10 June 2024
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Note: If you are a consumer with a Junk Fee issue, please do NOT contact us! We do not represent consumers. We represent owners, developers, lenders, and management of hotels, restaurants, and other hospitality-related properties. We advise them on litigation, labor, regulatory compliance, contracts, transactions, financing, development, and strategies.
Mark S. Adams is the go-to senior lawyer in JMBM’s hospitality litigation team for assessing legal exposure, pursuing legitimate claims, and defending a client’s rights involving hospitality matters.
Jim Butler caught up with Mark to find out what all the fuss is about over California’s Junk Fee law (SB 478) and a proposed amendment by SB 1524 that has consumer advocates for transparent consumer prices in an uproar.
| Jim Butler
|
As a hospitality litigator and advisor, you have been at the forefront in junk fee matters for many years, and have written extensively about the latest developments.
Tell us what all the fuss is about concerning the California Junk Fee Law. |
| Mark S. Adams
|
In October 2023, California passed a law (SB 478) that declared junk fees to be a prohibited, misleading business practice. Anyone who advertises a price for goods or services must provide the total cost on first contact. In other words, drip pricing is illegal. Sellers cannot use a come-on price to get attention with later disclosure of additional mandatory fees or charges.
See California bans Junk Fees as of July 1, 2024. Good bye to junk fees, resort fees, mandatory service charges, and drip pricing. Hello to – the fruits of SB 478.
California was the first state in the country to adopt such a comprehensive law, and it was widely hailed as a consumer victory. However, the substantive provisions of the California Junk Fee law are scheduled to become effective on July 1, 2024. And on June 6, 2024, William Dodd (with the support of the California Restaurant Association) introduced SB 1524 to exempt the restaurant industry from the California Junk Fee Law.
See Pricing transparency without hidden mandatory junk fees. Does this apply to restaurants too? New California proposed law (SB 1524 ) says “No!” Can this be right? |
| Jim Butler
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Isn’t this blatant preference of special interest legislation over consumer protection? |
| Mark S. Adams
|
I have seen some strong criticism of the proposed SB 1524 as special interest legislation gutting landmark consumer protection. It certainly does make the playing field uneven. We have heard complaints from many other businesses affected by SB 478 who are not getting similar benefits. Just ask hotel owners or ticket sales companies.
Before Senator Dodd’s latest proposal, there were a couple of exemptions in SB 478 for certain highly regulated businesses who comply with their primary regulator’s detailed rules (such as broadband services complying with FTC regulations, or financial entities complying with relevant regulations such as the Financial Code, Truth in Lending or the Federal Reserve Act).
But SB 1524 is an outright exemption from SB 478 for any “items sold by a restaurant, bar, or other food service provider, or pursuant to a contract for banquet or catering services.”
The bill would permit drip pricing, as long as the additional mandatory fees are conspicuously set out in the advertisement, menu or other display. |
| Jim Butler |
Doesn’t that provision gut SB 478? |
| Mark S. Adams
|
Yes and no. It does exempt the restaurant industry from SB 478’s ban on junk fees, as long as the service charge or administrative fee or health compliance charge is disclosed. The consumer is not entitled to get the total cost on first exposure to price, as she would be if looking at a promotion for a hotel stay. Some people feel this is a violation of the honest pricing or transparent pricing mandate behind the reform legislation.
But unless further amended, as of July 1, 2024, SB 478 will affect every other business dealing with California consumers. Of course, most of these other affected businesses feels this is unfair. Most of them disclose various mandatory fees somewhere in the sale process. It is just that they disclose them after the initial advertised price, and after the consumer has invested time in researching the goods or services, or filling in required information to get to a form. Hiding the additional fees just frustrates open competition and makes it difficult for consumers to make wise decisions.
SB 478 is only gutted as to the restaurant industry. It applies to everyone else. Is that fair? Does that serve the public?
I guess we will have to see what the California legislature decides. |
California DOJ SB 478 FAQs
Anticipating the effectiveness of the law, on May 8, 2024, the California Department of Justice released a set of SB 478 Frequently Asked Questions (SB 478 FAQs) to provide guidance on the law.
Although these SB 478 FAQs may become moot as to restaurants, they will continue to apply to all other businesses, unless exempted.
Mark S. Adams, Hotel Dispute Lawyer, is an experienced trial lawyer and a senior member of JMBM’s Global Hospitality Group®. A primary focus of Mark’s practice is devoted to representing clients on hundreds of matters involving Hospitality Litigation, Arbitration & Dispute Resolution – from avoiding litigation to conducting complex, multi-state litigation, arbitration, and mediation.
Mark’s expertise is in business litigation involving contracts, corporate and partnership disputes, and hospitality disputes and litigation. On behalf of hotel and resort owners, Mark has successfully litigated the termination of long-term, no-cut, hotel management agreements, franchise agreements, fiduciary duty issues, investor-owner disputes, TOT assessments, and more. He has wide-ranging trial experience in various commercial disputes, including complex multi-party litigation and class actions. He has tried numerous cases in state courts, federal courts, and domestic and international arbitrations and is a frequent author and speaker on trial practice. Forbes, Reuters, and other publications have covered Mark’s trial wins. He obtained two of California’s 50 largest jury verdicts in the same year.
Mark has taken or defended nearly 1,000 depositions throughout North America, Europe, and the Middle East. The Wall Street Journal has quoted him as an expert on noncompete agreements. For more information, contact Mark at 949.623.7230 or markadams@jmbm.com.
For more recent articles written by Mark S. Adams, please see the following links:
Junk Fee Law: Exception for California restaurants moves forward
California’s AB 537 mandates transparent pricing for all short-term lodging as of July 1, 2024 — $10,000 penalty for violation
New Federal Junk Fee Law – The No Hidden FEES Act of 2023 (HR 6543)
Jim Butler asks Mark S. Adams for update on California Junk Fee law: Would SB 1524 gut SB 478’s honest pricing for all?
Pricing transparency without hidden mandatory junk fees. Does this apply to restaurants too? New California proposed law (SB 1524 ) says “No!” Can this be right?
FTC’s proposed rule will end drip pricing and junk fees for hotels, restaurants, and many other businesses. Goodbye to resort fees, destination fees, service charges and other miscellaneous fees?
California bans Junk Fees as of July 1, 2024. Good bye to junk fees, resort fees, mandatory service charges, and drip pricing. Hello to – the fruits of SB 478.
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This is Jim Butler, author of www.HotelLawBlog.com and founding partner of JMBM and JMBM’s Global Hospitality Group®. We provide business and legal advice to hotel owners, developers, independent operators, and investors. This advice covers critical hotel issues such as hotel purchase, sale, development, financing, franchise, management, ADA, and IP matters. We also have compelling experience in hotel litigation, union avoidance and union negotiations, and cybersecurity & data privacy.
JMBM’s Global Hospitality Group® has been involved in more than $125 billion of hotel transactions and more than 4,700 hotel properties located around the globe. Contact me at +1-310-201-3526 or jbutler@jmbm.com to discuss how we can help.
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