The legal question of the AI era: if nobody agrees on the price, but everyone uses the same machine to set it, is that still competition?
🇺🇸 McDonald's is being sued for price-fixing, and the alleged accomplice is an algorithm.
A new class action in Chicago claims McDonald's AI pricing tool collects sales data from thousands of restaurants, the kind of data competing owners would never normally share with each other, and then spits out the "optimal" price for each menu item.
Independent franchise owners run about 95% of McDonald's 14,000 U.S. stores, and the suit argues it all adds up to price-fixing by algorithm.
McDonald's says the lawsuit is full of inaccuracies, that owners set their own prices, and that the tool is optional.
Its own CEO even admitted in August that only about 60% of U.S. restaurants were offering its under-$3 value menu, so owners clearly don't always listen.
Still, it's a gray area regulators are struggling with.
Old-school price-fixing meant executives agreeing on a number behind closed doors, but now competitors can just use the same software, feed it their private data and get similar prices back without ever talking.
Courts haven't settled it yet. One appeals court tossed a Las Vegas hotel case, saying using the same software isn't illegal on its own.
The DOJ settled its case against rent-pricing company RealPage last year, limiting what data its tool can use, and California made it illegal in January to use a shared pricing algorithm to fix prices.
There's a reason people are worried. In German towns where both competing gas stations switched to pricing algorithms, their margins jumped 28%.
The old cartel needed a smoke-filled room, and the new one might just need a login.
Sources: AP, Reuters, Newsweek / Writer: Julie