California Establishes New Criminal and Civil Liability Targeting Shared Pricing Algorithms and “Coercion”

Two days later, on October 8, 2025, the governor signed into law SB 763, which increases the criminal and civil penalties for violations of the Cartwright Act. Taken together and in conjunction with other statements, these new laws signal strong and expanded antitrust enforcement in California.

What Are the New Offenses and Claims under AB 325?
AB 325 amends the California antitrust statute, known as the Cartwright Act (Cal. Bus. & Prof. Code §§ 16700–16770), and creates liability for (i) using or distributing a common pricing algorithm as part of a contract, combination or conspiracy restraining trade, or (ii) coercing another firm to adopt an algorithm’s recommended price or term for similar products or services in California. (Sections 16729(a) and (b).) It also codifies that Cartwright Act complaints are judged under a lower plausibility standard and need not plead facts that “tend to exclude” independent action at the complaint stage, which is required under Supreme Court precedent.

As background, pricing algorithms can take many forms such as:

• Dynamic Pricing (based on inventory and market conditions)
• Personalized Pricing (customer history)
• Rule-Based Pricing (using predefined conditions)
• Machine Learning-Based Pricing (such as regression analysis)
• Cost-Plus Pricing (adding fixed margin to cost of goods)
• Bundle Pricing (discounts for multiple goods), among many others.

AB 325 begins with a sweeping definition of “common pricing algorithm.” A “common pricing algorithm” is “any methodology”—software, computer 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.” (Section 16729(d)(3).) “Commercial term” includes level of service, availability and output; “price” includes employee and contractor compensation. “Distribute” covers selling, licensing or providing access (including by subscription). End consumers are excluded from “person.”

Two points bear emphasis. First, there is no public-data carveout—a shared methodology that relies on publicly available competitor information can still qualify as a “common pricing algorithm.” Second, the statute is aimed at shared tools. Bespoke, single-firm systems that do not use competitor data are not covered.

Four key areas of the new laws are highlighted. The first concerns the new standard “common pricing algorithm.” The second is the new “coercion” offense. The third involves enhanced criminal and civil penalties. Finally, the fourth significant change is the modified pleading standard which will encourage more litigation and discovery in California antitrust cases brought under the Cartwright Act.

• Defining “common pricing algorithm”—and reading “otherwise influence”
  As an overview, the definition requires two things: The tool or methodology is shared by at least two firms and it relies on “competitor data.” Multi-tenant vendor products, platform modules, franchise/network tools, and similar systems are examples if they ingest competitor data and influence outcomes (even indirectly).

Because the terms “common pricing algorithm” apply to both new offenses, it is important to understand the scope of this new standard. First, it applies to the use or distribution of “competitor data to recommend, align, stabilize, set, … a price or commercial term.”

Second, the phrase “otherwise influence” broadens the application beyond explicit price setting or pricing recommendations. The scope of these terms remains to be seen concerning constraints, defaults and design choices that may move outcomes toward alignment as well as the capacity or power to have an effect on “a price or commercial term.”

A single-firm algorithm trained solely on the firm’s own data, with no competitor inputs, is not prohibited. If challenged on the use or distribution of a “common pricing algorithm,” the firm would want to show that the price or commercial term was the product of independent action.

• New coercion offense
  Separately, AB 325 prohibits using or distributing a covered tool if the person coerces another firm to adopt the tool’s recommended price or commercial term. While the statute does not define “coercion,” legislative materials treat it as penalizing a firm that declines to accept the recommended price or commercial term.

This is a new standalone provision and statutory standard. It does not require a “contract, combination in the form of a trust, or conspiracy to restrain trade or commerce.” Instead, this second offense focuses on the use or distribution of a “common pricing algorithm” in a coercive manner “to set or adopt a recommended price or commercial term recommended by the common pricing algorithm for the same or similar products or services.”

As noted below, the penalties are substantial for this new offense. The cases will provide further guidance on the application and scope of this new standard.

• What are the new criminal and civil penalties?
  California has also increased the penalties for violations of the Cartwright Act. Criminal corporate fines have increased to $6 million (from $1 million) per violation, or twice the gain or loss, whichever is greater. (Section 16755(a)(1).)

For criminal convictions, an individual may be subject to imprisonment for one, two or three years; or not more than one year in a county jail; to a fine of not more than the greater of $1 million (previously $250,000); or twice the gain or loss, whichever is greater; or to both a fine and imprisonment. (Section 16755(a)(2).)

Civil liability continues to include treble damages, injunctive relief, reasonable attorney’s fees and the cost of the suit. (Section 16750.)

However, under a new provision, in a civil case brought by the Attorney General or district attorney, the statute (Section 16755.1(b)) provides for civil penalties up to $1 million per violation based on certain factors considered by the court or jury, including:

1. 1. 1. The nature and seriousness of the misconduct.
      2. The number of violations committed by the defendant.
      3. The persistence of the defendant’s misconduct.
      4. The length of time over which the defendant’s misconduct occurred.
      5. The willfulness of the defendant’s misconduct.
      6. The defendant’s assets, liabilities and net worth.
      7. The extent to which the defendant cooperated in the Attorney General’s or district attorney’s investigation and litigation.

The new law confirms that, unless otherwise provided, the remedies and penalties under the Cartwright Act “are cumulative to each other and to the remedies or penalties available under other state law,” which would include California’s Unfair Competition Law.

While the last Cartwright Act criminal prosecution was 25 years ago in People v. Sherwin, 82 Cal. App. 4th 1404 (2000), the California Attorney’s General Office previously announced that it is “reinvigorating criminal prosecutions under the Cartwright Act.”^[1]

The enhanced penalties elevate the risks of a Cartwright violation along with the use or distribution of “common pricing algorithms” under the new offense.

New Pleading Standard in California after AB 325

What the statute says. A Cartwright Act complaint will be sufficient if it alleges facts that make a contract, combination or conspiracy plausible. The plaintiff does not need to allege facts that tend to exclude independent action at the pleading stage. (Section 16756.1.)

Where that leaves existing doctrine. California remains a fact-pleading jurisdiction under Code Civ. Proc. § 425.10. A complaint must allege essential facts, rather than assert bare conclusions, that, if proven, would support each element of the cause of action.

AB 325 does not change that requirement. Instead, the section now clarifies that allegations that make a conspiracy plausible are sufficient at the pleading stage. The statute rejects the plausibility pleading requirements under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007), which requires allegations “pointing toward a meeting of the minds.” Instead, the standard “tending to exclude the possibility of independent conduct,” will arise at the summary judgment state consistent with Aguilar v. Atlantic Richfield, 25 Cal.4th 826 (2001), which require that: “A plaintiff must present evidence that tends to exclude, although it need not actually exclude, the possibility that the alleged conspirators acted independently rather than collusively.”

Litigation implications. Cartwright cases are now more likely to reach discovery in California cases. Early motion practice will focus less on importing federal “plus-factor” screens and more on whether the complaint’s facts about the tool or methodology make agreement or coercion plausible. Summary judgement will focus on the independent conduct issues.

Where This Meets Current Litigation and Enforcement
Recent cases on algorithmic pricing show both sides of the risk. On one side, courts have credited allegations that vendors pooled rival data and that customers followed recommendations at high rates, and DOJ has supported the view that a shared tool can facilitate a Sherman Act Section 1 agreement. In contrast, courts have rejected complaints that alleged only a common vendor without facts suggesting an agreement, nonpublic data exchanges or standardized adherence. Earlier DOJ matters likewise confirm that software can implement an unlawful agreement once rivals commit to align. Against that backdrop, AB 325 can be seen as targeting shared tools that use or distribute competitor data and coercive adoption practices, while lowering the pleading bar sufficient to sustain a claim.

What Companies Should Do Now

• List algorithmic pricing tools. Identify all tools that affect price, fees, availability or output, ranking/visibility, or pay in California. Note any tool used by more than one firm and any tool that uses competitor data, using public information or not.
• Update compliance policies. Last year, the Antitrust Division updated its compliance standards to include “new technologies such as … algorithmic revenue management software.”^[2]Company policies should be reviewed and updated. Review whistleblower program based on the new Antitrust Division Whistleblower Rewards Program.^[3]
• Update contracts and settings. Review current contracts concerning the pooling or reuse of your nonpublic data. Avoid mandatory terms concerning price or “commercial terms” under the new law. State clearly that deviation is permitted.
• Avoid conduct that may be deemed retaliatory/coercive. Avoid conduct that may be construed as coercing others to set or adopt a price or commercial term based on a common pricing algorithm for the same or similar products or services. Consider neutral ranking criteria.
• Demonstrate independent decision-making. Maintain records that establish that pricing and other decisions are the product of independent decision-making.
• Prepare for California litigation practice. Update demurrer and motion-to-dismiss playbooks for the plausibility standard. Anticipate discovery issues. Develop litigation strategies for the summary judgment stage.
• Obtain legal guidance. Consult experienced antitrust counsel to evaluate exposure under the new law and the Sherman Act and mitigate risk under the enhanced penalties.

Key Takeaway
AB 325 does not make algorithms unlawful. Rather, it targets shared tools that use competitor data—including those that influence outcomes indirectly—and coercive practices that pressure adoption of the recommended price or commercial term under the “common pricing algorithm.” With California’s lower pleading threshold, cases involving algorithmic pricing and platform design are now more likely to move into discovery in California.

^{[1]   See M. Krotoski & M. Sibarium, California to Focus on Criminal Antitrust Enforcement (March 25, 2024); see also B. Eslinger, Top Calif. Antitrust Atty Says Criminal Cases On The Horizon, Law360 (March 6, 2024) (California Assistant Attorney General Paula Blizzard stating, “One of my initiatives in the last year is that we are reinvigorating criminal prosecutions under the Cartwright Act,”; “We have not brought a case in 25 years, but that will change.”).}

^{[2]   See M. Krotoski, “Landmark Antitrust Division Policy to Incentivize Corporate Compliance and Mitigate Antitrust Risk,” Bloomberg Law (Oct. 2019); M. Krotoski & P. Edmondson, “Key Areas to Consider Under the Updated Antitrust Division Corporate Compliance Guidelines” (Dec. 20, 2024).}

^{[3]   See M. Krotoski & V. Sidhu, “How to Know When to Use DOJ’s Antitrust Whistleblower Program,” Bloomberg Law (Sept. 3, 2025); see also M. Krotoski, V. Sidhu & M. Sibarium, “Antitrust Division Announces First-Ever Antitrust Whistleblower Rewards Program” (Aug. 19, 2025).}