A Chinese firm has filed an antitrust complaint against McDonald's over its the proposed sale of 80% of its holdings in China and Hong Kong, alleging the deal could hit workers' pay and allow the fast-food giant to abuse its market power.
Hejun Vanguard, a Beijing-based group that has previously taken on multinationals  like Coca-Cola and Apple, filed the complaint with the Ministry of Commerce (MOFCOM) in response to last month’s $2.1 billion sale to Chinese state-backed Citic and U.S. private equity firm Carlyle. The move could delay regulatory approval over the sale.
"Regulators should investigate the transaction and impose restrictions to prevent McDonald's from abusing its dominant market position." said Li Su, CEO of Hejun, in a statement, adding that "the deal will put enormous downward pressure on the workers and customers."
So far the Hong Kong Confederation of Trade Unions (HKCTU)  and the Service Employees International Union (SEIU)  expressed support for the antitrust complaint.
"In other countries where McDonald's has sold a large stake of its business, the resulting model has placed enormous pressure on franchisees, which has made it harder for franchise operators to provide adequate pay and conditions for their workers," HKCTU official Wong Yu Loy said in the statement. "If the buyers in Hong Kong get squeezed by McDonald's as they have in other countries, workers here may get even less as a result," Wong said.
The Service Employees International Union, a U.S. labour organization, also criticised the deal in a statement last month, pointing to previous transactions in Brazil and Puerto Rico that had placed pressure on franchisees and hurt workers.
At present, McDonald's owns and runs most of its stores in China, but the transaction would switch the company to a franchise model that would place intense pressure on franchisees to cost cuts while McDonald’s reaps profits.
In a statement, McDonald's said its model is not unfair, but based on “mutually beneficial partnerships.” The burger giant also said it "treasures" employees as its most valuable asset.
Hejun disagrees, alleging McDonald’s franchise model will be an abuse of the burger giant’s market dominance in the fast food industry. Hejun points to the company’s high royalty rates: as high as 6 percent according to the complaint, compared with 3 percent rate charged to McDonald’s franchises in other countries, as well as the rate charged by China’s Yum Group to its brands KFC and Pizza Hut.
The burden of this cost cutting will likely fall squarely on workers and consumers, placing enormous pressure on franchisees to lower pay and conditions for their workers.
Hejun has prevailed on antitrust complaints before, winning a case against Coca-Cola in the first ever acquisition blocked by MOFCOM. In McDonald’s case, the Ministry has the powers to launch an investigation against McDonald’s if it believes the allegations are well founded.
McDonald's operates more than 2,400 stores and employs about 120,000 workers in China.