California restaurants upset with AG as state bans hidden fees

As California Senate Bill 478 is set to be enforced July 1, state Attorney General Rob Bonta issued guidance last week indicating that an item's "posted price must include all amounts that the consumer will be required to pay."

Additionally, Bonta's office said restaurants cannot add a surcharge on top of a listed price.

The state's new price transparency bill is intended to require businesses to list their "all-in" price for items upfront before a customer goes to checkout. Similar efforts are underway to require companies nationwide to exhibit an upfront all-in price.

"Our price transparency law is about clear and honest communication with consumers, so consumers can make the financial choices that are best for them and their families. This new guidance provides information for businesses across California to ensure that clear answers are available, particularly for small businesses,” said Bonta. “The law is simple: the price you see is the price you pay. Laws work when everyone can comply. I am pleased that we can offer this guidance to help facilitate compliance with the law and make a more fair and level marketplace for businesses and consumers."

Eliminating 'junk fees' would create chaos at restaurants, group says

The California Restaurant Association objected to how Bonta's office interprets the new law. The association said Bonta's directive represents a misunderstanding of the industry's standard of upfront pricing.

“Courts have consistently concluded that service fees are permissible under the Consumer Legal Remedies Act as long as they are properly disclosed on restaurant menus. Nothing in the plain language of the bill or legislative debate suggested an intent to change the pricing structure for every restaurant in this state," said Matthew Sutton, California Restaurant Association senior vice president. "The office’s interpretation of the law itself is the 'bait-and-switch' — suggesting an interpretation of this new law that was never presented or debated in the legislature, which we believe is clearly inconsistent with the legislature’s intent.”

Bonta's office said companies can continue setting whatever price they would like for goods and services. The attorney general says the law applies to goods and services intended for a consumer’s personal use, including event tickets, hotels and other lodging, restaurants, and food delivery.

Previously, the National Restaurant Association decried national efforts to implement a ban on hidden fees, claiming it would create "chaos."

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The Federal Trade Commission has defended its efforts by saying price transparency is important for consumers.

“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. These junk fees now cost Americans tens of billions of dollars per year — money that corporations are extracting from working families just because they can,” said FTC Chair Lina M. Khan. “By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront."

The FTC published proposed nationwide rules in late 2023 that would require businesses to disclose all mandatory fees when giving customers a price. The FTC provided examples, such as concert tickets and renting an apartment, which might have added fees not visible in the original purchase price.