A federal lawsuit alleging that gas companies in California are colluding to keep prices high through their use of AI-powered software will test the state\u2019s antitrust law at a time of growing concerns about the effects of technology on the high cost of living.<\/p>\n
Filed on behalf of three drivers last week, the proposed class-action lawsuit accuses roughly a dozen companies and their subsidiaries \u2014 including Walmart and 7-Eleven \u2014 of using algorithmic software to fix prices. The company that provided the software, Kalibrate, is named as a defendant. <\/p>\n
Kalibrate\u2019s program, according to the lawsuit, encourages gas stations to upload private price data. The company\u2019s AI-powered software, called Kalibrate Fuel Prices, then uses the data to recommend prices in real time, promising in its marketing materials to help gas companies \u201csqueeze out profit.\u201d<\/p>\n
The lawsuit touches on a growing conversation over how companies are using technology, including AI, to push prices higher.<\/p>\n
In a highly publicized case in 2024, the federal government sued<\/a> a company whose algorithmic pricing software was used by large landlords to share private rental data, recommend prices and drive apartment rents up. Last year, reporters found that the grocery delivery company Instacart was running AI-enabled pricing experiments<\/a> on customers, sometimes resulting in a nearly $3 difference in the price of individual products. <\/p>\n \u201cI wouldn\u2019t be surprised if [this kind of individualized pricing] exists in all different kinds\u201d of industries,said Robert Zeithammer, a professor at UCLA\u2019s Anderson School of Management. \u201cIf you\u2019re a car dealer, you could be doing it.\u201d<\/p>\n Lawyers in the gas station lawsuit assert that technology is enabling antitrust violations. Even if companies didn\u2019t communicate their pricing strategies to one another directly, the argument goes, the software is allowing them to share data and keep prices above a certain threshold.<\/p>\n \u201cThe quintessential image of price fixing is a secret deal made between competitors over cigars in a smoky back room,\u201d attorneys wrote in the complaint. \u201cBut as technology has advanced, so too have the mechanisms available to competitors to fix prices without the cigars, the smoke, or even the room.\u201d<\/p>\n The lawyers represent two firms that include staff members who worked at the Federal Trade Commission during an era of bolstered antitrust enforcement under President Biden. <\/p>\n The Times reached out to the companies named in the lawsuit, but only Walmart responded, saying it would address the accusations in court.<\/p>\n In a statement, Kalibrate denied the claims.<\/p>\n \u201cWe disagree with the allegations in the lawsuit and intend to defend the company vigorously,\u201d Matias Toye, legal director at Kalibrate Technologies, wrote in an email. \u201cKalibrate is committed to serving its customers with lawful, innovative fuel-pricing technology, and we remain focused on supporting our customers while respecting the litigation process.\u201d<\/p>\n The lawsuit comes as consumers report struggling to afford basic necessities. Recent polling from Gallup<\/a> found that Americans are concerned most about housing and energy prices, including gas.<\/p>\n In California, drivers pay some of the highest prices in the country. Taxes, environmental fees and the Iran war have pushed fuel prices up<\/a>; according to the American Automobile Assn., regular gas sold at an average of $5.43 a gallon on Tuesday, which is more than $2 above states such as Texas and Oklahoma.<\/p>\n The lawsuit alleges that Kalibrate\u2019s software drove prices at the pump even higher. It cited research on algorithmic pricing that found when a station adopted this kind of software, prices rose by an average of 6 cents a gallon.<\/p>\n Established in 1907, California\u2019s antitrust law makes clear that it\u2019s illegal for companies to come together and agree on prices to charge customers. The practice is anti-competitive and hurts consumers, antitrust experts say.<\/p>\n Legislators last year updated the law<\/a> to clarify that even if businesses don\u2019t communicate directly but use algorithmic pricing software that leads to them charging a common rate, that could still be considered price-fixing.<\/p>\n \u201cIf every gas station owner in an area got together \u2026 and set the price of gasoline, it would be an antitrust violation,\u201d said Jamie Court, president of Consumer Watchdog, a national nonprofit based in California. \u201cBut if you have an algorithm do it for you, it\u2019s no better.\u201d<\/p>\n Several groups opposed adoption of the updated regulation, including the California Chamber of Commerce, saying the language was too broad.<\/p>\n \u201cIt doesn\u2019t mean that all businesses using dynamic pricing or pricing algorithms are engaging in inflating prices,\u201d said Eric Enson, a lawyer representing the chamber, during a legislative hearing last year.<\/p>\n This is not the first time the use of nonpublic price data in algorithmic software has been the target of legal action. <\/p>\n In 2024, the U.S. Department of Justice sued RealPage, a Texas-based software company, alleging it gathered private data from landlords to set rent prices and make it difficult for property managers to deviate from these price recommendations.<\/p>\n In one instance, a landlord reported to RealPage that they increased rents after just a week of using the company\u2019s software. Within a year of adoption, their rent prices had grown 25%, according to the federal government\u2019s complaint.<\/p>\n In 2025, the DOJ agreed to settle<\/a> with RealPage. As part of the agreement, it demanded the company stop collecting landlords\u2019 private rental data.<\/p>\n In the case of Instacart, the company said it stopped letting grocery retailers use technology that offered different prices to different customers, after Consumer Reports and Groundwork Collaborative found that the technology led, in some cases, to a $10 difference between baskets of the same grocery items.<\/p>\n As consumers feel the budget crunch, there has been renewed focus on companies\u2019 pricing behavior, said Ted Mermin, executive director at the UC Berkeley Center for Consumer Law & Economic Justice.<\/p>\n \u201cPeople can\u2019t afford to make ends meet,\u201d he said. \u201cWhy is that? A lot of that has to do with there is no competition. And people know that.\u201d<\/p>\n The federal government and states have begun investigating pricing strategies that companies report have led to higher profits. This includes an increased scrutiny over the practice of surveillance pricing. <\/p>\n Surveillance pricing is when a company uses a customer\u2019s private data to show them a cost fitted to them, instead of charging every customer the same rate. A bill currently filed<\/a> in the state Assembly would outlaw surveillance pricing in California.<\/p>\n In 2024, the FTC asked eight companies to disclose how they used technologies such as AI and advanced algorithms to target individualized prices to customers. In a publication of some of their findings<\/a>, the FTC wrote that companies said surveillance pricing had led to increased revenues of 2% to 5% and, at the same time, had helped them lower costs.<\/p>\n