A new junk fee ban will hit California restaurants and other businesses

California restaurants finally have their answer: They, too, must comply with a new state law that bans unadvertised fees, surcharges and other charges from appearing on the end of the bill.

Starting July 1, restaurants will join thousands of other California businesses, including event ticket sellers, short-term rental apps, hotels and food delivery services, that are required to include all mandatory fees and surcharges in the prices they display or advertise.

The attorney general's office issued conflicting statements in the weeks after Gov. Gavin Newsom signed the measure last year. some news media that restaurants could continue to maintain their current prices while listing any surcharges on their menus, and others that the surcharges should be included in the prices themselves.

On Wednesday Atty. General Rob Bonta's office has released some guidelines to clarify that issue and answer other questions about how companies should comply with the new law. Bonta sponsored the measure, Senate Bill 478together with his co-authors, Sens. Bill Dodd (D-Napa) and Nancy Skinner (D-Berkeley).

For restaurants, this means that it will no longer be enough to simply list service charges and fees on a bill or in the fine print of a menu. Instead, these costs should be included in the prices printed on the menu.

For example, a $20 mole enchilada at a restaurant that charges a 5% fee to cover employee health costs will have to be listed on the menu as a $21 mole enchilada. And a flyer advertising a $10 lunch buffet at a restaurant that adds a mandatory 10% “service charge” will have to refer to the offer as an $11 lunch buffet.

In a statement, the Golden Gate Restaurant Assn. said Bonta's guidelines “will create significant challenges for the restaurant industry going forward.”

The association, which advocates for the restaurant industry, argues that by banning the longtime practice of using service charges to increase staff salaries or cover the costs of local ordinances — such as San Francisco's requirement that businesses spend at least a minimum amount in the area of ​​healthcare – the law will exacerbate the problems facing an already struggling industry.

“Diners will not pay less, but instead they will see significant increases in menu prices, which we believe will cause them to withdraw from dining out,” the statement said. “Not only will restaurants struggle, but workers will lose hours and jobs.”

With few exceptions, California businesses of all kinds 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,” except for government-imposed taxes or duties or reasonable shipping costs, according to the authors of the measure.

“Simply put, the price a Californian sees should be the price he or she pays,” Bonta's office said in a news release.

The new law does not prescribe what companies charge for their goods or services. Businesses can still set prices, but the published price must match the full amount a customer sees on their final bill.

Although companies can exclude taxes and shipping costs, handling fees must be included. In other words, actual shipping costs can be excluded, while the cost of taking it off the shelves and taking it to a shipping company should be included in the advertised price.

No separate charges for optional services or features need to be advertised. This could extend to a whole range of industries and services, for example the amount an airline charges for a seat upgrade or checked baggage.

What about late fees or additional charges for customers who smoke in a hotel room? Because these charges are avoidable, they do not need to be advertised per Bonta's office guidelines.

Businesses cannot circumvent the law by advertising one price and then letting customers know that additional charges may be added later. However, a company can list the full price of its product and provide customers with an overview of all included costs.

Bonta also offered some guidance for companies who say they don't know in advance what the final costs will be when their work is done. Such companies “should wait to show a price until they know how much they will charge,” the guidelines say.

This could impact how live music fans interact with ticket sellers for concerts and other live events. The nonprofit watchdog Consumer Reports noted that hidden fees can increase the price of tickets to live events by 30% to 40%.

Live Nation Entertainment, the parent company of ticketing giant Ticketmaster, said in a statement that it supports SB 478 and has already offered all-in pricing at some venues and festivals across the country. “Unfortunately, we routinely see resellers defy state laws requiring all-inclusive pricing, which confuses and harms fans, so we strongly encourage regulatory oversight to ensure compliance across the industry,” the company said.

The Virginia-based Travel Technology Assn., a global network of online travel agencies, said it considers transparency a top priority but opposed SB 478 and would prefer to see a uniform national standard for lodging pricing regulations.

“We are taking this position to create uniformity and certainty for lodging operators, travel technology companies and especially travelers, who will have a better understanding of what is included in advertised prices for travel both in and out of their home state,” said President and general manager Laura Chadwick in a statement.

Online travel company Expedia opposed the bill for similar reasons.

In response to the argument, Bonta said California does not need to wait for federal action to ensure transparency for consumers. The practice of hiding mandatory fees, he said in a statement, “is deceptive and unfair to consumers wherever it occurs – and not just in certain sectors.”

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