California “Junk Fee” Legislation Headed to Governor’s Desk

California Assembly Bill 537

On September 12, 2023, the California legislature passed a bill that would add a section to California’s Business and Professions Code focused on rate advertising for short-term lodging. If signed into law, it will prohibit short-term lodging providers — including hotel operators, and residential properties rented to a visitor for 30 consecutive days or less — from advertising a room rate that does not include all fees and charges. The bill does not require that government-imposed taxes and fees be included in the advertised price. However, short-term lodging providers must include the total price to be paid, including government-imposed taxes and fees before the customer reserves their stay.

If passed, the new law will become operative on July 1, 2024. Any violations of the law after that time would expose the noncompliant short-term lodging provider to a potential civil penalty of up to $10,000 for each violation, though the bill does not provide a private right of action.

California Senate Bill 478

Sweeping more broadly, California Senate Bill 478, passed the same day (September 12, 2023), proposes to add to the list of prohibited unfair and deceptive acts under the CLRA, “advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” other than government-imposed taxes or fees and certain postage or carriage charges. If passed, this law will implicate not only hotel operators but many other businesses providing goods or services in California. Unlike the narrower Assembly Bill 537, these requirements would be enforceable by a consumer, consistent with other claims under the CLRA.

Additional Background

The California legislation is only the latest chapter in an ongoing effort by consumer advocates to require hotel and resort operators, and other businesses, to disclose certain fees in their upfront advertised prices. An August 31, 2023 alert noted the latest consumer class actions faced by hotel operators regarding how they advertise prices, as well as the Biden Administration’s renewed focus on eliminating “junk fees” and increasing upfront pricing disclosures across many industries.

Takeaways

Hotel operators have long been faced with challenges regarding how they advertise room rates. The new California law, if signed, will provide guidelines for operators who want to avoid civil penalties and potential consumer actions, though the precise parameters and applicability of the law to consumers and businesses outside of California remain open questions.

For more information on related issues, visit the firm’s hospitality and advertising pages.