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McDonald’s Sued in US Over Alleged AI-Driven Price Coordination Across Franchises

McDonald’s faces a proposed US class action alleging its AI-powered pricing system coordinated menu prices across franchises using shared data, potentially violating federal antitrust laws and consumer protections.

Written By : Poulami Saha
Reviewed By : Pranchal Srivastava

McDonald’s is facing a proposed nationwide class-action lawsuit in the US over allegations that it used an AI-powered pricing system to coordinate menu prices across franchise and company-owned restaurants. The lawsuit, filed in the US District Court for the Northern District of Illinois on October 2, accuses the fast-food chain of violating antitrust laws by using algorithms trained on non-public sales data.

Lawsuit targets McDonald’s pricing system

The complaint alleges that McDonald’s has operated a centralised machine-learning pricing engine since at least 2019. According to the lawsuit, the system pools confidential sales information from franchisees and corporate restaurants and generates pricing recommendations.

The plaintiff argues, “The arrangement allows independently operated restaurants to use shared information when determining prices. The lawsuit claims this effectively coordinates pricing among businesses that are expected to make independent decisions.”

The complaint seeks damages and other relief under US antitrust law. It could potentially cover consumers who purchased McDonald’s products under the alleged pricing practices.

AI analyses millions of transactions

The legal challenge follows a Reuters report on McDonald’s use of machine-learning technology for pricing. The company’s pricing engine reportedly analyses millions of transactions across nearly 14,000 US restaurants to generate what McDonald’s describes as optimal prices for individual locations and menu items.

The system considers factors such as local market conditions, costs, competition and customer demand. The use of shared data has raised questions over whether algorithmic pricing could cross the line into unlawful coordination between competitors.

The lawsuit will now test whether the company’s use of shared data and algorithmic recommendations amounts to unlawful price coordination. The case could also have wider implications for businesses using AI-based pricing systems across networks of independent operators.

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