Sherman Act, but largely from European Union (EU) competition law—generally makes it unlawful for a dominant entity to abuse its position to its competitive advantage. Unlike the Sherman Act’s monopolization standard, which some courts find inapplicable until purported monopolists reach market shares of at least 70% of the relevant market,³ the EU considers dominance to start around a 40% market share.⁴ The AOD standard also eases plaintiffs’ burdens to prove harm from a broad range of allegedly anti-competitive behaviors, including:

• Predatory pricing (selling products or services below cost to drive competitors out of the market);
• Self-preferencing (favoring one’s own products or services over those of competitors in a way that harms competition);
• Exclusionary contracting (entering into agreements that unfairly limit the ability of competitors to compete); and
• Refusals to deal (unjustifiably refusing to supply essential goods or services to competitors).

By lowering the bar for enforcement and expanding the types of conduct that can trigger liability, the AOD standard would arm California regulators—and private plaintiffs bringing suit under California state antitrust law—with a powerful new enforcement tool for addressing business practices of firms with large market shares, where previously only federal law could provide remedies.

Potential Impact on U.S. Merger Enforcement

For companies operating in or contemplating transactions in California, the adoption of an AOD standard could significantly alter legal exposure, deal risk, and compliance strategy in multiple areas:

1. Increased scrutiny of mergers and acquisitions: The new standard may lead to increased scrutiny of strategic transactions involving dominant firms. The California Attorney General may be more vigilant in assessing whether proposed mergers could lead to an abuse of dominance, potentially blocking deals that would have been approved under federal standards.
2. Influence on federal policy: A more proactive stance on abuse of dominance by California enforcers could influence federal antitrust policy. As California develops new standards of enforcement and theories of economic harm, enforcers at the Federal Trade Commission and the Department of Justice may consider adopting similar standards or theories borrowing from California’s approach. This could lead to a more aggressive federal stance on merger clearance and unfair competition enforcement.
3. Legal precedents: Early litigation under the AOD framework will likely produce novel case law in California courts. While not binding elsewhere, such decisions may become persuasive authority in other jurisdictions, especially in states considering similar reforms.
4. Corporate compliance: Companies operating in California will need to ensure compliance with the new standards, which may lead to broader changes in corporate behavior. Firms may adopt more cautious approaches to mergers and acquisitions to avoid triggering enforcement actions. This could result in more thorough internal reviews and adjustments to business practices to mitigate the risk of antitrust violations.

What’s next?

On March 24, 2025, CLRC staff proposed three legislative options to revise the Cartwright Act’s treatment of single-firm conduct, building on prior Commission recommendations.⁵ These proposals are now under review by the Commission, with a public comment period open ahead of the June 26, 2025, meeting, where the Commission may choose one option to recommend for legislative adoption. Our team at V&E is closely monitoring these developments and is available to discuss their potential impact on your business or assist with preparing and submitting public comments to the CLRC.

¹ 2022 Cal. Stat. res. Ch. 147.

² Cal. Law Rev. Comm’n, Antitrust Law: Initial Recommendations for ACR 95 Questions, Memo. 2025-11, Jan. 13, 2025 (“Memo”) (available at https://www.clrc.ca.gov/pub/2025/MM25-11.pdf).

³ 1 ABA Section of Antitrust Law, Antitrust Developments 230 (9th ed. 2022).

⁴ European Commission, Procedures in Article 102 Investigations (“If a company has a market share of less than 40%, it is unlikely to be dominant.”) (available at https://competition-policy.ec.europa.eu/antitrust-and-cartels/procedures/article-102-investigations_en).

⁵ Memorandum, Draft Language for Single Firm Conduct Provision, Cal. L. Revision Comm’n (Mar. 24, 2025) (available at https://www.clrc.ca.gov/pub/2025/MM25-21.pdf).