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McDonald’s Faces Antitrust Attack as Unions Complain to EU

Published on Jan 12 2016 12:04 PM in Restaurant tagged: Europe / McDonald's

McDonald’s Faces Antitrust Attack as Unions Complain to EU

A group of McDonald’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 US firms facing a clampdown on tax loopholes.

The Big Mac-maker was accused by a coalition of Italian consumer organisations and European and US 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 Illinois-based 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 in taxes across Europe.

McDonald’s declined to immediately comment on the complaint. The commission said it received the filing and will now look into it.

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.”

The commission has to assess the complaint that McDonald’s abused its dominant position before deciding whether it should take it up or reject it.

News by Bloomberg, edited by Hospitality Ireland

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