A federal antitrust lawsuit against McDonald’s this week claims the fast-food giant is using AI-powered tools to fix menu prices, marking the latest case to allege companies are relying on new technologies to collude and harm consumers.
Plaintiffs have sued companies in industries ranging from hotels and real estate to health insurance, and now, hamburgers. The claims are pending in class action lawsuits around the country, with mixed outcomes so far.
The McDonald’s case hinges in part on the company’s franchise model, in which most of its 14,000 US restaurants are independently owned. It says restaurant owners should be competing freely but are pressured by Mc
Donald’s to use its “pricing engine” or risk losing their franchise status, driving up the cost of Big Macs, fries and other menu items for millions of customers.
McDonald’s told Reuters that its franchisees set prices individually, and that “AI does not set the price of a Big Mac or any other menu item.”
The lawsuit followed a Reuters report detailing how McDonald’s is using AI to guide menu prices. The proposed class action in Chicago federal court says the company leverages its technology “to nickel-and-dime consumers down to the last French fry.”
New Technology, Old Laws
Courts are still grappling with how to apply decades-old antitrust laws to AI and other modern software tools that can help companies instantly share and adjust pricing decisions.
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There’s nothing inherently illegal about using computer algorithms to make business decisions on matters like pricing, courts have said. However, antitrust law ca
n bar businesses that compete against each other from using such tools to coordinate their decision-making when it raises consumer costs.
New technologies are giving competing companies access and insight into each other’s pricing decisions, opening them up to claims that they are coordinating illegally, said antitrust expert Maurice Stucke, who teaches at the Uni
versity of Tennessee’s law school. In many of the pending cases, companies allegedly pooled pricing data using a shared third-party vendor.
“As more companies outsource pricing to an algorithm, you can expect them to have more instances of collusion,” Stucke said.
The results have been mixed in the lawsuits filed so far. In an opinion in July, a federal appeals court sided with plaintiffs by reinstating a lawsuit claiming Atlantic
City casino-hotels used shared pricing software to push up room rates.
The Philadelphia-based 3rd US Circuit Court of Appeals said technical limits on communication in the past made collusion more difficult. “Today, these algorithms have the capacity to bridge any such gaps,” the court said.
Other courts have been less receptive to similar claims. The San Francisco-based 9th US Circuit Court of Appeals last year rejected a lawsuit against major Las Vegas hotels, finding their use of shared price-recommendation software amid a rise in room costs wasn’t enough to sustain an antitrust claim.
