Key takeaways
- New laws regulating algorithmic pricing enacted in New York and California demonstrate that state enforcement against the use of artificial intelligence will likely continue to increase, mirroring the objective of federal authorities. We anticipate many other state legislatures will follow.
- The Superior Court of California granted summary judgment in favor of Defendants, Yardi Systems, Inc. (“Yardi”) for alleged price fixing from the use of algorithmic software. Yardi’s successful defense paves the way for potential use of algorithmic pricing that complies with antitrust laws.
- Despite antitrust enforcers at the Department of Justice, Federal Trade Commission, and offices of state attorneys general scrutinizing the use of algorithmic pricing tools, courts are closely examining the alleged conduct to determine whether it warrants per se condemnation or should be evaluated under the rule of reason.
In more detail
States are increasingly targeting algorithmic pricing tools as part of broader efforts to curb perceived anticompetitive practices. Last month California enacted a series of laws that amended the Cartwright Act to include provisions that prohibit the use or distribution of pricing algorithms. On October 16, 2025, New York Governor Kathy Hochul similarly signed Senate Bill S78821 and Assembly Bill A1417-B2 into law, amending the state’s antitrust statute, the Donnelly Act, to prohibit rental property owners from using algorithmic pricing tools to set rental prices for tenants. The legislation marks a notable shift in how states are approaching the intersection of technology and antitrust enforcement, particularly in the housing sector.
The legislation responds to mounting concerns over the use of algorithmic pricing tools in the residential rental market. These tools have come under scrutiny for their alleged potential to facilitate collusion among landlords. By aggregating sensitive rental data and recommending rental prices, many contend that such algorithms may distort housing markets and contribute to inflated rents.
The New York statute prohibits residential rental property owners and managers from using pricing recommendations generated by tools that collect and analyze data from multiple property owners. The law also targets third-party vendors who operate or license algorithmic tools used by New York landlords, even if the vendors are located outside of New York. Specifically, liability may arise for vendors who operate or license software that performs a “coordinating function.” A coordinating function is defined broadly to include tools that collect rental data, such as prices, supply levels, and lease terms, from two or more landlords, process or analyze that data using computational methods including algorithmic training, and then recommend rental prices, occupancy levels, or lease terms.
New York’s S.7882 applies to any conduct that affects residential rental units located within the state, regardless of where the actor is physically located. Jurisdiction may be established over landlords, property managers, or third-party software providers if their actions may influence rent-setting practices anywhere in New York’s housing market. Importantly, the law does not require direct adoption of algorithmic recommendations to trigger liability.
Notably, the law does not distinguish between public and non-public data sources, nor does it require proof of actual harm to competition. This expansive definition and the inclusion of a “reckless disregard” standard lowers the threshold for liability, potentially creating legal exposure for both landlords and providers.
Despite growing scrutiny of algorithmic pricing tools, the legal landscape remains fragmented. On one hand, states like New York and California3 have enacted legislation banning rent-setting algorithms, signaling a proactive regulatory stance. On the other hand, federal and state courts have issued divergent rulings and have been more hesitant to criminalize the use of algorithmic pricing.
Recent cases show courts are actively scrutinizing algorithmic pricing under varying antitrust standards. In Duffy v. Yardi Systems4, a federal court allowed a per se theory to proceed, suggesting shared pricing algorithms could constitute unlawful price fixing. However, in Mach v. Yardi Systems5, a California court granted summary judgment for Yardi, citing source code evidence that customers used the software independently, without sharing sensitive pricing data. Similarly, courts have either dismissed claims for lack of agreement or applied the rule of reason, requiring proof of anticompetitive effects. These decisions may lead to a circuit split in the future. In the meantime, businesses need to navigate a fragmented and evolving legal landscape.
Recommendations
Companies operating in California and New York should act quickly to mitigate risk under these new laws. While recent court precedent has provided examples of behavior that may be permissible, companies, nonetheless, should avoid providing detailed competitively sensitive information through pricing algorithms that are utilized by their competitors and suggest pricing. In California, businesses must ensure they do not use or distribute pricing algorithms that rely on competitor data to recommend or align prices. In New York, landlords and property managers should discontinue rent-setting tools that aggregate data from multiple landlords and recommend rental prices or lease terms. Both states’ laws apply broadly and impose liability even without proof of harm, so companies should review vendor relationships, update compliance programs, and document independent pricing decisions. Given the heightened enforcement risk and evolving standards, proactive audits and internal controls are essential to avoid exposure. As legal standards in this area continue to develop, we will closely monitor them and provide updates.
1 NY State Senate Bill 2025-S7882
2 NY State Assembly Bill 2025-A1417B
3 United States: California Modernizes Antitrust Law to Tackle Pricing Algorithms, Baker McKenzie (Oct. 13, 2025)
4 Duffy v. Yardi Systems, Inc., No. 23-01391 (W.D. Wash. Dec. 4, 2024) (denying motion to dismiss)
5 Mach v. Yardi Systems, No. 24-063117 (Cal. Super. Ct. Oct. 6, 2025) (granting motion for summary judgment)
