California’s new fee disclosure law goes into effect July 1, 2024

On July 1, 2024, a new California law will go into effect that will change how added fees, such as service and delivery fees, must be disclosed to California consumers. 

Senate Bill 478 (SB 478), or the Consumer Legal Remedies Act: advertisements, prohibits displaying an initial price for a good or service that does not include “all mandatory fees or charges,” other than taxes or government fees and shipping fees, with limited exceptions. In short, SB 478 makes it illegal to advertise a low initial price for a product or service and then charge additional mandatory fees later in the checkout process. 

Below, we answer some key questions about the law’s requirements and provisions.

• What businesses does SB 478 apply to? SB 478 applies to the sale or lease of most goods and services that are for a consumer’s personal use, including event tickets, short-term rentals, hotels, restaurants, and food delivery, among others. The only express exceptions apply to food delivery platforms and vehicle rental companies, dealerships, and leases.
  
  
• Can businesses still charge fees? SB 478 is “not a price control law.” Businesses are free to set prices, including charging fees, but the posted price must include all fees that consumers are required to pay.
  
  
• What constitutes a “mandatory” fee or charge? Although not explicitly defined in the statute, mandatory fees or charges include those that consumers are required to pay without receiving optional or additional services or features (such as a delivery service) or that are not contingent on later conduct by consumers. 
  
  
• How can a business comply? Businesses can comply with the law by listing the total price for a good or service and noting that total price includes certain fees.  On the other hand, businesses cannot comply with the law by simply including a disclosure that additional fees will apply at checkout. 
  
  
• What relief is available? Consumer lawsuits under SB 478 may be brought under the CLRA on an individual or class basis and seek (i) actual damages (minimum of $1,000 for total award in class actions), (ii) injunctive relief, (iii) restitution, (iv) punitive damages, and (v) attorneys’ fees. 

SB 478 was preceded by increased regulatory scrutiny by the Biden Administration, legislators, and regulators as companies have implemented innovative pricing and fee disclosures in response to the pandemic, supply-chain bottlenecks, and inflationary pressures. Further, the Federal Trade Commission (FTC) and several states have since initiated or passed similar legislation targeting added fees. For example: 

• On October 11, 2023, the FTC announced a proposed rule to prohibit “hidden” and “bogus” fees, which would (i) “prohibit businesses from advertising prices that hide or leave out mandatory fees” and (ii) “prohibit sellers from misrepresenting fees and require them to disclose upfront the amount and purpose of the fees and whether they are refundable.”
  
  
• On May 1, 2024, Minnesota passed a similar fee disclosure bill, effective January 2025, and, in April 2024, Illinois introduced two similar bills.

DLA Piper advises companies within the restaurant, fast food, and hospitality industries on fee disclosure practices and has defended clients in consumer class action litigation involving fee disclosure practices in federal and state court, even before SB 478 was enacted. Since the new law was proposed, DLA Piper has tracked and analyzed its progress and related legislation. We are committed to providing creative solutions as companies seek to comply with the law come July 1, 2024.

If you have any questions, or if you would like to discuss how SB 478, the proposed FTC rule, or any related state law may affect your business, please reach out to the authors or your DLA Piper relationship partner.