On October 6, 2025, Governor Gavin Newsom expanded the scope of California’s antitrust laws by signing Assembly Bill 325, an amendment to the Cartwright Act, California’s primary antitrust statute. AB 325 prevents the use of algorithms to coordinate pricing among competitors, creates liability for efforts to coerce compliance with pricing tool recommendations, and clarifies the bar for plaintiffs pleading conspiracies under the Cartwright Act. The original author of AB 325, Majority Leader Cecilia Aguiar-Curry, stated that the purpose of the bill is to “stop big corporations from using digital tools to collude and drive up costs for our working families and small businesses.”1
AB 325 prohibits competitors from using or distributing a “common pricing algorithm” to restrain trade. A common pricing algorithm is defined as any methodology, including a computer, software, or other technology that uses “competitor data” to “recommend, align, stabilize, set, or otherwise influence a price or commercial term.” The term “competitor data” is not defined so it could be public or non-public data. Notably, “price” includes not only payment for goods and services but also compensation paid to employees or contractors, reflecting California’s focus on labor markets as well as consumer markets.
AB 325 also makes it unlawful for algorithm users or distributors to "coerce[]" others to adopt prices or commercial terms recommended by the algorithm, allowing liability even in situations where there was no agreement or understanding among the parties using the tool.
AB 325 finally clarifies the pleading threshold for private plaintiffs alleging Cartwright Act violations (even beyond the use of algorithms). AB 325 states that a plaintiff must allege “plausible” facts showing the existence of a contract, combination, or conspiracy to restrain trade, and is not required to plead facts that exclude the possibility of independent action. This clarifies the bar for plaintiffs to file antitrust claims under California state law, potentially motivating plaintiffs to bring more claims.
In addition to amending the Cartwright Act, AB 325 can also be expected to expand liability under the California Unfair Competition Law (UCL). The UCL, in general terms, prohibits business conduct that is “unlawful,” “unfair,” or “fraudulent.” Violations under AB 325 would generally violate the “unlawful” prong of the UCL and may also lead to liability under the “unfair” prong even where AB 325 is not itself violated. Given the quickly evolving technology and policies in this space and its political salience, firms should expect private plaintiffs, and possibly the California Attorney General, to probe the limits of “unfair” use of algorithm pricing tools under the UCL.
Key Takeaways
- Businesses should audit usage and policies around pricing tools. If possible, firms should avoid using tools that are designed to set pricing. Firms should also establish policies and consider training to ensure that recommendations are reviewed and, where possible, validated independently before being implemented.
- Businesses should avoid tools that rely on confidential information. Firms should also avoid, if possible, the use of tools based on confidential or competitively sensitive information. If the tool does use such information, firms should bring in counsel to advise on a path forward.
- Businesses should implement safeguards to ensure anonymity. Firms should establish guardrails to limit knowledge of whether and how competitors may be using the same tools. There should be clear documentation that the tool is purposely safeguarding the anonymity of its sources and users.
- Pricing tool developers should take care in documenting and marketing their products. Developers should position their tools as promoting competition by enabling customers to independently make use of market insights. Tools should not be positioned as allowing customers to “be in line” with the market or as providing one side of the market an advantage over the others.
- Pricing tool developers should provide the relevant output in an open and nonbinding manner. Tools that provide information to both sides of the market (i.e., both buyers and sellers) are lower risk. Moreover, developers should take care not to steer users toward accepting tool recommendations.
[1] Governor Newsom also signed into law Senate Bill 763, which increases criminal fines for individuals from $250,000 to $1 million and criminal fines for corporate violators from $1 million to $6 million per violation of the Cartwright Act. SB 763 also implements civil penalties of up to $1 million per violation that courts can impose based on factors including the nature, seriousness, and persistence of the misconduct.
