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What You Need to Know
- Key takeaway #1 If you currently use pricing software or an algorithm to set prices and other terms in California, particularly for multiple entities, this practice may soon be under closer scrutiny.
This week, California Governor Newsom signed a new California pricing law that will have significant impact to companies doing business in California. The new legislation—known as AB325—will go into effect January 1, 2026 and makes it unlawful under California's Cartwright Act to collude using a pricing algorithm and to "coerce another person to set or adopt a recommended price or commercial term" using a "common pricing algorithm."
The new law's prohibition on collusion through a pricing algorithm largely restates current law. But AB325 also calls for criminal and civil liability for any company that "coerces" another to adopt a price or commercial term via a common pricing algorithm. A key feature of the new law is its broad definition of what constitutes a "common pricing algorithm;" namely, "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."
Although the new law should not apply to companies using their own proprietary pricing software for their own use, companies engaged in enterprise or platform pricing may be covered, particularly without a clear definition on what constitutes coercion. Not only does the legislation not define the term, but historically courts have evaluated the existence of coercion in antitrust matters on a case-by-case basis with no single statutory definition under federal or state law.
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