McDonald's: Italian consumer groups call for EU probe into 'anti-competitive' franchises

Three consumer organisations in Italy have urged the EU to launch an investigation into the franchise model McDonald's uses. The groups say the way the fast-food chain is operating in the country is anti-competitive.

Movimento Difesa del Cittadino, Cittadinanzattiva and Codacons have all issued complaints, urging EU antitrust regulators to intervene. The groups have accused McDonald's of using its dominant position in the market to exploit franchise holders.

"McDonald's exercises an excessive and disproportionate control on its franchisees by implementing conditions that exceed without justification what is required for the protection of its system, its know-how and reputation," the complaint seen by Reuters reads.

The groups say franchisees have to lease the restaurant from the company and accuse McDonald's of charging rents as high as 10 times the market value. Franchisees are also forced to sign up for 20 years, the groups claim.

More than three quarters of McDonald's stores in Europe are franchises. Worldwide, the fast-food giant generated $9.27bn (£6.42bn, €8.55bn) in sales from franchises in 2015, accounting for more than a third of total revenue.

IBTimes UK has contacted McDonald's but it has not replied to a request for comment.

Double trouble?

A significant intervention by EU antitrust regulators is uncommon, though McDonald's is already under scrutiny from EU lawmakers. The European Commission launched an investigation into the company following allegations it had not paid taxes on profits in Luxembourg and the US in more than six years.

The European Commission claims McDonald's may have been given "advantageous tax treatment in breach of EU state aid rules". This was because of a US-Luxembourg tax treaty that was allegedly exploited by the fast-food chain.

The treaty states the company did not have to pay taxes in Luxembourg on income from its franchises as long as US taxes were covered.