Antitrust probe by Italy’s AGCM looms ahead of McDonald’s, franchise business model in focus

According to a document from Italian antitrust authority AGCM, the regulator will investigate the terms and conditions in McDonald’s agreements with franchise operators following several complaints.

The development could see the U.S. fast-food chain at risk of a hefty fine of as much as 10% of its global turnover if it is found guilty of breaching Italian antitrust rules.

The AGCM declined to comment.

In a statement McDonald’s Italy said, it was “certain of the correctness of our work”; it is open to collaborating with the AGCM.

In 2020, the group reported revenues of $19.2 billion.

According to the Italian competition watchdog, based on the available information there appears to be a relationship of economic dependence between the store operators and McDonald’s. Some of the clauses in the franchising agreements cited by the complainants could be grounds to constitute an abuse of economic dependence.

A series of pervasive and binding clauses on prices, promotions, stocks, supplies and purchases, financial management, among others, could be seen as elements of abusive conduct, said the watchdog.

With 85% of its outlets operated by franchisees, franchising is an important business model for McDonald’s. It has about 615 restaurants in Italy, 85% of which are not owned by the company.

In a statement McDonald’s Italy said, “While we do not yet know details of the investigation launched by the Italian Competition Authority, we are open to collaborating with the Authority, and we are certain of the correctness of our work and of the role that McDonald’s has had and continues to have in stimulating entrepreneurship and in supporting the country’s economy.”

McDonald’s has 60 days to respond once it is notified.

The investigation must be wrapped up by December 31, 2022.

Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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