Written by attorney Howard Mark Ullman

California's Cartwright Act (antitrust law): A Primer

California’s Cartwright Act: A Primer

Howard M. Ullman

California State Bar Annual Meeting

October 9, 2004

Cartwright Act

Cal. Bus. and Prof. Code §§ 16700 to 16770

California’s main antitrust law

Similar to federal Sherman Antitrust Act, but not identical

Cartwright Act versus Federal Antitrust Laws

Major differences concern treatment of:

• Mergers

• Monopolization

• Indirect purchaser suits

Purpose of the Cartwright Act

Protection of consumer

Protection of competition

Main Provisions of Cartwright Act

Section 16720:

• Trusts

Section 16727:

• Exclusive dealing

Section 16725:

• Permits agreements, associations or combinations that

promote, encourage, or increase competition

Section 16720 - Trusts

Defines and prohibits “trusts"

• A “trust" is a “combination of capital, skill or acts by two

or more persons" for certain enumerated purposes

Major Types of Enumerated Unlawful Trusts

• To create or carry out restrictions in trade or commerce

• To limit or reduce the production, or increase the price of

merchandise or of any commodity

• To prevent competition in manufacturing, making,

transportation, sale or purchase of merchandise, produce

or any commodity

• To fix at any standard or figure, whereby its prices to the

public or consumer shall be in any manner controlled or

established, any article or commodity of merchandise,

produce or commerce intended for sale, barter, use or

consumption in California

Section 16727 - Exclusive Dealing

Prohibits contracts restricting the right of a buyer

or lessee to “use or deal in" the products of a

competitor of the seller or lessor if the effect of

the restriction “may be to substantially lessen

competition or tend to create a monopoly in any

line of trade or commerce in any section of the


Section 16725

Exemption for “reasonable" restraints of trade

Use of Federal Precedents

Sherman Act cases are generally informative

As to Section 16727, federal precedent construing

Section 3 of the Clayton Act is persuasive

However, Sherman Act and Cartwright Act are not


• For example, Cartwright Act does not reach mergers

Where there is such a divergence, federal

precedent will have little or no weight

The Concerted Action Requirement

A trust exists only where there is a “combination

of capital, skill or acts by two or more persons"

Pleading concerted action – low threshold

Summary judgment standard for concerted action

(Aguilar v. Atlantic Richfield Corp.) – similar to

federal summary judgment standard

Standards of Review

Per se illegal arrangements

The Rule of Reason

Other standards (e.g., quick look)

Horizontal Restraints


Market divisions and customer allocations

Group boycotts

Unilateral refusals to deal


Tying - Elements

• The sale is linked to the sale of the tied product

• The seller has sufficient economic power to coerce the

purchase of the tied product

• A substantial amount of sale is effected; and

• The plaintiff has suffered a pecuniary loss as a


Under Section 16727 (which does not cover real

estate), a plaintiff need show either the second or

third elements, but not both

Vertical Restraints

Refusals to deal

Resale price maintenance


Non-price vertical restraints


Unilateral monopolization versus conspiracy to


Unilateral monopolization not within Cartwright

Act (Dimidowich v. Bell & Howell)


The Cartwright Act does not reach mergers: the

Texaco case

State ex rel. Van de Kamp v. Texaco, Inc.

Indirect Purchaser Suits

Hanover Shoe: Rejection of the “pass-on" defense

Illinois Brick: Rejection of “offensive" use of pass-


• California’s state law repeal of Illinois Brick

• Section 16750(a) expressly allows suit “regardless of

whether . . . injured person dealt directly or indirectly

with the defendant."

• Problems created by indirect purchaser suits


Private suits

California Attorney General

District attorneys

Criminal enforcement – “hard core" offenses


Treble damages

Attorney’s fees

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