A federal judge, who had dismissed the lawsuit in December last year, has now ordered McDonald’s to defend against media entrepreneur Byron Allen’s $10 billion (AED36.7 billion) lawsuit accusing the fast-food chain of racial stereotyping and its refusal to advertise on Black-owned media networks.
Allen, who is Black, has accused the American fast food company of instituting a “racially discriminatory contracting process” in a lawsuit first filed in May 2021.
According to the lawsuit, McDonald’s intentionally discriminated against AMG divisions Entertainment Studios and Weather Group through a pattern of racial stereotyping and refusals to contract in violation of the Civil Rights Act of 1866.
On Friday, September 16, defendant McDonald’s was denied a Motion to Dismiss by Judge Fernando M. Olguin of the United States District Court for the Central District of California. The case will now proceed to trial before a jury in May 2023.
Allen alleged that McDonald’s established “a two-tiered, race-based system and shut plaintiff out of the general market (i.e. white-owned media) tier.”
The judge dismissed the suit in December, saying that the allegations were not sufficiently supported. The same judge denied a request by McDonald’s to dismiss the case, thereby allowing it to proceed, after further discussions on the case.
The Chicago-based company is the world’s leading global food service retailer with over 39,000 locations that generate over $100 billion in annual revenue. Even though African Americans represent approximately 40 percent of McDonald’s US sales, the company spends less than approximately $5 million each year on African American-owned media from its annual advertising budget of $1.6 billion.
The lawsuit alleges that McDonald’s refusal to contract is the result of racial stereotyping through their tiered advertising structure that differentiates on the basis of race. The primary advertising tier for McDonald’s is referred to as ‘general market’ and it constitutes the vast majority of its advertising budget. The company created a separate ‘African American’ tier with a much smaller budget and less-favourable pricing and other terms.
For this African American tier, McDonald’s contracts with a separate ad agency, Burrell Communications, thereby creating separate and unequal tracks for Black-owned media companies to earn advertising revenue.
Demanding that the CEO, the Chief Marketing Officer and the Board of Directors must be fired, Allen said in a statement: “This is about economic inclusion of African American-owned businesses in the US economy. McDonald’s takes billions from African American consumers and gives almost nothing back. The biggest trade deficit in America is the trade deficit between White corporate America and Black America, and McDonald’s is guilty of perpetuating this disparity. The economic exclusion must stop immediately.”
Loretta Lynch, the former US attorney general who is representing McDonald’s, said Allen’s complaint was “about revenue, not race”.
“The plaintiffs’ groundless allegations ignore both McDonald’s legitimate business reasons for not investing more on their channels and the company’s long-standing business relationships with many other diverse-owned partners,” Lynch added.
In December last year, the company settled a lawsuit filed by a Black franchise owner, retired Major League Baseball player Herbert Washington, that alleged the company steered him toward less profitable restaurants in lower-income, predominantly Black neighbourhoods because of his race.
McDonald’s said in a statement that in agreement to exit the company’s system and dismiss his suit, the company agreed to purchase the 13 restaurants Washington owned for $33.5 million.
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