Hotel Law Blog

25 June 2024 [updated 27 June 2024]

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Junk Fee Litigation.

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.

On June 25, 2024, the California Assembly unanimously approved emergency legislation in the form of SB 1524’s so-called “restaurant exception” from SB 478’s Honest Pricing Law. As the Senate’s concurring approval and the governor’s signature are expected by the end of the week, this emergency provision will be effective immediately and thus will prevent the Honest Pricing Law from applying to any restaurant, bar, food concession, grocery store, or grocery delivery service. [As noted below, on June 27, 2024, the Senate unanimously approved the bill, and it was presented to the Governor at 3:00 PM]

The political gymnastics to accomplish this result are extraordinary and somewhat controversial with consumer advocacy groups.

Mark Adams gives us the details of the situation.

Junk Fee Law: Exception to SB 478
for California Restaurants Moves Forward

by

Mark S. Adams
Hotel Dispute Lawyer, Partner & Senior Member
JMBM’s Global Hospitality Group

California restaurants are likely to avoid SB 478’s Honest Pricing Law effective July 1, 2024.

[Update note: The Senate unanimously approved the Assembly’s version of SB 1525 on June 27, 2024. The bill was enrolled and sent to the Governor at 3:00 PM on that date.]

In the morning hours of June 25, 2024, the California Assembly unanimously approved Senate Bill 1534, an emergency response to the special interests of restaurants and labor (the California Restaurant Association and UNITE HERE), exempting any “restaurant, bar, food concession, grocery store or grocery delivery service” from application of the SB 478’s Honest Pricing Law that was passed in last year to become effective on July 1, 2024.

It is too cumbersome to use the complete list of carveouts in this discussion. So, we will use the phrase “Restaurants and Bars” to refer to any exempted business in HR 1524’s list of any “restaurant, bar, food concession, grocery store or grocery delivery service”.

The State Senate is scheduled to approve SB 1524 in a concurrence vote this week, and send the bill to the governor for signature and immediate effectiveness. [Update: Senate approval was given.] CONTINUE READING →

17 June 2024

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Junk Fee Litigation.

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.

As of July 2, 1024, California’s Business and Professions Code is amended to impose a civil penalty of up to $10,000 for each knowing violation of strict transparent pricing standards for short-term lodging.

AB 537 applies to any hotel, residence or other place offering short-term” lodging (for 30 days or less), as well as any person or entity advertising a short term lodging price in California or from California (such as an internet site or platform).

The new law will be enforced by city, county and state legal officers. There is not private right of action under this statute.

AB 537 requires transparent pricing for all short-term lodging
Effective July 1, 2024

by

Mark S. Adams
Hotel Dispute Lawyer, Partner & Senior Member
JMBM’s Global Hospitality Group

AB 537, the California Resort Fee Law is misnamed. It should be the “Transparent Pricing for Short-Term Lodging Law”

Assembly Bill 537 (AB 537) was signed into law by Governor Gavin Newsom on October 13, 2023. It becomes effective on July 1, 2024, and adds a new Section 17568.6 to the California Business and Professions Code applicable to all advertising for short-term lodging.

The bill was originally nicknamed the “California Resort Fee Law,” but it applies to so much more than just “resort fees.” It applies to any advertising of a rate or charge for short-term lodging (hotel, motel, residence or other place for 30 days or less) in this state or from this state

What activity is covered?

The amended B&P Code section applies to all advertising (in this state or from this state) for short-term lodging.

What is short-term lodging?

Short-term lodging is defined to include hotels, motels, bed and breakfast inns, or other transient lodging.

It also includes any residential property advertised on a centralized platform and rented to a visitor for 30 consecutive days or less.

Who is covered?

The law applies to all of the following:

• Place of short-term lodging
• Internet website, application, or other similar centralized platform — such as a brand website, Airbnb, Expedia, Travelocity, Hotels.com, hoteltonight.com, or other travel booking platforms
• Any other person

What 2 things are required or prohibited to avoid violation?

There are two prongs or tests for transparency in short-term lodging under AB 537. It is a violation if a covered person does either of the following:

1. Advertises a rate for the lodging, which does not include all mandatory fees, except taxes and government charges. (no drip pricing at any time)
2. Takes a reservation from a consumer before disclosing the “total price” of the lodging with all taxes and government charges included.

AB 537 is the only legislation we know of that requires disclosure of all taxes and government charges before taking a reservation from a guest. CONTINUE READING →

13 June 2024
See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Junk Fee Litigation.

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.

HR 6543: The US Congress wants in on Junk Fee regulation for hotels

Over the past several weeks, we have written about recent major regulatory developments concerning Junk Fees, Hidden Fees, and Drip Pricing:

• California’s SB 478, The California Junk Fee Law, Honest Pricing Law, Transparent Pricing Law or Hidden Fees Statute
• California’s proposed SB 1524, which will carve out an exception for the restaurant industry from the application of SB 478, and an update on its
• FTC’s proposed rule on Unfair or Deceptive Fees, adding Part 464 to 16 CFR, defining junk fees and drip pricing to be unfair or deceptive acts or practices under Section 5(a)(1) of the FTC Act (15 U.S.C. 45(a)(1)

We now turn our attention to the very latest – the Federal proposed “No Hidden FEES Act of 2023”.

The House passes HR 6543 and enters the ring to regulate Junk Fees
for hotels and short-term lodging

by

Mark S. Adams
Hotel Dispute Lawyer, Partner & Senior Member
JMBM’s Global Hospitality Group

On June 11, 2024, the United States House of Representatives passed HR 6543, the so-called “No Hidden FEES Act of 2023” which introduces federal regulations aimed at enhancing transparency and fairness in the advertising of hotel room and short-term lodging prices. A critical component of this Act is its preemption clause, found in Section 4(a), which establishes a national standard prohibiting states from enforcing any laws that conflict with the federal mandate. This provision has significant implications for state regulations, such as California’s SB 478, which also aims to protect consumers from hidden fees in various transactions. The scope and application of this preemption clause are essential for assessing how state laws will be affected and ensuring compliance with the new federal standards.

Below, we compare the No Hidden FEES Act of 2023 to the Proposed FTC Rule on Junk Fees and California’s SB 478: CONTINUE READING →

10 June 2024
See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Junk Fee Litigation.

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.

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.

CONTINUE READING →

6 June 2024
See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Junk Fee Litigation.

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.

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?

by

Mark S. Adams
Hotel Dispute Lawyer, Partner & Senior Member
JMBM’s Global Hospitality Group

For more than 20 years consumers have complained about hidden mandatory fees, junk fees, resort fees, destination fees, service fees, administration fees, health fees, surcharges, connection fees, and similar charges, whatever they are called.

California’s new “Honest Pricing Law,” SB 478, cracks down on hidden fees, requiring businesses to advertise and list a price that includes all mandatory charges. This applies to most goods and services, but a new bill, SB 1524, proposes an exception for restaurants.

SB 478: Transparent Pricing and the End of Junk Fees

SB 478, taking effect July 1, 2024, prohibits businesses from advertising a misleadingly low price and then tacking on hidden mandatory fees at checkout. This includes service charges, resort fees, and other surprise surcharges. Consumers have long complained about these “junk fees,” and SB 478 aims to create price transparency. California’s Civil Code Section 1770(a)(29), amended by SB 478, prohibits unfair business practices like misrepresenting product qualities. Importantly, it requires businesses to advertise prices that include all mandatory fees, excluding only government taxes and reasonable shipping costs. This transparency aims to protect consumers from unexpected charges. Certain industries, like those complying with FCC regulations for internet access or those already subject to federal and state disclosure laws for financial services, are exempt from this specific provision.

SB 1524: A Special Exception for Restaurants?

Introduced on June 6, 2024, SB 1524 would allow restaurants to continue adding mandatory service charges, gratuities, and other fees on top of their advertised prices, as long as these fees are clearly disclosed on menus or advertisements. The proposed amendment to Civil Code 1770, would add a new subsection 29(D) to exempt restaurants from the transparent pricing mandate of in that section by adding this language:

(D)  For purposes of this paragraph, “advertising, displaying,  or offering a price for a good or service” does not include advertising or displaying the price of individual food or beverage items sold by a restaurant, bar, or other food service provider, or sold pursuant to a contract for banquet or catering services, provided that any service charge, mandatory gratuity, or other mandatory fee or charge is clearly and conspicuously displayed on the advertisement, menu, or other display.

The Debate: Transparency vs. Industry Flexibility

This exemption has raised concerns about consumer protection and a level playing field for businesses. SB 1524’s proponents, including the restaurant industry and the labor union UNITE HERE, argue that it allows restaurants flexibility in covering costs like employee benefits. Opponents argue that this exemption undermines the core purpose of SB 478 – price transparency for consumers. They question why restaurants should be treated differently from other businesses and point out the Federal Trade Commission’s stance that hidden fees are deceptive practices. CONTINUE READING →

17 May 2024
Click here for the latest articles on Resort Fee Litigation.

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.

Consumers hate drip pricing and junk fees

Consumers and politicians have complained about drip pricing and junk fees for more than 20 years. There’s a close connection between the two, but they are not exactly the same thing.

• Junk fees: These are generally any unexpected, often mandatory fees added to the advertised price of a good or service. They can be hidden or poorly explained, making it difficult for consumers to anticipate the true cost. Examples include service fees on concert tickets, credit card processing fees, or resort fees at hotels.
• Drip pricing: This is a specific tactic used to introduce junk fees. It involves advertising a lower headline price initially and then revealing additional mandatory fees later in the purchasing process, often in small print or during checkout. This creates a misleading impression of the actual cost and makes it harder for consumers to compare prices accurately.

So, all drip pricing involves junk fees, but not all junk fees involve drip pricing. For instance, a credit card with an “electronic service fee” added – even if clearly advertised — would not be considered drip pricing, even though it is a type of a junk fee.

Here’s an analogy: Drip pricing is like revealing all the ingredients in a recipe one by one, after having already taken a bite. Junk fees are like the unexpected or ill-defined ingredients that might not have been listed at all.

The first reports of  hotels charging resort fees (or similar charges) can be traced back to the year 2000. We are not sure if hotels invented the practice or were just amongst the early innovators. But in any event, the various mandatory fees with various labels soon became widespread throughout the hospitality industry and other industries including hotels, restaurants, food delivery services, live-event ticket sales, transportation such as car rentals and airlines, and many others.

FTC concern about drip pricing, junk fees, and deceptive practices

On November 9, 2023, the Federal Trade Commission (FTC) issued notice of a proposed rule on “Unfair or Deceptive Fees.” This development is discussed in the Blog below by my partner, Mark S. Adams.

FTC Cracks Down on Hidden Fees:
Upfront Pricing Is Coming

by

Mark S. Adams
Hotel Dispute Lawyer, Partner & Senior Member
JMBM’s Global Hospitality Group

Federal Trade Commission (FTC) is proposing a new weapon in the fight against hidden fees, surprise charges that inflate the cost of everything from hotel rooms and restaurant charges to concert tickets and college tuition. This proposed rule addresses prevalent fee practices that are unlawful under Section 5 of the FTC Act, 15 U.S.C. 45, and declares them to be unfair or deceptive to consumers. This “junk fee” crackdown would impact a wide range of industries, aiming to bring transparency to how businesses disclose their true costs.  Generally, the proposed rule makes two changes: Upfront Pricing and Deceptive Fees. CONTINUE READING →