McDonald’s AI pricing tool hit with antitrust class action over franchisee data sharing

A McDonald’s regular in DeKalb, Illinois, has filed a proposed nationwide class action in federal court in Chicago accusing the chain of algorithmic price-fixing through the AI pricing tool it offers its independently owned restaurants, The Guardian reports. The suit was filed Oct. 2, a day after McDonald’s put out a statement denying that it uses dynamic pricing.

The plaintiff, Michael Thomas, is described as “price conscious.” He noticed that his usual order, a Quarter Pounder with cheese, fries and a Coke, cost different amounts at McDonald’s locations within his own town. “McDonald’s has built and for years deployed its own information-sharing pricing platform, which draws on data from its millions of daily transactions to set menu prices across thousands of US restaurants,” the complaint says. “The result is algorithmic price-fixing aimed at customers who are already stretched thin.”

The legal theory is about information more than software. Antitrust law requires competing businesses to set their prices independently, because rivals who coordinate can hold prices above what competition would allow. The vast majority of McDonald’s U.S. restaurants are owned by franchisees, independent operators who run stores under the brand. The complaint argues that the tool amounts to those operators exchanging nonpublic price and sales data with each other through McDonald’s.

McDonald’s says the complaint “is filled with inaccuracies” and that it will “vigorously defend against this lawsuit.” A spokesperson said, “AI does not set menu prices at McDonald’s restaurants,” and that franchisees do. “Optional tools are available to franchisees to help them make the best decisions for their businesses and customers, but these tools do not automate, coordinate or fix pricing in any way,” the spokesperson said.

If franchisees are independent businesses setting their own prices, they are competitors with each other, and a pricing tool built on pooled transaction data is a channel between competitors. When Reuters reported on the system in September, screenshots showed the portal’s own legal terms warning owners that they “may be competitors” and must comply with antitrust and competition laws. Bitter Fool’s breakdown of that report walked through how the portal scores each store’s sensitivity to price.

McDonald’s strongest word here is “optional.” A suggestion an owner can ignore at no cost looks like a calculator. A suggestion the company tracks owners against starts to look like a shared price list, and Reuters reported that some franchisees were pressured to use the tools and that the company recorded when owners deviated from its recommendations. McDonald’s called that reporting “speculative and uninformed.” Whatever the court finds about how much pressure there was will matter more to this case than any single menu price.

McDonald’s own 2024 fact sheet put the rise in the average menu item’s price at about 40% from 2019 to 2024. In 2023 an $18 Big Mac meal at a Connecticut location went viral, and that franchise’s owner sued, alleging the AI pricing tool suggested the price. McDonald’s bought the AI company Dynamic Yield in 2019 and has denied using AI to set menu prices.

Lindsay Owens, who leads the left-leaning Groundwork Collaborative, counts at least 90 bills filed across the country this year to push back on algorithmic price-fixing, so the rules McDonald’s franchisees price under could change before a judge rules on this one.

Sources

• The Guardian: McDonald’s sued for allegedly using AI tool to determine pricing for franchises
• Reuters: Inside McDonald’s push to have AI price your Big Mac