How Will the New Price Transparency Law Affect Businesses?

After California’s landmark price transparency law went into effect July 1, State Attorney General Rob Bonta released guidance to help businesses across the state comply with the new law.

According to 2018 data from Consumer Reports, at least 85% of Americans have experienced a hidden or unexpected fee for a service, and more than two-thirds of those surveyed in 2023 said they were paying more now in surprise charges than they did five years earlier. Consumer Reports noted that hidden fees can increase the price of live event tickets by as much as 30% to 40%. Senate Bill 478 (SB 478) makes it illegal for businesses to advertise or list a price for a good or service that does not include all required fees or charges other than certain government taxes and shipping costs.

Also known as the “Honest Pricing Law” or “Hidden Fees Statute,” SB 478 is a price transparency law that protects consumers from deceptive price advertising and allows them to make an informed decision by seeing the all-in price of goods or services up-front, before they get the bill. SB 478 has no effect on prices; the law does not ask businesses to charge less, nor does it require businesses to charge more.

The Honest Pricing Law works to empower consumers by arming them with accurate information upfront, so that they can compare prices between merchants, creating an equitable marketplace for businesses to compete.

“Our price transparency law is about clear and honest communication with consumers, so consumers can make the financial choices that are best for them and their families. This new guidance provides information for businesses across California to ensure that clear answers are available, particularly for small businesses,” said Bonta. “The law is simple: the price you see is the price you pay. Laws work when everyone can comply. I am pleased that we can offer this guidance to help facilitate compliance with the law and make a more fair and level marketplace for businesses and consumers.”

“Every consumer deserves honest, up-front pricing and I’m proud to have worked with Attorney General Bonta and Senator Skinner to pass a law to help do just that,” said Senator Bill Dodd, D-Napa. “A consumer shouldn’t discover hidden fees made up by a business when they pay their bill.” “On July 1, Californians from Yreka to Calexico will be able to tell how much a product or service will actually cost right from the start,” said Ted Mermin, director of the California Low-Income Consumer Coalition, which co-sponsored the bill. “No more getting drawn in by a falsely low advertised price only to find that the cost has doubled by the time you check out. The people of California have been played for too long. This summer, it’s game over.”

Coauthored by Senator Bill Dodd (D-Napa) and Senator Nancy Skinner (D-Berkeley), and co-sponsored by the California Low-Income Consumer Coalition, SB 478 prohibits hidden fees in California beginning on July 1, 2024. 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.

SB 478 applies to the sale or lease of most goods and services that are for a consumer’s personal use including event tickets, hotels and other lodging, restaurants and food delivery.

SB 478 eliminates bait-and-switch tactics and demands transparency, so that consumers know what they are paying for and the total cost of a good or service upfront.

California is at the forefront of a national movement against hidden and deceptive fees. In February, Attorney General Bonta supported the Federal Trade Commission’s (FTC) new “Rule on Unfair or Deceptive Fees,” which would ban hidden fees nationwide. The FTC’s proposed rule would prohibit unfair or deceptive practices relating to fees for goods or services, including misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.