McDonald's (NYSE: MCD) has received all kinds of litigious assaults over the years regarding its foodstuffs. There was the hot coffee incident, the issue with the fries containing animal fat (which irritated vegetarians), and the charge that McDonald's is responsible for obesity.
Here's the latest one, according to Reuters. A radio personality in San Francisco named Katherine Fettke is suing the company over the idea that McDonald's has, in her opinion, failed to live up to its stated intentions of lowering the quantities of trans fatty acids in its menu items. McDonald's had indeed previously announced back in September 2002 that it would be substituting a healthier cooking oil for the less-healthier one, a move that would lower this particular type of fat molecule. The change was to happen by February the following year. It's possible the move might have been pushed back because McDonald's doesn't want to interfere with its "taste equity," if you will -- i.e., it wants to make sure its patrons don't detect a difference between one oil and another. The FAQ section of the company's Web site addresses the status of the new oil.
A company spokesman said that in February 2003, "we made a broad public statement that the change in our cooking oil was taking longer than anticipated and would be delayed." The woman claims that she wouldn't have purchased food for herself or her children had she known the company had yet to make the switch. Incidentally, the lawyer who is handling the case, Stephen Joseph, is the same one who was angry over Kraft Foods' (NYSE: KFT) Oreos.
I'm not a lawyer, so I have no idea how meritorious this suit is. Sure, on one hand, she does have a point. On the other hand, I just don't see McDonald's necessarily being responsible for a delay in procedure. One question I have is, did she inquire at her local restaurant location as to whether the move had been made? Months ago I had actually asked this of my nearby McDonald's and found out it had not occurred.
But let's forget that debate for now. The question is, does this matter for shareholders? In the short term, not a bit. Everything is fine. The balance sheet won't be affected.
But longer term, will some of these health suits begin to gain serious traction and indeed provide some resisting gravity wells for the stock? Will Wendy's (NYSE: WEN) and Yum! Brands (NYSE: YUM) also come under pressure and be seen as viable class-action targets in a similar fashion to tobacco concerns such as Altria (NYSE: MO)? This certainly isn't an original thought, as it was mentioned in a piece last year. KFC recently came under the gun of the Federal Trade Commission for certain claims it made in its advertising with regard to its menu's quotient of healthiness. The new diet fads sweeping the nation could trigger all kinds of investigations like this and lead to a very hostile environment for the fast-food industry.
I'm not trying to be alarmist, however, and I am not necessarily taking any side. I understand Bob Bobala's thesis in his article about the filmmaker who subsisted on Ronald's menu for a month, but I do acknowledge that obesity is dangerous. For me, just the fact the lawsuit exists is relevant. I own shares in Disney (NYSE: DIS), and believe me, I was very interested in the outcome of the Pooh legal struggle. The outcomes are what matter, not what they represent in a broader scope; after all, investors basically need to know whether they should hold or fold.
For now, let's hope that the next time Ronald McDonald is called into court, it's over the capricious actions of the Hamburglar.
What do you think of this subject? Share your thoughts at the McDonald's discussion board.
Fool contributor
Steven Mallas owns shares of Disney.
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