McDonald’s is facing a federal lawsuit alleging its AI-enhanced pricing tool violates antitrust laws because it shares non-public data with franchisees who may be competing in the same market.
The lawsuit, filed Friday in Illinois, says McDonald’s pricing tool uses artificial intelligence to collect data that competing franchises would not normally share, such as store-level sales. The Chicago-based burger giant said it was making the tool available to U.S. franchisees to help them set prices at their individual restaurants.
The lawsuit also accuses the pricing scheme of raising McDonald’s prices in the United States.
“McDonald’s has built and deployed for years its own pricing information sharing platform, which draws on data from its millions of daily transactions to set menu prices at thousands of U.S. restaurants,” the lawsuit says. “The result is algorithmic pricing aimed at already strapped customers. »
McDonald’s said Tuesday that the lawsuit was “riddled with inaccuracies” and that it would vigorously defend itself.
“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 business and their customers, but these tools do not automate, coordinate, or set prices in any way. »
The lawsuit was filed on behalf of a consumer, Michael Thomas, of DeKalb, Illinois. According to the lawsuit, Thomas frequently visits McDonald’s and orders a Quarter Pounder with cheese, fries and a Coke. The lawsuit says Thomas noticed price differences between McDonald’s stores near his home.
McDonald’s said it has been using an AI-enhanced pricing tool for more than a decade. The program determines the optimal price of menu items based on store sales, location and other factors, including competitor prices.
McDonald’s said that long before adopting the AI-enhanced tool, it collected data and recommended prices to its franchisees, who own and operate 95% of McDonald’s 14,000 U.S. stores.
“All we’re doing is providing context for what’s happening,” a McDonald’s spokesperson told The Associated Press. “We have no way of influencing menu prices in a restaurant.”
But the lawsuit says McDonald’s has “significant leverage over its franchisees” and can pressure them to follow its pricing recommendations.
The Associated Press left a message Tuesday with the National Owners Association, which represents McDonald’s franchisees.
McDonald’s experimented various value strategies in the United States and other markets for several years, in an effort to win back low-income consumers, whose visits to fast food chains have declined.
But franchisees don’t always follow his advice. In an August conference call with investors, McDonald’s Chairman and CEO Chris Kempczinski said that only 60% of his U.S. restaurants offer McDonald’s proposed 10-course menu for less than $3.
“As you know, in our system it’s not just about pushing a button,” Kempczinski said. “That requires conversations with franchisees.”
The suit asks the judge to certify the case as a class action and require McDonald’s to pay damages to the class. It also aims to prevent McDonald’s from implementing agreements that restrict competition.
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