California’s Junk Fee Laws Create Overlapping Compliance Issues

The Federal Trade Commission said it bluntly in its background section of the Rule on Unfair or Deceptive Fees: “When shopping for a good or service, consumers want to know: how much?”

Pricing transparency has become a priority for both federal and state regulators. A new FTC rule and state laws such as California’s Honest Pricing Law (SB 478) seek to eliminate so-called drip pricing by requiring businesses to present consumers with the full cost of goods and services upfront.

However, the federal and state measures differ in scope, timing, and compliance obligations, leaving California businesses to cope with how to navigate the new demands of overlapping regulation.

The FTC’s Rule on Unfair or Deceptive Fees, also known as the junk fees rule, took effect May 12. It “prohibits bait-and-switch pricing and other tactics used to hide total prices and mislead people about fees” in the live-event ticketing and short-term lodging industries, and applies to consumer and business-to-business transactions.

A set of frequently asked questions emphasize that businesses must disclose total prices upfront, display the total price prominently, disclose excluded charges before asking for payment, and prohibit businesses from misrepresenting fees and charges. That requires a business to “calculate, then clearly, conspicuously, and prominently disclose the final amount of payment, including taxes, shipping, and optional add-ons, before asking people to pay.”

Some fees can be excluded from the total price, such as taxes or other government charges and shipping charges, but any excluded charges must be disclosed before payment, including the nature, purpose, amount, and the good or service for which the charges are imposed.

Sound daunting? While the FTC’s approach is significant, it’s only part of the landscape. California’s junk fee framework is even stricter and far more sweeping across industries than the FTC’s rule.

California SB 478 took effect on July 1, 2024. The law broadly applies to the sale or lease of most goods and services that are for a consumer’s personal use. It also aims to target drip pricing—the practice of advertising a price that appears lower than the actual amount a consumer must pay once mandatory fees are added.

As the California Attorney General’s published frequently asked questions explain, the price consumers see “should be the price they pay,” subject to limited exceptions. SB 478 requires that any listed or advertised price include all mandatory charges, with the narrow exception of reasonable shipping costs for physical goods and government-imposed taxes or fees.

A closer look at specific industries highlights a key divergence in scope between California’s law and the FTC’s junk fees rule.

California enacted SB 1524 in June 2024 to carve out an exemption for restaurants and other food sellers from SB 478’s all-in pricing requirements. Under SB 1524, restaurants and other sellers of food and beverage items may continue listing mandatory fees they charge separately as long as the charges are “clearly and conspicuously displayed, with an explanation of its purposes, on any advertisement, menu, or other display that contains the price of the food or beverage item.”

By contrast, the FTC’s junk fees rule doesn’t cover restaurants at all.

The bottom line is that California has tightened the screws. Its junk fee law carries added weight because of its robust enforcement mechanisms. Unlike the FTC’s junk fees rule, which is enforceable only by the government and carries civil penalties and consumer refunds, California empowers remedies such as private lawsuits, statutory damages, attorney’s fees, and class actions, which significantly increases the stakes for noncompliant businesses.

The most effective response to California’s junk fee law is proactive compliance, because surprises at checkout will serve as a catalyst for litigation. Businesses should conduct an audit of their current pricing practices and equip their marketing, sales, and customer service teams with guidelines and training to avoid pricing inconsistencies.

Ultimately, businesses should prepare for potential litigation exposure under the California framework by evaluating insurance coverage options, considering legally permissible dispute resolution alternatives, and creating a strategy for early claim resolution. Compliance upfront could be less costly than defending a class action later.

In practice, while the federal rule creates enforcement risk confined to the live-event ticketing and short-term lodging industries, the private right of action under the California framework transforms consumer pricing disputes into frequent and costly civil litigation. The takeaway is clear: For California businesses, noncompliance in today’s economy can be costly.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Ashley R. Fickel is a partner at Stinson who focuses his practice on business litigation, real estate litigation, construction litigation, consumer class action defense, and data and private cybersecurity.

Zoey M. Surdis is an associate at Stinson who has managed lawsuits across multiple practice areas, including premises liability, construction defect, breach of contract, and class actions.

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