Enacted in 1907, California's Cartwright Act (Business and Professions Code Sections 16720 through 16770) serves as the state's primary antitrust and fair competition law.
While it mirrors federal statutes like the Sherman Act, the Cartwright Act is tailored specifically to regulate domestic trade practices, suppress anti-competitive behavior, and ensure an open marketplace where businesses compete fairly on price, innovation, and quality.
Although designed to protect California consumers and open markets, the Act's broad scope means that businesses, corporate executives, and individuals can face serious civil or criminal allegations for commercial practices—whether those violations are deliberate or accidental.
What Does BPC 16720 Say? (The Legal Definition of a Trust)
California Business and Professions Code 16720 defines a "trust" as any combination of capital, skill, or acts by two or more persons structured to achieve anti-competitive ends. Under the statute, prohibited arrangements include actions designed to:
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Restrict Trade or Commerce: Creating or carrying out artificial restrictions in trade.
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Control Production and Pricing: Limiting or reducing product manufacturing, artificially inflating commodity prices, or fixing a standard price for public sale, barter, use, or consumption.
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Suppress Competition: Precluding open competition in the manufacturing, mining, transportation, sale, or purchase of any commodity or article of trade.
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Execute Restrictive Contracts: Binding parties not to transport or sell items below a common standard figure, or pooling and uniting business interests to manipulate market pricing.
Overview of the Cartwright Act
Unlike federal antitrust laws, which primarily target major monopolies, the Cartwright Act covers a wider array of commercial misconduct. It governs both horizontal agreements (collusion between direct competitors) and vertical agreements (restrictions imposed between suppliers, distributors, and retailers).
The statute grants broad enforcement authority to the California Attorney General, local district attorneys, and private plaintiffs, authorizing both severe civil financial penalties and criminal prosecution.
Prohibited Activities Under the Cartwright Act
The Cartwright Act explicitly outlaws several collusive and anti-competitive business practices, including:
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Price-Fixing: Competitors conspiring to establish uniform pricing or minimum price floors rather than allowing free market forces to dictate rates.
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Market Allocation: Competitors agreeing to carve up geographic territories or customer bases to eliminate direct competition.
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Bid-Rigging: Secret coordination among bidding competitors to manipulate procurement outcomes, such as submitting intentionally inflated bids to secure contracts for a designated party.
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Tying Arrangements: Forcing consumers or buyers to purchase an unwanted secondary product as a condition of acquiring a primary desired product or service.
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Group Boycotts: Collusive agreements among multiple entities to refuse to do business with a competitor, often executed to drive smaller firms out of the market.
How the Cartwright Act Is Enforced
Antitrust violations in California are prosecuted aggressively through multiple distinct legal channels:
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Role of the Attorney General: The California Department of Justice investigates suspected anti-competitive conduct, seeking court injunctions, substantial civil penalties, and structural market remedies.
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Private Civil Lawsuits: Individuals or businesses harmed by unfair trade practices can file private civil antitrust lawsuits. Successful plaintiffs are entitled to recover treble damages (triple the actual financial harm suffered) alongside attorney fees.
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Criminal Prosecution: While most antitrust claims are handled civilly, severe, intentional, or fraudulent collusion can lead to criminal indictments, resulting in felony charges, heavy corporate and individual fines, and potential state imprisonment.
Frequently Asked Questions (FAQs)
What is the main difference between federal antitrust laws and the Cartwright Act?
While federal laws like the Sherman Act focus heavily on monopolization and interstate commerce, the Cartwright Act applies specifically to intrastate trade in California and historically encompasses a broader array of vertical and horizontal trade restrictions.
Can individuals face jail time for violating the Cartwright Act?
Yes. Although many antitrust matters are resolved through civil litigation and financial penalties, egregious, intentional price-fixing or bid-rigging can be prosecuted criminally as felonies, carrying prison sentences.
What are treble damages in Cartwright Act lawsuits?
Treble damages allow private plaintiffs who prove economic injury from an antitrust violation to recover three times their actual financial losses, serving as a powerful deterrent against anti-competitive business conduct.
Does a business have to succeed in harming the market to violate the Act?
No. Under California law, entering into an illegal conspiracy, contract, or agreement to restrict trade or fix prices is itself a violation of the Cartwright Act, regardless of whether the anticompetitive scheme achieved its intended financial outcome.
How can a business ensure compliance with California antitrust laws?
Companies can safeguard against antitrust violations by implementing corporate compliance training, avoiding discussions of pricing or market allocation with competitors, and retaining legal counsel to review distribution and supply agreements.
Allegations involving antitrust violations, price-fixing, or unfair trade practices carry devastating commercial and personal consequences.
Cron, Israels & Stark represents corporate clients and individuals facing complex white-collar investigations throughout Los Angeles and California.
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