Italian groups seek EU antitrust probe into McDonald's

Tue Jan 12, 2016 8:04am EST
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By Foo Yun Chee

BRUSSELS - Three Italian consumer organizations have urged EU antitrust regulators to investigate McDonald's (MCD.N: Quote) franchise system in Europe, a month after the opening of an EU inquiry into the U.S. fast food company's tax deals with Luxembourg.

Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva filed their complaint with the European Commission on Monday, urging the EU competition enforcer to step in and look at a system, which they alleged was anti-competitive.

"The system construed by McDonald's raises strong concerns under antitrust laws," the group said in its 46-page complaint seen by Reuters.

Franchising is a key business model for the world's largest fast food chain. The company made $9.27 billion in revenues from its franchised restaurants worldwide last year, accounting for about a third of overall turnover. Franchisees operate about 75 percent of McDonald's outlets in Europe.

At issue are 20-year contracts which are twice as long as most other franchises, a requirement that licensees lease premises from McDonald's at above-market rates and conditions hindering them from switching to competitors, the group says.

"McDonald's exercises an excessive and disproportionate control on its franchisees by implementing conditions that exceed without justification what is required for the protection of its system, its know-how and reputation," the group said.

It said the restrictions hinder competition and lead to consumers paying higher prices in franchised restaurants. It cited a survey which showed 97 percent of menu items cost more in franchises than in company-operated outlets in Bologna, while in Rome the figure was 68 percent and in Paris 71 percent.

McDonald's dismissed the criticism.   Continued...

A McDonald's logo is pictured in Rome, January 9, 2013. REUTERS/Giampiero Sposito