McDonald’s runs into Chinese wall
Hong Kong — A Chinese consultancy that has previously helped to win antitrust battles against Coca-Cola and Apple has taken aim at McDonald’s, arguing in a complaint to regulators that the fast-food giant’s Chinese sale may hurt workers and consumers.
McDonald’s said in January that it had agreed to sell the bulk of its China and Hong Kong business to state-backed conglomerate CITIC and US private equity firm The Carlyle Group for up to $2.1bn. Under the deal, the consortium will act as the master franchisee for 20 years.
The complaint, which follows allegations from a US labour union that the transaction is likely to lead to worse pay and conditions for 120,000 McDonald’s workers in China, could delay regulatory approval for the deal.
Hejun Vanguard Group, a Chinese management consultancy that has a track record of representing domestic companies against foreign firms, filed two separate complaints against McDonald’s with the ministry of commerce’s antimonopoly bureau and its franchise office, Hejun Vanguard told Reuters.
While Hejun has stopped short of asking the ministry to block the deal, it has called on the regulator to closely scrutinise 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 its outlets in mainland China.
The ministry had yet to respond to a request for comment at the time of publication. 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 disputed Hejun’s analysis of its market share in China.
Hejun said it was not acting for specific companies in the case and generally sought to protect domestic brands from overly aggressive foreign companies.
In 2016 the Service Employees International Union, a US labour organisation, warned potential buyers of about 3,000 McDonald’s restaurants in Asia that such deals could saddle them with operational risks.
In January, it raised concerns over the China deal, saying previous transactions in Brazil and Puerto Rico had put enormous pressure on franchisees, making it harder for them to provide adequate pay and conditions for their workers.
CITIC and CITIC Capital, an affiliate company that manages private equity funds, will hold 52% of the China business following the deal. Carlyle will control 28%, while McDonald’s will retain a 20% stake.