Why Yelp Supports California’s COMPETE Act

California's startup ecosystem thrives when competition is fair. When the most dominant corporations wield their power to stifle competition, the next generation of innovators gets shut out, and Californians pay the cost, consumers lose choice, workers lose opportunity, and the next wave of great ideas never gets off the ground.

Yelp knows this firsthand. For years, we've experienced what happens when an adjudicated illegal monopolist self-preferences its own inferior services at the expense of competitors who offer consumers better results. And we're not alone; both startups and established challengers across California's economy face the same dynamic.

These concerns are especially relevant as we enter the era of AI, where the stakes are even higher. Dominant firms are well positioned, and in some cases already leveraging their advantages, to entrench their market power and use it to gain an unfair edge expanding into new areas, potentially shutting out the next wave of AI innovators.

It's for these reasons that Yelp is endorsing California AB 1776, the COMPETE Act.

What the COMPETE Act Does

California's 1907 antitrust law, the Cartwright Act, currently provides recourse against anticompetitive conduct executed by two or more firms. The COMPETE Act aims to modernize California's antitrust laws to reflect what happens when a single dominant firm or company is abusing its market power in a number of ways, including by:

• Establishing a clear framework. Provides a methodology for careful distinction between success on the merits and anticompetitive restraint, which would apply to certain self-preferencing or predatory pricing tactics by dominant firms. The COMPETE Act stands for the principle that protecting competition is the foundation for the next generation of innovation.
• Closing a clear gap in California's antitrust laws. Aligns California law with longstanding federal law in addressing single firm conduct, such as Section 2 of the Sherman Act, under which federal and state governments brought successful claims against Google for its behavior in the general search market, and Yelp has brought it own claims against Google related to its anticompetitive conduct in the local search market. The COMPETE Act provides California enforcers, and parties harmed by the anticompetitive conduct of a dominant firm, with more flexibility to bring antitrust claims under California law in California courts.
• Protecting California's startup ecosystem. Enables startups to cultivate investment and enter markets without being unfairly crushed by dominant firms. This is the same principle that has long driven California's refusal to enforce non-compete agreements in employment. While intellectual property and trade secrets laws maintain necessary incentives for innovation, California's startup ecosystem benefits from a landscape where employees are free to match with the firms where their skills and knowledge will be put to the most productive use. Similarly, the COMPETE Act encourages innovation and increased output by enabling startups to cultivate investment and enter markets without being unfairly crushed.

How we Got Here: Years of Independent Study

The COMPETE Act was designed to reflect the recommendations of the California Law Revision Commission (CLRC), a neutral public body that spent several years studying California's antitrust law and opportunities for reform. Those studies were informed by dozens of academics, economists and legal practitioners, and hundreds of letters from leaders across business and advocacy. In 2024, Yelp participated in the CLRC's study by presenting about its experience of being subjected to anticompetitive tactics in online search by Google, now an adjudicated illegal monopolist.

The CLRC's final recommendation, which the COMPETE Act reflects, opted for terminology and standards that are well-understood by federal and California courts. Since introduction of the bill, the language has further been strengthened to add additional guardrails to prevent frivolous targeting of firms without market power.

The COMPETE Act would be a pivotal step towards restoring the type of robust, procompetitive marketplace that can fuel innovation, and California's economy. We encourage state lawmakers to support the COMPETE Act and reach out to us with any questions about Yelp's perspective on these matters.

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