National Restaurant Association calls for exemption from FTC fee regulation

Tuesday, February 13, 2024

In their submission to the Federal Trade Commission (FTC) concerning its Unfair or Deceptive Fees Notice of Proposed Rulemaking, the National Restaurant Association and the Restaurant Law Center (Law Center) urged the Commission to exempt the restaurant industry from the ultimate rule. Emphasizing in their remarks, the groups argued that the proposed rule’s broad prohibition on “hidden” and “misleading” fees, as applied to restaurants, is unjustified, illegal, and would lead to significant unintended consequences for consumers.

The FTC’s proposal aims to eradicate all fees or surcharges, compelling restaurant operators to adjust menus to display a single “Total Price” for each item. The Commission estimates this would cost the restaurant industry over $3.5 billion, projecting a menu redesign expense of nearly $5,000 per restaurant.

“While the National Restaurant Association and the Restaurant Law Center appreciate the Commission’s aim to provide increased price transparency for consumers, this proposed rule ultimately fails to achieve this objective in the restaurant industry,” said Brennan Duckett, director of technology and innovation policy for the National Restaurant Association. “A one-size-fits-all prohibition on common restaurant charges is both unworkable and unlawful, and we therefore have urged the Commission to exclude the industry from any final rule of similar nature and scope.”

The comments underscored that while restaurant operators already make considerable efforts to ensure fees and surcharges are transparent before consumers receive their bill, they typically offer the option for customers to remove surcharges. These practices set the restaurant industry apart from others outlined in the proposed rule and appear to address the Commission’s concerns regarding the refundability of such fees.

The Association and Law Center contend that by mandating restaurant operators to incorporate service fees, credit card surcharges, or delivery fees into menu prices, the Commission is effectively concealing from consumers the costs associated with services integral to the restaurant experience. Moreover, if the FTC succeeds in enforcing all-in pricing across menus, it would create an inequitable payment system where diners pay for services, such as delivery, they do not receive.

“The FTC’s proposed ‘junk fees’ rule will unleash nothing but chaos and confusion for restaurant owners and diners alike,” said Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association. “Restaurant customers understand that they will pay extra if they are having food delivered or are dining with a large party. Fees for these services aren’t ‘junk fees’ – they reflect the higher costs that a restaurant is taking on to make a customer’s experience even more convenient.”

The comments also highlight the outcome of being forced to create a menu for each situation, as the FTC suggests: “Imagine walking into a restaurant and the person at the desk asks you how you’re going to be paying that evening. This would become an uncomfortable reality in a world where restaurants can’t use surcharges and are forced to provide a menu for large parties, one for smaller parties, one for people paying with credit cards, one for takeout, and one for delivery.”

As an alternative to the proposed rule, the Association and Law Center expressed a readiness to collaborate with the FTC to establish a transparency standard for potential fees or surcharges. This standard would outline notice and disclosure requirements for fees and surcharges necessary to sustain business viability for restaurant operators.

However, the groups cautioned that if a final rule encompassing restaurants is issued, fees that provide value and transparency must be preserved. These include service fees benefiting tipped workers, credit card surcharges, and delivery fees.

« Back to Page