McDonald's is confronting a federal lawsuit in Illinois that accuses its artificial intelligence-driven pricing system of violating antitrust laws. The suit contends that the system facilitates the sharing of proprietary data, such as store-level sales figures, among franchisees who may operate in competing markets.
The lawsuit, filed Friday, alleges that McDonald's pricing tool utilizes AI to gather data that franchisees would typically not share with one another. The Chicago-based fast-food giant maintains that the tool is offered to U.S. franchisees to assist them in setting prices for their individual restaurants. The plaintiffs claim this pricing system has contributed to an increase in McDonald's U.S. menu 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 lawsuit states. "The result is algorithmic price-fixing aimed at customers who are already stretched thin."
In response, McDonald's stated on Tuesday that the lawsuit contains "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 observed price discrepancies at different McDonald's locations near his home. The lawsuit notes that Thomas is a frequent customer who orders a Quarter Pounder with cheese, french fries, and a Coke.
McDonald's acknowledged using 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, its geographic location, and the prices set by competing businesses. The company emphasized that data collection and price recommendations to franchisees—who own and operate approximately 95% of McDonald's 14,000 U.S. locations—predate the adoption of the AI tool.
"All we do is provide the context of what’s going on," a McDonald's spokesperson told The Associated Press. "We don’t have any way to affect the menu pricing in a restaurant."
However, the lawsuit asserts that McDonald's possesses "significant leverage over its franchisees" and can compel them to adhere to its pricing recommendations.
McDonald's has been exploring various value strategies across its U.S. and international markets for several years as part of an effort to attract lower-income customers, whose patronage of fast-food establishments has reportedly declined. Franchisees do not consistently follow the company's pricing guidance. McDonald's Chairman and CEO Chris Kempczinski mentioned in an August investor call that only 60% of U.S. restaurants were implementing a proposed 10-item menu for under $3.
"As you know, in our system, that’s not something that we just flip the switch on," Kempczinski said during the call. "It requires conversations with franchisees."
The lawsuit seeks class-action certification, requesting damages for the affected consumers and an injunction to prevent McDonald's from enforcing agreements that allegedly restrict competition.