California Governor Gavin Newsom has signed a new law that will encourage transparency in pricing among a number of industries, including hotels, rental car companies, and delivery services by banning hidden fees. This bill is a blueprint for other states.
California Bans Hidden Fees…Transparency Coming To Hotel, Rental Car, Delivery Pricing
How often have we felt the bait and switch? We see a hotel listing at what looks like an attractive price, but once you click through to reserve, sometimes several pages in, you find that once government taxes and fees as well as scams like mandatory resort fees are added in, the price can rise significantly and in some cases more than double.
But it’s not just hotels. Food delivery apps like Grubhub, Postmates, or UberEats will advertise a marked-up price for food (which is fair enough), but then add on a service fee, delivery fee, and government tax, and then request gratuity for the driver on top. It’s ridiculous.
Or renting a car. You will see one price on the search results, but once you click through and find extra taxes and fees. This is true when buying a new or used car as well. The “++” can materially alter the actual price, causing consumer confusion.
We’ve long voiced our opposition to all of these fees here, which undermine commerce and frustrate consumers by offering what is akin to a bait and switch. Now California has required many of those annoying fees to be disclosed up front in the form of SB 47B.
Rob Bonta, California Attorney General, explained:
“Hidden fees are fees in which a seller uses an artificially low headline price to attract a customer and usually either discloses additional required fees in smaller print, or reveals additional unavoidable charges later in the buying process.
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. And, because a growing list of websites, apps, and brick-and-mortar businesses are using them, they penalize companies that are upfront and transparent with their prices.
With the signing of SB 478, California now has the most effective piece of legislation in the nation to tackle this problem. The price Californians see will be the price they pay.”
This is government at its best: encouraging an actual free market system, that is marked by transparency rather than deception.
The bill still goes a step shorter than I would like in terms of delivery fees, but working a delivery fee or service fee into the menu is complicated because the fees may fluctuate based on the number of items ordered:
In addition, this act is not intended to require a food delivery platform to include in the menu price shown to the consumer the fees it charges for providing its services.
Still, this remains unfinished business. The provision above was a last-minute amendment. I wonder how hard Gubhub lobbied for that?
CONCLUSION
California is prohibiting hidden fees in more industries by requiring more transparent all-in pricing via a new law.
As Brian Cohen states, “Mandatory ‘hidden junk’ fees need to cease once and for all.” The new bill goes into effect Monday, July 1, 2024 and is at least a start.
I’m chuckling at this line: “This is government at its best: encouraging an actual free market system, that is marked by transparency rather than deception.”
I appreciate where Matt is coming from, and agree with him wholeheartedly on this issue (and good for California for taking that lead!) but free market proponents would simply state that transparency is something that consumers should demand on their own without “Big Government” getting involved. Don’t like hotels playing that game? Just don’t stay there! How’z that working out? Bad industry trends take effect even when a majority of consumers dislike them. Don’t like tipping culture? Too bad, Mr. Pink.
If libertarians and laissez faire capitalists dislike Big Guberment regulation, the companies should have cleaned up their acts on their own. “Collusion” in a healthy manner is perfectly legal. Remember when we had entire boxes full of leftover charger cables before the USB standard came about? That’s the kind of “free market” cooperation we need to see more of but sadly, it happens less often than it should. It’s often a race to the bottom.
But yeah, this is one “progressive” trend that many of us can get on board with.
I’m curious to know what the implication is for points earning. Does this law simply require hotels et. al. to include all fees in the displayed price, or does it actually ban those fees and force hotels et. al. to roll them into the price? If I understand things correctly, you don’t earn any points on mandatory destination/BS fees in some programs, just the room rate.
Nice to see a state government that passes laws that actually help normal people. Maybe it’ll start a movement since the federal government hasn’t taken steps despite making threats in the past.
California leads again. Instead of wasting time attacking drag queens, homosexuals, and women, it’s refreshing to see a governor and legislatures focus on legislation that actually helps people, and not control people. It’s not an accident California has the 5th largest economy in the world, and will continue to grow and lead not just the United States, but the world in agriculture, technology, entertainment, education and tourism.
Rob Bonta is the Attorney General FYI.
Normally reading “California bans…”, I groan, but this is really not bad. Too bad I rarely have to do rental or even hotel there because I have a big family there that I usually just stay with.
Do hidden fees include sales tax? If not, why not? In the EU, VAT must, by law, be included in the price.
Finally! One area that people also did not understand is “hidden fees” were not commissionable to travel advisors.
Hopefully the rest of the country will follow soon.
Not right away, but next year. Just like California banned certain cancer-causing food additives which will take effect in 2027, I could have cancer by then.
Capitalism functions best with accurate signposting.
Yay! I’m a capitalist through and through but capitalism requires regulation like this to function effectively.
Are Indian properties exempt for this law?