California’s landmark price transparency law, Senate Bill 478 (SB 478), also known as the ‘Honest Pricing Law’ or ‘Hidden Fees Statute,’ is set to take effect. This legislation, designed to combat the prevalence of hidden fees, places a significant responsibility on businesses for its successful implementation. However, it also brings a host of benefits, such as fostering trust with consumers and leveling the playing field for businesses. As the July 1, 2024, deadline looms, California Attorney General Rob Bonta has issued comprehensive guidance to assist businesses in understanding and adhering to the new requirements, ensuring a smooth transition.
Understanding the Need for Price Transparency
Hidden fees are not just a minor inconvenience; they can have a significant impact on consumers’ wallets. According to 2018 data from Consumer Reports, at least 85% of Americans have experienced a hidden or unexpected fee for a service. More than two-thirds of those surveyed in 2023 stated they were paying more in surprise charges than they did five years earlier. These hidden fees can inflate prices by a substantial margin. For instance, Consumer Reports noted that the cost of live event tickets can increase by as much as 30% to 40% due to these fees.
Key Provisions of SB 478
SB 478 brings significant changes for businesses. It prohibits businesses from advertising or listing prices for goods or services that do not include all mandatory fees or charges, except for certain government taxes and shipping costs. This legislation is a game-changer, as it ensures consumers can make informed decisions by seeing the all-in price upfront before completing a transaction. Importantly, the law does not dictate the price businesses should charge but requires that the listed price includes all necessary charges.
Impact on Consumers and Businesses
“The price transparency law is about clear and honest communication with consumers,” said Attorney General Rob Bonta. “This new guidance provides information for businesses across California to ensure that clear answers are available, particularly for small businesses. The law is simple: the price you see is the price you pay.”
Senator Bill Dodd (D-Napa), one of the co-authors of SB 478, emphasized the importance of this legislation: “Every consumer deserves honest, up-front pricing, and I’m proud to have worked with Attorney General Bonta and Senator Skinner to pass a law to help do just that.”
Ted Mermin, Director of the California Low-Income Consumer Coalition, highlighted the consumer protection aspect of the law: “No more getting drawn in by a falsely low advertised price only to find that the cost has doubled by the time you check out. The people of California have been played for too long. This summer, it’s game over.”
Scope and Compliance
SB 478 applies to the sale or lease of most goods and services for personal use, including event tickets, hotels, restaurants, and food delivery. Businesses must include all mandatory fees in advertised prices, eliminating bait-and-switch tactics and ensuring transparency for consumers.
For businesses, particularly those in the hospitality industry that historically added service charges to bills, compliance with SB 478 will require changes to their pricing practices. The FAQs provided by the Attorney General’s office clarify that service charges must be included in the displayed price and cannot be added later. A copy of the FAQs can be found here.
Federal and Broader Implications
California’s SB 478 is part of a broader national movement against hidden fees. The Biden-Harris Administration has made combating these fees a top priority, and the Federal Trade Commission (FTC) has proposed a rule similar to SB 478 that would ban hidden fees nationwide. The FTC’s proposed rule would prohibit deceptive practices related to fees for goods or services, ensuring consumers see the total cost upfront.
Looking Ahead
Even if the FTC’s proposed rule does not pass, other states will likely follow California’s lead in enacting similar consumer protection laws. For instance, Minnesota recently enacted legislation banning service charges unless there is clear and conspicuous disclosure and full distribution of these charges to employees.
Businesses operating in California and other states considering similar laws should review and potentially modify their pricing practices to comply with new regulations. Legal challenges to SB 478 are anticipated, with the California Restaurant Association already issuing statements challenging the law’s application to restaurants. However, the push for transparency in pricing is gaining momentum and is likely to shape future legislative efforts across the country.
