McDonald's is confronting a federal lawsuit that claims its AI-driven pricing tool infringes upon antitrust laws by facilitating the exchange of nonpublic sales data among U.S. franchisees who may operate in competing markets.
The lawsuit, filed Friday in Illinois, asserts that McDonald's pricing tool leverages artificial intelligence to gather information, such as store-level sales figures, that competing franchises typically do not share. The Chicago-based company has stated that the tool is offered to U.S. franchisees to assist them in setting prices for their individual restaurants.
According to the lawsuit, the pricing system has contributed to an increase in McDonald's U.S. prices. "McDonald’s has built and for years deployed its own information-sharing pricing platform, which draws on data from its millions of daily transactions to set menu prices across thousands of U.S. restaurants," the suit states. "The result is algorithmic price-fixing aimed at customers who are already stretched thin."
McDonald's has refuted the allegations, stating that the lawsuit is "filled with inaccuracies" and that the company intends to defend itself vigorously. "AI does not set menu prices at McDonald’s restaurants – McDonald’s franchisees do," the company said in a statement. "Optional tools are available to franchisees to help them make the best decisions for their businesses and customers, but these tools do not automate, coordinate or fix pricing in any way."
The legal action was initiated on behalf of Michael Thomas, a consumer from DeKalb, Illinois, who reportedly noticed price variations between McDonald's locations near his home. Thomas frequently orders a Quarter Pounder with cheese, french fries, and a Coke, according to the lawsuit.
McDonald's indicated that it has been utilizing an AI-enhanced pricing tool for over a decade. This program is designed to determine optimal prices for menu items by considering factors such as a store's sales volume, location, and competitor pricing.
The company also noted that data collection and price recommendations to franchisees—who own and operate 95% of McDonald's 14,000 U.S. stores—predate the adoption of the AI-enhanced tool. "All we do is provide the context of what’s going on," a McDonald's spokesman told The Associated Press. "We don’t have any way to affect the menu pricing in a restaurant."
However, the lawsuit contends that McDonald's possesses "significant leverage over its franchisees" and can compel them to adhere to its pricing suggestions.
McDonald's has been exploring various value strategies across the U.S. and other markets in recent years to attract lower-income consumers, whose patronage of fast-food establishments has declined. Despite these efforts, franchisees do not always follow the company's guidance. In August, McDonald's Chairman and CEO Chris Kempczinski mentioned that only 60% of U.S. restaurants were offering a proposed 10-item menu for under $3, noting that implementing such changes requires "conversations with franchisees."
The lawsuit seeks class-action certification and requests that McDonald's be ordered to pay damages to the class, as well as be prevented from enforcing agreements that restrict competition.