In March, Nancy Yaffe gave us an overview of SB 487, the new “junk fee” ban becoming effective on July 1st. As a refresher, legal requirements in California and across the country will soon change the way businesses must operate as the government seeks to eliminate the practice of “drip pricing” – i.e., advertising a price that is less than the actual price a consumer will have to pay for a good or service – through the use of so-called “junk fees.” As of July 1, 2024, businesses in California will no longer be allowed to add additional fees or surcharges to the advertised price for a good or service. Under SB 478, businesses will be prohibited from advertising, displaying, or offering a price for a good or service that does not include all mandatory fees and charges, other than taxes or shipping fees.

Initially, it was unclear whether, and to what extent, the law would impact restaurants. It appeared that additional surcharges might be permitted so long as the restaurants adequately disclosed the fees to consumers. However, a few days ago, the San Francisco Chronicle quoted Attorney General Rob Bonta as follows: “SB 478 applies to restaurants, just like it applies to businesses across California … The law is about making sure consumers know what they are going to pay and requires that the posted price include the full amount that a consumer must pay for that good or service.”

As a result of this new law and Bonta’s current stance on its implementation, restaurants and hotels will no longer be allowed to add a “service charge,” “resort fee,” “healthcare surcharge,” or other fee to a customer’s bill in addition to the price advertised to the guest. Similarly, the law could prevent an auto-gratuity such as those customary for large parties. Instead, restaurants would need to increase menu prices to offset increasing operational costs. The Attorney General’s office was expected to release guidance and regulations concerning compliance by May 1, but has not done so yet. Trade groups representing restaurant and hotel owners are seeking clarification on the law’s intended impact.

SB 478 notably contains an exemption for “food delivery platforms,” which will be permitted to add delivery fees on top of regular menu pricing.

Violations of the law could prove costly to California businesses. Consumers who allegedly suffer damages as a result of a business’ violation of the law may bring a lawsuit on an individual or class basis seeking damages of at least $1,000 per violation, plus attorney’s fees. Businesses that do not comply with these new requirements after July 1 risk facing what could be an onslaught of lawsuits brought by plaintiff’s attorneys across the state.