Dynamic pricing software has quietly become standard equipment. Landlords use it to set rents, hotels and short-term-rental hosts use it to set nightly rates, and retailers and service businesses use it to adjust prices in real time. Much of that software is supplied by third-party vendors whose value proposition is that they aggregate market data—sometimes including competitors' data—to recommend the “optimal” price. As of January 1, 2026, that practice carries serious new legal risk in California. Assembly Bill 325 amends California's Cartwright Act to restrict “common pricing algorithms,” to create liability for coercing others to follow algorithm-recommended prices, and—most consequentially—to lower the pleading standard for antitrust claims.

This guide explains what AB 325 prohibits, how broadly its key definition reaches, the steep penalties it carries, why the new pleading rule dramatically raises litigation risk, and what California businesses that rely on pricing software should do now. Our firm represents companies in business and commercial disputes across California.

Background: The Cartwright Act and the Shared-Algorithm Problem

The Cartwright Act (Bus. & Prof. Code § 16700 et seq.) is California's principal antitrust statute. It has always prohibited agreements among competitors to fix prices. The difficulty in the algorithm era is that price coordination no longer requires a secret meeting or an explicit handshake. When multiple competitors each feed their data into the same third-party pricing tool and then follow its recommendations, the result can look and function like coordinated pricing—even though the competitors never spoke. High-profile litigation over rent-setting software brought this concern into the mainstream, and AB 325 is California's direct legislative response.

What AB 325 Prohibits

AB 325 establishes two core prohibitions under the Cartwright Act. First, it expressly bars using or distributing a common pricing algorithm to collude on price. Second, it prohibits coercion: a person may not use or distribute a common pricing algorithm to coerce another person to set or adopt a price or commercial term that the algorithm recommends for the same or similar products or services in California. Together, these provisions target both the pooling of competitor data to align prices and the strong-arming of others into following algorithmic recommendations.

The “Common Pricing Algorithm” Definition Is Broad

The reach of AB 325 depends on a single, expansive definition. A “common pricing algorithm” is “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.”

Two triggers do the work here. The tool must be used by two or more persons, and it must use competitor data. That sweeps in a wide range of ordinary third-party pricing and revenue-management products—not just the notorious examples. Many business owners do not actually know whether the pricing vendor they use pools competitors' nonpublic data, which is exactly why this definition deserves close attention.

The Lowered Pleading Standard: Why This Is the Real Headline

The most important change for litigation risk is procedural. AB 325 adds Section 16756.1 to the Business and Professions Code, establishing a plaintiff-friendly pleading standard for Cartwright Act claims. Under the new rule, a complaint survives a challenge on the pleadings if it alleges facts that make a conspiracy plausible—and a plaintiff is not required to allege facts that tend to exclude the possibility of independent action.

That is a deliberate departure from the stricter federal standard that has long allowed defendants to dispose of thin antitrust cases early. The practical consequence is significant: more algorithmic-pricing suits will survive the demurrer stage, which means more cases proceed into expensive discovery and carry far greater settlement pressure—regardless of their ultimate merit.

Penalties and Remedies

The stakes under the amended Cartwright Act are high, and the remedies are cumulative. Companion legislation signed the same day—Senate Bill 763—authorizes civil penalties of up to $1 million per violation in actions brought by state enforcers. SB 763 also raises criminal exposure sharply: a corporation convicted of a criminal Cartwright Act violation now faces a fine of up to $6 million (up from $1 million), and an individual faces one to three years of imprisonment and a fine of up to $1 million. On top of public enforcement, private plaintiffs may still pursue treble damages and attorney's fees under Business and Professions Code § 16750. The combination of public penalties, private treble damages, and an easier path past the pleadings is what makes AB 325 a genuine business risk rather than an academic one.

Who Should Pay Attention

Any California business that uses third-party software to set or recommend prices should evaluate its exposure. The risk is most acute for multifamily and residential landlords, hotels and short-term-rental operators, retailers, healthcare providers, and any business in a concentrated market that relies on a vendor tool fed by competitor data. Importantly, AB 325 is not aimed only at the software developers. Businesses that use a common pricing algorithm are within the statute's reach, so “we just bought the tool” is not a shield.

How to Reduce Your Exposure

• Audit your pricing tools. Determine whether any tool you use ingests competitors' nonpublic data and whether the same tool is used by your competitors.
• Avoid data-pooling pricing tools. Be especially cautious of products that aggregate competitor data to recommend or align prices across firms.
• Preserve independent pricing discretion. Treat algorithmic outputs as one input among many, retain the final decision, and document that your pricing decisions are made independently.
• Do not coerce others to follow recommended prices. Avoid pressuring franchisees, partners, or distributors to adopt algorithm-recommended prices or terms.
• Get vendor representations and indemnity. Require the vendor to disclose its data sources and to represent that its tool does not use competitor data in a manner that violates the Cartwright Act—and negotiate contractual protections.
• Consult antitrust counsel before adopting or renewing any shared pricing or revenue-management tool.

Frequently Asked Questions

Q: We only use a pricing tool—we did not build it. Are we exposed, or just the software company?
A: Both can be exposed. The statute reaches persons who use a common pricing algorithm, and coordination or coercion theories reach the businesses that adopt the recommendations, not just the developer.

Q: Is all dynamic or automated pricing now illegal in California?
A: No. Setting prices for your own products using your own data and your own judgment remains lawful. AB 325 targets shared algorithms that use competitor data among two or more persons, and the coercion of others to adopt recommended prices.

Q: What does the “lowered pleading standard” actually mean for my business?
A: It means antitrust claims are harder to dismiss at the outset. Even a weak case can now survive long enough to force costly discovery and create settlement pressure, so the cost of being sued rises even when you have done nothing wrong.

Q: Does AB 325 only apply to large corporations?
A: No. The Cartwright Act applies broadly, and small and mid-sized businesses that use common rent-setting or price-setting tools are squarely within scope.

Q: What is the first thing we should do?
A: Inventory every pricing tool you use and identify whether any of them rely on competitor data shared across firms. If the answer is yes or unclear, consult counsel before continuing to use the tool.

This article is provided for general informational purposes and is not legal advice.

Need help? Contact Kolmogorov Law, P.C. at (909) 235-6116 or visit kolmogorovlaw.com to schedule a consultation with our business litigation team in Irvine, California.