California’s prohibition on so-called “hidden” or “junk” fees in consumer transactions is set to take effect on July 1, 2024, with potentially wide-ranging ramifications for how prices are displayed or offered to consumers in the Golden State – and the potential for a significant wave of new class action litigation.

The law—often referred to by its bill number, SB 478—amends California’s Consumer Legal Remedies Act (“CLRA”) to restrict the prices and fees businesses can offer to California consumers.  The basic prohibition is stated in simple terms:  businesses can no longer “advertis[e], display[], or offer[] a price for a good or service that does not include all mandatory fees or charges” to consumers, with limited exceptions such as for sales tax and certain shipping charges.  SB 478 § 3 (to be codified at Cal Civ. Code § 1770(a)(29)(A)).  But this simple language generates numerous complexities.  For example:  Are clearly disclosed fees prohibited if not folded into the main price, or just fees not presented to consumers in close proximity (in both location and time) to the primary price?  When is a fee “mandatory”?  Can fees that are included in a price still be itemized? 

The California Office of the Attorney General (“AG”) recently released guidance giving businesses some answers, at least as to how the AG is interpreting the law.  According to the AG, even fees clearly disclosed up front are prohibited: “The price listed to the consumer must be the full price that the consumer is required to pay.” In other words, the consumer should not be required to do any math to determine the price of a good or service.

As for when fees are discretionary, not “mandatory,” and may be excluded from an advertised price, the AG’s guidance states: “Fees that are contingent on certain later conduct by a consumer . . . [or] fees for optional services or features do not need to be included in the advertised price.” 

The AG also confirmed that businesses may still itemize charges taken into account in calculating a quoted price: “Businesses are free to explain how they set their prices or to subsequently itemize the charges that make up the total price that they charge customers.”

The AG’s guidance has already been followed by more recent legislative activity.  On June 6th, one of SB 478’s authors introduced a bill that would, if enacted, allow restaurants and bars to still include service fees on their menus without folding those charges into their food and beverage pricing.  However, the challenges the law poses for restaurants have parallels for many other businesses for whom legislative relief is not proposed.

Correctly navigating SB 478’s complexities will be of no small consequence for businesses transacting with California consumers.  The CLRA, which we’ve written about before, is a favored statute invoked in consumer class actions brought under California law, and penalties available to aggrieved consumers include statutory damages of $1,000 for each violation.  Cal. Civ. Code § 1780(a)(1).

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Sonya Winner Sonya Winner

A litigator with three decades of experience, Sonya Winner handles high-stakes civil cases for clients in a wide range of industries, including banking, pharmaceuticals and professional sports. She has handled numerous antitrust and consumer disputes, many of them class actions, in state and…

A litigator with three decades of experience, Sonya Winner handles high-stakes civil cases for clients in a wide range of industries, including banking, pharmaceuticals and professional sports. She has handled numerous antitrust and consumer disputes, many of them class actions, in state and federal courts across the country.

Sonya’s cases typically involve difficult technical issues and/or complex legal and regulatory schemes. She is regularly able to resolve cases before the trial phase, often through dispositive motions. But when neither summary judgment nor a favorable settlement is an option, she has the confidence of her clients to take the case all the way through trial and on appeal. Her recent successes have included a cutting-edge decision rejecting a “true lender” challenge to National Bank Act preemption in a class action involving interest rates on student loans, as well as the outright dismissal of a putative antitrust claim against the National Football League and its member clubs asserting an unlawful conspiracy to fix cheerleader compensation.

Sonya has been recognized as a leading trial lawyer by publications like Chambers and the Daily Journal. She is chair of the firm’s Class Action Litigation Practice Group.

Photo of Alexander Schultz Alexander Schultz

Alexander Schultz is an associate in the firm’s Los Angeles office where he is a member of the firm’s litigation, class action, and appellate and Supreme Court practice groups. He represents clients in all phases of litigation, and his cases frequently involve difficult…

Alexander Schultz is an associate in the firm’s Los Angeles office where he is a member of the firm’s litigation, class action, and appellate and Supreme Court practice groups. He represents clients in all phases of litigation, and his cases frequently involve difficult technical issues and/or complex legal and regulatory schemes. Alexander also maintains an active pro bono practice focusing on criminal and administrative law matters.

Before joining Covington, Alexander clerked for Judge David J. Barron on the U.S. Court of Appeals for the First Circuit and Judge Susan Oki Mollway on the U.S. District Court for the District of Honolulu. He also worked at the U.S. Department of Justice, Civil Appellate Division as a Summer Law Internship Program intern.