What is California's New Price Transparency Law Bill 478 (SB 478) and How Does it Impact eCommerce Websites?

Quick Summary:

“The price a Californian sees should be the price they pay.”

California’s self-proclaimed “most effective in the nation” ban on drip pricing goes into effect on July 1, 2024. When promoting a price to a California consumer, businesses that omit any obligatory fees or levies risk serious legal penalties and class action lawsuits. California's move to do away with junk fees is comparable to those being pursued by other states, and it supports federal actions spearheaded by the Federal Trade Commission and the Consumer Financial Protection Bureau.

Table of Content

• Introduction to SB 478: Honest Pricing Law
• Key Provisions of SB 478
• Impact on eCommerce Businesses
• Consumer Benefits and Empowerment
• Compliance Tips for eCommerce Websites
• Ending Note

Introduction to SB 478: Honest Pricing Law

Customers have complained about surcharges, connection fees, hidden required fees, junk fees, resort fees, destination fees, service fees, administration fees, health expenses, and other similar charges. With the passage of California's "Honest Pricing Law," or "Hidden Fees Statue" SB 478, hidden costs are outlawed, and companies are forced to publish prices that include all required fees. It applies to most goods and services.

SB 478 forbids companies from advertising or publishing a price for a good or service that does not include all necessary fees or charges, with the exception of shipping costs and some taxes (like sales tax). It does not put any restriction on what price a business can charge or what may be included in that cost. All they want is a transparent price (whatsoever it is). Despite being specific to sales in California, the mandatory pricing disclosure rule is expected to affect many firms, especially those that conduct business online due to the global nature of eCommerce.

Key Provisions of SB 478

What Does the Law Require? 

"Drip pricing, which involves advertising a price that is less than the actual price that a consumer will have to pay for a good or service," is what the law is explicitly meant to outlaw. Listing or promoting a price that is lower than what a customer will ultimately pay is considered misleading advertising and is prohibited by both state and federal laws. Accurate price comparisons can be made by customers and businesses alike when truthful pricing is promoted and published.     

Clarification on Mandatory Fees and Charges 

Any mandatory fee that a customer cannot avoid and that is required to finish a transaction must be included in the stated price under SB 478. Service fees, administrative fees, and any additional costs that are not voluntary are included in this.  

Exceptions to the Law 

• Government-imposed taxes and shipping expenses, on the other hand, are specifically exempt from the law and do not have to be included in the price that is offered. These exclusions recognize the complexity and unpredictability of taxes and delivery costs, which may vary depending on the customer's region. 

• It can also exclude sales tax and reasonable shipping costs, postage, or carriage charges for physical goods. Fees for optional services or features also do not need to be included in the advertised price. 

• Fees that are based on certain later behavior of a consumer, like fees for returning rented equipment after the set date or time, or a fine for smoking in a non-smoking hotel room, are excluded from the advertised price. 

• Food delivery platforms are subject to special requirements under the Business and Professions Code section 22598 et seq. when they list the prices charged by a restaurant from which they deliver food, and this law does not change those requirements. But when the food delivery platform advertises the price of the delivery service that it provides, it must advertise the full, all-in price of the delivery service. 

• This law also does not apply to the tips or gratuities left by customers, as they are not compulsory. 

• A business that provides discounts or charges a customer less than the advertised price has not violated this law. The law just restricts showing a price that is less than what the customer will have to pay for a good or service. 

Businesses That Must Follow This Law 

The law applies to the sale or lease of most goods and services that are for a consumer’s personal use including: 

• Event Tickets 

• Short-term Rentals 

• Hotels 

• Restaurants 

• Food Delivery 

These were just a few top industries. The purchase or leasing of products or services for business purposes, as well as a few other transactions and industries that are already covered by other pricing rules, are exempt from the law.   

Impact on eCommerce Businesses

Effects on Online Retailers and eCommerce Platforms

The application of Transparency Law Bill 478 will massively impact how eCommerce development company operate in California. Online retailers and eCommerce platforms will have to re-evaluate their pricing structure to comply with the new law. Any additional mandatory fees must be incorporated into the prices displayed on their websites. Several online businesses and eCommerce platforms will have to undergo major changes and make adjustments to their pricing models, advertising methods, and overall marketing strategies.

Challenges and Adjustments for Compliance

Online businesses will definitely have to tackle challenges to comply with SB 478. This includes updating website interfaces to reflect accurate pricing, recalibrating automated pricing systems, and training staff on the new legal requirements. They will also have to work with their legal and compliance teams to ensure that all advertising materials, both online and offline, adhere to the new regulations. Failure to comply with SB 478 can result in legal repercussions, including fines and reputational damage. If they fail to comply Consumer Legal Remedies Act (CLRA), each violation of the new prohibition on drip pricing can result in: 

• Actual damages, but no less than $1,000 

• An order enjoining the methods, acts, or practices 

• Restitution of property 

• Punitive damages 

• Attorney fees 

• Any other relief that the court deems fit 

Consumer Benefits and Empowerment 

Transparent Pricing for Consumers 

Consumers were being fooled by surprise charges after selecting the product and knowing about them at the time of final payment. Well, not anymore with the application of SB 478. One of its primary advantages is the increased transparency it gives to consumers. Businesses now have to include and show all mandatory fees in the advertised price. Consumers can see the true cost of a product or service upfront, without any hidden surprises at checkout. This transparency allows them to make well-informed decisions, compare prices more effectively, and trust that the price they see is the price they have to pay. 

Empowering Shoppers 

No more scams with the shoppers. Price Transparency Law Bill 478 empowers shoppers by forcing all businesses to follow the same pricing standards. This will put an end to malpractices where businesses artificially advertise low prices to lure customers only to get a higher price later in the purchasing process. With clear and honest pricing, consumers can confidently shop, knowing they have all the information they need to make the best purchasing decisions. 

Compliance Tips for eCommerce Websites 

Practical Advice for Businesses 

To follow SB 478, eCommerce websites have to take the below-mentioned actions: 

• Audit Current Pricing Practices: Scrutinize all advertised prices and double-check that all the mandatory fees are included. 

• Update Website and Marketing Materials: Apply essential changes to your website. Make sure that all product listings show the total cost. Update any marketing materials that show costs that go hand-in-hand with the new law. 

• Train Staff: Share with your team about SB 478 and its requirements to make sure it is followed and applied at all levels of your organization. 

• Review Terms and Conditions: Update your terms and conditions and clearly showcase any additional costs such as taxes and shipping fees. 

Best Practices for Displaying Prices Accurately 

• Clear Price Listings: Put the total cost next to the product or service, including all compulsory fees. 

• Transparent Checkout Process: Provide a detailed breakdown of the price, highlighting any additional costs like taxes and shipping, before the final purchase step. 

• Consistent Communication: Ensure all communication channels, including email, social media, and customer service, align with the pricing transparency mandated by SB 478.

Ending Note 

Just remember SB 478 is a transparency law – not a price control law. It imposes no restrictions on setting the price, it should just be transparent. By adhering to these rules, eCommerce companies may both abide by SB 478 and gain the trust of their clients by using honest and open pricing strategies. Finally, SB 478 in California is a big step in the right direction for increased pricing transparency in the retail industry. In the end, it helps consumers by encouraging fair pricing practices and providing them with the knowledge necessary to make educated purchasing decisions, even while it presents difficulties for eCommerce businesses. Businesses can improve their reputation and build closer bonds with their clients by accepting these developments.