Ed Perkins on Travel: California Bans Junk Fees—Big Win for Consumers

Junk Fees inscription on the piece of paper. (Dreamstime/TNS)

Last Saturday, Gov. Gavin Newsom of California signed an historic bill: The Consumers Legal Remedies Act: advertisements prohibits “drip pricing,” which means “advertising a price that is less than the actual price that a consumer will have to pay for a good or service.” It adds such advertising into the cluster of offenses that California classes as “unfair competition” and “false advertising.” In short, the law says, “Ya gotta show the full price.” It will go into effect next July. And those existing laws authorize consumers to bring action and sue for damages resulting from false advertising.

The gold standard in price advertising is, as I’ve often stated in a trope dating back to early word processors, “What you see is what you pay,” or WYSIWYP. The new bill doesn’t quite make that standard:

• Airlines are exempted, because the Deregulation Act exempts them from all state regulation. But that doesn’t matter here; the Department of Transportation (DoT) already requires full-fare airline advertising.
• It allows sellers to exclude taxes and fees imposed by a government on the transaction. Mainly, this means state and local sales taxes.
• For no clear reason, the bill excludes rental car price advertising. Again this is not a serious omission, given that almost all of the various metasearch systems allow you to select all-up prices when you search and compare.

Most of the travel blogosphere’s attention is focused on mandatory hotel fees—fees such as “resort,” “destination,” or “facility” fees that so many hotels now exclude from the prices they feature in advertisements and post on search engines. The Hilton, Hyatt, and Marriott chains are already starting to display full-rate prices on their own websites. But they still post the phony pre-fee prices to external search engines. And so far Best Western, Choice, IHG, and many independent hotels have stuck with the deception. For the most part, the metasearch engines have abdicated their honest display responsibilities by continuing to post initial comparisons based on false prices.

Hotel chains are the obvious target, but they aren’t the only offenders, and it isn’t yet clear how the law will apply in at least two other marketplaces:

• Honest hotel price advertising should certainly be a requirement for all metasearch systems and online travel agencies. In my view, these folks—such as Booking.com and Expedia—should long since have taken the lead in displaying full-cost rates. But surprisingly, as far as I know, only Kayak currently offers a filter option for full-price comparisons. Presumably, the new law will apply broadly to search engines, and it’s hard to see how they would or could mount a different system for California than for the rest of the country.
• Recently, some restaurants have started to add mandatory fees to meal bills. Often, they’re listed as “service” fees, even though the entire fee goes to the restaurant operator and not to the employees—you still have to tip. The new law should certainly apply to restaurants, but we'll have to wait to see how the state treats them.

California’s move is big. Yes, deceptive hotel pricing is already under attack from other states and even the glacially slow Federal Trade Commission. But so far, those efforts haven’t made much progress. Now, California’s move is likely to lead to speedier consumer remedies everywhere: The state is such an important part of the total US economy that its practices often spread nationally.

A remaining question is whether any company or group will challenge the law in court. Travel Tech, the trade association that includes metasearch folks, is on record as favoring price transparency. But the big online travel agencies have so far stood on the sidelines, and some hotels might want to put up a fight. I’m not a lawyer, but I don’t believe a legal challenge would work: Regardless of the legal verbiage, the bottom-line fact is that drip pricing is deceptive and that its sole purpose is deception. So, at least for now, it’s “Good job, California.” Let’s hope it encourages a lot of imitation.