There's an old saying in politics: As California goes, so goes the nation. From environmental regulations to consumer privacy, policies born in Sacramento have a way of spreading across state lines. Now California is considering a sweeping change to merger law that could reshape how businesses are bought and sold across the country.
On October 30, the California Law Revision Commission will consider a proposal that would make mergers easier to challenge and harder to defend. It may sound like an obscure legal debate, but the consequences could reach from Silicon Valley startups to family-owned businesses on Main Street, and eventually well beyond California.
Supporters will call the proposal a compromise, and compared with where the Commission started, they have a point. Earlier drafts would have allowed the state to block deals over an undefined "appreciable risk" of harm or applied rigid concentration formulas to a full spectrum of markets, from rural communities to emerging technologies. After widespread opposition from business groups, entrepreneurs and investors, Commissioners directed staff to move closer to existing federal law.
The latest draft adopts more familiar language but retains troubling departures from federal standards. It allows judges to block deals based on a "reasonable probability" of harm, creates presumptions against mergers in concentrated markets, and places a heavier burden on companies to demonstrate their deals won't harm competition.
These may sound like technical distinctions. For businesses contemplating a sale, they're anything but.
Consider a retiring business owner in a town with three HVAC contractors. Selling to a competitor may be the best way to preserve the company, keep employees working and ensure customers continue receiving service. But under California's proposal, that transaction could face a presumption of illegality simply because the local market is deemed to be concentrated.
Large corporations can afford prolonged legal battles. Small businesses cannot. Faced with mounting costs and uncertain outcomes, buyers may lower their offers or walk away entirely. The result would be fewer businesses, fewer jobs and less competition, precisely the opposite of what antitrust law is supposed to achieve.
The stakes are equally high for America's innovation economy. In 2025, venture-backed companies were acquired 995 times, compared with just 62 initial public offerings. For most startups, acquisition is the most realistic path to success. The prospect of an eventual sale is also what encourages investors to finance the next generation of entrepreneurs.
Add uncertainty and potentially years of litigation to that equation, and investors become less willing to take risks. In fast-moving fields like artificial intelligence, robotics and biotechnology, delays can mean the difference between bringing a breakthrough to market and watching an overseas competitor get there first.
California's proposal is particularly troubling because the state has not demonstrated that its existing enforcement powers are inadequate. California's attorney general has already used federal antitrust law to challenge major transactions, including high-profile media mergers this year. The state has shown it can scrutinize and challenge deals without rewriting the rules for everyone else.
And this is where the national implications become impossible to ignore.
California is not operating in a vacuum. Other states, including New York, have explored expanding their own antitrust authority. If California adopts a more aggressive merger standard, lawmakers elsewhere could follow, creating a patchwork of conflicting rules governing transactions that routinely cross state lines.
Imagine a startup in Texas seeking acquisition by a company operating in California, or a family-owned manufacturer with customers across several states. A transaction that satisfies federal law could still encounter additional legal uncertainty because of where the companies do business.
At a time when America needs more investment, entrepreneurship and economic growth, adding layers of uncertainty to the market for buying and selling businesses is a step in the wrong direction.
Effective antitrust enforcement matters. Genuine threats to competition deserve scrutiny, and regulators should have the tools to address them. But stronger enforcement should not mean making ordinary business transactions prohibitively expensive or unpredictable.
The Commission should reconsider its approach before sending recommendations to lawmakers. California has an opportunity to protect competition without undermining the entrepreneurs, workers and investors who drive its economy.
Because if California gets merger policy wrong, the consequences may not stop at the state line.
