Opinion ID: 1312425
Heading Depth: 4
Heading Rank: 4

Heading: Breadth of the Cartwright Act

Text: Ultimately, the Attorney General's view that the Cartwright Act applies to mergers is not supported by analogy to the Sherman Act or the common law. As shown above (i) the Sherman Act is not, contrary to our past statements, directly probative on interpretation of the Cartwright Act; (ii) the cases under both the Sherman Act and the common law show at most a willingness to allow challenges to mergers that actually restrain competition, and not those that pose merely an incipient threat to competition; and (iii) in any event, the remedy at common law was different in kind from that available under the Cartwright Act  invalidation of the illegal agreement, etc., as opposed to civil or criminal sanctions. At bottom, therefore, the Attorney General resorts to the propositions that (a) the acts of Texas, Michigan and numerous other states, and the cases interpreting those acts, are insignificant indicators of the drafters' intent; (b) the Cartwright Act is more expansive than both of its other putative sources (Sherman Act and common law); and (c) the Cartwright Act essentially embodies the later-enacted section 7 of the Clayton Act, which as noted above allows challenges to mergers in their incipiency. (1b), (2c) For the reasons set out above, we conclude that the 1889 Texas act and the 1899 Michigan act, the interpretation of those acts in Gates, supra, 39 S.W. 1079, and Davis, supra, 127 Fed. 875, 131 Fed. 31, and the striking similarity of the Cartwright Act to those laws, together with the enactment by three states  including Texas  of express antimerger provisions, clearly indicates that the drafters did not intend the Cartwright Act to apply to a purchase and sale agreement, or a merger, between otherwise competing firms. Nor can we agree that the Cartwright Act is somehow broader than the Sherman Act and the common law. For this proposition, the Attorney General cites our statement in Palsson, supra, 16 Cal.3d 920, that the bill proposed in the United States Senate by Senator Reagan  on which our act was purportedly based  was designed not to narrow the scope of the Sherman Act but to broaden it. ( Id., at p. 926.) As we have explained above, however, our shorthand description of the Act's derivation in Palsson, although adequate for proposes of our analysis in that case, was not completely accurate: The Cartwright Act was modeled after the original Texas act of 1889 and the Michigan act of 1899, not the Reagan bill. (See ante, fn. 14.) Even assuming, however, that our Act might be in some respects broader than the Sherman Act, we find nothing to indicate that the Act was intended to be broader than  or even equal to  the Sherman Act on the question of merger coverage. In the same vein, the Attorney General also rests on dicta from our recent decision in Cianci, supra, 40 Cal.3d 903, to the effect that the Cartwright Act is broader in range and deeper in reach than the Sherman Act ( id., at p. 920), and that it reaches beyond the Sherman Act to threats to competition in their incipiency  much like section 7 of the Clayton Act ...  and thereby goes beyond `clear-cut menaces to competition' in order to deal with merely `ephemeral possibilities' [citations]. ( Id., at p. 918.) In view of the evidence to the contrary, Cianci's conclusory and substantively suspect dicta [20] simply cannot support the Attorney General's claim. In light of (i) the authoritative construction of identical language in similar state laws and (ii) the existence (in at least three states) of explicit merger regulations at the time of the Cartwright Act, we believe that the Legislature did not intend for the Act to reach a merger or acquisition. [21]