Senator Warren asks McDonald’s about algorithmic pricing — Channel NewsAsia

In the United States, Democratic Senator Elizabeth Warren and four Democratic members of the House of Representatives have asked McDonald’s CEO Chris Kempczinski questions about the company’s use of algorithmic pricing tools. Channel NewsAsia reports.

Lawmakers’ questions

The letter is dated November 2. It was also signed by Representatives Greg Casar, Becca Balint, Jesús García and Mary Gay Scanlon. The lawmakers cited a Reuters report published on September 29, which said that McDonald’s uses machine-learning algorithms to generate recommendations on the so-called optimal price for each menu item at an individual restaurant.

According to Reuters, such recommendations are partly based on an assessment of how much typical visitors to a particular location are willing to pay. The letter’s authors expressed concern that artificial intelligence could encourage consumers to pay more and that pricing tools could facilitate coordination among franchisees that are supposed to compete with one another.

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The company’s position and lawsuits

The lawmakers asked whether these tools use personal data from members of McDonald’s loyalty program, how franchisees may be encouraged to use them, and what antitrust review was conducted before the system was launched. They asked Kempczinski to respond by November 16.

McDonald’s did not respond to a request for comment on the letter. After Reuters’ earlier report, the company said its tools do not generate recommendations based on data from individual customers, while franchisees set prices independently and are not required to use such recommendations. Three franchisees previously told Reuters that the system’s recommendations increased price differences between nearby restaurants.

Two consumer class-action lawsuits have been filed in federal court in recent weeks. The plaintiffs allege that the company unlawfully coordinates menu prices at franchised and company-owned locations through a centralized algorithmic system. After the first lawsuit was filed, McDonald’s said that artificial intelligence does not set the price of a Big Mac or any other menu item, and that franchisees make pricing decisions.