The California effect is the shift of regulation—such as antitrust, environmental, data privacy, and artificial intelligence regulations—toward political jurisdictions with stricter regulatory standards.^[1][2]

Terminology

Sometimes the expression "California effect" is used to describe the shift of regulation toward regulation introduced in California, which typically involves stricter regulatory standards. The expression "Brussels effect" is used in a similar sense, to describe the shift of regulation toward regulation introduced by the European Union.^[3]

A distinction is sometimes made between de jure and de facto versions of the Brussels effect. EU regulation may cause countries outside the EU to adopt similar standards, and these standards may in turn influence firms operating in these non-EU jurisdictions. This is an example of de jure Brussels effect, because the firms are legally required to comply with these new standards. In other cases, however, the firms may voluntarily decide to comply with EU law even in the absence of similar regulation outside the European Union, typically because doing so simplifies their business processes. An example is firms that modify their websites to comply with General Data Protection Regulation (GDPR) not just in the EU but globally, even when not legally required to do so.^[4]