Lawsuit Alleges AI Software Facilitated Gas Price Collusion in California

A federal lawsuit filed Monday alleges that artificial intelligence software has been used by gas station operators across California to illegally collude and increase prices at the pump. The proposed class action names major gas station entities, including Marathon, Circle K, BP, Speedway, EG America, Walmart, and Albertsons, accusing them of violating California's antitrust law through the use of Kalibrate, a global fuel-pricing software system.

The plaintiffs describe Kalibrate as the "central nervous system for a conspiracy to extinguish retail price competition among gas stations." According to the lawsuit, the software helps to "coordinate high prices" and actively discourages users from undercutting competitors, warning that doing so could initiate a "downward spiral."

"Kalibrate promises that if gas stations surrender their pricing decisions and competitively sensitive cost and volume data to Kalibrate Fuel Pricing, the software will enable them to avoid competing with other area stations and to charge higher prices to consumers," the lawsuit states.

Californians already face some of the highest gasoline prices in the nation. Global fuel prices have also surged since the start of the Iran war.

This lawsuit is the latest in a series of legal actions targeting software companies for allegedly contributing to increased living costs. Similar accusations have been leveled in lawsuits brought by the Department of Justice against RealPage, accused of facilitating rent price hikes, and Agri Stats, a data-sharing company alleged to have aided the meatpacking industry in inflating grocery prices. While the DOJ has reached settlements in both of those cases, some state attorneys general are still pursuing legal action against RealPage and various property management firms.

Concerns about algorithmic pricing led California Governor Gavin Newsom to sign a bill last year asserting that state antitrust law applies to pricing algorithms, which proponents say helped pave the way for the current lawsuit.

Kalibrate, headquartered in Manchester, England, operates in over 70 countries and did not immediately respond to a request for comment. The lawsuit contends that Kalibrate facilitates cartel-like collusion, but instead of secret agreements, the price-fixing occurs through AI. "As technology has advanced, so too have the mechanisms available to competitors to fix prices without the cigars, the smoke, or even the room," the lawsuit argues.

The suit cites a "restoration" tool within Kalibrate that allegedly helps "nearly all gas stations in an area raise their prices contemporaneously and by a large amount." Research cited in the lawsuit suggests that algorithmic fuel-pricing software has led to average price increases of approximately 6 cents per gallon, with some markets experiencing hikes of up to 30 cents per gallon where the technology is widely adopted.

Given the volume of fuel sold in California, a single cent increase per gallon is estimated to cost drivers across the state $134 million annually, according to the lawsuit. The defendants collectively operate more than 1,700 gas stations in California. None of the named defendants immediately responded to requests for comment.

The lawsuit aims to represent California drivers who purchased gasoline at stations utilizing Kalibrate software since June 2022.