Requiring the full price be advertised


There's "uproar" in California over a new law that requires fees to be disclosed in prices, even at restaurants. Restaurants say that those which have a mandatory service charge (ie. non-optional tip) and other completely bogus fees like a 6% "employee health insurance fee" and similar will be punished because their prices are now going to look higher than other restaurants, and this will scare away customers, even though all they are being made to do is show the price the customer will pay.

People hate these hidden fees, found especially on hotel rooms, tickets and the like, so much that Joe Biden pledged to get rid of them in the State of the Union.

A nice simple rule could be, "If you advertise a price, then that is what the consumer pays" with the possible exception real government mandated taxes, which should be known but also clear to the customer.

Challenges come, though from "optional" and variable things like tips and shipping/delivery. This is what the restaurants are upset about. They make the tip mandatory, and so must list it under the new law, in other restaurants the tip is optional and thus not listed. And the tip is indeed technically optional. If you're ordering something with delivery, the delivery is not generally optional, though.

So I would propose the following. In the case of tips, the restaurant must advertise the price with the median tip paid by customers. They can either calculate the real median tip at their restaurant, or they can use a standard one calculated by some agency for their industry. And they are free to list a price as "$23-3" where $3 is the optional tip included. Or perhaps $23-15%.

That does add some complexity, particularly if we want to put in the taxes. For example $23-3S-5T is one way to write $3 of optional charge and $5 of taxes, but it's a bit complex. Possibly the taxes could be done only on the final bill so people are aware of much of their money went to tax. Mandatory fees like service charges and resort fees could be listed, but would not be required, and probably would not be listed to avoid complicating the display.

These fees have ruined many online shopping services. Google hotel search is great, but it displays the price "before taxes and fees" and this causes the "online travel agents" and hotels to jack up fees and even fake taxes, which probably is not legal but nobody enforces it. Because Google shows the lowest of the prices on the map, the price you see is often wildly and unpredictably different from the price you pay. (Worse, they allow scam OTAs to put in prices that don't exist at all--if you click on the OTA you will find they claim they "just sold out" or have an entirely different price, even than the price including taxes/fees you see if you click for more details. Google really needs to fix this.)

AirBNB used to be terrible at this. They advertised a price without cleaning fees or service fees, and that led many properties to jack up their cleaning fee to the moon. Their new site lets you click a box to see everything but taxes bundled in, so you can actually compare. Peer to Peer RV rental sites like Outdoorsy hide some very high fees, including mandatory insurance, that make the price on the map have nothing to do with what you will pay.

The challenge is to come up with a nice, clear and not too complex syntax to express the 3 numbers -- the final price you will pay, the part that's taxes, and the part that's optional.

Shipping and delivery can also add complexity. Delivery is technically optional, because you can go to the restaurant or store and pick up an order. Online, it's not hard to get the customer to say which they plan to do, though they might want to decide later. (Restaurants notoriously now have different dish prices for in-restaurant, take-out and delivered. They almost always quote a subsidized delivery fee and increase the cost of the food.)

A rule is needed for advertising of prices where you don't know anything about the customer, which is what applies for classical advertising (like on a sign) as well as web pages before the customer has provided information. Here, again, displays of median prices could make sense, with some fine print saying what median price was used. Vendors would be responsible to pick a fair median for the particular ad. If they don't like that rule, they are free to improve it with real data for the real audience of the ad. That does add some cost and complexity, but it's not hard, and there's always the fallback of the "official" rate. I'm not thrilled at adding this bureaucracy, but the reality is that today, almost everybody sees ads through a computer which makes this easier to deal with.

Do you prefer to see a combined price as the full price minus components ($23-15%) or as the sum of components ($20+$3). Vendors will prefer the latter, they want to show you the lowest number they can show you. For subtraction, percentages are OK, they might be abused for addition as sadly, fewer and fewer people can just do this in their head.

Of course, in a lot of countries, it's the norm to advertise only the final price, including all taxes. There's no tipping and no fees. There's a lot of attraction to that, but just as we don't want vendors hiding fees, we also don't like the government hiding taxes. Voters should be aware of what taxes they pay.


In Europe, the quoted price is always the full price paid. A tip is by definition voluntary, so not included. Taxes are included. People generally know how high sales tax is (it varies from country to country, but not within a country), but it is listed on the bill, both the percentage and the amount.

If there is something like “service charge included”, it basically means that tips are not expected.

Tipping customs vary enormously: how much, whether the amount depends on something, which jobs are tipped and which aren’t, and so on. In some places, such as Australia, it is considered impolite to tip. Other places blur the line between tips and corruption (i.e. tipping the nurse in a hospital). In Germany, where cash is still common, it is common to round up the bill for a restaurant, taxi, or barber. But people who earn less, such as someone at a supermarket checkout, are not tipped, and it is probably not legal for either side to do so.

And many other countries. Some countries have hardly any tipping, some have a little.

In the USA and a few other countries, tipping is institutionalized and while technically optional, isn't really. The law allows restaurants to pay tipped workers lower wages because they will get their tips. And good waiters love this as they get far more pay than they could get as a salaried worker. When restaurants declare they will go to fixed service charge, no tipping, the top staff often quit.

The rule I propose with a median tip makes tipping more official. You can still not tip but the advertised price would assume that you will. You can leave more. You can even leave less though I suspect few would. It might push up the median.

My comment appeared twice because the first time I was told that the captcha answer was incorrect (although it wasn’t) and I got an error message and two new captchas.

An upgrade is needed some day when I have time.

I believe in maximum disclosure. I would go even further: restaurants need to show all their fees on the menu, not just on the bill at the end, after you don't have a choice.

Everyone tries to pull this crap. I recently butted heads with a property management company. Came time to renew a tenant's lease, and they tried to charge the tenant $150 "renewal fee" (in addition to the previously agreed-upon fee they were charging me). I wouldn't let them. The rent is the rent, there are no extra fees unless there's a violation. If they want more, they can charge me directly. They also tried a $25/month "pet fee" which they were going to keep for themselves. Nixed that too. I only learned of these because I actually read the renewed lease; I'm sure a lot of owners just rubber stamp without reading. I told them I refuse to be the Verizon of landlords.

Health care is another industry in dire need of more up-front disclosure. Most of the time you're just expected to pay whatever bill comes after the fact. People need to start asking more questions in advance.

As for taxes, what actually constitutes a "tax"? Are airport concession fees taxes? I have seen vendors (looking at you Verizon) label charges "tax" that are really just vendor fees. Is that legal? Is it legal to pad an actual tax in an attempt to get more $$$ but shift the blame to the government? Probably not but I would wager there's plenty of companies doing that.

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