Mark Pestronk
I have a bunch of questions about California's Senate Bill 478, also known as the Honest Pricing Law, that went into effect July 1. I understand that, in general, the law requires that ads, displays or offers include the total price to be paid, including all fees, except for government taxes and fees. For example, in the travel industry, quotes must include the total price, including service fees, and hotel ads must display the total price, including resort fees.
Q: Does the law apply to companies inside and outside California that advertise nationwide?
A: Yes. The law applies as long as California consumers can access the advertising and as long as offers are made to California consumers, regardless of your location.
Q: Speaking of consumers, does the law apply to quotes to corporate-account travelers?
A: No. The law does not apply to business-to-business quotes or solicitations.
Q: Does the law apply to optional services or add-ons such as a credit card surcharge?
A: No. The law applies only to mandatory services. If the add-on is truly optional, such as a credit card surcharge that you can avoid by paying by check, you don't have to include the surcharge.
Q: Can an ad or quote include the base price and then separately list the mandatory fees?
A: Yes, as long as you also include the total. Although the law itself does not expressly state that you must total up the mandatory parts, the California attorney general's interpretation is that you must do so. For example, you can say, "The hotel rate is $300 plus a resort fee of $40, for a total of $340" or "The price is $340 (including a $40 resort fee)."
Q: What's the difference between the California law and the DOT's full-price rule?
A: The DOT rule applies just to airfares and packages that include air as a mandatory component, but the California law applies to all goods and services for consumers. The DOT rule requires that the total price include taxes; the California law does not. The DOT rule requires that you always start a quote with the full price, and it requires that the full price be more prominent in an ad or display than any components, but the California law lets you show the full price last.
Note that neither of them requires you to show the components if you don't want to.
Perhaps the most important difference is that the California law allows private lawsuits such as class actions against violators. There have already been several class actions against violators outside the travel business, and it is only a matter of time until a travel agency or tour operator gets targeted by class-action attorneys.
Q: What about federal pre-emption? Isn't it against federal law for a state to regulate airfare advertising?
A: No state is allowed to regulate airline pricing, so if you are targeted by the state or a class-action attorney because your airline ticket quote did not include your service fee, you probably have a good defense.