McDonald's CEO Chris Kempczinski is facing scrutiny from U.S. lawmakers over the fast-food giant's use of artificial intelligence in its pricing strategies. A group of Democratic representatives, led by Senator Elizabeth Warren, has expressed concerns that the company's increasingly sophisticated pricing technology could be used to estimate how much customers in different areas are willing to pay, potentially leading to higher prices for consumers.
The inquiry follows a Reuters investigation that revealed McDonald's uses machine-learning algorithms to recommend what it calls the 'optimal price' for menu items at each restaurant. This technology reportedly analyzes millions of transactions to set prices based on local market conditions and customer spending habits.
In a letter dated November 2, the lawmakers questioned whether data from McDonald's loyalty program is integrated into these pricing algorithms, how franchisees are incentivized to adhere to the recommendations, and if an antitrust review was conducted before the technology's rollout. They also raised concerns that the system could facilitate coordinated pricing decisions among franchisees, potentially undermining competition.
McDonald's has previously stated that its pricing tools are not mandatory, do not use individual customer data to set prices, and that franchisees retain the freedom to make their own pricing decisions. The company has rejected suggestions that its AI is used to manipulate prices, calling them "speculative and uninformed."
The political pressure coincides with two proposed class-action lawsuits filed in federal court, which allege that McDonald's algorithmic pricing system illegally coordinates prices across its franchised and company-owned restaurants, thereby hindering competition. McDonald's has denied these allegations, asserting that AI does not set menu prices and that the use of analytical tools for pricing guidance is common business practice.
This controversy echoes similar concerns raised about other companies using dynamic pricing. Wendy's faced backlash in 2024 after its CEO discussed testing dynamic pricing, and Instacart previously ended a trial that displayed different prices to different shoppers. McDonald's has been asked to respond to the lawmakers' questions by November 16. The lawsuits remain ongoing, and McDonald's has not been found liable for price-fixing.