Lawsuit Accuses McDonald's of Racially Discriminatory Ad Spending
By Suzanne Vranica and Heather Haddon
Two companies owned by media mogul Byron Allen have filed a
lawsuit against McDonald's Corp., accusing the fast-food giant of
discriminating against Black-owned media companies.
Entertainment Studios Networks Inc. and Weather Group LLC filed
the complaint in Superior Court of California, seeking $10 billion
in damages. The lawsuit targets what the companies allege are the
restaurant chain's "discriminatory contracting process and refusals
to advertise on Plaintiffs' networks on the basis of race."
The suit marks the latest move by Mr. Allen, who is Black, to
pressure large U.S. corporations to spend more ad dollars on
Black-owned media companies. His Allen Media Group/Entertainment
Studios produces movies 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 lawsuit alleges that McDonald's spent approximately $1.6
billion on U.S. TV ads in 2019 and estimates that less than $5
million, or 0.31%, of that budget was spent on Black-owned media.
The complaint also alleges that McDonald's hasn't advertised on
Entertainment Studios' lifestyle networks since they were launched
in 2009 but has purchased significant advertising on similarly
situated, white-owned networks.
Mr. Allen has previously called on advertisers to spend at least
2% of their budgets with Black-owned media companies, a target he
later increased to 5%.
In their complaint against McDonald's, Entertainment Studios and
Weather Group don't indicate how they arrived at their estimates of
the restaurant chain's ad spending. A spokesperson for Mr. Allen
said the figures came from "multiple sources across the
A McDonald's spokesman said the company would review the lawsuit
and respond accordingly. He pointed to McDonald's planned changes,
announced earlier Thursday, aimed at diversifying the company's
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 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. McDonald's
said its spending with Black-owned media groups would rise to 5% of
national ad spend by 2024 from 2% today.
The fast-food giant also said it would join with diverse-owned
media and production companies, content-creators and influencers.
The company said it has longstanding relationships with marketing
companies with diverse ownership, including the Boden Agency, Lopez
Negrete Communications, IW Group Inc. and Burrell Communications
"Together with our franchisees we have doubled down on our
relationships with diverse-owned partners," the McDonald's
Entertainment Studios and the Weather Group accuse McDonald's of
engaging in racial stereotyping tied to what their complaint says
is a tiered advertising structure that differentiates on the basis
of race. McDonald's operates a separate "African-American" tier
that gets a smaller budget and less-favorable pricing than its
larger "general market" tier, according to the complaint.
McDonald's declined to comment on how it structures its
Mr. Allen has accused some of the country's largest advertisers,
including General Motors Co. and Coca-Cola Co., and big advertising
agencies like Omnicom Group Inc. and Interpublic Group of Cos. of
inadequately supporting Black-owned media companies.
After Mr. Allen and other Black media executives publicly
criticized GM in newspaper ads, the auto giant pledged to increase
the amount it spends on advertising with Black-owned media
companies. The nation's largest car maker by revenue said last
month that it would allocate 4% of its U.S. advertising spending on
Black-owned media companies by next year and boost that level to 8%
Madison Avenue has faced criticism in the past over the effects
of industry practices on Black-owned media organizations, which
have long complained of receiving disproportionately less business
from advertisers than outlets not controlled by Black
Following public outcry over the murder of George Floyd, a Black
man, by a white police officer in Minneapolis last year, many
companies promised to direct more money to Black-owned businesses.
Some ad agencies pledged to improve transparency around the
composition of their workforces. Recently, some agencies have also
promised to direct more ad dollars to Black-owned media
McDonald's previously stood out for its record on race, having
promoted numerous Black executives into senior leadership roles. It
has faced criticism for its commitment to diversity in recent years
after minority representation in upper management diminished. Chief
Executive Chris Kempczinski said last year that the company has
more work to do. Earlier this year, McDonald's connected executive
pay to reaching diversity and inclusion targets and said it would
increase the percentage of historically underrepresented groups in
senior roles by 2025.
During the company's shareholders meeting Thursday, Mr.
Kempczinski said he remained committed to improving diversity among
the company's restaurant owners, suppliers and employees.
Write to Suzanne Vranica at email@example.com and Heather
Haddon at firstname.lastname@example.org
(END) Dow Jones Newswires
May 20, 2021 20:53 ET (00:53 GMT)
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