Beginning July 1, 2024, California's Senate Bill 478 (SB 478) will come into effect to boost price transparency for consumers. Businesses will no longer be able to advertise initial prices that don't include all mandatory fees or charges (a.k.a. “drip pricing”), ensuring consumers know the total cost upfront. The bill will transform how goods and services are advertised, empowering consumers with the information they need to make fully informed decisions.
Key Takeaways of SB 478
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Total Price Disclosure: All advertised prices must include mandatory fees and charges, excluding government-imposed taxes and shipping fees. In the case of online retailers, the total price of a good or service must be presented to the user before they start the checkout process.
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Specific Exceptions: Vehicle rental companies, lessors, and motor vehicle manufacturers are given particular guidelines on how to disclose prices without violating the law.
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Impacts Various Industries: The law affects a broad range of goods and services, from e-commerce to car rentals and home improvements.
What This Law Doesn’t Do
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This law does not limit or tell a business what they can charge for a good or service.
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This law does not limit the number and types of fees a business can charge.
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This law does not prohibit the use algorithmic or dynamic pricing.
How SB 478 Will Impact Certain Industries
Hospitality: Hotels and vacation rental services must disclose all mandatory fees in their advertised rates. This includes resort fees, cleaning fees, and service charges.
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Example: A hotel advertises a nightly rate of $150. Under SB 478, this rate must include all mandatory fees such as a $20 resort fee and a $15 service charge, bringing the advertised rate to $185 per night.
Online Retailers: An online retailer must include all mandatory fees such as handling fees in the price displayed on product pages.
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Example: If a TV is advertised for $300, the customer should not encounter an unexpected $20 large-item handling fee at checkout. To be compliant, the advertised cost of the TV should be $320.
Telecommunications and Internet Services: Telecommunication companies must include all mandatory fees in their advertised prices for services such as internet, cable, and phone plans.
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Example: An internet service provider advertises a monthly rate of $50. If there is a $5 mandatory equipment rental fee, the total advertised price must be $55 per month.
Event Ticketing: Event organizers and ticketing platforms need to include all mandatory fees in the ticket prices displayed to consumers. This includes service fees, handling fees, and venue fees.
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Example: A concert ticket advertised at $50 should include a $5 service fee and a $3 handling fee, making the total advertised price $58.
Education Institutions: If the institution advertises a price for courses or programs, they must ensure that the advertised price includes all mandatory fees, including registration, enrollment, or technology fees.
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Example: Advertising the $1,000 certification program must include the mandatory $50 registration fee, making the advertised price $1,050.
How Brands Can Comply with SB 478
These are the core steps brands should take to comply with price transparency regulation:
- Audit Current Pricing Models: Review all advertised prices to ensure they include mandatory fees and charges.
- Update Advertising Materials: Ensure all marketing communications clearly reflect total prices. This includes online platforms, websites, in-store signage, and printed materials. If your website displays pricing coming from a third-party system make sure the price displayed on your website is aggregating all mandatory costs (except taxes and shipping) into a total cost.
- Train Staff: Educate employees on the new requirements to prevent inadvertent violations.
- Communicate to Customers: Transparently communicate any changes in pricing to customers, highlighting compliance with the new law to build trust and credibility.
The Attorney General’s Office released FAQs to help businesses comply with the new law.
Other FAQs About SB 478
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You do not comply with the law by simply disclosing or stating that there will be additional fees.
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Advertisements that mention discounts but do not list a price are in compliance with the new law.
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“A handling charge must be included in the advertised price.” A business can exclude shipping charges, but not handling charges. Companies that currently have “Shipping & Handling” as a combined line item in the checkout process will need to separate those fees and include the handling charge in the advertised price.
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“Businesses that do not know how much they will charge a customer at the beginning of a transaction should wait to display a price until they know how much they will charge.” This could impact businesses that have different geographic or location-specific pricing.
Next Steps for Marketers
SB 478 enforces greater transparency in pricing, aiming to protect consumers from unexpected costs. By proactively adjusting pricing strategies and advertising practices, brands can ensure compliance and foster consumer trust. Need more guidance on implementing these changes? Refer to official resources or consult with compliance experts.