If a California restaurant violates a new law requiring transparent pricing, consumers can seek “actual damages of at least $1,000.”
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If a California restaurant violates a new law requiring transparent pricing, consumers can seek “actual damages of at least $1,000.”
Photobuff/Getty Images
Service Fees; Resort Fees; “Additional Fees”: If you’re surprised by an unexpected charge when paying at a restaurant, booking a hotel room, or purchasing game tickets, you’re not alone. But if you live in California, change is coming. A new state law requiring price transparency will take effect in July.
“The law is simple: The price you see is the price you pay,” Attorney General Rob Bonta said Wednesday as his office issued long-awaited guidance on a law that would apply to thousands of businesses across industries. Opinion.
The law, which comes into effect on July 1, promises to change the number of restaurants that can operate. Their menus will be required to list a comprehensive price for each dish, with all mandatory charges consolidated into one number. Only expenses that are completely optional (such as tipping staff) may be removed from the published price.
The law allows consumers to seek “actual damages of at least $1,000” if a business violates that provision. In the new guidance, the state said initial enforcement efforts will not focus on “payments made directly and exclusively by restaurants to their employees, such as automatic gratuities. However, businesses may be held liable in private lawsuits.”
Many business owners, especially restaurateurs, have been trepidatious about the change, which would prohibit restaurant owners from increasingly relying on surcharges to pay employees higher wages and absorb discrete costs, such as San Francisco’s mandatory health care cost.
Consumer advocates applauded the change
Consumer advocacy groups welcomed SB 478, calling it a simple matter of common sense that would bring much-needed clarity and transparency to retail transactions.
“People should know the true price of a product up front so they can do good comparison shopping and compete well in the marketplace,” Jenn Engstrom, state director of the California Public Interest Research Group, a Los Angeles-based nonprofit, told . National Public Radio.
“I think this guidance is very good for consumers,” Engstrom said, adding that in her view the attorney general’s interpretation was consistent with lawmakers’ intent.
Erin Witte, director of consumer protection for the Consumer Federation of America, said laws like California’s will give consumers what they need: clarity about their expectations.
Now, she said, “it feels like it’s everywhere.” She added that for many people, they’re not sure if their dinner will cost an extra $20 if it exceeds their budget, which could have a knock-on effect.
“You’re looking at things like late fees and added interest. So it’s not only annoying, it’s harmful to a lot of people,” Witt said.
Restaurant owners warn of price hikes and consequences
Restaurant owners such as Laurie Thomas, president of the Golden Gate Restaurant Association, said the changes will bring higher prices and price shocks that could create a psychological barrier to customers’ dining habits. This, in turn, could hurt restaurants and their employees, she warned.
“If it were included in the core price of the menu, customers would spend less,” she told NPR shortly before the attorney general issued the guidance. “I think some people want restaurants to be able to cover that cost because we’re seeing people say, ‘Oh, it’s too expensive with the service charge.'”
Thomas’ organization said in an email to NPR that restaurants will be forced to “significantly increase menu prices” under the new guidelines. The report warns that if customers cut back on dining out, “not only will restaurants struggle, but workers will lose hours and jobs.”
Thomas said she has always advocated for any additional fees that restaurants clearly charge.
“As a restaurant organization, we have never advocated not fully disclosing any additional fees,” she said, citing longstanding practices like mandatory gratuity for large gatherings.
“It should always be listed,” she said. “You should never mislead a customer.”
Thomas said that at both of her restaurants, longtime employees prefer traditional tips. She plans to use the time before July 1 to consult with employees on how to adapt to the new regulations.
Matthew Sutton, senior vice president of government affairs for the California Restaurant Association, said the association “strongly opposes the attorney general’s broad interpretation of the law.”
Sutton accused the attorney general’s office of a “bait and switch,” saying its interpretation was “clearly inconsistent with the Legislature’s intent.” Courts have allowed service charges to be imposed as long as they are properly disclosed, he said, adding that the industry group was “considering all available options to prevent the implementation of the law” in the manner outlined in the guidance.
Momentum is building for transparent pricing
It’s difficult to predict all the potential impacts of California’s new law, in part because of the different industries it affects and because it would be the first such ban enacted in the United States. Legislation is being considered.
More than a dozen states, including Colorado and Pennsylvania, have adopted legislation similar to California’s this year, but so far none of the bills has received final approval, according to the American Economic Freedom Project, a progressive nonprofit that opposes trash fees.
At the federal level, the Federal Trade Commission is reviewing thousands of comments it received after issuing a proposed rule last November on “unfair or deceptive fees,” which mislead customers about the total cost of goods and services. . But federal rules can change whenever the White House changes hands.
“So there’s a real need for states to act very aggressively on this issue,” Vitter said, noting that momentum behind garbage fee legislation is growing.
“We’re seeing consumers cross political lines,” she said. Pushing for transparent pricing “This is really a bipartisan issue.”
But Vitter and other advocates say another important consideration is making sure the changes don’t harm employees.
Why do restaurant patrons react so strongly to charges?
Restaurants’ relationships with customers are inherently personal: after all, you’re putting their product into your body. For millions of Americans, the COVID-19 pandemic has interrupted that dynamic. When they returned to the restaurant, things were different. It’s common for restaurants to have trouble attracting and retaining enough employees. To smoothen the deal, many companies have added surcharges to help them increase workers’ salaries.
“Nationally, the restaurant industry has been one of the largest employers in the United States, but it has also been the absolute lowest-paying employer for generations,” said Saru Jayaraman, president of One Fair Wage and director of the UC Food Labor Research Center. “Part of that is because of tips. Workers were paid less than the minimum wage, a direct legacy of slavery. ”
But for many customers, the changes are surprising.
“It feels a little sudden,” Vitter said, citing the lingering effects of the pandemic and high inflation.
“You know, people know that inflation affects everyone, right? But it feels like adding fees on top of already rising prices across the economy feels like a double whammy for consumers,” Vitter said.
Another factor, she said, is that restaurants don’t always make it clear to diners what fees will be added to their final bills, or what the money will be used for.
“Some people feel like, well, I’ve already tipped the waiter in the form of a 20 percent service charge, why should I tip the waiter if they already get it? This disconnect and lack of transparency makes consumers angry and makes them Feeling cheated and potentially hurting people who rely on this income.
Jayaraman said if a restaurant adds a service charge to your bill, “if it’s not clearly stated, you have the right to ask what they are for.”
Jayaraman says if a restaurant offers the option of tipping, you should use it.
“We definitely encourage you to tip,” she said, adding that cash is best.
“The reason why tips are paid in cash is because many businesses will deduct credit card processing fees from the tips of tipped employees, which is very difficult for tipped employees and is not what consumers expect.”
How common are hidden fees?
The California law applies to both online and brick-and-mortar transactions and covers “the sale or rental of most goods and services for a consumer’s personal use,” the attorney general’s office said, from short-term rentals and event tickets to hotels, restaurants and food delivery services.
“I think this is more common with online purchases,” Engstrom said, adding that she has seen event ticket sellers add 20 to 30 percent to the advertised price.
Part of the law’s goal is to ensure a level playing field, whether a company is trying to attract concertgoers or diners. It also targets hotels that may add a “resort fee” to a customer’s check-out price for fairly standard amenities.
“We know this is a lucrative opportunity for businesses, not just because of the fee itself, but also because it allows them to take business away from other honest businesses who transparently disclose higher fees beforehand,” said Witt. price.
“Where we see a lot of junk fees and hidden fees is at car dealerships, and this is certainly not limited to large franchised car dealers,” Witt said, describing tactics like dealers advertising cars at attractive prices just to Expensive fees are charged for hours-long procedures.
Auto dealers are the subject of a pending Federal Trade Commission (FTC) rule, which says the change could save U.S. consumers more than $3.4 billion and an estimated 72 million hours in car-buying time. The rule was originally scheduled to take effect in July, but is currently in limbo following a legal challenge from the car dealer industry.
