California’s Hidden Fees Law: What Businesses Need to Know About All-In Pricing

California businesses are facing a new pricing reality.

Under California’s “Hidden Fees Statute,” also known as SB 478 or the “Honest Pricing Law,” most businesses advertising prices to consumers must show the full price a customer will be required to pay, with limited exceptions for certain government-imposed taxes and reasonable shipping costs.

The law targets what is commonly called “drip pricing.” That is the practice of advertising one price, only for the consumer to discover later in the transaction that additional mandatory fees have been added.

The basic rule sounds simple: the price the consumer sees should be the price the consumer pays. But in practice, many businesses are finding the law more complicated than it first appears.

What the Hidden Fees Statute Requires

SB 478 amended California’s Consumer Legal Remedies Act to make it unlawful for covered businesses to advertise, display, or offer a price for a good or service that does not include all mandatory fees or charges, other than certain government-imposed taxes or fees and reasonable shipping costs.

The law does not tell businesses what they can charge. A business can generally decide how to structure its prices, including whether to recover certain operational costs through fees. But if a fee is mandatory, the advertised price generally must include that fee.

A business can still itemize the components of the price. For example, a business may advertise a total price and then explain that the price includes a service fee, facility fee, platform fee, or other charge. What the business generally cannot do is advertise a lower price and then add a mandatory fee later in the transaction.

Which Businesses Are Covered

The law applies broadly to the sale or lease of most goods and services for a consumer’s personal use. The California Attorney General’s guidance identifies examples such as event tickets, short-term rentals, hotels, and food delivery platforms.

The law does not apply to all transactions or industries. Certain transactions are subject to other pricing rules. In addition, SB 1524 created a limited exemption for mandatory fees charged by restaurants, bars, food concessions, grocery stores, grocery delivery services, and certain banquet or catering services, provided the fee is clearly and conspicuously disclosed, with an explanation of its purpose, wherever covered prices are displayed.

The Practical Question: What Kind of Fee Is It?

The most important compliance question is often not whether the business charges a fee, but what kind of fee it charges.

Some fees are plainly mandatory. Others are optional. Some are imposed by the government. Others are business costs. Some depend on the customer’s later conduct. Others are tied to the payment method or purchase channel. Businesses should evaluate each fee separately rather than assuming all fees can be treated the same way.

Taxes and Shipping Costs

The clearest exceptions are government-imposed taxes or fees and reasonable shipping costs. A business generally does not need to include sales tax in the advertised price. The same is true for certain other government-imposed charges that apply to the transaction. Businesses also generally do not need to include reasonable shipping costs for physical goods.

These exceptions make practical sense. Taxes and shipping costs often depend on the customer's location, the delivery method selected, or other variables that may not be known when the price is first advertised.

But businesses should be careful not to stretch these exceptions too far. The Attorney General’s guidance distinguishes shipping from handling. Shipping charges may be excluded from the advertised price, but handling charges generally may not be excluded if they are mandatory.

Optional Fees

Optional fees generally do not need to be included in the advertised price. For example, if a customer chooses to add an optional service, upgrade, warranty, or feature, that optional charge generally does not need to be included in the original advertised price. The key is whether the customer can actually complete the transaction without paying the fee.

Similarly, fees based on later conduct, such as late fees, damage charges, or penalties for violating rental terms, are generally not mandatory and do not have to be included in the advertised price.

Credit Card Processing Fees

Credit card processing fees require a more careful analysis.

Generally, a business is not required to include a credit card processing fee in the advertised price if the customer can avoid the fee by paying another way, such as cash or check. In that situation, the fee is not mandatory because the customer has a realistic alternative payment method.

But if a business only accepts credit cards, or if a particular transaction can only be completed by credit card, the analysis may change. In that case, the credit card fee may effectively be mandatory and may need to be included in the advertised price.

Businesses should therefore avoid treating all credit card fees as automatically excluded. The relevant question is whether the consumer can avoid the fee in practice.

Online Platform or Convenience Fees

Online platform fees, convenience fees, ticketing fees, and similar charges are a common source of confusion.

Consider a business that sells event tickets. A customer can buy a ticket at the box office for $47. But if the customer buys the same ticket online, the customer must pay an additional $3 platform fee, for a total online price of $50.

If the $3 charge is a credit card processing fee that can be avoided by paying another way, the business may have a stronger argument that the fee does not need to be included in the advertised price. But if the $3 charge is simply a mandatory online platform, convenience, or technology fee, the business should likely not advertise the online ticket as $47 and then disclose later that additional fees apply.

In that situation, a clearer approach would be to disclose both prices: for example, “Tickets are $47 at the box office and $50 online, including the online platform fee.”

What is unlikely to be sufficient is a flyer or advertisement that says: “Tickets are $47, unless purchased online, in which case additional fees apply.” If the business knows the online price is $50, the all-in online price should be disclosed.

This can be frustrating for businesses that want to avoid cluttering printed materials with multiple prices. But the purpose of the statute is to prevent consumers from seeing one price and later learning that a required charge increases the amount they must pay.

Where and How the Price Should Be Disclosed

Businesses should also consider where the price appears in the customer journey.

The safest approach is to make the all-in price clear and conspicuous wherever the price is advertised, displayed, or offered. On a website, the full price should appear when the price is first advertised, displayed, or offered—not merely at the final checkout screen. It should not be buried in terms and conditions, hidden behind a link, or disclosed only after the customer has invested time in the purchase process.

At checkout, the customer should be able to understand exactly what will be charged before clicking the purchase button. A good practice is to place the total price and any necessary explanations of included fees near the final purchase or payment button.

A Practical Approach to Compliance

Businesses can begin their compliance review by asking a few practical questions.

First, where do we list prices? This includes websites, printed materials, social media posts, email campaigns, online marketplaces, ticketing platforms, booking engines, menus, signs, proposals, and advertisements.

Second, what fees are added after the initial price is shown? Businesses should identify all charges that may be added at checkout or on invoices, including service fees, platform fees, convenience fees, processing fees, handling charges, administrative fees, facility fees, and similar charges.

Third, is each fee mandatory or optional? If the customer must pay the fee to complete the purchase, the fee likely needs to be included in the advertised price unless an exception applies.

Fourth, does the fee fall within a recognized exception? Government-imposed taxes and reasonable shipping costs are treated differently. Credit card fees may also be treated differently if the customer can avoid them by paying another way.

Fifth, do different purchase channels have different prices? If the online price differs from the in-person price, or the app price differs from the box-office price, the business should consider whether it needs to disclose the different all-in prices for each channel.

Finally, is the disclosure clear to an ordinary consumer? The goal should be to make sure the customer understands the price they will actually pay.

Conclusion

California’s Hidden Fees Statute requires businesses to think carefully about how they advertise and display prices. The guiding principle is simple: if a fee is mandatory, it generally needs to be included in the price the consumer sees, unless a specific exception applies.

Businesses should be aware of these issues because California regulators and private plaintiffs are undoubtedly paying attention to hidden-fee practices. Businesses that fail to comply may face inquiries from enforcement authorities, demand letters, or private litigation.

The best approach to avoid scrutiny is to understand the ins and outs of the law and make pricing as clear as possible before a customer decides to buy.

As with all consumer protection laws, the details really matter. Businesses with questions about specific fees, pricing structures, or advertising materials should consult counsel to evaluate how the law applies to their particular circumstances.