- Coalition of consumers, unions say firm abuses its dominance
- EU already probing Big Mac maker’s tax deal with Luxembourg
A group of McDonald’s Corp.’s critics urged the European Union to rein in alleged antitrust abuses by the world’s largest restaurant chain in a complaint just weeks after regulators added the company to a growing list of U.S. firms facing a clampdown on tax loopholes.
The Big Mac-maker was accused by a coalition of Italian consumer organizations and European and U.S. trade unions of abusing its market power to harm franchisees who run its burger restaurants as well as customers, workers and rivals.
“No company is more responsible for driving a global race to the bottom than the Golden Arches, which has pioneered and perfected a brand of cannibal capitalism,” said Scott Courtney, an official at the Service Employees International Union, which backs the antitrust complaint filed with the European Commission on Monday.
The accusation adds to an EU probe opened in December into suspicions the company unfairly exploited a pact with Luxembourg to avoid tax for more than half a decade. The trade unions helped throw McDonald’s in the spotlight by producing a report claiming it dodged more than 1 billion euros ($1.09 billion) in taxes across Europe.
McDonald’s defended its practices, saying that the company is committed to working closely with franchisees “so that they have the support they need to operate their restaurants.”
“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,” the Oak Brook, Illinois-based company said in a statement.
The EU said it received the filing and will look into it. The commission has to assess whether McDonald’s abused its dominant position before deciding whether it should take up or reject the complaint.
McDonald’s exploited its position as a landlord by requiring franchisees to lease its property and charging rents in Europe about three to four times higher than market levels, according to the complaint by consumer associations Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva. Two-thirds of McDonald’s total revenue from franchisees in Europe comes from rents, according to the statement.
McDonald’s contract terms, such as one- or two-year non-compete clauses, severely limit the ability of franchisees to switch to other brands, preventing effective competition between chains, according to the coalition.
Short-term profitability is the main rationale driving franchisees to enter into agreements with McDonald’s, according to the coalition’s lawyer, Raffaele Cavani. “But in the long-term it may prove to be a golden cage.”