Today's Law As Amended


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SB-1154 California Preventing Algorithmic Collusion Act of 2024.(2023-2024)



As Amends the Law Today


SECTION 1.

 Chapter 8 (commencing with Section 17370) is added to Part 2 of Division 7 of the Business and Professions Code, to read:

CHAPTER  8. California Preventing Algorithmic Collusion Act of 2024
17370.
 This chapter shall be known, and may be cited, as the “California Preventing Algorithmic Collusion Act of 2024.”
17371.
 For purposes of this chapter, the following definitions apply:
(a) “Antitrust laws” has the same meaning as defined in the Clayton Act (15 U.S.C. Sec. 12), and includes Section 45 of Title 15 of the United States Code, and this part, including provisions commonly known as the Cartwright Act (Chapter 2 (commencing with Section 16700)).
(b) “Commercial term” means any of the following:
(1) Level of service.
(2) Availability.
(3) Output, including quantities of products produced or distributed or the amount or level of service provided.
(4) Rebates or discounts made available.
(c) “Distribute,” “distribution,” and “distributing” include selling, licensing, providing access to, or otherwise making available by any means, including through a subscription or the sale of a service.
(d) “Nonpublic competitor data” means nonpublic data that is derived from or otherwise provided by another person that competes in the same market as a person, or a related market. “Nonpublic competitor data” does not include information distributed, reported, or otherwise communicated in a way that does not reveal any underlying data from a competitor, such as narrative industry reports, news reports, business commentaries, or generalized industry survey results.
(e) “Nonpublic data” means information that is not widely available or easily accessible to the public, including information about prices, commercial terms, and related products or services, regardless of whether the data is attributable to a specific competitor or anonymized.
(f) “Person” has the same meaning as defined in Section 16702.
(g) “Price” means the amount of money or other thing of value, whether tangible or not, expected, required, or given in payment for any product or service, including compensation paid to an employee or independent contractor for services provided.
(h) “Pricing algorithm” means any computational 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 within the jurisdiction of this state.
17372.
 (a) Upon written request by the Attorney General, a person shall, no later than 30 days after the date of the written request or any later date approved by the Attorney General, provide to the Attorney General a written report on each pricing algorithm identified in the request.
(b) Each report pursuant to subdivision (a) shall include all of the following:
(1) Information on whether the person is responsible for the development or distribution of the pricing algorithm, or whether a third party is responsible for the development or distribution of the pricing algorithm, including the identity and contact information of any other person responsible for the development or distribution of the pricing algorithm.
(2) Information on whether the pricing algorithm autonomously sets prices or commercial terms and whether there is human review of any recommendation or decision of the pricing algorithm.
(3) An explanation of the rules or processes that the pricing algorithm uses to set or recommend prices or commercial terms.
(4) A description of all data the pricing algorithm uses to set or recommend prices or commercial terms, including data used to train the algorithm.
(5) All sources and collection processes, including the frequency of collection, of any data that the pricing algorithm uses to set or recommend prices or commercial terms.
(6) Whether the pricing algorithm engages in price discrimination by setting or recommending different prices or commercial terms for the following:
(A) Different customers seeking identical or nearly identical products or services, and if so, the factors used in differentiating among those customers.
(B) Different employees or independent contractors providing substantially similar services, and if so, the factors used in differentiating among those employees or independent contractors.
(7) Any changes made to the pricing algorithm between the date of receipt of the request under subdivision (a) and the date of certification under subdivision (c).
(c) The chief executive officer, chief economist, chief technology officer, or a corporate officer of similar authority of a person shall certify, under penalty of perjury, the accuracy of a report under subdivision (a) submitted by the person.
(d) All information submitted in a report under subdivision (a) shall be treated as confidential and shall be considered to be privileged and confidential trade secrets exempt from disclosure under the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(e) Notwithstanding subdivision (d), the Attorney General may share the report pursuant to subdivision (a) with the National Institute of Standards and Technology for technical assistance in understanding the report if the National Institute of Standards and Technology agrees to refrain from disclosing the contents of a report shared under this subdivision or the analysis of the report by the National Institute of Standards and Technology to any person, except the office of the Attorney General.
(f) This section shall not be construed to do either of the following:
(1) Limit the ability of the Attorney General to issue a civil investigative demand, to issue a subpoena, to seek discovery in the course of litigation, or to otherwise obtain information through other means available to the Attorney General.
(2) Restrict the use of information submitted in a report under subdivision (a) in the course of a formal investigation, enforcement action, litigation, trial, or other proceeding, in accordance with the confidentiality procedures applicable to that proceeding.
17373.
 (a) A person shall not use or distribute any pricing algorithm that uses, incorporates, or was trained with nonpublic competitor data.
(b) If the Attorney General has reason to believe that a person has violated subdivision (a), the Attorney General may bring a civil action against the person in any court of competent jurisdiction in this state to seek to recover one or both of the following:
(1) A civil penalty of one of the following:
(A) Not less than ten thousand dollars ($10,000), adjusted for inflation on the basis of the California Consumer Price Index, for each day during which the violation occurs or continues to occur.
(B) The sum of the price of each product or service sold using the pricing algorithm in violation of subdivision (a).
(2) Other appropriate relief, including an injunction or other equitable relief.
17374.
 (a) If the Attorney General meets the requirements of subdivision (b), there shall be, as applicable, the following presumptions:
(1) The defendant entered into a contract in restraint of trade in violation of Chapter 1 (commencing with Section 16600).
(2) The defendant entered into a contract, agreement, or trust in violation of Chapter 2 (commencing with Section 16700).
(3) The defendant entered into a contract in violation of Chapter 4 (commencing with Section 17040).
(b) The applicable presumptions described in subdivision (a) shall apply if the Attorney General establishes either of the following:
(1) The defendant distributed the pricing algorithm to two or more persons with the intent that the pricing algorithm be used to set or recommend a price or commercial term of a product or service in the same market or a related market and two or more persons used the pricing algorithm to set or recommend a price or commercial term of a product or service.
(2) The defendant used the pricing algorithm to set or recommend a price or commercial term of a product or service and the pricing algorithm was used by another person to set or recommend a price or commercial term of a product or service in the same market or a related market.
(c) The presumptions under subdivision (a) shall not apply to a defendant if the defendant did not develop or distribute the pricing algorithm and the defendant demonstrates by clear and convincing evidence that the defendant did not have actual knowledge or could not have reasonably known that the pricing algorithm used nonpublic competitor data.
(d) In a civil case in which a presumption described in subdivision (a) is applicable, any person that distributed the pricing algorithm and knew, or could have reasonably known, that the pricing algorithm would use, incorporate, or be trained with nonpublic competitor data shall be jointly and severally liable for any violation of Chapter 1, 2, or 4.
(e) Nothing in this section shall impair or limit the applicability of antitrust laws.
17375.
 (a) A person that has five million dollars ($5,000,000) or more in annual revenue that uses a pricing algorithm to recommend or set a price or commercial term shall make, in a clear manner, the following disclosures:
(1) To a customer, before the customer purchases the relevant product or service, that the price or a commercial term, as applicable, is set or recommended by a pricing algorithm.
(2) To a current or prospective employee or independent contractor that the price or commercial term for services rendered as an employee or independent contractor is set or recommended by a pricing algorithm.
(b) (1) If applicable, a disclosure under subdivision (a) shall state that the pricing algorithm sets or recommends different prices for the following:
(A) Different customers seeking identical or nearly identical products or services.
(B) Employees or independent contractors providing substantially similar services.
(2) If applicable, a disclosure under subdivision (a) shall do both of the following:
(A) State that the pricing algorithm was developed or distributed by a person other than the person making the disclosure.
(B) Provide the identity of the person that developed or distributed the pricing algorithm.
(c) Failure to provide a disclosure under subdivision (a), including the information required under subdivision (b), shall constitute an unfair trade practice in violation of Chapter 4.
(d) If the Attorney General has reason to believe that a person has violated subdivision (a) or (b), the Attorney General may bring a civil action against the person in any court of competent jurisdiction in this state to seek to recover one or both of the following:
(1) A civil penalty of not less than five thousand dollars ($5,000), adjusted for inflation on the basis of the California Consumer Price Index, for each day during which the violation occurs or continues to occur.
(2) Other appropriate relief, including an injunction or other equitable relief.
(e) Nothing in this section shall impair or limit the applicability of antitrust laws.
17376.
 On or before January 1, 2027, notwithstanding Section 10231.5 of the Government Code, the office of the Attorney General shall publish on its internet website, and notify the Legislature of the publication of, the results of a study conducted in collaboration with the Governor’s Office of Business and Economic Development and the Department of Financial Protection and Innovation on the use of pricing algorithms using, incorporating, or trained with either or both public and nonpublic data, including the following information:
(a) The prevalence of pricing algorithms.
(b) The frequency of the use of pricing algorithms to engage in price or wage discrimination.
(c) The potential for persons to use pricing algorithms to engage in behavior that increases prices, lowers wages, reduces output, lowers quality, deters innovation, or otherwise harms the competitive process outside of the price-fixing context.
(d) The potential benefits or efficiencies of pricing algorithms.
(e) Any industries, sectors, or markets in which pricing algorithms may warrant additional oversight or regulation to protect competition and consumers.
(f) Recommendations for additional legislation, regulation, or rulemaking relating to competition and consumer protection issues arising from the use of pricing algorithms.
SEC. 2.
 The Legislature finds and declares that Section 1 of this act, which adds Chapter 8 (commencing with Section 17370) to Part 2 of Division 7 of the Business and Professions Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
To protect the privileged and confidential trade secrets and commercial or financial information of persons submitting a written report, it is necessary to restrict the public’s access to this information.