For well over 100 years, the United States government has been firmly opposed to price-fixing, antitrust operations, and monopolies. One might argue that healthy competition is the foundation of every functioning capitalist society. Without competition, oligarchs and mega corps consolidate their power and begin to exert frightening amounts of power not only on the American people but also on the entire government structure. Antitrust legislation dates back to the Sherman Antitrust Act of 1890, when people could not even imagine the power of AI. Today, machine learning is powering a new debate on this subject. If you face allegations of algorithmic price fixing because of your AI startup, you should consider speaking with an experienced technology lawyer in the United States.

California Drivers Sue Gas Station for Algorithmic Price Fixing Immediately After New Law Passes

In June of 2026, multiple sources reported that a group of disgruntled drivers in California had sued various gas stations for alleged algorithmic price fixing. In their class-action lawsuit, the plaintiffs allege that the gas stations in question all used the same AI platform to set their prices. This AI platform acted like a “neural network,” effectively allowing different gas stations to communicate with each other in the digital world and agree upon their prices.

From the perspective of the AI provider, the tool was functioning exactly as it was designed to do. It helped raise prices and improve profits for gas stations across California. In the eyes of the drivers, this was perhaps the most blatant price-fixing scheme ever concocted. The plaintiffs allege that gas prices soared by 30 cents per gallon after the companies adopted the AI tool, with some gas stations charging as much as $7 per gallon.

What makes this case interesting is the fact that the plaintiffs filed their lawsuit almost immediately after California amended its age-old antitrust law, the Cartwright Act. Previously, the outdated text did not sufficiently cover AI algorithmic price fixing. A recent change specifically adds this type of price-fixing into the statute, allowing the plaintiffs to quickly take action.

The outcome of this case is not yet clear, and many of the defendants probably weren’t even aware of what the AI platform was doing in the digital world. As far as they were concerned, there was no need to dive into the code and figure out what was causing increased profits. However, these companies could have perhaps taken more effective steps to ensure legal compliance, especially after the passing of the new amendment in California.

Which States Have Banned Algorithmic Price Fixing?

As of this writing, only three states have banned algorithmic price fixing: Connecticut, New York, and California. However, California and New York are two of the most populous and influential states in the country. Others may soon follow, especially as average consumers “wise up” to what’s going on behind the scenes.

These states recognize the shortcomings of the Sherman Act. Specifically, companies may be able to avoid violating the act if there is no evidence of communication between them. An AI solution introduces an intermediary that links these companies together and helps them “agree” on prices without any obvious communication trails or written contracts. As a result, AI makes it possible to engage in what many legal scholars would call “price fixing” without actually violating the Sherman Act.

The solution is to amend state laws to fill these gaps. California made it illegal to “distribute” any pricing algorithm between companies. This only becomes illegal when two or more companies share a pricing algorithm, and it does not make pricing algorithms illegal if used internally within a single company. A separate amendment makes it easier for ordinary plaintiffs to bring allegations to civil court.

New York’s amendment to its own antitrust law (the Donnelly Act) only applies to the residential rental market. Algorithmic price fixing among landlords is one of the most controversial issues on this subject, and has infuriated tenants around the country. Connecticut also focuses only on the housing rental world with its algorithmic price-fixing laws.

Does Federal Law Ban Algorithmic Price Fixing?

Why are states forced to amend their own antitrust legislation? Why can’t the federal government simply amend the Sherman Act? In theory, the existing Sherman Act should be enough to prohibit algorithmic price fixing on its own. However, the Supreme Court is still attempting to clear up this debate before issuing a final ruling.

The outcome is still unclear. Corporate interests, particularly those connected to the residential real estate industry, are trying their best to argue that an AI platform’s right to communicate with companies via algorithmic price fixing software is protected by the First Amendment.

The key debate is over whether the actual source code in a price-fixing algorithm should be defined as “speech” or “economic activity.” If courts decide that the code is economic activity, then the First Amendment argument falls flat. If courts decide that the code is speech, then that communication between companies should be protected under the First Amendment.

In any case, AI startups involved with algorithmic pricing (one of the most booming areas within the AI industry) should carefully monitor this situation, ideally with guidance from a lawyer. The fact that California has adopted some of the strongest laws against algorithmic price fixing suggests that Silicon Valley may be less friendly toward certain AI tech startups than some would have imagined.

Contact John P. O’Brien, Technology Lawyer, for Further Guidance

States are beginning to amend centuries-old antitrust legislation to reflect the emergence of AI. As a result, companies and AI platforms are facing new litigation threats. Even if your AI solution makes businesses successful and performs exactly as it should, you could still face lawsuits and other consequences due to unintentional violations of state price-fixing laws. Whether you find yourself in this situation or you simply want to remain legally compliant, a conversation with an experienced technology lawyer in the United States could be helpful. Contact John P. O’Brien, Technology Lawyer, today at (732)-219-6641.