From the LA TImes: Atty. Gen. Rob Bonta releases guidelines for the state’s new ban on ‘drip pricing.’ By Karen Garcia and Nathan Solis
California restaurants finally have their answer: They, too, must comply with a new state law that bans unadvertised fees, surcharges and other costs tacked onto a bill.
Starting July 1, restaurants will join thousands of other California businesses — including event ticket sellers, short-term rental companies, hotels and food delivery services — that are prevented from utilizing “drip pricing” and are required to include all mandatory fees and charges in the prices they display or advertise.
The state attorney general’s office gave conflicting statements in the weeks after Gov. Gavin Newsom signed the measure into law last year. The office told some news outlets that restaurants could keep their current prices while listing any surcharges on menus and told others that the surcharges had to be included in prices.
Atty. Gen. Rob Bonta’s office this month released a set of guidelines to clarify that issue and answer other questions about how businesses must comply with the law. Bonta sponsored the measure, Senate Bill 478, along with state Sens. Bill Dodd (D-Napa) and Nancy Skinner (D-Berkeley).
For restaurants, that means it will no longer be enough to list service charges and surcharges on a bill or as part of the menu’s fine print. Instead, these charges must be included in the price printed on the menu.
For example, a $20 mole enchilada at a restaurant that levies a 5% fee to cover employee health costs will have to be listed on the menu as a $21 mole enchilada.
And a $10 lunch buffet at a restaurant that adds a mandatory 10% “service charge” will have to be advertised as an $11 lunch buffet.
The Golden Gate Restaurant Assn. said in a statement that Bonta’s guidelines “will create significant challenges for the restaurant industry moving forward.”
The association, which advocates for the restaurant industry, argues that by prohibiting the longtime practice of utilizing service charges to cover wages or the cost of local ordinances — such as San Francisco’s required spending on healthcare services — the law will compound the problems faced by a struggling industry.
“Diners will not pay less, instead they will see significant menu price increases, which we believe will further cause them to pull back on dining out,” the organization’s statement said. “Not only will restaurants struggle, but workers will lose hours and jobs.”
With few exceptions, businesses of all sorts across California will not be able to advertise, display or offer a price for their goods or services that does not include all “mandatory fees or charges” other than government- imposed taxes or fees or reasonable shipping costs, according to the measure’s authors.
“Put simply, the price a Californian sees should be the price they pay,” Bonta’s office said in a news release.
The law doesn’t dictate what companies charge for their goods or services. Businesses still set prices, but the posted price will need to match the amount a customer sees on the final bill.
Though businesses can exclude taxes and shipping charges, handling fees must be included. In other words, postage or delivery charges can be excluded from the advertised price, but the cost of pulling an item off a shelf and taking it to a shipping company must be included. Separate fees for optional services or features do not need to be advertised; this could extend to a bevy of industries and services, such as the amount an airline charges for a seat upgrade or checked bags.
As for late fees or extra charges for customers who smoke in a hotel room, because those charges can be avoided, they do not have to be advertised, according to Bonta’s guidelines.
Businesses will not be allowed to skirt the law by advertising one price and letting customers know that fees might be added later. A business can, however, list the full price and provide customers with a breakdown of all fees.
Bonta offered guidance for businesses that say they do not know upfront what final costs for a transaction will be. Such businesses “should wait to display a price until they know how much they will charge,” the guidelines say.
The law could affect how music fans interact with ticket sellers for concerts and other events. The nonprofit watchdog Consumer Reports noted that hidden fees can increase the price of event tickets by 30% to 40%.
Live Nation Entertainment, parent of ticketing giant Ticketmaster, said in a statement that it supported SB 478 and has already offered all-in pricing at some venues and festivals .
“Unfortunately, we routinely see resellers defy state laws requiring all-in pricing, which confuses and harms fans, so we strongly encourage regulatory scrutiny to ensure compliance across the industry,” the company said.
The Travel Technology Assn., a global network of online travel agents, said it views transparency as a priority but opposed SB 478 and would rather see a national standard for regulations on lodging prices.
“We take this position to create uniformity and certainty for lodging operators, travel technology companies, and most of all, travelers, who will have a better understanding of what is included in advertised prices for trips both in and out of their home state,” President and Chief Executive Laura Chadwick said in a statement.
The online travel company Expedia opposed the bill for similar reasons.
In response, Bonta said California does not need to wait for federal action to ensure transparency for consumers. The practice of hiding mandatory charges, he said in a statement, “is deceptive and unfair to consumers wherever it occurs — not just in certain industries.”