Italian consumer groups join fight against McDonald’s

Top of the list of complaints was ‘excessively long franchise contracts’ of up to 20 years.

McDonald’s faces flak on another regulatory front after a coalition of Italian consumer advocates filed an antitrust complaint Tuesday, claiming the fast-food giant is abusing its “dominant position” in Europe.

The complaint follows last month’s announcement by the European Commission that it was investigating the McDonald’s tax deal with Luxembourg, which may have dramatically and illegally reduced the company’s tax bill.

Movimento Difesa del Cittadino and Cittadinanzattiva, joined by lawyers from Munari Cavani, now allege McDonald’s is harming both consumers and the owners of its franchise restaurants.

Top of the list of complaints was “excessively long franchise contracts” of up to 20 years, according to Antonio Longo, one of the complainants, who argues this breaches EU rules on so-called vertical agreements.

Longo said that McDonald’s charges franchisees, who own about three-quarters of McDonald’s restaurants in Europe, rents at “10 times above market rates,” which may constitute predatory pricing.

Longo also said the company practices a form of price discrimination that forces franchisees to accept lower profit margins than corporate-owned stores.

To demonstrate their complaint is a European rather than national competition issue, the consumer groups have sought to compile examples of practices that hurt consumers in countries across Europe.

Chief among their targets is the practice of consumers being charged higher prices in restaurants owned by McDonald’s itself, rather than a franchisee. A small serving of fries in Marseille, France, the consumer groups said, costs 72 percent more in a McDonald’s-owned restaurant than in a franchise.

However, no franchisee has joined the complaint.

“We are proud of our franchisees and are committed to working closely together so that they have the support they need to operate their restaurants and their businesses,” McDonald’s said in a statement. “This approach, with the principle of sharing risk and reward, has been successful for many years and has helped create the best business opportunities for our franchisees and the best overall experience for our customers.”

For the Commission to take up and enforce the complaint it would need to be satisfied that McDonald’s not only had a dominant position but also harmed either consumers or competitors, and that any harm outweighed the benefits of “efficiencies” the firm achieved through its practices.

The Commission said it will assess the complaint. It will consider issues such as the barriers to entry faced by competitors, pricing conduct and predatory practices such as a failure to supply. Typically the Commission responds within 90 days, and will seek the opinion of McDonald’s before taking further action.

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