- McDonalds faces a US class-action lawsuit over alleged AI-driven price fixing
- Lawsuit claims McDonalds used AI algorithms to coordinate prices among franchises
- AI pricing system analyzes transactions and estimates local customers' willingness to pay
Did you pay more for a Big Mac simply because of where you bought it? McDonald's is facing a proposed nationwide class-action lawsuit in the US that accuses the fast-food giant of using an AI-powered pricing system to coordinate menu prices across its franchise network.
Filed in federal court in Chicago, the lawsuit alleges that McDonald's violated US antitrust laws by conspiring with independent franchisees to fix prices using algorithms trained on nonpublic data. The case could potentially represent millions of McDonald's customers, according to the complaint.
The lawsuit follows a Reuters investigation into McDonald's growing use of artificial intelligence to guide prices at its nearly 14,000 restaurants.
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Reuters reported that McDonald's pricing engine uses machine-learning algorithms to analyse millions of transactions and recommend what the company calls an optimal price for individual menu items at individual restaurants. One factor considered by the system is an estimate of customers' willingness to pay in a particular area.
That can mean different prices for the same product at restaurants located just a few miles apart. Reuters found that a company-run McDonald's in Fresno, California, was selling a Big Mac for $5.69 in September, while another company-run outlet two miles away charged $6.89, a 21% difference. Reuters could not establish whether the gap was directly linked to the pricing engine.
McDonald's has maintained that its franchisees are free to set their own prices. The company said its AI system provides recommendations rather than mandates and described the lawsuit's allegations as speculative and uninformed.
“AI does not set the price of a Big Mac or any other menu item,” McDonald's said, adding that franchisees ultimately make their own pricing decisions.
Reuters' investigation, however, found that some franchisees felt pressure to follow the company's recommendations. Internal documents reviewed by Reuters showed McDonald's tracking instances where franchisees deviated from recommended prices.
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The pricing system has also raised questions around antitrust rules. McDonald's itself warns franchisees using the platform that they may be competitors and must comply with competition laws.
The latest lawsuit is part of a broader wave of US legal challenges involving algorithms and pricing. Plaintiffs have accused companies in sectors including hotels and apartment rentals of using algorithms to facilitate potentially illegal price coordination.
For McDonald's customers, the case raises a simple question: when two restaurants sell the same Big Mac, how much should location, and an algorithm's assessment of what customers are willing to pay, influence the price?
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