Junk food giant, McDonald’s Corp. is heading towards regulatory headwinds in Europe after when three Italian consumer groups filed an antitrust complaint against it to European Union to be imposing illegal regulations over its franchisees. The European Commission, the bloc’s top antitrust authority, said it had received the complaint and would look into it.
The complaint has been supported by both U.S and European trade unions as when McDonald’s exploits its dominant market position by charging consumers its franchisees rent exceeding to that of market rates with 10x – that too restricting them to take a switch-over to any other brand. The company earned revenues worth US$ 9.27 billion from its franchised restaurants globally in year 2015, accounting for about a third of overall turnover. Franchisees operate about 75% of McDonald’s outlets in Europe.
“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.” – Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva
This has taken a form after when European Union widened up its complete investigation in McDonald’s tax affairs in Luxembourg. As a result of that investigation, the company was reported to have had avoided approx. US$ 1.09 billion (i.e. €1 billion) in taxes by funneling royalties to Luxembourg.
Does McDonald’s really have a dominant position in Europe’s fast-food market? – Upon this, European Union is looking ahead for a legal test that could indicate whether it could raise costs without having an impact on consumer demand. Not to mention, European Union might decide to open a full investigation after inspecting the evidence, or drop it between the middle.
