USA – CALIFORNIA Trends and Developments Contributed by: Eric Enson and Ann Rives, Crowell & Moring LLP
rates or was trained with “nonpublic competitor data” , defined broadly to include data of a com - petitor in the same or a related market; or (ii) is used to set prices and other commercial terms where the algorithm is being used by another business in the same or a related market. In addition to its broad definition of data, AB325’s definition of “pricing algorithm” is similarly sweeping – encompassing “any com- putational process, including a computational process derived from machine learning or other artificial intelligence techniques, that processes data to recommend or set a price or commercial term” . As written, the bill would not only prohibit software used to set prices, but also technology used to measure and predict output and capac - ity needs. SB384 is even more expansive, prohibiting the use of any software, system or process that col - lects current or historical pricing or supply level data from two or more persons or from public databases for the purposes of analysing and creating pricing models based on that data, which has long been recognised as a legitimate, competitive method for analysing pricing and other commercial terms.
While both bills appear aimed at curbing col - lusion through pricing algorithms, both federal and California antitrust law via the Cartwright Act already prohibit agreements between com - petitors to fix the prices of goods and services – whether via an algorithm or otherwise. These bills would go further by imposing liability even if competitors do not agree on prices or on the use of algorithms employed to set prices. Both have the potential to stifle development and use of algorithmic and dynamic pricing technologies in California, which as the world’s fifth-largest economy, would have significant ripple effects across industries. What Comes Next for California? California continues to set the stage for aggres - sive enforcement and expansion of antitrust laws, separate from its federal counterparts. With the work by the CLRC, the coming year will likely bring significant legislation to the state Assembly dealing with increased regulation of single-firm conduct and more aggressive merger review, as well as the potential for increased civil and criminal penalties for antitrust violations. The interplay between stricter California regula - tion and existing federal law will likely be tested and challenged within the courts, but that fact alone is unlikely to dissuade California from its current trajectory of stricter regulation of anti- competitive conduct.
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