On October 6, 2025, California Governor Gavin Newsom signed AB325, a law targeting the use and distribution of certain algorithmic pricing tools. This law is part of a larger legislative trend to try to rein in algorithmic pricing. But while other bills have focused narrowly on the rental housing market and languished in state legislatures, California’s bill targets pricing algorithms in all markets and will take effect in 2026. However, a violation of the new law requires a conspiracy or price coercion, so as a practical matter, it may not extend the range of violations already encompassed by the Cartwright Act.
What’s in the Law
- Big Picture
- Bans the use or distribution of a “common pricing algorithm” as part of a contract, trust, or conspiracy to restrain trade or commerce
- Bans a person from coercing another person to set or adopt a recommended price or commercial term recommended by the common pricing algorithm for the same or similar products or services
- Definitions
- “Common pricing algorithm” is defined 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
- The law does not distinguish between whether an algorithm relies on public rather than private or confidential data
- “Person” includes corporations, firms, partnerships and associations
- Private Right of Action
- The law amends the Cartwright Act, so the Cartwright Act’s private right of action applies
What’s Not Covered
- The law does not appear to target proprietary, internally developed algorithms. In other words, the law does not reach when a corporation’s algorithm recommends prices solely for that corporation.
Takeaways
- The use or distribution of an algorithm does not violate the law in the absence of a conspiracy or coercion regarding price.
- The law targets algorithms that use “competitor data” without defining that term, meaning that the law likely covers both public and nonpublic data.
- Two or more businesses cannot use the same pricing algorithm if the algorithm uses “competitor data.”
- Algorithms that only use internal, non-competitor data appear to be safe as long as they are used in-house only.
- In-house algorithms that use competitor data appear permissible as long as the algorithms stay “in-house”—a pricing algorithm that relies on competitor data cannot be “used by two or more persons.”
- Besides setting prices, the law also covers when algorithms influence any “commercial term,” for example the duration of a lease or other contract.