California’s Unfair Practices Act

An Overlooked, Important Antitrust Statute

California’s Unfair Practices Act is codified at Cal. Bus. & Prof. Code § 17000 et seq. The California courts have not yet given a definitive clarification of the full meaning and reach of this law, which is cast in the language of classical antitrust, enumerates forbidden practices, and is openly directed against monopolists, would-be monopolists, and mere sharp competitors that use any of these practices in their sales agreements or advertising.

Broadly speaking, the practices forbidden by the Unfair Practices Act can be classified as various kinds of predatory and exclusionary pricing that undermine competitive markets or thwart an incipient competitive threat posed by a disruptive innovator or fledgling competitor.

We think that this law is an overlooked resource that antitrust lawyers can use to challenge certain kinds of monopolistic pricing practices that too often get a free pass in federal court — namely, exclusionary and predatory pricing that to all appearances undermines competition in a properly defined relevant market, but nevertheless escapes liability or the least reproach under current federal standards.

The challenge will lie in identifying or isolating offending practices that have a substantial adverse impact on California commerce, but only an incidental or separable impact on interstate or foreign commerce. Otherwise, California’s enforcement of its Unfair Practices Act might be challenged in federal court as a forbidden exercise of the U.S. Congress’s “dormant” powers under the Commerce Clause of the U.S. Constitution.

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