California is set to implement a new law on July 1, 2024, that will require restaurants and other businesses to include all mandatory fees and charges in their advertised prices. The law, SB 478, aims to promote price transparency and protect consumers from unexpected costs. Attorney General Rob Bonta issued long-awaited guidance on Wednesday, stating, "The law is simple: the price you see is the price you pay."
Under the new law, restaurant menus will be required to list comprehensive prices for each item, with all mandatory charges incorporated into a single figure. Only optional fees, such as tips for staff, can be excluded from the posted price. Businesses that violate the mandate may face penalties, with consumers being able to seek "actual damages of at least $1,000" in private actions.
Consumer advocacy groups have celebrated the law, calling it a matter of common sense that will bring much-needed clarity to retail transactions. "People deserve to know the true price of products upfront so that they can do good comparison shopping and so that there's just good competition in the marketplace," said Jenn Engstrom, state director for the California Public Interest Research Group.
However, many restaurant owners have expressed concerns about the law's potential impact on their businesses. Laurie Thomas, head of the Golden Gate Restaurant Association, warns that the changes will lead to higher prices and sticker shock, which could raise a psychological hurdle in customers' dining habits and ultimately hurt restaurants and their workers. "If it's in the core price of the menu, there will be a pullback" in patrons' spending, Thomas told NPR.
The California Restaurant Association "strenuously disagrees with the AG's expansive interpretation" of the law, according to Matthew Sutton, the group's senior vice president of government affairs. Sutton accuses the attorney general's office of a "bait-and-switch," stating that the interpretation is "clearly inconsistent with the Legislature's intent."
The law's impact on the restaurant industry remains to be seen, as it will be the first such ban enacted in the U.S. However, momentum is building for transparent pricing, with a dozen states considering similar legislation and the Federal Trade Commission reviewing a proposed rule about "unfair or deceptive fees."
Consumer advocates stress the importance of ensuring that changes do not harm employees. Saru Jayaraman, president of One Fair Wage and director of the Food Labor Research Center at the University of California, Berkeley, notes that the restaurant industry has been one of the largest employers in the U.S. but also the absolute lowest-paying employer for generations, partly due to the sub-minimum wage for tipped workers.
The California law applies to both online and in-person transactions, covering a wide range of industries, from short-term rentals and event tickets to hotels, restaurants, and food delivery services. While compliance may be relatively straightforward in some cases, many companies will have to make difficult choices based on their risk tolerance and pay attention to enforcement trends.
