Consumers versus McDonald's. Today in Brussels a coalition of consumer representative associations, Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva filed a complaint against the giant of fast food, Mc Donald's, with the support of the American trade union SEIU and the European trade union association EFFAT. According to the complaint, the fast food restaurant chain abuses its dominant position in the European market, with practices that distort competition which harm both franchisees and consumers.
If the charge is confirmed, McDonald's would risk a maximum fine of up to 10% of global revenue, so based on 2014 data, up to $9 billion. The European Commission could also ask McDonald's to remove all restrictions that prevent free competition.
The complaint asks the European Commission to investigate the contractual provisions that McDonald's imposes on its franchised stores, which would have a negative effect on consumers' freedom of choice, on prices and on the quality of products and services in Europe.
According to the complaint, the franchising agreements stipulated by McDonald's violate the fundamental rules of competition established by articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) on the prohibition of anti-competitive agreements and abuse of the dominant position on the market.
McDonald's is one of the largest multinational corporations in the world with a network of 8 restaurants in Europe – are the data collected by consumer associations – which serves 15,7 million customers with a European sales volume of almost 20 billion dollars, double that of its main competitors. With these numbers McDonald's is the dominant fast food chain in most of the countries where it operates.
McDonald's, however, doesn't just sell hamburgers: it's also the largest franchisee and the largest real estate owner in the world. According to the complaint, a large part of its revenues in Europe would be generated precisely from rents: 66% of the profits received by franchisees derive in fact from rents that would be up to ten times higher than market prices. Or in any case, according to the complainants, much higher than those paid by direct competitors. “In France, for example – states a release from consumer associations – McDonald's licensees pay 84% more than operators such as Quick, the large fast food chain across the Alps. The margins deriving from the real estate sector would vary between 63 and 77% in France, between 61 and 77% in Italy and between 65 and 74% in the United Kingdom”.
In addition to higher royalties, McDonald's would oblige the licensees to comply with a series of penalizing contractual terms with further distorting effects on competition: very long contractual duration (twenty years), high royalties and other expenses, termination clauses and unbalanced competition and a strict corporate policy of defining the location of the restaurant.
In support of the complaint, to highlight the harm to consumers, the coalition conducted research in McDonald's restaurants in Europe. “The survey highlights a clear fact: most of the products in franchised restaurants are more expensive than those of the restaurants directly managed by the multinational. In Bologna, for example, 97% of the products on the menus of franchised establishments have a higher price than the same products in restaurants managed by McDonald's. In Rome 68%, in Marseille 79%. Furthermore, in Europe, franchised restaurants have fewer staff and therefore longer waiting times and lower quality service.
The three associations declare: “This complaint shows how anti-competitive practices and company management harm consumers. We urgently ask the European Commission to examine the McDonald's franchise system and take all measures necessary to put an end to the rules imposed on franchisees that generate harm to consumers".
Scott Courtney, Organizing Director at SEIU, says: “We fully support the consumer associations that filed the complaint. McDonald's abuse of its dominant position hurts everyone: franchisees, consumers and workers. It's time for McDonald's to become the modern, progressive leader it claims to be".
The coalition
The complaint was filed by a coalition of Italian consumer associations formed by Codacons, Movimento Difesa del Cittadino (MDC) and Cittadinanzattiva with the support of Service Employees International Union (SEIU) and the European Union Federation of Trade Unions in the Food, Agriculture and Tourism (EFFAT).
SEIU (Service Employees International Union) is the union of service workers who gathers over 2 million workers in the United States, Canada and Puerto Rico. SEIU members work in the health sector, in the public sector and in the service sector. SEIU fights to obtain more rights, better working conditions and to promote the creation of better communities and to create a more equal society and an economic system that benefits everyone, not just multinationals and the wealthiest sections of the population.
