Late last week, the California attorney general released Frequently Asked Questions regarding California's "Honest Pricing Law" or "Hidden Fees Statute," which will take effect July 1, 2024. The law is anticipated to have a sizeable impact, given its breadth, and will vastly change how businesses disclose the price of their goods and services to the public. When "advertising, displaying, or offering" a price, the law requires businesses to include all required fees and charges other than certain government taxes and shipping costs.
The Advertised Price Is a Single Price, No Exceptions
The FAQs make clear that the intent of the law is to force businesses to display a single price that includes all required fees and charges that a consumer would pay at the end of the transaction. This is similar to the Federal Trade Commission's Proposed Rule that businesses display the "Total Price" for goods and services.
It was previously thought that businesses might comply with California's law by disclosing additional required charges and fees before the end of the transaction, but the FAQs categorically prohibit that method and emphasize that "[t]he price listed or advertised to the consumer must be the full price that the consumer is required to pay."
"Handling" and Related Charges Not Excluded from the Advertised Price
California clarifies that businesses may not exclude "handling" charges from the advertised price. While the FAQs only use the term "handling charges," the requirement to include the fee in the advertised price likely extends to similar charges, such as catchall "processing" or "service" fees. A business can still exclude shipping charges if they "will be reasonably and actually incurred to ship the physical good to the consumer."
Uncertain Pricing and Variable Charges and Fees
In response to concerns that it would be difficult to comply with the law when a business does not know what consumers will be required to pay upfront, California essentially says, "Tough luck." If a business uses a model in which required fees or charges vary based on individualized factors, those fees cannot be added later unless they were included in the advertised price. According to the FAQs, "[b]usinesses that do not know how much they will charge a customer at the beginning of a transaction should wait to display a price until they know how much they will charge." However, the law's legislative purpose states that it is not meant to prohibit algorithmic or dynamic pricing.
Restaurants, Gratuity, and Food Delivery
Under the law, restaurants need not incorporate delivery fees into the price of menu items. However, restaurants should still disclose the full, all-in price of delivery. If a restaurant imposes an overall mandatory fee, that fee must be included in the advertised price. Food delivery platforms must also disclose the all-in delivery price, but other pricing disclosures are governed under a separate law, California Business and Professions Code § 22598.
Wide Range of Industries Impacted
Certain industries are specifically mentioned, including event tickets, short-term rentals, hotels, restaurants, and food delivery. The FAQs also mention that resale sites are covered. However, the law is expected to cover most goods and services that are for a consumer's personal use.
Private Lawsuits
Reminder: Enforcement is not limited to government agencies. The California law allows private plaintiffs to sue businesses for alleged non-compliance with the law. We can expect plaintiff attorneys to be on the hunt for businesses that are caught unaware or are too slow in coming into compliance. A deluge of litigation is likely, and Venable's Advertising and Marketing team will be closely monitoring how courts interpret various price disclosures and future developments. Please contact us if you need assistance with understanding how this law impacts your business.
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