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Governor Newsom Signed SB1524, Clarifying Rules for Disclosure of Service Charges and Other Mandatory Fees

If you are a business selling food or alcohol directly to consumers, then SB1524 affects you. If Governor Newsom had not signed SB1524, California’s sweeping new Junk Fee Ban would have had a huge impact on the hospitality industry. The Junk Fee Ban prohibits businesses from advertising, offering, or displaying prices for goods or services that do not include all mandatory fees. Cal. Civ. Code §1770(a)(29). If Governor Newsom had not signed SB1524, the Junk Fee Ban would have required the first price consumers see on menus and other marketing material to be the total, all-in price, except taxes and shipping fees. The Junk Fee Ban goes into effect on July 1, 2024.

Of course, the food and beverage industry commonly uses menus and other marketing material showing prices that do NOT include mandatory service charges or other fees. SB1524 creates an exception to the Junk Fee Ban for these categories of businesses:

1. Restaurants,

2. Bars,

3. Food concessions,

4. Grocery stores,

5. Grocery delivery services, and

6. Catering/banquet service providers.

The new law clarifies their mandatory fee practices remain legal if they present fees “clearly and conspicuously” to customers. The revised language states:

A mandatory fee or charge under clause (i) shall be clearly and conspicuously displayed, with an explanation of its purpose, on any advertisement, menu, or other display that contains the price of the food or beverage item.

Essentially, the Legislature wants to ensure customers are not surprised by fees on their bills.

Consumer-facing businesses who benefit from the new exception should review their fee disclosures to ensure they comply.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice and does not form an attorney-client relationship. You can unsubscribe from future messages by replying “unsubscribe” to this message.

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