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February 17, 2017

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McDonald’s China sale disputed

A Chinese consultancy that has previously helped to win antitrust battles against Coca-Cola and Apple has taken aim at McDonald’s Corp, arguing in a complaint to regulators that the American fast-food giant’s China sale may hurt workers and consumers.

McDonald’s said last month that it had agreed to sell the bulk of its China business to conglomerate CITIC Ltd and US private equity firm Carlyle Group for up to US$2.1 billion, in a deal that will see the consortium act as the master franchisee for a 20-year period.

The complaint, which follows allegations from a US labor union that the transaction will likely lead to poorer pay and conditions for McDonald’s 120,000 workers in China, could delay regulatory approval for the deal.

Beijing-based Hejun Vanguard Group said it filed two separate complaints against McDonald’s with the Ministry of Commerce’s anti-monopoly bureau and its franchise office.

While Hejun has stopped short of asking the ministry to block the deal, it has called on the regulator to closely scrutinize the transaction and take measures to prevent McDonald’s “abusing” what it claims is the company’s dominant position in the fast-food burger market in China.

It has also called for the ministry to investigate alleged violations of China’s franchise law by McDonald’s, which it claims has failed to properly register all of its outlets in China’s mainland.

The ministry had yet to respond to a request for comment. CITIC, CITIC Capital and Carlyle declined to comment.

McDonald’s said it had filed its franchise business with the ministry in accordance with franchise regulations, and disputes Hejun’s analysis of its market share in China. It added that its franchise model globally is based on mutually beneficial partnerships.

Hejun said it was not acting for any specific companies in the case and generally seeks to protect domestic brands from overly aggressive foreign firms.

The Service Employees International Union, a US labor body, last year warned potential buyers of roughly 3,000 McDonald’s restaurants in Asia that such deals could saddle them with operational risks, including significant costs and liabilities.

In January, it raised concerns over McDonald’s China deal, saying previous such transactions in markets — including Brazil and Puerto Rico — had put enormous pressure on franchisees, making it harder for them to provide adequate pay and conditions for their workers.


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