California may grant a right to sue for monopoly abuses

from Ryan SabalowCalMatters

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A controversial bill lawmakers are debating this year has them asking: Should Californians have the right to sue if a company uses unfair tactics to strangle its competition?

Assembly Bill 1776 would expand California’s antitrust law to allow people and businesses who claim they have been harmed by a company’s attempts to stifle competition to sue in state court.

Under long-standing California law, such cases can generally only be brought when two or more parties are suspected of working together to suppress competitors. Federal law allows for unilateral enforcement, but proponents of California’s COMPETE Act say federal courts have watered down antitrust law to the point where the state must chart its own course.

The battle pits some of the state’s biggest political enforcers — unions and trial lawyers — against the lobbying power of California’s business and technology industries. Combined, groups fighting the bill have given at least $106 million to lawmakers’ campaigns since 2000, according to CalMatters Digital Democracy Database.

Supporters say the measure would give consumers a way to fight to keep independent grocery stores and pharmacies open, prevent farm and restaurant supply chains from being controlled by individual companies and give patients more options for their medical care.

The measure’s author, the Democratic Assembly Majority Leader Cecilia Aguilar-Currytold the Senate Judiciary Committee late last month that more than 75 percent of American industries have undergone consolidation since the late 1990s.

“When companies get so much power and abuse it, it means higher prices, less choice, fewer opportunities for job creators to start small businesses, and depressed wages for working families.” said Aguiar-Curry, who represents the Davis district.

Business groups say that if the measure is signed into law, it will open a new way for predatory law firms to shake down companies. Business owners have complained for years that California laws allow activists and an entire industry of lawyers to bombard them with money demands and lawsuits access for people with disabilities, product warning labels, labor complaints and user privacy.

The California Chamber of Commerce was so alarmed by this latest attempt to increase the companies’ legal risks that its lobbyists put up billboards near the Capitol earlier this year. They targeted Aguiar-Curry by name.

“Cecilia, the prices are high enough already,” read one billboard. “Don’t make life more expensive for California consumers.” Chamber spokesman John Myers declined to discuss the billboards.

Moderate Democrats remain suspicious

If the group’s goal was to pressure lawmakers to repeal the measure, it may have backfired.

The rare public attack on a popular, high-ranking Democrat appears to have boosted 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 well-founded.

Babette Boliek, a Pepperdine University law professor and former chief economist of the Federal Communications Commission, argued that the bill is so vague that it would “invite judges to pick winners and losers based on subjective likability rather than measurable harm.”

She likened it to “a speed limit that no one knows exists.”

Aguiar-Curry’s team is receptive to some concerns. After pushback, she added an exemption designed to protect small, independently owned businesses in California, provided they have no more than 100 employees and average $10 million or more in gross annual revenue over the previous three years.

Ben Golombek, executive vice president at the Cal Chamber, said thousands of California businesses will still be vulnerable to costly litigation, including from their competitors.

“This unprecedented and massive legal liability for businesses of all sizes — small, medium and large — that this bill creates is why we are so opposed to it,” he said.

Mark Ramos, president of the United Food and Commercial Workers Council of the Western States, said the legislation would ensure that consolidation would not lower wages while raising the cost of goods for workers. As grocery chains merge, it’s also harder for his members to bargain for wages that once allowed workers like him to afford their own homes, he said.

“With this consolidation came the greater challenge of not … being able to negotiate a contract that allows our members to thrive in their local economy because these grocers no longer have to compete with each other,” he said.

Some Democrats, especially Sen. Tom Umbergthe Democratic chairman of the Judiciary Committee, are suspicious.

A major hurdle for Umberg is whether private citizens and businesses can sue in what is known as a “private right of action.” Umberg told the committee he wants only local prosecutors and the California attorney general to have those powers for now.

“We want to make sure we’re not stifling competition by virtue of the threat of lawsuits,” Umberg told the committee.

Aguiar-Curry said she would make most of the changes Umberg requested, but would not commit to limiting law enforcement to prosecutors. She said she would continue to work to make it “more difficult to file a frivolous claim” in the next version of the bill.

Will the measures act as a deterrent?

The bill passed committee with only Republicans voting against it, but Umberg did not vote when it was his turn, which is considered the same as a no vote.

Abstention is a common tactic California lawmakers use to express their discomfort with a bill while avoiding a firm “no” that might anger influential interest groups or legislative colleagues. Umberg was joined by 15 other Democrats who did not vote as she narrowly passed the Assembly.

The COMPETE Act will then be heard by the Senate Appropriations Committee when lawmakers return from their summer recess in early August.

Supporters hope the final version won’t prevent Californians from suing a company for anti-competitive behavior.

Lee Hepner, Senior Counsel at American Economic Freedom Projectantitrust activist group, said it is imperative that ordinary Californians have the right to pursue legal action.

Otherwise, he said, wealthy corporations will use their lobbying money and political influence to pressure politicians and regulators to give them a free pass.

“The private right of action is a critical prop for the politicization of antitrust enforcement, which threatens the entire project of controlling markets for fairness,” he said.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.