By Bob Egelko, SAN FRANCISCO CHRONICLE

https://www.sfchronicle.com/politics/article/restaurant-surcharge-ban-19456033.php

When you sit at a restaurant table and order food and drink, are you receiving “goods and services”?

That issue apparently never came up in legislative debate over a state law that, as of July 1, will require businesses in California to inform customers in advance of any fees they will be charged. But it’s the issue that the California Restaurant Association is raising in disputing Attorney General Rob Bonta’s decree that the law will prohibit restaurants from billing customers for charges they add to food and beverage prices without disclosing them ahead of time.

“Restaurant menu items are neither ‘goods’ nor ‘services,’” the two categories covered by the new law, Brian Hildreth, a lawyer for the Restaurant Association, said in a letter to Bonta demanding that he remove restaurants from the list of businesses that must inform customers of their charges. The association provided the letter to the Chronicle on Monday.

Bonta promptly disagreed, an indication that the issue is probably headed for court. The new law “empowers consumers by arming them with accurate information,” and “protects businesses that don’t charge hidden fees from being unfairly undercut by those that do,” the attorney general said in a statement issued by his office.

The Restaurant Association, which lists more than 22,000 members, has been active in court. It recently won a lawsuit challenging Berkeley’s ban on installation of natural gas appliances in new buildings, a ban that was aimed at limiting greenhouse gas emissions but was found by federal courts to conflict with U.S. energy regulation.

SB478, which takes effect July 1, will prohibit businesses from charging fees to customers that they have not disclosed before the sale, other than some taxes and shipping costs. Nationally, President Joe Biden has denounced what he describes as “junk fees” on credit cards, entertainment events and hotel stays, and has submitted regulations requiring airlines to disclose fees they will charge for handling luggage and changing reservations. Those rules are also due to take effect July 1 and are being challenged in court.

Many California restaurant owners say they use surcharges on food and beverages to increase their food servers’ pay and benefits, and will have to reduce their pay if the charges are banned. Application of SB478 to food surcharges does not appear to have been a subject of legislative debate – it was not mentioned in analyses  by legislative committees – but Bonta, a sponsor of the bill, has now advised restaurant owners that they are covered by the disclosure requirement.

“The law requires honest pricing,” the attorney general said last week in a memoaddressing “Frequently Asked Questions” about SB478. He said the law does not require advance disclosure of charges for “reasonable shipping costs,” including delivery fees for food received from restaurants. But “if a restaurant charges a mandatory fee, it must be included in the displayed price,” even if it is used to pay workers, Bonta said.

The California Restaurant Association emphatically disagreed.

The attorney general “attempts to unilaterally expand the scope of (SB478) to include restaurant food items,” attorney Hildreth wrote in his letter saying Bonta must adopt the association’s view of the law. 

Hildreth noted that the text of SB478 does not mention restaurants or their products, but instead requires disclosure of charges for products classified as “goods” or “services” under state law.

“Goods,” he argued, are defined by law as tangible items  “bought or leased for use primarily for personal, family, or household purposes,” a definition that does not apply to food or beverages bought at a restaurant. And “services,” Hildreth contended, are defined as labor and other actions associated with transportation, hotels, entertainment and similar institutions.

Asked about a possible lawsuit, Meegan Gamble, a spokesperson for the Restaurant Association, said Monday that “we will give the AG’s office time to respond to our request before taking further action.”

Paul Payne, spokesperson for Sen. Bill Dodd, D-Napa, lead author of the legislation, said Dodd agrees with Bonta’s interpretation of SB478. And Harvey Rosenfield, founder of the advocacy group Consumer Watchdog, called the Restaurant Association’s argument “ridiculous.”

“Whether it’s in your grocery cart or delivered to your table, (food) is still a product,  a ‘good’ covered by the law, Rosenfield said. And by paying for its delivery, he added, “you’re also purchasing a service.”