Governor Signs Law Exempting Restaurants From New Hidden Fees Law |  By: Cate A. Veeneman
Governor Signs Law Exempting Restaurants From New Hidden Fees Law |  By: Cate A. Veeneman

Over the weekend, Governor Newsom signed Senate Bill 1524 into law, an emergency provision clarifying that Senate Bill 478, the “hidden fees” law that went into effect this week, will not apply to restaurants, bar, food concessions, grocery stores, or grocery delivery services in the same way it will apply to businesses in other industries. SB 1524 arose from concern in the restaurant industry regarding the impact SB 478 would have on restaurants following the issuance of guidelines from the California Attorney General Office in May.

As a reminder, SB 478 revises applicable code provisions to protect California consumers from hidden fees by prohibiting “drip pricing,” the act of initially advertising a price as less than the actual price a consumer will ultimately pay for a good or service. The law, with limited exceptions, prohibits a business from advertising a good or service at a price that does not include all mandatory fees or charges that will ultimately be charged to the consumer (excluding taxes or fees imposed by the government.)

With SB 1524, the legislature has clarified that restaurants and similar businesses in the food and beverage industry will not need to adhere to the provisions of SB 478.  Unlike other businesses, restaurants will not be required to incorporate all mandatory fees directly into prices on their menus. Instead, restaurants will only need to “clearly and conspicuously” display all mandatory fees wherever food or beverage items are displayed, such as a menu or advertisement. This “clear and conspicuous” display will need to include an explanation of the purpose of each mandatory fee.

While SB 1524 may have passed both chambers of the California legislature and earned the approval of the Governor in a surprisingly short time, the bill has proven to be far less popular among California consumers, with many voicing their frustration at their representatives for allowing what they see as deceptive practices to continue. A recent survey conducted by the San Francisco Chronicle revealed that 81% of respondents did not agree with restaurants’ surcharge practice. A growing number of patrons are threatening to boycott restaurants and pursue a ballot initiative that would once again subject restaurants to the hidden fees law. Time will tell the effect consumer dissatisfaction will have on restaurants’ practices.


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