15 July 2022

CONSUMER PROTECTION UPDATE | GUIDELINES ON SERVICE CHARGES

Central Consumer Protection Authority (CCPA) recently issued guidelines dated 4 July 2022 (Guidelines) which now prohibits hotels and restaurants to levy any service charges to the customers.

BACKGROUND

Following amendments made in the Consumer Protection Act 2019, the Central Government vide notification dated 30 July 2020 established the Central Consumer Protection Authority to regulate the matters that are related to the violation of consumer rights, unfair trade practices and false and misleading advertisements which are prejudicial to the interest of the consumers and to promote, protect and enforce the rights of consumers with effect from 29 July 2020. The Department of Consumer Affairs vide notification 21 April 2017 had previously established guidelines on an almost equivalent effect barring it being limited. Thus, the new Guidelines are a more comprehensive set of guidelines that shall be in addition to the previous guidelines.

GUIDELINES

The Service Charge Guidelines are ascribed to the CCPA to curb unfair trade practices and protect the rights of the consumer, they are as given below:

• No hotel or restaurant shall add service charge automatically or by default in the bill;

• Service charge shall not be collected from consumers by any other name;

• No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer's discretion;

• No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers;

• Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.

  The recourse available to the consumers on non-compliance of the Guidelines by the restaurants or hotels are:

• Make a request to the concerned hotel or restaurant to remove service charge from the bill amount;

• Lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or through the NCH mobile app;

• File a complaint against unfair trade practice with the Consumer Commission. The Complaint can also be filed electronically through e- daakhil portal www.edaakhil.nic.in for its speedy and effective redressal;

• Submit a complaint to the District Collector of the concerned district for investigation and subsequent proceeding by the CCPA. The complaint may also be sent to the CCPA by e-mail at com-ccpa@nic.in;

  On satisfaction of the CCPA that there was a violation, the CCPA may pass an order after giving the other person an opportunity to be heard under Section 20 of the Consumer Protection Act, 2019 as follows:

• To recall the goods or withdraw the services which are dangerous, hazardous or unsafe;

• To reimburse the prices of goods or services that are so recalled to the purchasers of such goods or services; and

• To discontinue the practices which are unfair and prejudicial to consumers' interest.

MHCO Comment : The Guidelines by the CCPA are a great addition to the previous set of guidelines released by the Department of Consumer Affairs. The Guidelines even provides for a mechanism to deal with the non-compliance and facilitate a wider redressal system for the consumer which was a limitation in the previous set of guidelines. While a great addition for the consumer, the pushback by the hospitality industry would make the implementation of the Guidelines noteworthy.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.