Hidden Fees Statute Effective July 1, 2024

On October 23, 2023, Senate Bill 478 (the “Hidden Fees Statute”) was signed into law amending the California Consumer Legal Remedies Act to generally ban “drip pricing”—the process by which a business advertises or lists the price for a good or service but does not include all of the fees or charges that will be added on at the time of actual purchase. The new Hidden Fees Statute is Section 1770(a)(29) of the California Civil Code and became effective July 1, 2024.

The Hidden Fees Statute prohibits businesses from “[a]dvertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than (i) governmental taxes or fees imposed upon the transaction and (ii) reasonable shipping costs for physical goods. The new law deems such practices to be deceptive advertising and, instead demands the provision of truthful price advertising that will help businesses to compete fairly on price and allow consumers to make accurate price comparisons.

Businesses are free to charge whatever amounts they desire for a good or service, to provide a subsequent breakdown of various fees or charges included in the advertised price, and to tell consumers about such fees and charges. But the posted price must include all amounts that the consumer will be required to pay. Thus, the Hidden Fees Statute is a price transparency law, not a price control law.

To assist businesses in complying with the Hidden Fees Statute, the California Attorney General has released a list of frequently asked questions regarding the law and its application. These FAQs can be found here: https://oag.ca.gov/system/files/attachments/press-docs/SB%20478%20FAQ%20%28B%29.pdf. For example, the FAQs make clear that: (1) a business can exclude reasonable shipping charges from its advertised price but not handling charges, (2) optional services or features do not need to be included in an advertised price, and (3) advertising a price that is less than what a consumer will pay with the disclosure that additional fees will be added before the consumer finalizes the transaction does not comply with the Hidden Fees Statute. The advertised price must be the full price that the consumer is required to pay; however, a business can offer discounts or otherwise charge a consumer less than the advertised price. Note also that the focus of the Hidden Fees Statute is consumers; it does not apply to the purchase or lease of goods or services for commercial use nor to certain other transactions and industries that are already subject to other laws governing pricing.

If your business has any questions on whether the Hidden Fees Statute applies to it or whether its advertising and promotion is in compliance with the new statutory requirements, the attorneys at Poole Shaffery look forward to the opportunity to be of assistance to you.