Dive Brief:
- Several California residents have sued 7-Eleven, Circle K, BP and other retailers for allegedly using an AI-powered fuel pricing algorithm to increase gas prices in the state, according to a lawsuit filed in the U.S. District Court for the Eastern District of California, Sacramento division.
- The lawsuit alleges that these retailers use “an illegal, algorithmic price-fixing scheme” developed by Kalibrate, whose AI software uses data from competing gas stations to automate pricing.
- According to the lawsuit, each retailer has allegedly violated California’s main antitrust law. “These acts represent a modern, digital iteration of traditional price-fixing and combination that California law expressly forbids,” the plaintiffs allege in the lawsuit.
Dive Insight:
Kalibrate’s technology evaluates fuel pricing at gas stations and recommends optimal price points to balance margin and volume. Kalibrate can automatically push those price changes to pumps and retailers’ store signs. This can result in multiple direct competitors of Kalibrate’s retail customers using the algorithm and coordinating rather than competing on price.
The lawsuit, brought by several California residents, alleges that areas where fuel retailers use Kalibrate technology see a mean gas price increase of about six cents. Additionally, areas with a high percentage of sites using the technology allegedly see as much as a 30-cent increase.
The lawsuit also notes that the retailers violated California’s Assembly Bill 325, which prohibits businesses from using shared pricing algorithms to coordinate prices with competitors.
While AI can help c-store retailers automate rote tasks and free up workers’ time, this lawsuit shows that the technology can bring its own potential challenges.
Besides 7-Eleven, Circle K, EG America — now known as Cumberland Farms — and BP, the defendants include Marathon Petroleum, Walmart and Albertsons, as well as 10 “unidentified gasoline fuel retail companies operating in the State of California,” per the lawsuit. While many of the retailers being sued have franchised locations, the lawsuit claims these companies maintain “pervasive direct and indirect control” over many store-level decisions.
A Walmart spokesperson said in an email, “we are reviewing the complaint and will respond appropriately to the Court.” Cumberland Farms declined to comment. No other companies responded by press time to requests for comment.
