Antitrust Law Daily Wrap Up, ANTITRUST NEWS: California’s Cartwright Act amended to specifically encompass common pricing algorithms, (Oct 7, 2025)

By Peter Reap, J.D., LL.M.

The new law will also ease the pleading restrictions for restraints of trade.

Governor Newsom of California announced he has approved legislation (CA AB 325) on October 6, 2025, which will amend the state’s antitrust law, the Cartwright Act, by making “pricing algorithms subject to state antitrust law, thereby protecting consumers from price increases and false scarcity generated through unlawful collusion.” The bill, which becomes effective January 1, 2026, will also specify that complaints for restraint of trade shall not be required to allege facts tending to exclude the possibility of independent action.

Prohibited uses of common pricing algorithms. The bill adds a new section, 16729, to the Cartwright Act that makes it “unlawful for a person 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 in violation of this chapter.”

It also “shall be unlawful for a person to use or distribute a common pricing algorithm if the person coerces 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 in the jurisdiction of this state.”

“Common pricing algorithm” is defined to mean 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.

Pleading requirements. The bill also provides that for any alleged violation of the chapter, “it is sufficient to contain factual allegations demonstrating that the existence of a contract, combination in the form of a trust, or conspiracy to restrain trade or commerce is plausible, and the complaint shall not be required to allege facts tending to exclude the possibility of independent action.”

Legislative analysis of algorithms provision. According to legislative bill analysis provided by the California Legislative Information website, the bill’s prohibition on common pricing algorithms was intended to “modernize California's antitrust laws to address the emerging threat of algorithmic price fixing, where multiple businesses use shared pricing algorithms—often powered by AI or machine learning—to coordinate prices, reduce competition, and inflate costs to consumers.”

The analysis continues to describe how algorithmic tools now enable firms to engage in tacit pricing collusion without formal agreements. Thus, competition may be harmed even without direct communication between competitors.

Legislative analysis of pleading requirements provision. That same analysis also explains that the pleading requirements provision of the bill is a rejection of the continued application of high federal pleading standards for antitrust complaints to complaints alleging the use of common pricing algorithms. The analysis notes that “courts applying federal law have often dismissed such cases due to stringent pleading requirements.”

Under federal law, particularly after the Supreme Court's decision in Bell Atlantic Corp. v. Twombly, plaintiffs must allege facts that rule out independent conduct and show a "meeting of the minds"—a high burden that often leads to early dismissal, especially in algorithmic collusion cases. This bill explicitly rejects that heightened standard. Instead, it clarifies that under California law, a plaintiff need only allege plausible facts showing a contract, combination, or conspiracy in restraint of trade. Courts may not require allegations that exclude the possibility of independent parallel conduct. This makes it easier for legitimate claims to survive a motion to dismiss and reach discovery, where further evidence can be obtained.

Author comments. The author of the measure, Majority Leader Cecilia Aguiar-Curry (D-Winters), stated “I’ve worked closely with Attorney General Bonta, consumer advocates, the business community, and antitrust experts to make sure AB 325 is fair—that it protects innocent business owners and clearly defines when their competitors are cheating—so honest companies can keep competing. Whether you’re sitting in person or using technology, price fixing is cheating. It hurts honest business, California families struggling to make ends meet; frankly it hurts everyone except the cheaters.”

She added that the measure “will stop big corporations from using digital tools to collude and drive up costs for our working families and small businesses.”

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