A Sea Change in California Antitrust Law? CLRC Single-Firm Proposal Raises the Stakes for Algorithmic Pricing

The CLRC’s proposal reflects several substantive shifts that would meaningfully change how California evaluates unilateral conduct, particularly in pricing contexts. Increasingly, companies (including smaller businesses) are using dynamic pricing tools, which are software systems that automatically adjust prices based on factors such as demand, inventory or competitor changes.

Potential Shifts from Federal Antitrust Law to Watch
The CLRC recommendations suggest movement in at least two areas with outsized relevance to pricing. The details will depend on the legislation as introduced and amended, but these are among the key developments to watch:

Predatory pricing: potential movement away from classic federal prerequisites
The CLRC recommendations signal a potential move away from the centrality of federal-style prerequisites that commonly frame predatory pricing disputes, particularly the traditional federal focus on the cost-based screens used in federal predatory-pricing cases.

Under federal doctrine, a predatory pricing claim generally requires (1) pricing below an appropriate measure of cost and (2) a realistic path to recoup those losses later. These screens exist to prevent ordinary discounts, promotions and inventory-driven markdowns from being mischaracterized as anticompetitive. (See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).)

Dynamic pricing and promotional systems can generate aggressive short-term prices for ordinary business reasons, such as markdowns and clearance pricing, inventory-driven discounts, introductory offers and automated competitor matching. As currently written, the CLRC draft would instruct courts that liability for single‑firm conduct does not require satisfaction of traditional federal predatory‑pricing screens, including (among other things) a finding that “the defendant’s price for a product or service was below any measure of the costs to the defendant for providing the product or service required under federal antitrust law,” or that “the defendant is likely to recoup the losses it sustains from below-cost pricing of the products or services at issue.”

If California moves toward a regime that relaxes traditional federal screens, aggressive short‑term prices produced by automated tools may be viewed as harming competitors rather than reflecting ordinary discounts or promotions. That makes it more important for companies to document the business reasons for those prices and to maintain clear oversight of how their pricing tools operate.

Platforms: reduced emphasis on cross-side “net effects” balancing
The CLRC materials suggest California may place less emphasis on requiring courts to weigh effects across multiple user groups at the outset of a case, an approach that federal courts have treated as essential in certain two‑sided markets. (See Ohio v. American Express Co., 585 U.S. 529 (2018) (AmEx).) In AmEx, the Court treated “transaction platforms” (i.e., where the product is a single transaction that simultaneously involves two distinct user groups) as requiring courts to assess competitive effects across both sides together.

In multisided-platform markets, “cross-side net effects” refers to how conduct affecting one group of users (e.g., merchants) impacts competitive conditions for another group (e.g., consumers). Federal courts typically require these effects to be weighed together in the context of transaction platforms. By contrast, as currently written, the CLRC draft would provide that “[a]nticompetitive effects in one market from the challenged conduct may not be offset by purported benefits in a separate market; and the harm to a person or persons from the challenged conduct may not be offset by purported benefits to another person or persons.”

Platform businesses often charge lower prices to one group of users to attract participation and grow the platform. If California adopts the CLRC’s proposed no‑offset language, companies may face greater pressure to demonstrate how their pricing structure benefits competition for the specific users and market being examined, without relying on cross‑side benefits to offset alleged harms.

California May Chart Its Own Path on Unilateral Conduct
The CLRC materials signal a potential move toward a distinctly new approach to single-firm conduct in California rather than a state-law mirror of federal Sherman Act Section 2. In practical terms, that direction matters because unilateral-conduct disputes often turn on early “screens,” or threshold issues that can narrow or end cases at the pleading stage under federal doctrine.

For businesses that price through tools, such as rules-based engines, dynamic pricing models, revenue-management software or other automated pricing workflows, scrutiny may focus as much on how the pricing system is designed and governed (e.g., how the tool is set up, what data it uses, and when human review applies) as on the resulting prices.

Why This Matters for Algorithmic Pricing Risk and Compliance
California has already been active in the algorithmic pricing arena, including through new statutory tools and related enforcement and multistate developments. The CLRC single-firm recommendations add another potential layer by signaling a more expansive unilateral-conduct framework that could interact with how automated pricing strategies are evaluated, challenged and defended. (For more information on California’s recent algorithmic pricing developments, see Pillsbury’s prior client alert, California Establishes New Criminal and Civil Liability Targeting Shared Pricing Algorithms and “Coercion,” and our Law360 coverage, New California Law Cracks Down on Algorithmic Price Fixing and California Toughens Penalties for Cartwright Act Violations).