EXCLUSIVE McDonald’s faces Italian antitrust investigation into franchise terms – document
BRUSSELS, Aug. 9 (Reuters) – Italian antitrust authority AGCM to investigate McDonald’s (MCD.N) terms and conditions in its franchise agreements following several complaints, according to an AGCM document seen by Reuters .
The AGCM’s decision could subject the American fast food chain to a fine of up to 10% of its global turnover if found guilty of violating Italian antitrust rules.
The AGCM declined to comment. McDonald’s Italy said it was “certain of the accuracy of our work” and open to collaboration with the agency. The group achieved a turnover of 19.2 billion dollars in 2020.
The Italian competition watchdog said based on the information available, there appeared to be an economically dependent relationship between the store operators and McDonald’s.
Some of McDonald’s clauses in franchise agreements cited by plaintiffs could constitute abuse of economic dependence, he said in his decision to open an investigation, according to the 13-page document dated Aug. 4.
The watchdog said a series of ubiquitous and binding clauses on prices, promotions, inventory, supplies and purchases, financial management, among others, could be seen as elements of abusive behavior.
Antitrust laws prohibit companies from abusing the economic dependence of another company through unduly onerous or discriminatory contractual terms, especially when the latter cannot find a viable alternative.
With 85% of its outlets operated by franchisees, franchising is an important business model for McDonald’s. It has around 615 restaurants in Italy, 85% of which are not owned by the company.
McDonald’s Italy said: “Although we do not yet know the details of the investigation launched by the Italian Competition Authority, we are open to collaboration with the Authority, and we are certain of the accuracy of our work and the role McDonald’s has played and continues to have in stimulating entrepreneurship and supporting the country’s economy. ”
McDonald’s has 60 days to respond once notified and the investigation must be completed by Dec.31, 2022, according to the document.
McDonald’s found itself on AGCM’s radar after three operators filed complaints in March about rents, royalties, the size of their investments and their selling policies, according to the document.
Italian consumer groups Codacons, Movimento Difesa del Cittadino and Cittadinanzattiva in 2017 brought their grievances to the AGCM.
Reporting by Foo Yun Chee Editing by Mark Potter and Marguerita Choy
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