AI is helping gas stations collude to raise California fuel prices, lawsuit says

AI-powered software has allowed gas station operators across California to illegally collude and drive up prices at the pump, according to a federal lawsuit.

The proposed class action lawsuit, filed Monday, accuses gas station giants including Marathon and Circle K of violating California’s antitrust law through Kalibrate, a fuel-pricing software system used across the world. The plaintiffs describe Kalibrate as the “central nervous system for a conspiracy to extinguish retail price competition among gas stations.”

According to the lawsuit, Kalibrate helps “coordinate high prices” and even discourages its users from pricing their gas lower than competitors, saying that doing so would trigger 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 said.

Californians already pay some of the highest gas prices in the nation, and prices have surged across the globe since the start of the Iran war.

The lawsuit is the latest to accuse software companies of driving up the cost of living for millions in the U.S. Other examples include the Department of Justice’s lawsuit against RealPage, which has been accused of helping landlords drive up rent prices, and the DOJ’s lawsuit against Agri Stats, a data-sharing company accused of helping the meatpacking industry inflate grocery prices. The DOJ has settled both of those lawsuits in the past year, though various state attorneys general are still pursuing lawsuits against RealPage and numerous property management companies.

Concern over algorithmic pricing prompted Democratic California Gov. Gavin Newsom last year to sign a bill saying that state antitrust law applies to pricing algorithms, helping to pave the way for this week’s lawsuit.

Kalibrate is headquartered in Manchester, England, and operates in more than 70 countries. It did not respond to a request for comment Wednesday.

The lawsuit accuses Kalibrate of facilitating cartel-like collusion. Only this time, instead of competitors making a secret deal “over cigars in a smoky back room,” the price-fixing is done through AI, according to the lawsuit.

“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 says.

Among the examples the lawsuit lists is a “restoration” tool that helps “nearly all gas stations in an area raise their prices contemporaneously and by a large amount.”

According to the lawsuit, research into algorithmic fuel-pricing software found average price increases of about 6 cents per gallon, rising to as much as 30 cents per gallon in markets where many stations use the technology.

“Because of the volume of fuel sold across California, a single cent increase at the pump will drain a whopping $134 million from California drivers’ wallets every year across the state,” the lawsuit says.

The defendants in the lawsuit — which also include BP, Speedway, EG America, Walmart and Albertsons — collectively operate more than 1,700 gas stations in California, according to the lawsuit. None of them immediately responded to a request for comment.

The lawsuit seeks to represent California drivers who bought gas at stations using Kalibrate software since June 2022.