Algorithmic pricing—using software to dynamically set prices based on market conditions, competitor data, and demand signals—is now a compliance risk as well as a business strategy. California's AB 325, which took effect January 1, 2026, is the most significant state-level restriction on algorithmic pricing enacted anywhere in the United States. Meanwhile, other states are actively legislating, and federal regulators have been scrutinizing "surveillance pricing" practices since 2024.
California AB 325 and SB 763: The New Antitrust Standard (Effective January 1, 2026)
On October 6, 2025, California's governor signed AB 325 and companion bill SB 763, amending the Cartwright Act to address AI-driven pricing.
What AB 325 Prohibits
AB 325 adds Section 16729 to the California Business and Professions Code and prohibits two related practices:
- Using or distributing a common pricing algorithm as part of a conspiracy to restrain trade. A "common pricing algorithm" is any software or technology used by two or more persons that uses competitor data to recommend, align, stabilize, set, or otherwise influence a price or commercial term. There is no exception for algorithms using only publicly available competitor data.
- Coercing others to adopt algorithm-recommended prices. The law creates liability when a user or distributor of a pricing algorithm pressures another business to follow the algorithm's pricing recommendations—even without a formal agreement.
The Expanded Definition of "Price"
The statute's definition of "price" explicitly includes employee and independent contractor compensation. Platforms that use algorithms to set pay rates for gig workers, and that share any market compensation data with competitors through a common software platform, face exposure under this provision. This was one of the more consequential and less-publicized aspects of AB 325.
What AB 325 Does Not Prohibit
The law does not prohibit dynamic pricing per se. A company setting its own prices based on its own sales data, inventory levels, and cost models—without using competitor data and without any coordinated arrangement with competitors—is not covered. The concern is coordination, not optimization.
Enhanced Penalties Under SB 763
| Violation Type | Prior Maximum | New Maximum |
|---|---|---|
| Criminal fine (corporate) | $1 million | $6 million per violation |
| Criminal fine (individual) | $250,000 | $1 million per violation (applies to any person, corporation, or business entity in AG civil actions) |
| Civil penalty (state enforcement) | Not available | Up to $1 million per violation |
| Treble damages (private action) | Available | Still available |
These penalties apply to all Cartwright Act violations, not just algorithmic pricing cases. See our full AI law penalty calculator for state-by-state penalty comparisons.
The Lowered Pleading Standard
AB 325 explicitly rejects the federal Twombly pleading standard for California antitrust claims. Complaints alleging algorithmic price-fixing now survive early dismissal more easily, pushing defendants into expensive discovery. This procedural change applies to all Cartwright Act claims evaluated after January 1, 2026. Expect increased class action activity in this space.
New York: Residential Rental Housing
New York's legislature advanced A1417B, which targets algorithmic pricing recommendations in residential real estate and would prohibit the use of nonpublic rental market data to facilitate rental price-fixing through algorithmic coordination. As of June 2026, the bill was pending in committee. Track current status on our New York AI law page.
Federal Scrutiny: Surveillance Pricing
The Federal Trade Commission issued orders to eight major companies in 2024 demanding information about their use of "surveillance pricing"—the practice of using individual consumer data (browsing behavior, location, purchase history) to charge different prices to different consumers for the same product. While not yet the subject of specific federal legislation, the investigation signals potential rulemaking or enforcement action. Businesses using AI to personalize prices at the individual consumer level should closely monitor FTC developments and assess whether their practices could be characterized as deceptive under Section 5 of the FTC Act.
Sector-Specific Considerations
Residential Rental Housing
The highest-profile algorithmic pricing controversy involves residential rentals, where software companies aggregated landlord rent data and provided pricing recommendations that critics argue resulted in coordinated rent increases. These practices are the direct target of the New York bill and a wave of class action litigation.
Healthcare Pricing
AI-driven pricing tools used by hospitals for patient billing may implicate both state algorithmic pricing laws and existing state prohibitions on unfair insurance practices. California's Unfair Insurance Practices Act already restricts certain pricing practices; AB 325 adds an additional layer for any competitive data-sharing component.
Compliance Steps
- Audit your pricing software. For every pricing tool, identify whether it is multi-tenant, whether it ingests competitor data (public or private), and whether that data is used to generate recommendations shared with or influenced by other users of the same platform.
- Review vendor agreements. If you use a SaaS pricing platform, review its data-sharing practices with other clients. A coordinated pricing signal—even if unintentional—may create exposure.
- Document your pricing rationale. Maintain records showing pricing decisions are based on your own cost and market analysis, independent of any shared algorithm output.
- Assess labor compensation platforms. If your company uses software to benchmark or set compensation rates, determine whether that software aggregates competitor compensation data.
- Consult antitrust counsel. AB 325's intersection with California antitrust law is relatively new, and the full contours of enforcement are not yet defined.
For current status of algorithmic pricing legislation across all states, visit our algorithmic pricing laws tracker. You can also monitor active investigations on our enforcement action tracker.
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance specific to your situation.
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