In comments they call the proposal unwarranted and unlawful, and highlight significant unintended consequences for consumers
In comments submitted to the Federal Trade Commission (FTC) regarding its Unfair or Deceptive Fees Notice of Proposed Rulemaking, the National Restaurant Association and the Restaurant Law Center (Law Center) called for the Commission to exclude the restaurant industry from the final rule. In the comments, the groups highlight that the proposed rule’s blanket prohibition on “hidden” and “misleading” fees as applied to the restaurant industry is “unwarranted, unlawful, and would create significant unintended consequences for consumers.”
The FTC proposal seeks to eliminate all fees or surcharges, forcing restaurant operators to change menus to reflect a single “Total Price” for each item. The Commission puts the cost for doing this at more than $3.5 billion dollars for the restaurant industry alone, forecasting a restaurant’s menu redesign will cost almost $5,000.
“While the National Restaurant Association and the Restaurant Law Center appreciate the Commission’s aim to provide increased price transparency for consumers, this proposed rule ultimately fails to achieve this objective in the restaurant industry,” said Brennan Duckett, director of technology and innovation policy for the National Restaurant Association. “A one-size-fits-all prohibition on common restaurant charges is both unworkable and unlawful, and we therefore have urged the Commission to exclude the industry from any final rule of similar nature and scope.”
The comments highlight that while restaurant operators already make significant efforts to ensure that fees and surcharges are evident and identifiable before consumers receive the check, they also typically provide customers with the option to remove a surcharge from their final bill. These practices differentiate the restaurant industry from the others outlined in the proposed rule and appear to address the Commission’s concerns around the refundability of such fees.
The Association and Law Center argue that by forcing restaurant operators to include service fees, credit card surcharges, or even delivery fees in menu pricing, the Commission is in fact forcing operators to hide from consumers the costs of the services they value in the restaurant experience. Additionally, if the FTC succeeds in forcing restaurants to reflect all-in pricing across a menu, it will create an unfair payment structure where diners are paying for service — like delivery — that they aren’t receiving.
“The FTC’s proposed ‘junk fees’ rule will unleash nothing but chaos and confusion for restaurant owners and diners alike,” said Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association. “Restaurant customers understand that they will pay extra if they are having food delivered or are dining with a large party. Fees for these services aren’t ‘junk fees’ – they reflect the higher costs that a restaurant is taking on to make a customer’s experience even more convenient.”
The comments also highlight the outcome of being forced to create a menu for each situation, as the FTC suggests: “Imagine walking into a restaurant and the person at the desk asks you how you’re going to be paying that evening. This would become an uncomfortable reality in a world where restaurants can’t use surcharges and are forced to provide a menu for large parties, one for smaller parties, one for people paying with credit cards, one for takeout, and one for delivery.”
As an alternative to the proposed rule, the Association and Law Center expressed a willingness to work with the FTC to establish a transparency test for potential fees or surcharges. This test would set notice and disclosure requirements for the fees and surcharges necessary to maintain business viability for restaurant operators.
However, the groups warns that if a final rule is issued which includes restaurants, fees that are value-adding and transparent must be preserved. According to the groups this includes service fees that go directly to tipped workers, credit card surcharges, and delivery fees.
Read the full National Restaurant Association and Restaurant Law Center joint comments here.