McDonald’s is being sued over claims that it uses an AI tool to collect and share data and potentially influence what locations charge customers.
The lawsuit, filed last week in federal court in Illinois, claims the pricing tool uses AI to collect data that franchise competitors would not typically share. Data includes store-level sales, The Associated Press reported.
The suit then goes further, claiming that the system also raises McDonald’s U.S. prices.
“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 U.S. restaurants,” the lawsuit states. “The result is algorithmic price-fixing aimed at customers who are already stretched thin.”
The fast-food giant said it does not use AI to set prices.
“AI does not set menu prices at McDonald’s restaurants – McDonald’s franchisees do,” the company said in a statement. “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 company said it has used an AI-enhanced tool for more than a decade to help determine the optimal menu prices based on location, sales, and other factors.
Before adopting the AI-enhanced tool, it did something similar to provide recommended prices to franchise owners.
“All we do is provide the context of what’s going on,” a McDonald’s spokesman told the AP. “We don’t have any way to affect the menu pricing in a restaurant.”
The lawsuit said the company has “significant leverage over its franchisees.”
Still, they don’t have to follow the suggestions. Earlier this year, McDonald’s Chairman and CEO said only 60% of the restaurants were using the proposed 10 items for an under-$3 menu.
McDonald’s has also posted an article on its corporate site that says, “AI does not set the price of a Big Mac or any other menu item. It does not change prices. And it does not determine what an individual customer pays.”
This is not the only case involving prices and AI. Reuters reported several lawsuits challenging the use of artificial intelligence in industries such as hotels, real estate, and health insurance. The lawsuits use antitrust laws.
Reuters said there is nothing illegal about using algorithms to make business decisions, but antitrust concerns arise when companies use tools to coordinate decision-making when raising prices, adding that the tools give competitors access to each other’s pricing decision-making, typically through a third party.
“As more companies outsource pricing to an algorithm, you can expect them to have more instances of collusion,” antitrust expert and University of Tennessee law professor Maurice Stucke told Reuters.
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