Amended California Bill AB 1776 Still Costs $760 Billion and 1.2 Million Jobs Over a Decade

When the CCIA Research Center first estimated the economic cost of California Assembly Bill 1776 (AB 1776), the “COMPETE Act,” in April, the bill on the table was the version amended on March 23, 2026. We projected that the bill would jeopardize roughly $67 billion in California GDP and 180,000 full-time-equivalent jobs in its first year, growing to about $1 trillion in annual GDP and 1.6 million jobs by year ten. On May 27, after multiple amendments, the bill narrowly passed the Assembly and moved to the Senate. The version that passed has some material differences from the one we analyzed, and the differences on net run in the direction of increased legal and constitutional questions around the bill, and somewhat lower expected economic costs from the bill’s enactment. Re-running our economic analysis on the basis of the legislative text that passed the Assembly, we find:

• Revised cost estimate of $760 billion in foregone California GDP by year ten, associated with 1.2 million fewer California jobs.
• The amendments lowered our central estimate of economic costs by roughly a quarter, contingent on the assumption that several questionable provisions survive legal challenges. 
• AB 1776 remains expensive, is still untested by any meaningful official cost-benefit analysis, and lacks plausible benefits at a scale to offset these costs.

Relevant Changes to the Bill

Three changes to the bill text drive most of the changes in our economic cost estimate.

First, the Assembly-passed text reinstates an affirmative market-power requirement, albeit one that is looser than federal requirements. New Section 16731(d) of the bill requires a plaintiff to allege and, at trial, to prove market power through either direct or indirect evidence. The March 23 version we analyzed contained no such requirement, which is why our original report treated the bill as eliminating any market-power threshold and widening the population of exposed firms. What the bill now removes is important but narrower: under Section 16732, a plaintiff relying on indirect evidence need not meet the federal market-share threshold, and a plaintiff using direct evidence need not define a relevant market. A market-power requirement exists, but in a narrower form than in federal antitrust law. On net, this reduces the estimated population of exposed firms somewhat and reduces our cost estimates.

Second, the Assembly-passed bill text changed the operative liability standard from a flat prohibition to a rule-of-reason inquiry. The Assembly-passed Section 16731(a) prohibits conduct that would “unreasonably restrain trade,” dropping earlier language that swept in the Cartwright Act’s “trust” categories wholesale, and Section 16731(c) directs courts to apply the rule-of-reason framework from In re Cipro Cases I & II. As Paul, Weiss summarized the floor version, the bill now turns on unreasonableness rather than a near-categorical bar. A rule-of-reason standard produces fewer adverse outcomes for ordinary procompetitive conduct than a flat prohibition, which somewhat lowers the expected regulatory cost that drives over-deterrence in our model.

Third, the Assembly-passed bill added a small-business exemption. Section 16731(e) carves out independently owned, California-based firms with California-domiciled officers that, together with affiliates, employ 100 or fewer workers and average $10 million or less in annual gross receipts over the prior three years. The exemption is narrow, meaning that a firm that exceeds either threshold, or is headquartered elsewhere, remains fully exposed. Still, the exemption removes the smallest firms who meet the California geographic test from the liability net, at least until they grow enough to exceed the arbitrary thresholds. The smallest, most financially constrained firms, like startups that typically operate on a defined capital runway based on their last round of venture capital fundraising, are firms whose investment responds to changes in expected profits resulting from over-deterrence of procompetitive conduct, so this has a non-trivial impact on our estimates. This impact is qualified by the caveat that the state-specific nature of the exemption, as well as the arbitrary size threshold for an exemption, create significant legal and constitutional uncertainties arising from concerns like barriers to interstate commerce, as noted by a separate CCIA legal analysis.

Two other changes point in a more aggressive direction and would drive expected costs higher, but we do not incorporate them in the model, which is one reason the revised estimate should be considered conservative:

• The bill now states an express purpose of protecting competition for workers and explicitly covers monopsony as well as monopoly, increasing the likelihood of labor-market related litigation costs against procompetitive conduct. 
• Governor Newsom’s budget requested an extra $14.25 million for antitrust enforcement to add new enforcement staff, a signal that the probability of investigation may rise relative to the baseline, which would raise the likelihood of over-deterrence and thus expected costs. 

Neither of these changes in the opposite direction would be expected to be large enough to reverse the net effect of the changes since the prior analysis, but both are reasons our revised estimate should be read as conservative rather than generous.

How the Changes Drive Estimated Costs 

Noteworthy Changes To the Bill Since Our Prior Analysis

Our methodology, adapted from the Analysis Group’s 2024 framework, scales the Analysis Group’s California results by a composite deterrence-intensity index that measures how much more aggressively AB 1776 deters procompetitive conduct than the New York Twenty-First Century Antitrust Act that anchored the original study. In our April analysis, that index was estimated at approximately 1.4, meaning that the COMPETE Act was about 40 percent more intense than the New York baseline. This increased intensity estimate relative to the New York bill baseline was driven in part by the absence of any market-share threshold and the prohibition on cross-market balancing.

Re-scoring the same components against the Assembly-passed text, while holding the weight of each component fixed, moves the estimated deterrence-intensity index from roughly 1.4 to roughly 1.06. The market-power component does most of the work: a provision that we previously scored as driving more over-deterrence than the New York baseline now scores comparably to it overall. Similarly, the shift from a flat prohibition to a rule-of-reason standard pulls the liability-standard component down to parity. The small-business exemption (based on arbitrary thresholds and limited to California small businesses) applies a further coverage discount, while also adding legal uncertainty that is not modeled. The cross-market constraint, the decoupling from federal precedent, and the liberal-interpretation directive all continue to push the overall index above 1.0, which is why the central scenario index lands just above parity with the New York baseline.

A scale factor of 1.06 instead of 1.4 reduces every headline figure by 24 percent, which is about a quarter. The bill is still more aggressive than New York’s, and still imposes very significant costs, as three quarters of a very large negative impact remains a very large negative impact.

The Revised Cost Estimate

Applying the recomputed deterrence-intensity index to the same macroeconomic baseline yields a central first-year cost of roughly $51 billion in foregone GDP, which is about 1.2 percent of state output. Likewise, it estimates a central first-year job-loss impact of roughly 136,000 full-time-equivalent jobs. In a decade, the GDP gap reaches roughly $760 billion, about 10.5 percent of annual projected output, with roughly 1.2 million fewer jobs. 

Allowing for a range of scenarios depending on how the enforcement practice and case law develops, we estimate a low cost scenario of index parity (1.0) and a high-cost scenario with an index of 1.15. 

• The low-cost scenario (deterrence-intensity index = 1.0) estimates first-year GDP losses of $48 billion and year-ten losses of $715 billion.
• The high-cost scenario (deterrence-intensity index = 1.15) estimates first-year GDP losses of $55 billion and year-ten losses of $821 billion.

The revised figures remain large, as a 1.2 percent GDP loss to California’s economy in the first year, and 1.2 million fewer jobs for Californians over a decade, are very salient costs that California voters would readily experience in their lives as workers and consumers.

Revised central scenario cost estimates

Problems With AB 1776 Beyond the Economic Costs 

None of the changes made to the version of AB 1776 that passed the Assembly resolves the underlying concern. The bill still: 

• Extends antitrust liability to single-firm conduct, 
• Decouples California’s antitrust analysis from the federal precedents that firms have relied on for decades, 
• Constrains cross-market balancing in a way that is particularly consequential for multi-sided platforms, and 
• Instructs courts to interpret the statute expansively in favor of deterrence. 

Everyday business practices that are widely enjoyed by consumers, including but not limited to volume discounts, loyalty programs, and bundled offerings, remain exposed to significant antitrust enforcement risk for any firm above the small-business thresholds, or offering goods or services to California customers without being headquartered in California. The litigation environment the bill would create is costly and associated with significant uncertainty. 

The cost of AB 1776 is likely to be experienced in missed opportunities. For example, business ventures that fail that would have succeeded but-for AB 1776. Consumer-friendly business practices that get discontinued due to legal risk. Scale-ups that no longer pencil out. Start-ups that can’t get funding because their business model won’t survive growing past the arbitrary size threshold of the small-business exception. Exciting jobs and career opportunities for ordinary Californians that don’t happen because of all of the above.

The central process problem also remains relevant. As the California Chamber of Commerce coalition has pointed out, no official economic or cost-benefit analysis has accompanied the bill through the Assembly, even as it advanced to the Senate. 

Bottom Line

The amendments to AB 1776 somewhat reduce expected economic costs, but the core problems and primary cost drivers remain unchanged. Our central estimate of the bill’s cost is now roughly $51 billion in the first year and about $760 billion by year ten, with about 1.2 million California jobs on the line. That remains a significant cost of about a tenth of the state’s annual GDP relative to a scenario without the enactment of AB 1776. Our analysis continues to point to the need for a rigorous, official cost-benefit analysis before California’s Senate votes on the most consequential change to its antitrust law in more than a century. A bill that could plausibly cost the state tens of billions of dollars and over a hundred thousand jobs in its first year deserves that scrutiny before it becomes law, not after, when its costs bear down on California workers, businesses, and consumers.