California’s Legislative Session Ends August 31: The Compliance Watch List for $1M to $20M Businesses
Every August, Sacramento works late. Hundreds of bills face floor votes before the Legislature adjourns at the end of August 31, and whatever does not pass dies for the session.
For businesses generating $1 million to $20 million in revenue, this week deserves your attention.
Major regulatory shifts rarely stop at the Fortune 500. Large corporations absorb new rules with in-house legal departments. Mid-market companies adapt while running daily operations, which is a harder job with fewer resources.
Below are the changes actually worth tracking, what they mean, and what to do before the year ends. Signing deadline for the Governor is September 30. Most measures that survive take effect January 1, 2027.
Where Things Stand Right Now
The Legislature must clear all remaining bills by August 31. Several significant business bills sit at or near final votes in their second chamber.
Two deserve close reading: an antitrust expansion and a surveillance pricing ban. Both passed the Assembly in May and have moved through Senate committees over the summer.
Why waiting is expensive
Bills signed in September become operative in January. That looks like four months of runway. In practice it is less.
Contract revisions require negotiation with counterparties. Software audits require vendor cooperation. Pricing changes require testing. None of that compresses well into December.
Starting now costs you a few hours. Starting in December costs you leverage, because you will be renegotiating agreements under a deadline rather than at renewal.
1. Antitrust Expansion Under AB 1776
Assembly Bill 1776, known as the COMPETE Act, is the most significant proposed change to California antitrust law in decades. Assembly Majority Leader Cecilia Aguiar-Curry introduced it, and it grew out of work by the California Law Revision Commission.
Here is the core of it. The Cartwright Act currently reaches coordinated conduct between two or more firms, meaning collusion. AB 1776 would extend it to single-firm conduct, adding express prohibitions on monopolization and monopsonization.
The federal precedent question
The bill also declares that interpretations of federal antitrust law are, at most, instructive rather than conclusive. That language matters more than it sounds.
California courts have historically leaned on Sherman Act case law when interpreting the Cartwright Act. Loosening that link would make state claims easier to plead and harder to dismiss early. Conduct long treated as lawful under federal standards could face a different analysis in state court.
Who this actually affects
One clarification worth making. AB 1776 targets conduct connected to market power, not companies of a particular size.
A $12 million company is unlikely to face a monopolization claim. Practices that already carry risk under existing law, though, deserve a fresh look. Exclusive dealing arrangements, restrictions on distribution, and refusals to deal all sit closer to the line if this passes.
Cartwright Act violations carry treble damages. That is why a contract audit is cheaper than a defense.
Action items
- Review commercial agreements for exclusive dealing, territorial restrictions, and supplier lock-in provisions.
- Replace blanket restrictions with narrowly tailored confidentiality and service-level terms where possible.
- Brief sales leadership on permissible competitive practices.
2. The Surveillance Pricing Ban: AB 2564
Assemblymember Christopher Ward introduced AB 2564 in February 2026. It passed the Assembly in May and has been amended in the Senate as recently as late August.
The prohibition is direct: a retailer may not engage in surveillance pricing. The bill defines that as setting a customized price for a good, for a specific consumer or group of consumers, based even partly on personally identifiable information gathered through electronic surveillance.
What counts as surveillance data
Browsing history. Location. Device type. Demographics. Purchase history and inferences drawn from it.
Pricing based on aggregate factors stays lawful. Inventory levels, time of day, and overall market demand are not personal data.
The detail most summaries miss
AB 2564 reaches price decreases as well as increases when they rest on personal data. The California Chamber of Commerce has pressed this point in opposition, arguing the bill could restrict discounts and promotions.
The bill does contemplate carve-outs, including discounts available to any consumer who signs up for a mailing list or joins a loyalty program. Transparency and general availability appear to be the dividing line. Because the language has been amended repeatedly, verify the final text before relying on any specific carve-out.
Where mid-market risk hides
Most exposure comes from software you did not write. Cart optimization plugins, personalization tools, and dynamic pricing modules often adjust prices on visitor metadata by default.
Many owners have no idea it is happening.
Action items
- Inventory every tool that sets prices, applies discounts, or personalizes offers.
- Confirm your pricing logic uses aggregate inputs only.
- Audit loyalty and discount programs against the carve-outs in the final bill text.
- Update terms of sale and privacy disclosures to match actual practice.
3. AI Rules: Separating What Applies to You
This is where most compliance advice goes wrong, so read carefully.
The California AI Transparency Act, enacted as SB 942 and amended by AB 853, became operative on August 2, 2026. It requires detection tools, visible disclosures, and embedded provenance watermarks on AI-generated images, video, and audio.
It probably does not apply to your company
The Act reaches covered providers, meaning entities that create or produce a generative AI system with more than one million monthly visitors or users.
If you run a $6 million e-commerce brand using a chatbot, you are not a covered provider. You have no watermarking obligation and no detection tool requirement under this statute. Anyone telling you otherwise is describing a rule for AI developers, not AI users.
Additional obligations for large online platforms and hosting platforms arrive January 1, 2027, and those thresholds are also high.
What does apply to mid-market businesses
Real obligations exist, they just come from elsewhere.
Employment is the sharpest one. California has adopted rules governing automated decision systems in hiring, which affect any company using AI to screen resumes or rank candidates. Human oversight and candidate disclosure matter here regardless of your size.
Data governance is the second. Feeding customer information or proprietary material into third-party AI tools raises contract and privacy questions under existing law, including the CCPA.
Consumer deception is the third. Misrepresenting AI-generated content or letting customers believe they are talking to a person can create exposure under general consumer protection law, separate from any AI-specific statute.
Action items
- Audit where AI touches hiring decisions, and add human review plus applicant disclosure.
- Review vendor agreements covering what happens to data you submit to AI tools.
- Disclose clearly when customers interact with an automated system.
- Track the AI bills still moving this session, since several would reach ordinary businesses rather than developers.
4. State Transaction Review Is Expanding
California is taking a larger role in reviewing deals, though the mechanics differ by industry and get misdescribed often.
The new antitrust notification law
Governor Newsom signed SB 25 in February 2026, creating a state premerger notification requirement. It applies to premerger notifications filed on or after January 1, 2027.
Two points matter for mid-market companies. First, SB 25 only applies to parties already required to file federally under Hart-Scott-Rodino, which means large transactions. Second, it creates no California waiting period and no state approval requirement. It gives the Attorney General visibility, nothing more.
So a $15 million acquisition does not trigger SB 25.
Sector rules are where smaller deals get caught
Industry-specific requirements reach much further down.
Healthcare transactions may require advance notice to the Office of Health Care Affordability, with a notice period measured in months rather than weeks. Grocery and retail pharmacy transactions carry their own advance notice obligation to the Attorney General. These rules capture deals well below any federal threshold.
A dental or medical practice roll-up in Los Angeles County can absolutely fall inside this framework. Deals have been delayed because the purchase agreement assumed a closing date the regulatory calendar could not support.
Action items
- Identify applicable notice requirements during diligence, before signing an LOI.
- Build outside dates that accommodate real review periods.
- Structure closing conditions that protect your deposit and financing while a state review runs.
Your Compliance Roadmap
Three steps, in order.
Audit across departments. Pull your commercial contracts, pricing software, hiring tools, and acquisition pipeline into one review. Anything touching consumer pricing, automated decisions, or exclusivity belongs on the list.
Update your documents. Revise vendor agreements, customer terms, privacy disclosures, and sales handbooks to match the rules as they will exist, not as they were.
Monitor what passes. Bills die at midnight on August 31. Others get amended in the final days. What you plan for in September should reflect the final enrolled text, not the version you read in June.
How Carbon Law Group Helps
Running a growing company should not require parsing bill text on weekends.
Pankaj Raval and our team act as outside general counsel for companies across Southern California. We audit commercial contracts for antitrust and unfair competition risk, review e-commerce and pricing systems against new statutory limits, draft AI governance policies that fit how you actually use these tools, and structure transactions that survive regulatory review.
Our approach is practical rather than theoretical. You get checklists, revised agreements, and clear answers instead of a memo.
Get Ahead of the January Deadline
When the gavel falls on August 31, your compliance timeline starts. The companies that do well in California are the ones that adapt early rather than the ones hoping to avoid regulation.
This post anchors our ongoing California regulatory series. Deep dives on each individual bill will follow once we know what the Governor signs.
If you want to understand how these changes affect your business specifically, contact Carbon Law Group at carbonlg.com. We will review your contracts, assess your exposure, and get you ready for 2027.
Take the next step book your consultation today, and safeguard your brand’s future.
Connect with us: Carbon Law Group
Visit our Website: carbonlg.com
[Pankaj on LinkedIn]
[Sahil on LinkedIn]
