California Should Exercise Caution on Proposed Antitrust Overhaul

By Morten C. Skroejer, Vice President, Competition & Trade Policy, SIIA

On Monday, the California Law Revision Commission will meet to consider proposals that could alter, in fundamental ways, how antitrust is enforced in the state. At issue are draft policy options regarding the review of proposed M&A-a technical area of law that nevertheless carries far-reaching consequences for California's broader innovation economy, investment climate, and business ecosystem.

For over a century, merger review across the United States has relied on a consistent legal baseline established under the federal Clayton Act. This unified national framework has provided enterprises of all sizes with clear, predictable rules of the road. The options currently under consideration by the Commission, however, explore a distinct path for California, introducing state-specific legal standards and rigid market concentration presumptions that depart from this well-established national precedent.

While the underlying goal of fostering competitive markets is commendable, altering long-standing legal standards requires a careful assessment of its trade-offs. In California's dynamic economy, mergers and acquisitions serve an essential structural function. For early-stage startups and growing companies, an acquisition is frequently the most, and sometimes only, viable path to scale breakthrough ideas, secure necessary operational capital, and provide a return to the angel investors and venture funds that finance early risk-taking.

The real-world implications of creating state-specific merger rules are highlighted in recent economic research. A study by Oxford Economics examining state-level regulatory divergence found that conflicting antitrust requirements tend to introduce substantial delays and operational uncertainty into commercial transactions. In a survey of more than 500 business leaders, nearly 40 percent anticipated prolonged review timelines under state-specific frameworks, while over half reported that regulatory unpredictability directly influences their long-term investment decisions and corporate strategy.

Importantly, the operational friction caused by regulatory divergence does not affect all market participants equally. Large, well-capitalized corporations generally possess the legal resources and financial wherewithal needed to navigate novel state procedures and extended administrative reviews. By contrast, emerging startups and smaller enterprises operate with tighter capital constraints, making prolonged legal delays and added compliance costs disproportionately burdensome-and potentially fatal to firm growth or even survival.

There is also a broader constitutional consideration regarding regulatory alignment. Maintaining cohesion with federal antitrust frameworks helps avoid conflicting legal requirements for multi-state enterprises. A significant state-level departure risks generating interstate commercial friction, which could ultimately prompt federal preemption challenges that would jeopardize state enforcement authority and create additional legal confusion for businesses.

As the Commission meets on Monday to deliberate on the future of California's antitrust policy, commissioners have an opportunity to weigh these proposals against empirical data and economic realities. Regulatory stability is not a concession to industry; it is the bedrock of a thriving innovation economy. Clear, predictable, and nationally aligned rules offer the most effective framework for protecting competition while ensuring California remains a global destination for investment and enterprise.