On the eve of the July 1, 2024 deadline for businesses to comply with California’s so-called junk fee ban (“SB 478”), Governor Gavin Newsom signed into law SB 1524, which allows restaurants, bars, and other food services businesses that sell directly to consumers to continue using surcharges so long as such fees are “clearly and conspicuously” displayed.

As written, SB 478 makes it illegal for businesses to use “drip pricing,” a practice where the business advertises or lists a price for a good or service that is lower than the actual price consumers will have to pay. The California Attorney General’s Office (“AG”) interpreted SB 478 to prohibit common food services practices—such as imposing a minimum gratuity percentage for large parties/banquets. SB 1524 was passed to clarify that such practices are not banned so long as they are disclosed in advance to consumers.

This win may be short-lived, though, as the Federal Trade Commission and multiple states consider similar bans. We will be tracking the progress of these laws.

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