California’s Proposed Antitrust Crackdown: SB 763 Penalties Could Jump from $1 Million to $100 Million

California’s Proposed Antitrust Crackdown: SB 763 Penalties Could Jump from $1 Million to $100 Million

A $1 million penalty for California corporations found guilty of criminal antitrust charges could soon become $100 million. That’s not a typo — it’s the potential new reality California commercial attorneys will need to prepare for if Senate Bill 763 (SB 763) passes. It would also add civil penalties of up to $1 million.

While uncertainty swirls around the Trump administration’s approach to antitrust, California legislators have introduced what could become the most significant overhaul of enforcement in decades. Far from an incremental legal update to file away for future reference, the proposed amendments to the Cartwright Act could fundamentally alter the risk analysis for virtually every business decision involving market competition in California.

Here’s how the proposed legislation could reshape business risk and enforcement strategies.

The Cartwright Act: California’s antitrust foundation

Enacted in 1907 and codified in the California Business and Professions Code, the Cartwright Act is the state’s principal antitrust statute. Named after California Sen. A.F. Cartwright, the law was designed to protect the California economy from anti-competitive business practices that harm consumers, workers and honest businesses. The statute aims to “protect and foster competition by preventing combinations and conspiracies which unreasonably restrain trade.”

While federal antitrust laws (the Sherman and Clayton Acts) have evolved through significant judicial interpretation and focus on curbing monopolistic practices, the Cartwright Act provides clearer rules that specify illegal practices. It allows “any person who is injured in his or her business or property” by an antitrust violation to seek remedies. This flexibility has allowed prosecutors and plaintiffs greater flexibility in addressing anti-competitive behavior than on the federal stage.

The Cartwright Act focuses on three main areas:

Trusts and restraints on trade: A “trust” or any combination of businesses that work together to limit competition or manipulate the market is illegal under the Cartwright Act. This includes companies that work together to fix prices, limit production or prevent free competition in any industry (like setting prices too high or agreeing not to sell below a certain price).

Illegal contracts: Any contract or agreement that violates the Cartwright Act is completely void and unenforceable. This means businesses cannot legally enforce agreements that break the rules about limiting competition.

Exclusive dealing and tying agreements: These arrangements are illegal if they restrict competition — for example, by forcing customers to buy their product exclusively or to only buy from them and not from competitors. The law covers situations where a company tries to force a customer to only use certain goods or services in a way that harms competition or could create a monopoly. It also specifically mentions “services of a competitor or competitors of the lessor or seller” as one of the restricted or tied items.

What could change under SB 763?

Introduced by Sen. Melissa Hurtado and supported by Attorney General Rob Bonta, SB 763 aims to modernize the Cartwright Act by increasing penalties for violations. The bill addresses concerns that current penalties aren’t enough to deter powerful corporations from engaging in anti-competitive behavior. 

Here’s what SB 763 proposes:

Criminal penalties: Corporate fines would increase from $1 million to $100 million per violation, while individual fines would rise from $250,000 to $1 million per violation. The maximum prison term for felony violations would extend from three years to five years.

Civil penalties: For the first time, courts could impose civil penalties of up to $1 million per violation depending on the nature, seriousness and persistence of the misconduct.

Cumulative remedies: SB 763 clarifies that penalties are cumulative, meaning companies could face multiple fines for the same conduct.

The bill’s passage would likely increase settlement leverage, as the threat of substantial civil penalties could alter the calculus in settlement negotiations. It could expand the focus of discovery in litigation as evidence of the persistence of violations will take on new importance. Private litigants harmed by anti-competitive practices might also find new opportunities for legal recourse under SB 763’s expanded civil penalty framework.

Takeaways for California attorneys

To prepare for the possibility of SB 763 becoming law, attorneys advising California businesses should:

Prepare for dramatically increased penalties: Assess the potential impact of the heightened penalties on clients’ risk management strategies.

Reevaluate risk analysis for business decisions: Work with clients to ensure that their business decisions — from pricing strategies to distribution agreements — are compliant with both the Cartwright Act and federal antitrust laws.

Provide compliance and antitrust training: Advise clients on the importance of antitrust training for executives, managers and employees to avoid anticompetitive conduct.

Review existing agreements: Review clients’ existing contracts, particularly those involving exclusive dealing and tying agreements, to ensure they don’t run afoul of antitrust laws.

Brace for broader enforcement in California: Prepare clients for increased scrutiny from state regulators and prosecutors. Antitrust violations might not just attract higher fines but could also trigger more comprehensive enforcement actions.

Monitor federal and state developments: With uncertainty around federal antitrust enforcement, California attorneys should keep a close eye on both federal and state law to ensure a unified approach to compliance.

A new era of antitrust enforcement

When a century-old statute suddenly grows teeth sharp enough to take a $100 million bite out of corporate balance sheets, yesterday’s compliant business practices might become tomorrow’s existential threats. As federal antitrust enforcement faces an uncertain future, California is positioning itself as the new battleground for competition law — and clients will be seeking guidance through increasingly treacherous waters.

For more insights into antitrust law and business litigation, schedule a free demo with CEB.