California lawmakers fast-track restaurant exemption to hidden fees law

Legislation that would make it easier for restaurants to set food prices without including add-on fees is being whipped through the Capitol in warp speed.

On Tuesday two Assembly committees endorsed the newly drafted Senate Bill 1524, that would exempt restaurants from a law passed last year requiring businesses to include any fees for service, employee benefits or other items in the prices they quote to customers.

When it was passed the 2023 legislation, SB 478, was hailed as a major reform to make consumers more aware of their final bills. Attorney General Rob Bonta, who sponsored the legislation, was especially boastful.

“Today, California is eliminating hidden fees,” Bonta said in a joint statement with the authors. “These deceptive fees prevent us from knowing how much we will be charged at the outset. They are bad for consumers and bad for competition. They cost Americans tens of billions of dollars each year. They hit families who are just trying to make ends meet the hardest.

 “With the signing of SB 478,” Bonta continued, “California now has the most effective piece of legislation in the nation to tackle this problem.”

Sen. Bill Dodd, a Napa Democrat and co-author of SB 478, agreed, saying, “With the governor’s signing of this historic bill, we can finally take aim at dishonest junk fees that are tacked onto seemingly everything — from online concert tickets to hotel reservations.”

SB 478 takes effect on July 1. But a couple of weeks ago, Bonta’s office released an advisory that restaurants would have to follow the new law, and restaurant owners and unions reacted, claiming that they assumed their added fees would be exempt.

Dodd quickly grabbed SB 1524, which was parked in the Assembly, stripped out its language and inserted new verbiage allowing restaurants to exclude fees from their menu prices if their menus include “clear and conspicuous” notices that such fees exist.

Thus patrons would have to search menus for such warnings — even so, SB 1524 would give restaurants an extra year to place the language in their menus.

Restaurant industry lobbyists and union officials contend that SB 478 would, in effect, eliminate negotiated service fees and therefore deprive employees of income. It is, however, a specious argument. There’s nothing in the new law to prohibit restaurants from folding fees into their quoted prices and using the income for whatever purpose it is being used now.

The real reason the industry dislikes the new law is a fear that disclosing complete prices of meals would discourage customers from dining out. In other words, they want to continue their bait-and-switch tactics with the Legislature’s blessing.

When SB 478 was being heard in legislative committees last year, Bonta sent representatives to stress his support.

For instance, Eleanor Blume, Bonta’s assistant for economic justice, told the Assembly Privacy and Consumer Protection Committee that he “is proud to sponsor SB 478 to bring an end to hidden fees in California,” adding, “Businesses use hidden fees or junk fees to pitch an artificially low headline price to attract a customer before revealing additional charges later in the buying process.”

However, no one from Bonta’s office testified on SB 1524 Tuesday, implying that he doesn’t oppose the restaurant exemption. Bonta is a very likely candidate for governor in 2026, and his major rival may be Lt. Gov. Eleni Kounalakis, who lists herself as a co-sponsor of the new bill along with the California Restaurant Association.

Gov. Gavin Newsom, a restaurateur himself, probably will have the last word on whether California consumers get shafted while politicians play games.