AI price software fuels lawsuit over California gas hikes

Kalibrate AI-powered – A federal class-action lawsuit filed by three California drivers alleges a set of gas companies used Kalibrate’s AI-powered pricing software to keep fuel prices high—raising questions about whether antitrust rules can reach algorithm-driven price coordination.

For drivers in California, gas prices are already a daily negotiation. Now a new lawsuit argues that the price at the pump may be shaped by software built to squeeze more profit—using private data shared by gas stations and turning it into recommendations in real time.

Filed in federal court last week, the proposed class-action lawsuit is brought on behalf of three drivers. It accuses roughly a dozen companies and their subsidiaries—including Walmart and 7-Eleven—of using algorithmic software to fix prices. The company that provides the software, Kalibrate, is named as a defendant.

Kalibrate’s program, according to the lawsuit, encourages gas stations to upload private price data. Its AI-powered software. called Kalibrate Fuel Prices. then uses that information to recommend prices in real time. and the lawsuit points to Kalibrate’s own marketing materials describing the system as a way for gas companies to “squeeze out profit.”.

The legal fight lands in a moment when many Americans are already squeezed by the cost of living. Recent polling from Gallup found Americans are concerned most about housing and energy prices, including gas. In California, the stakes are magnified: taxes, environmental fees, and the Iran war have helped push fuel costs up.

On Tuesday, regular gas sold at an average of $5.43 a gallon in California, according to the American Automobile Assn.—more than $2 above states such as Texas and Oklahoma.

The lawsuit says Kalibrate’s software made prices even higher. It cites research on algorithmic pricing that found when a station adopted this kind of software, prices rose by an average of 6 cents a gallon.

Established in 1907. California’s antitrust law makes clear that it is illegal for companies to come together and agree on prices to charge customers. Antitrust experts say that kind of coordination is anti-competitive and harms consumers. Last year. California lawmakers updated the law to clarify that even if businesses don’t communicate directly. the use of algorithmic pricing software that leads them to charge a common rate could still be considered price-fixing.

Jamie Court. president of Consumer Watchdog. a national nonprofit based in California. described the problem this way: “If every gas station owner in an area got together … and set the price of gasoline. it would be an antitrust violation. ” Court said. “But if you have an algorithm do it for you, it’s no better.”.

Not everyone supports the expanded language. Several groups opposed adoption of the updated regulation, including the California Chamber of Commerce, which argued the language was too broad.

Eric Enson, a lawyer representing the chamber, said during a legislative hearing last year, “It doesn’t mean that all businesses using dynamic pricing or pricing algorithms are engaging in inflating prices.”

The lawsuit also adds to a broader national fight over whether technology can be used to tip markets toward higher prices—sometimes without companies needing to speak to one another. The complaint draws comparisons to earlier enforcement actions.

In 2024, the federal government sued RealPage, a Texas-based software company. The government alleged RealPage gathered private data from landlords to set rent prices and make it difficult for property managers to deviate from the software’s recommendations. In one instance described in the government’s complaint. a landlord reported that they increased rents after just a week of using the software. Within a year of adoption, their rent prices had grown 25%, the complaint said.

In 2025, the DOJ agreed to settle with RealPage and required the company to stop collecting landlords’ private rental data.

Legal scrutiny has also followed algorithmic pricing experiments outside housing. Last year. reporters found that the grocery delivery company Instacart was running AI-enabled pricing experiments on customers. and sometimes the approach resulted in a nearly $3 difference in the price of individual products. Robert Zeithammer. a professor at UCLA’s Anderson School of Management. said. “I wouldn’t be surprised if [this kind of individualized pricing] exists in all different kinds” of industries. “If you’re a car dealer, you could be doing it.”.

In the California gas case, lawyers argue that technology enables antitrust violations. Even if companies did not communicate their pricing strategies directly, the argument is that the software allows them to share data and keep prices above a certain threshold.

The attorneys used a familiar image of price fixing in the complaint. writing: “The quintessential image of price fixing is a secret deal made between competitors over cigars in a smoky back room.” They added. “But 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 case is being brought by attorneys representing two firms that include staff members who worked at the Federal Trade Commission during an era of bolstered antitrust enforcement under President Biden.

Kalibrate denies the accusations. In an email. Matias Toye. legal director at Kalibrate Technologies. wrote. “We disagree with the allegations in the lawsuit and intend to defend the company vigorously.” He added. “Kalibrate 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.”.

When The Times reached out to the companies named in the lawsuit, only Walmart responded, saying it would address the accusations in court.

As the lawsuit proceeds. it also arrives amid intensified attention on surveillance pricing—where a company uses a customer’s private data to show a cost fitted to them instead of charging a single rate to everyone. A bill currently filed in the state Assembly would outlaw surveillance pricing in California.

The federal government and states have begun investigating pricing strategies that companies report have led to higher profits. including that form of surveillance pricing. In 2024. the FTC asked eight companies to disclose how they used technologies such as AI and advanced algorithms to target individualized prices. In a publication summarizing some of its findings. the FTC wrote that companies said surveillance pricing had led to increased revenues of 2% to 5% while also helping them lower costs.

In January, California Atty. Gen. Rob Bonta announced an investigation into surveillance pricing, though it is not yet clear whether that inquiry has resulted in any action.

For critics, the core issue is not just the technology—it is the lack of ordinary competition. Ted Mermin. executive director at the UC Berkeley Center for Consumer Law & Economic Justice. said. “People can’t afford to make ends meet. ” and added. “Why is that?. A lot of that has to do with there is no competition. And people know that.”.

In the drivers’ lawsuit, the claim is more direct: that algorithmic pricing systems can become a modern route to coordinated, profit-seeking price behavior—and that California’s antitrust law must be able to reach it even when the coordination happens through code rather than a handshake.

California antitrust law algorithmic pricing AI pricing software gas prices Kalibrate Fuel Prices Kalibrate Technologies Walmart 7-Eleven surveillance pricing FTC investigation Robert Zeithammer Consumer Watchdog RealPage Instacart cost of living