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The Central Consumer Protection Authority (CCPA) said on Monday (July 4, 2022) that hotels or restaurants cannot add service charges automatically or by default to food bills. The Authority issued guidelines to prevent unfair business practices and violations of consumer rights. The authority said that no hotel or restaurant can "force" a consumer to pay service charges. In addition, hotels and restaurants must clearly inform the consumer that the service charge is "voluntary, optional and at the discretion of the consumer."
Guidelines
The CCPA has issued five main guidelines regarding the collection of service fees by restaurants and hotels. Interestingly, the service charges have been long been a contentious issue and has regularly drawn consumer complaints.
- Hotels or restaurants shall not add service charges automatically or by default in the food bill;
- No collection of service charge shall be done by any other name;
- No hotel or restaurant shall force a consumer to pay the service charge and shall clearly inform the consumer that the service charge is voluntary, optional and at the consumer’s discretion;
- No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers;
- Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount
What can you do when guidelines are violated?
The consumer has four options at different escalation levels. If services charges are included in any bill of the consumer by default, then it is clear violation of above-mentioned guidelines. They can/should request the hotel or restaurant to remove the service charge from the bill. If they don't, the consumer can file a complaint with the National Consumer Helpline (NCH) by calling 1915 or through the NCH mobile app.
- First, you can make a request to the hotel or restaurant to remove the service charge from your bill.
- Second, you can file a complaint with the National Consumer Helpline (NCH). NCH functions as an alternative dispute resolution mechanism at the pre-litigation level. The complaint can be filed by calling 1915, or on the NCH mobile app.
- Third, the consumer can complain to the Consumer Commission or through the edaakhil portal, http://www.edaakhil.nic.in.
A press release was issued by the Ministry of Consumer Affairs, Food & Public Distribution on the Press Information Bureau website. The press release stated that a number of complaints have already been registered in the NCH by consumers with regards to levy of service charge.
"The issues raised by consumers include restaurants making service charge compulsory and adding it in the bill by default, suppressing that paying such charge is optional and voluntary and embarrassing consumers in case they resist paying service charge. Various cases relating to levying of service charge have also been decided by consumer commissions in favor of consumers, holding the same as an unfair trade practice and in violation of consumer rights," the press release stated.
What CCPA said?
The CCPA became aware of complaints and said, "it has been observed, through complaints filed with NCH, that hotels and restaurants charge a service fee on the bill by default without informing consumers that paying such a fee is voluntary.
CCPA also added, "the service charge is charged in addition to the full price of the food items listed on the menu and any applicable taxes, often under the guise of some other fee or charge."
The guidelines state that a service component is inherent in the price of food and beverages offered by a restaurant or hotel.
“Product pricing covers both the goods component and the services component. There are no restrictions for hotels or restaurants to set the prices at which they want to offer food or drinks to consumers.Therefore, placing an order implies consent to pay the food prices shown on the menu together with applicable taxes. Charging any amount other than such amount would amount to unfair trade practices under the (Protection of to the Consumer)," the guidelines say.
Conclusion
The CCPA, in its guidelines, said that a tip or gratuity is for the hospitality received beyond the basic minimum service contract between the consumer and hotel management. The tip constitutes a separate transaction between the consumer and hotel/restaurant staff to consumer discretion.
Only after completing the meal is the consumer in a position to assess the quality and service and decide whether or not to pay a tip and, if so, how much. A consumer's decision to pay a tip does not arise simply from entering the restaurant or placing an order. "Therefore, the service charge cannot be added to the bill inadvertently, without allowing consumers the choice or discretion to decide whether or not they want to pay the service charge," the guidelines say. Furthermore, any entry restriction based on charging a service fee amounts to an unfair trade practice.
The CCPA was established under the Consumer Protection Act of 2019 to regulate matters related to the violation of consumer rights, unfair business practices, and false or misleading advertisements. It has been created to promote and enforce the rights of consumers as a class.
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