6 June 2024
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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 →