McDonald’s facing $10 billion lawsuit from black-owned media companies over ad buys

[sharenow]

A pair of companies owned by black entertainment and business mogul Byron Allen has filed a $10 billion lawsuit against McDonalds, alleging the fast-food giant engages in discriminatory ad purchases involving African American-targeted audiences.

The Wall Street Journal reported Thursday the suit was filed on behalf of Entertainment Studios Networks Inc. and Weather Group LLC in California Superior Court, alleging that the restaurant chain engages in “discriminatory contracting process and refusals to advertise on Plaintiffs’ networks on the basis of race.”

The legal action is the latest in a series of other moves by Allen to pressure major American corporations to spend more of their advertising dollars on exclusively black-owned media entities. According to the WSJ, Allen’s Media Group/Entertainment Studios produces films “and owns more than a dozen television stations as well as the Weather Channel and 10 digital-TV networks, such as Pets.TV and Cars.TV.”

The suit claims that McDonald’s purchased about $1.6 billion in television ads in 2019, but less than $5 million of that total, or about 0.31 percent, was directed towards black-owned media. In addition, the complaint alleges that the restaurant chain has not bought advertising on lifestyle networks owned by Entertainment Studios since they were first launched in 2009, though McDonald’s has nevertheless bought TV ads on white-owned networks that were situated in similar markets.

Previously, the WSJ reported, Allen has pressed American companies to spend at least 2 percent of their advertising budgets with black-owned media firms, but he has since bolstered that to 5 percent.

The paper said that neither company owned by Allen indicated in the complaint how they calculated their estimates of McDonald’s ad expenditures, though a spokesman for Allen claimed the figures were extrapolated from “multiple sources across the industry.”

A spokesman for the restaurant chain did not respond directly to the lawsuit because the company had not had time to review it. However, he referenced the corporation’s planned changes that were announced earlier on Thursday regarding diversification of its ad-buying practices, the WSJ reported.

“Those moves include a commitment to more than double the advertising dollars McDonald’s devotes to media companies with diverse ownerships in the next four years,” the Journal noted. “The chain said that by 2024 it would increase to 10% the portion of its national advertising budget going to groups owned by Black, Hispanic, women and other underrepresented groups, up from 4% today.”

The restaurant chain also said it would shift more ad buys to black-owned media groups amounting to 5 percent of its national budget by 2024, up from 2 percent currently, WSJ reported.

McDonald’s also announced it planned to link up with media companies and content creators that are diverse-owned while adding that the corporation already has a lengthy history with diverse-owned marketing firms.

“Together with our franchisees, we have doubled down on our relationships with diverse-owned partners,” the spokesman told the WSJ.

The complaint specifically accuses McDonald’s of practicing racial stereotyping which consists of a layered advertising framework that is based on race. For instance, the complaint says, McDonald’s’ structure includes an “African-American” level that features a smaller advertising budget and unequal pricing compared to the company’s larger “general market” tier.

Allen has regularly accused large American corporates of failing to adequately support black-owned media firms. They include the Coca-Cola Co. and General Motors, as well as large ad agencies such as the Omnicom Group and Interpublic Group of Cos.

In response, GM has already announced it would boost its ad spending to black-owned companies to 4 percent by next year and to 8 percent overall by 2025, the WSJ reported.

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Jon Dougherty

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