McDonald's Antitrust Complaint

© AP Photo/Eugene Hoshiko, File

Consumer groups file antitrust complaint against McDonald's - A coalition of Italian consumer groups, with backing from the American Service Employees International Union, said Tuesday that it has filed an antitrust complaint with the European Commission against McDonald's, alleging that the hamburger giant has used its dominant position in the market to gouge consumers and its franchisees.

In the complaint, the consumer groups (Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva) allege that McDonald's is violating European Union rules by abusing its position as a landlord by charging rents to franchisees with prices up to 10 times above market rates. The group says McDonald's has set 20-year franchise contracts followed by one- to two-year non-competitive clauses that limit the ability of franchisees to switch to other brands.

The high rents and the contract terms leads to the franchisees charging inflated prices to consumers, the consumer groups say.

The groups argue that the practices are in violation of EU antitrust rules that establish "dominant companies have a responsibility not to abuse their powerful market position by restricting competition."

The coalition that filed the complaint says that the effects of McDonald's practices in Europe are perhaps most obviously demonstrated by higher priced items at franchise restaurants compared to company-operated restaurants.

About 97% of menu items had higher prices at franchise outlets than in corporate-owned restaurants in Bologna, 68% of items had higher prices in franchise stores in Rome; and 71% of menu items had higher prices in Paris, the coalition says in its complaint. In France for example, an order of small fries was 72% more expensive at franchised stores than corporate stores in Marseille, 64% more expensive in Paris and 25% more expensive in Lyon, the coalition says

"This complaint is an important step in recognizing how anti-competitive practices and bad corporate citizenship harm consumers," the consumer groups said in a joint statement. "We urge the Commission to examine McDonald’s franchising system in detail, and take all appropriate action to ensure that the unfair burdens on the company’s franchisees end, and can no longer harm consumers.”

McDonald's officials did not immediately respond to requests for comment.

The Service Employees International Union, which has more than 2 million members in the U.S. and Canada and has backed a push in the U.S. for a $15 minimum wage, has thrown its support behind the European Commission complaint. Several American fast food workers traveled to Brussels on Tuesday to call on the European Commission to investigate the antitrust complaint and to publicize the push in the U.S. to improve wages for fast food workers.

“We fully support the consumer groups in launching this complaint. McDonald’s abuse of its dominant market position hurts everyone: franchisees, consumers, and workers," said Scott Courtney, SEIU's organizing director. "We strongly urge the European Commission to investigate the charges and to use all of its powers to hold McDonald’s accountable."

The antitrust complaint comes after the European Commission announced last month that it was investigating whether the fast-food chain's tax arrangements in Luxembourg violate EU law.

The commission said it believes that the European division of the U.S.-based fast food giant may not have paid taxes in Europe or the U.S. on profits — in the form of royalties — derived from franchise restaurants in Europe and Russia.