Above photo: AP Photo/Andre Penner
Golden Arches Faces First-Ever Global Hearing on Company’s Low-Road Business Model, Under Fire for Allegations of Tax Dodging, Unfair Competition, Franchise Law Violations
Workers from five continents, elected leaders from around the world to testify before Brazilian Senate on McDonald’s low wages, alleged tax dodging, predatory business practices
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Hearing marks new challenge in company’s most important Latin American market
São Paulo and Brasília, Brazil – The Brazilian Federal Senate will hold an unprecedented hearing Thursday on McDonald’s role in driving a global race to the bottom, placing the fast-food giant under the microscope in one of its most important markets overseas, and marking a major escalation of the global effort to hold McDonald’s accountable for its mistreatment of workers and bad corporate citizenship.
Workers from five continents, elected officials, and labor leaders from around the world will deliver in-depth testimony on how McDonald’s business model is harming workers, consumers, governments, suppliers, and competitors.
The hearing comes the same week one of Brazil’s most powerful unions filed a complaint asking Brazil’s public prosecution service to open a civil inquiry into allegations of tax dodging, unfair competition and violations of franchise laws by McDonald’s. Calling McDonald’s largest franchisee, Arcos Dourados, “recalcitrant in its breach of employer obligations in Brazil,” the General Workers’ Union (UGT) filed a petition calling on the Public Prosecution Service to launch a wide-ranging civil investigation into the burger giant’salleged illegal business practices in the country. The complaint alleges McDonald’s has organized its business in Brazil in a way that allows it to avoid taxes, skirt compliance with local franchise laws and engage in anti-competitive behavior that disadvantages competitors and consumers alike. If found guilty of tax dodging, fines and penalties could amount to more than $342 million. Anti-competition penalties could total 1% to 20% of the company’s gross profits, plus an additional 10% to 50% of the fine against the company to its CEO.
Actions and protests throughout Brazil kicked off Monday afternoon and are continuing into the week.
Background
McDonald’s is coming under increased scrutiny for both its treatment of workers and its questionable corporate citizenship around the world. In Brazil, a coalition of trade unions has filed two lawsuits accusing the company of widespread and systematic labor and health and safety violations. One of the suits accuses McDonald’s of “social dumping,” an anti-competitive practice that drives standards down for workers across the country, and seeks to prevent the company from opening new stores unless it complies with Brazilian law. Also, McDonald’s agent in Latin America and the Caribbean, Arcos Dorados, has come under scrutiny, with an investor group asking the New York Stock Exchange to review the company’s corporate governance.
In Europe, McDonald’s is being accused by a coalition of trade unions and the UK-based NGO War on Want of avoiding more than €1 billion in taxes over the last five years. In March, the European Commission’s Directorate of Competition launched a preliminary investigation to find out whether McDonald’s entered into an illegal deal with Luxembourg that allowed it to avoid taxes.
Meanwhile, in the United States, the federal government recently launched a case against McDonald’s, accusing the fast-food giant of rampant labor-law violations, and arguing that the corporate parent, and not just franchisees, are responsible for the illegal actions. This is all on top of suits alleging wage theft and racial discrimination in the US; more than two-dozen complaints filed with the Occupational Safety and Health Administration alleging McDonald’s workers are being burned on the job, with many told to use condiments like mustard to ease the pain; and the more than $1 billion in public assistance taxpayers spend to subsidize low wages in the United States.