Price transparency is now on the menu
For the last several years, restaurant and bar patrons have been seeing an increase in various miscellaneous charges tacked onto the end of their bills. These surcharges often read “to cover labor costs,” “to offset employee health care” or something to that effect. But the fact of the matter is that we didn’t really know where those “fees” were going. To the employees? To the owners? It was confusing to say the least. It was also difficult to compare pricing when one bar or restaurant tacked on a 4% fee and another one didn’t. Was it mandatory? Did the patron have to pay them? These hidden fees that popped up across numerous industries inspired California Sen. Bill Dodd, who represents District 3, which encompasses parts of Sonoma, Napa, Contra Costa and Yolo counties, to introduce Senate Bill 478, which became law on July 1.
“I heard from so many of my constituents who were sick and tired of hidden fees being tacked onto the end of the transaction,” Dodd says. “I also experienced it myself in everything from hotels to tickets for events.”
According to the State of California Department of Justice website, SB 478, referred to as the “Honest Pricing Law” or “Hidden Fees Statute,” makes it illegal for businesses to advertise or list a price for a good or service that does not include all the required fees or charges other than certain government taxes and shipping costs. SB 478 is a price transparency bill. The statute does not change what price a business can charge or what may be included in that cost; it simply requires that the listed price includes all mandatory charges. Put simply, the price a California consumer sees should be the price they pay.
But, SB 478 was not without controversy, so even before it went into effect, a subsequent addendum was added.
“The addendum in SB 1524 clarifies this legislation to ensure that its implementation is logical and effective, while ensuring that customers are empowered with the full and complete costs ahead of making any purchase,” says Assemblymember Damon Connolly, of San Rafael, who represents District 12, which includes Marin County. “I was happy to support SB 478 in the Assembly Judiciary Committee and on the Assembly floor to help implement necessary common-sense reforms to address hidden fees and protect consumers. I commend Sen. Dodd’s work to ensure that this legislation effectively serves its intended purpose.”
Instead of guessing the intent, or interpreting the information ourselves, we decided to get the information directly from the source and recently caught up with Dodd:
Q SB 478 does not appear to be a restaurant-specific bill, but it is having quite a bit of an impact on that industry. Was there a specific event that generated interest in creating this law? Or was it a more general “truth in advertising” approach?
A My goal with SB 478 was to increase transparency and eliminate drip pricing (where the advertised price of an item fails to include all mandatory fees or charges necessary to complete that purchase) and surprise fees for California consumers. Because restaurants did not weigh in until after SB 478 was passed, I have since introduced SB 1524 to enhance protections for restaurant patrons by requiring all mandatory fees be listed in clear and conspicuous language on restaurant menus and anywhere else a price is displayed.
Q Since the pandemic, restaurant patrons have been inundated with extra fees. In San Francisco, specifically, many restaurants added a surcharge to cover additional medical insurance costs. But in some situations, where the money goes is more nebulous. Will SB 478 affect all surcharges, up to and including added gratuities?
A SB 1524 requires all mandatory fees, including mandatory gratuities and service fees, to be listed on the menu and anywhere else there’s a price. This gives the consumer all the information up front, so they can decide whether they want to pay the total price or go to a different establishment.
Q Who does the law aim to protect? The customers? The employees? The employers? All of the above?
A These are consumer protection bills. That said, they do not restrict restaurateurs from charging whatever price they need to charge for their menu items. It’s about price transparency.
Q Is sales tax excluded from this bill? Why or why not?
A Sales tax and other government charges are exempt from disclosure because these are mandated charges and they are not discretionary on the part of the business owner, and consumers are used to not seeing prices with sales tax included.
Q Are there any exceptions allowed in regard to restaurants?
A Under SB 1524, restaurants must clearly and conspicuously list any and all fees added to the cost of food items on the menu. SB 1524 doesn’t have any exception that would allow a surprise fee when the bill comes or allow drip pricing.
Q Final thoughts?
A As a former small business owner myself, I recognize how difficult it is to run a business. We all try to be transparent, and these policies ensure we do that by spelling out the rules.
More information can be found at oag.ca.gov/hiddenfees.
Jeff Burkhart is the author of “Twenty Years Behind Bars: The Spirited Adventures of a Real Bartender, Vol. I and II,” the host of the Barfly Podcast on iTunes (as seen in the NY Times) and an award-winning bartender at a local restaurant. Follow him at jeffburkhart.net and contact him at jeffbarflyIJ@outlook.com