California drivers sue gas station chains, claiming AI helped inflate pump prices

California drivers already pay some of the highest gasoline prices in the country. Now a new federal lawsuit says part of the reason may be artificial intelligence.

A proposed class-action lawsuit filed in federal court in Sacramento accuses several major gas station operators — including Marathon, Circle K, BP, Speedway, EG America, Walmart and Albertsons — of using Kalibrate, an AI-powered fuel-pricing system, to coordinate higher prices at the pump.

The lawsuit – Casciani et al. v. Knowledge Support Systems Inc.– describes Kalibrate as the “central nervous system” of an alleged scheme to reduce or eliminate price competition among gas stations.

Instead of each station independently deciding whether to cut prices to attract customers, the complaint says Kalibrate allowed competing retailers to feed sensitive pricing, cost and sales-volume data into a common system that could recommend higher prices across a market.

The companies named in the lawsuit collectively operate more than 1,700 gas stations in California, according to the complaint. The proposed class would cover California drivers who bought gasoline at stations using Kalibrate software since June 2022.

The defendants have not yet answered the allegations in court. Kalibrate and the gas-station operators did not immediately respond to media requests for comment, according to reports.

The allegation: price fixing without the back room

Traditional price fixing is often imagined as executives secretly agreeing to raise prices. The California lawsuit says the modern version can happen through software.

“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 complaint says.

The lawsuit claims Kalibrate’s system discourages stations from undercutting nearby competitors and warns that aggressive discounting can trigger a “downward spiral.” The plaintiffs say that means the software does not simply help stations analyze the market; it allegedly helps competitors avoid competing.

One feature singled out in the complaint is a “restoration” tool that allegedly helps many stations in an area raise prices at roughly the same time and by a substantial amount. Plaintiffs say that kind of coordinated pricing can lift the floor for an entire local market, affecting even consumers who buy from stations not directly named in the lawsuit.

The complaint also says Kalibrate’s marketing materials encouraged gas retailers to turn over much of their pricing decision-making to the software. In one section, the lawsuit says Kalibrate has promoted the idea that users can automate as much as 90% of their pricing decisions.

What it could cost drivers

The lawsuit cites research on algorithmic fuel-pricing software that found average price increases of about 6 cents per gallon, with increases as high as 30 cents per gallon in markets where many stations used the technology.

That may sound small on a single fill-up. But across California’s enormous gasoline market, pennies add up quickly. The lawsuit estimates that each additional cent per gallon costs California drivers about $134 million a year statewide.

For a commuter filling a 15-gallon tank once a week, a 6-cent increase would add about 90 cents per tank, or roughly $47 a year. A 30-cent increase would add $4.50 per tank, or more than $230 a year. For households with multiple vehicles, long commutes or lower incomes, the impact can be much larger.

The complaint argues that those costs are especially painful in California, where drivers already face high fuel prices because of taxes, environmental rules, refinery constraints and recurring supply shocks.

Why this lawsuit matters beyond gasoline

The case lands in the middle of a broader national fight over algorithmic pricing.

Regulators and private plaintiffs have increasingly focused on software systems that collect competitors’ data and use it to recommend prices. The concern is not that businesses use software to set prices; nearly all large retailers do. The concern is that competitors may be relying on the same pricing engine, fed by shared data, to reach similar high-price outcomes without having to communicate directly.

The Department of Justice previously sued RealPage, accusing the rental-pricing company of helping landlords use shared data and algorithmic recommendations to raise rents. The DOJ also sued Agri Stats, alleging that data-sharing tools helped meat processors coordinate in ways that inflated grocery prices. Those cases helped frame a new antitrust question: When does pricing software become a substitute for a cartel?

California moved directly at that question last year when Gov. Gavin Newsom signed legislation making clear that the state’s antitrust law applies to common pricing algorithms. The gas-price lawsuit appears to be one of the first major tests of that law in a consumer market that millions of people experience every week.

What consumers should know

The lawsuit is still at an early stage, and the allegations have not been proven. A class action can take years to resolve, and drivers do not need to take immediate action unless a court later certifies a class and approves a notice process.

Still, the case is worth watching because it could shape how companies use AI to set prices in everyday markets. Gasoline is only one example. Algorithmic pricing is already common in apartment rentals, airline tickets, hotels, online retail, insurance and delivery services.

For consumers, the practical problem is transparency. A driver can see the price on the pump, but not the software or data behind it. If multiple nearby stations are using the same pricing system, consumers may have fewer real choices than they appear to have.

The lawsuit asks the court to award damages to affected California drivers and to stop the alleged use of Kalibrate software in ways that coordinate prices. If the plaintiffs succeed, the case could become a template for similar claims in other states and industries.

For now, the message is simple: the AI pricing fight has moved from rent and groceries to the gas pump.