November 2024

California’s new “Honest Pricing Law” – SB 478 – became effective on July 1, 2024. The bill renders “drip pricing” unlawful, meaning no more hidden fees or unexpected surcharges at checkout! It allows the market (and consumer price comparison) to function organically. The price is the price is the price!

Of course, the bill fundamentally impacts how California businesses can, and cannot, advertise their goods and services. Here are a few myths (and tips) about how the bill may impact your business:

MYTH #1: SB 478 does not apply to credit card surcharges.

Reality: If your business charges consumers extra fees for credit transactions, those fees now need to be incorporated into the price that you advertise.

Tip: Institute (a) The Gas Station Model: advertise both a “credit” and “cash” price clearly and conspicuously OR (b) The Cash Discount Model: advertise the inflated credit price and note that a percentage discount is available for cash purchases.

MYTH #2: My business has to calculate sales tax ahead of time.

Reality: SB 478 exempts two critical fees from its purview: 1) taxes/government fees and 2) shipping costs.

Tip: No need to adjust your pricing based on sales tax or shipping costs.

MYTH #3: SB 478 applies to all California transactions.

Reality: SB 478 applies only to “consumer” transactions and does not apply to “commercial” transactions. The Consumer Legal Remedies Act defines a consumer transaction to mean goods or services acquired “for personal, family, or household purposes.”

Tip: Commercial sellers/suppliers should amend their credit and purchasing agreements to require purchasers to attest to the purchase’s commercial nature.

MYTH #4: SB 478 does not apply to food vendors.

Reality: SB 1524 indeed exempted restaurants, bars, and other food vendors from SB 478’s requirements. However, food vendors added fees must be clearly and conspicuously displayed wherever prices are shown.

Tip: To comply with the Civil Code’s definition of “clear and conspicuous,” ensure that any surcharges are explained and advertised on your menus in a manner that clearly calls attention to the language (contrasting font, set off with symbols, etc.).

For more information, please contact:

Taylor Jennings at tjennings@gibbsgiden.com (310) 734-3376

Taylor Jennings is an associate in Gibbs Giden’s Westlake office.  Taylor represents clients in an array of business and commercial matters and has accrued professional experience in complex civil litigation, contract drafting and analysis, and real estate transactions and disputes.

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