On October 6, 2025, California Governor Gavin Newsom signed two laws amending the Cartwright Act to create two new violations specifically focused on certain uses of “common pricing algorithms” by competitors. The amendments will take effect on January 1, 2026.
California’s new law reflects an ongoing focus by enforcers and legislatures across the country to combat use of pricing algorithms for anticompetitive purposes.
Spotlight on Algorithmic Pricing
Antitrust enforcers have increasingly scrutinized information exchanges through algorithms. Before February 2023, federal enforcers assessed information exchange among competitors with reference to various policy statements such as the “Antitrust Enforcement Policy Statements Issued for Health Care Industry,” the “Statements of Antitrust Enforcement Policy in Health Care,” and “Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program” (together, the “Information Sharing Guidelines”).1 The Information Sharing Guidelines established certain “safety zones” that defined types of conduct that the federal agencies said they would not challenge. To fall within the safety zones, the information exchanged had to: (1) be managed by a third party; (2) be more than three months old; (3) include data from at least five providers for each metric, with none of the participating providers’ data constituting more than 25 percent of that metric on a weighted basis; and (4) be sufficiently aggregated.2
The federal agencies withdrew the Information Sharing Guidelines in February 2023. At that time, Principal Deputy Assistant Attorney General for the Antitrust Division Doha Mekki explained that the Antitrust Division would have heightened concerns “[w]here competitors adopt the same pricing algorithms,” which may “lead to tacit or express collusion.”3 The Department of Justice (DOJ) and the Federal Trade Commission (FTC) echoed these statements in filings made in various cases alleging price-fixing through algorithms.4 For example, the DOJ and FTC argued that “competitors’ joint use of common algorithms can remove independent decision making,” and that price fixing through algorithms “must therefore be subject to the same condemnation as other price-fixing schemes.”5 The agencies elaborated that “[a]lthough not every use of an algorithm to set price qualifies” is an antitrust violation, there may be a violation where defendants “knowingly combin[ed] their sensitive, nonpublic pricing and supply information…with the knowledge and expectation that other competitors will do the same.”6
Shortly after withdrawing the Information Sharing Guidelines, DOJ and 10 state attorneys general sued RealPage, a supplier of revenue management software used in the rental housing industry, and several landlords that were alleged to use the software.7 The complaint alleges a hub-and-spoke conspiracy through common use of RealPage’s algorithmic pricing tool, which the enforcers claim allowed competitors to coordinate on pricing.8
Current enforcers remain focused on the potential anticompetitive effects stemming from algorithms. Assistant Attorney General Gail Slater recently said, “What we saw in RealPage was the shared algorithm that was running on proprietary, competitive, sensitive data that went to output, that went to price. I mean, this is bread and butter antitrust, right? And so, you know, 50 years ago it was a smoke-filled room, and today it’s an algorithm.”9
FTC Chairman Andrew Ferguson similarly observed: “Particularly on algorithmic collusion, which is taking a very, very traditional antitrust theory of just ordinary collusion, people putting their heads together to raise prices or suppress output or divide markets, and adding into it this new wrinkle of algorithms, where the collusion, at least the intentionality of the collusion, may not be super obvious. I don’t think it’s a bad thing to have the FTC and its deliberative process participate in investigating and if necessary, enforcing the antitrust laws with regard to algorithmic collusion.”10
California Restricts Use of Common Pricing Algorithms
State legislators are also focused on addressing potential antitrust concerns arising from competitors’ common use of pricing algorithms to restrain trade. On October 6, 2025, California became the second state after New York to pass a law prohibiting certain uses of pricing algorithms. California antitrust enforcers appear focused on pricing algorithm-related concerns. Paula Blizzard, California’s head antitrust enforcer, recently commented that, “Breadth and adaptability to new industries are existing strengths of the antitrust laws” and that she “look[ed] forward to seeing what ends up being enacted into law” with respect to algorithmic pricing.11
California Assembly Bill 325 and Senate Bill 763 amend the Cartwright Act to make it unlawful to use or distribute a common pricing algorithm as “part of a contract, combination in the form of a trust, or conspiracy to restrain trade or commerce.”12 The bills define a common pricing algorithm as “any methodology, including a computer, software, or other technology, used by two or more persons, that uses competitor data to recommend, align, stabilize, set or otherwise influence a price or commercial term.”
Importantly, the bills do not ban all uses of algorithmic pricing; they only prohibit collusion that restrains trade through algorithmic tools. In effect, the bills simply make explicit what was already the law: illegal restraints of trade that are accomplished through algorithm are prohibited.
The bills also impose civil and criminal liability for any company that “coerces” another to adopt a price or commercial term through a common pricing algorithm.13 The bills do not define the term “coercion,” but the term may be deemed to cover conduct such as encouraging or incentivizing use of the algorithmic tool in pricing decisions. It is possible that courts might find that concept to include “give-to-get” data arrangements where companies agree to provide their data in exchange for industry-wide data.
AB 325 also makes changes that affect the pleading standard for civil claims brought under the Cartwright Act beyond those involving algorithmic pricing. Before AB 325, the case law required a plaintiff to allege facts suggesting that the conspirators’ conduct was coordinated and could not be explained as independent, parallel conduct. The bills do away with this requirement. Now, it “is sufficient to contain factual allegations demonstrating that the existence of a…[conspiracy] is plausible,” without also having to allege facts “tending to exclude the possibility of independent action.”14 That is, allegations merely suggesting that a conspiracy may exist could be sufficient, without the plaintiff having to also allege why the conduct could not simply be the result of independent, parallel conduct. This contrasts with the pleading standard that federal courts have developed for collusion claims under Section 1 of the Sherman Act, which requires factual allegations that tend to exclude the possibility of independent conduct.15 This more lenient pleading standard could make California a more favorable venue for conspiracy claims going forward.
Finally, the bills modify the civil and criminal penalties available for any violation of the Cartwright Act. A corporation found guilty of a criminal Cartwright Act violation will now be subject to a fine of up to $6 million; the previous fine was up to $1 million.16 Individuals found guilty of a criminal violation will be subject to one to three years imprisonment (previously there was no set minimum), a fine of up to $1 million (up from $250,000) or both.17 The bills also now allow civil penalties of up to $1 million per violation.18
Action Across the United States
California is not the only state to act to address potentially anticompetitive algorithmic pricing. New York passed its first algorithmic pricing law in May 2025, which only requires that companies disclose when they use personalized or dynamic pricing algorithms to set prices.19
In October 2025, New York enacted its second algorithmic pricing bill, S.7882. Unlike the California bills, S.7882 outright prohibits the use of algorithmic pricing tools in the residential rent context.20 Specifically, it is unlawful for a person or entity to operate, license or otherwise provide software, a service, or an algorithmic device with a “coordinating function” to residential rental property owners or managers. S.7882 does not distinguish between use of public or nonpublic data but rather imposes a blanket ban on use of any pricing or supply information from multiple landlords in a tool that recommends rent prices or terms to users of the algorithm.
Several other states have introduced legislation related to setting rental prices with assistance of an algorithm. For example, Washington recently introduced Senate Bill 5469, which would prohibit algorithmic rent fixing and noncompete agreements in the rental housing market.21 Georgia and North Carolina have introduced similar legislation.22 Additionally, several cities have passed ordinances that prohibit the use of algorithmic pricing in the rental market, including Berkeley, San Francisco, Hoboken, Minneapolis, Philadelphia and Jersey City.23
Key Implications
Enforcers have made clear that companies must avoid anticompetitive uses of algorithms. Not all algorithms raise competitive concerns, but California’s new laws present some risks that companies that seek to integrate algorithms into their business operations should consider.
- Companies should take care to ensure that pricing decisions remain independent and avoid engaging in conduct that could be construed as “collusive.” For example, companies should avoid automatically implementing pricing recommendations from algorithms and instead use them as a data point to inform unilateral pricing practices.
- The recent amendments to the Cartwright Act may make California a more attractive venue for cases alleging collusion through algorithms, particularly in state courts. We can also expect the California Office of the Attorney General to be a leader in this area. Companies based in, or with significant business in, California should take measures to minimize the possibility that their pricing practices could be challenged under the new law.
- Algorithms that rely on public data may be implicated by California’s new law, so companies will need to develop compliance strategies that carefully analyze algorithm use, even when the algorithm only uses public data.
