McDonald’s Brazil in a (Mc)Flurry

Published On 05/07/2014 | By Elouise Davis | Consumer protection

McDonald’s – the official restaurant of the FIFA Brazil World Cup – has been cleared of abuse of dominance allegations against its Brazilian subsidiary by the country’s antitrust regulator. The Conselho de Administrativo de Defesa Economica (CADE) ruled in tribunal proceedings that the action was time-barred, according to the Commissioner Alessandro Octaviani.

Rio Grande do Sul prosecutors commenced proceedings against the fast food chain in October 2007, with respect to conduct taking place between June 1998 and December 1999, despite the five year limitation on antitrust investigations, which led to the CADE tribunal’s unanimous dismissal of the proposed litigation. The substantive allegations were that McDonald’s insisted that a clause be included in its agreement with Brazilian shopping mall Iguatemi, prohibiting the retailer from entering into lease arrangements with McDonald’s main domestic hamburger competitor, Brazilian-owned food chain Bob’s. These actions imposed illegal restrictions on Bob’s franchising activities.

Fast food is a major growth market in Brazil, which recorded sales last year of $21.7USD billion, up 82 percent since 2008. Much of this is due to the middle class shift to eating at fast food chains, where they would have traditionally chosen local street stalls and independent outlets. McDonald’s entered the Brazilian market in 1979.

Approximately a third of chained fast food outlets in Brazil are a McDonald’s, giving it by far the greatest market share of Brazil’s fast food competitive landscape. There are over 1,300 McDonald’s franchises in Brazil, most of which are owned by Arcos Dorados Holdings Inc, the world’s largest franchisee of the McDonald’s Corporation. Part of the company’s success has been due to its aggressive expansion into large cities in regions beyond the developed South East (which currently holds approximately 60% of foodservice chains), and creative marketing strategies. Brazilian McDonald’s also adapts its menu to suit South American taste preferences, setting it apart from its major international rivals Burger King and Subway.

It is estimated that McDonald’s has spent in the range of $25USD million to be a major sponsor of the FIFA World Cup, enabling it to feature on FIFA’s website and in their World Cup promotional materials, have signage rights during matches, and air commercials during World Cup coverage.

Image credit: Tumblr

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