Do you feel you were overcharged? Why are service prices not transparent?

“If you don’t want to pay a service charge, don’t enter the restaurant.” This is what the Delhi High Court remarked as it stayed the recent guidelines issued by the Central Consumer Protection Authority, which said that restaurants cannot levy service charges by default on food bills. The stay order was passed on a petition by the National Restaurant Association of India (NRAI), which represents more than half a million restaurants. 

However, food outlets have been told to display such charges clearly on their menus so that customers know.

Restaurants generally levy a service charge of 10% on the food bill. For many customers, seeing the service charge component at the time of bill payment comes as a surprise. The NRAI has urged its members to comply with the conditions spelt out by the high court. 

Moreover, some restaurants do not print GST-inclusive prices on their menu. A customer expecting to pay a Rs 500 bill ends up paying almost Rs 580 with GST and service charge that is revealed to him after the food is consumed. 

Complaints about the lack of transparency in pricing are not limited to the restaurant and hotel sector. In May, the CCPA issued notices to cab aggregators Ola and Uber for alleged violation of consumer rights and unfair trade practices.

One of the primary issues raised in the notices is the lack of information on the algorithm or method used by the companies to charge different fares for the same route from two individuals.

Other issues included unreasonable levy of cancellation charge wherein users are not shown the amount of time within which cancelling a ride is permitted and the amount of cancellation charge not being displayed prominently on the platform before booking the ride.

The issue of inclusion of charges for add-on services such as insurance by pre-ticked boxes without obtaining consent by explicit and affirmative action was also raised.

On the same lines, a cursory check on top online aggregators show that the platforms do not provide a break up of taxes and other charges while booking flight tickets. 

These charges include Aviation Security Fee, Passenger Service Fee, User Development Fee, Regional Connectivity Scheme Fee and Common User Terminal Equipment charge.

The applicability of the platform’s convenience fee, typically non-refundable, is disclosed only in the last step of the booking process. 

Similarly, the amount of convenience fee on online platforms for movie or event bookings is known only towards the end before the customer makes the payment, giving an impression that outgo is being vastly inflated. 

Shreya Suri, Partner, IndusLaw, says consumer protection act already has pricing transparency requirements. These fall under the unfair trade practices head. E-commerce rules ask for specific price break-up. CCPA to determine violations on case-by-case basis, says she.

Consumers have also complained that prices shown on food delivery platforms are in some cases 20-30% higher than the offline prices at the restaurant. 

High commissions charged by such platforms have forced restaurants to display higher prices online. Transparency here would mean Zomato and Swiggy should have a system that notifies the customer that the prices on their platforms are much higher than the physical menu price for the same products.

According to IndusLaw’s Shreya  Suri, there is also a separate requirement for e-commerce marketplace entities not to manipulate the prices of sellers on their platforms. If any marketplace e-commerce entity is charging a mark-up on its own, that is also restricted under the e-commerce rules, which are part of the overall consumer protection act framework. Also, while the framework already exists, the Central Consumer Protection Authority is struggling a bit with implementation and there is significant industry push-back. What constitutes pricing manipulation and the degree and extent of pricing break-up that needs to be displayed is still a matter of discussion and debate at present.