A federal antitrust lawsuit brought against McDonald’s this week illustrates the complexities involved in applying decades-old laws to artificial intelligence and other software tools, Reuters reported Thursday (Oct. 8).
The case against McDonald’s alleges that the fast-food company pressures its franchisees to use its AI-powered algorithmic pricing, thereby driving up prices for consumers by preventing restaurant owners to compete freely, according to the report.
The proposed class action says McDonald’s leverages its technology “to nickel-and-dime consumers down to the last French fry,” per the report.
McDonald’s said in the report that each franchisee sets their own price and that “AI does not set the price of a Big Mac or any other menu item.”
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Companies in other industries, including hotels, real estate and health insurance, are also facing class action lawsuits involving AI and algorithmic pricing, according to the report.
These lawsuits have had mixed results, the report said.
While courts have said there is nothing illegal about using algorithms to set prices or make other business decisions, businesses may violate antitrust law if they and their competitors use the technology to coordinate their decisions and raise consumer costs, per the report.
The application of these laws has been complicated by third-party vendors that pool pricing data from different companies, thereby giving them insight into each other’s pricing decisions and making them vulnerable to claims that they are colluding, according to the report.
In one recent ruling, a federal appeals court said that pricing software and its algorithms enabled collusion that would have been more difficult in the past. In another recent decision, a court said that companies’ use of the same price-recommendation software was not enough to support an antitrust claim, per the report.
The lawsuit against McDonald’s may be the first to allege that such claims can be brought against franchisees operating under the same brand, rather than competing companies, the report said.
Reuters reported Monday (Oct. 5) that the consumers bringing the case against McDonald’s contend that a system used to provide franchisees with pricing recommendations reduces competition. McDonald’s disputes that characterization, saying franchisees retain control over prices charged at their restaurants and that AI does not independently determine what customers pay, per the report.
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