Minnesota has joined California in banning restaurant ‘junk fees’

Minnesota Gov. Tim Walz signed a price-transparency bill into law this week detailing how industries, including restaurants, will have to make additional fees clear to customers upfront. The law goes into effect Jan. 1.

“Minnesotans value transparency, which is why we’re putting an end to junk fees on everything from food and entertainment to hotels and credit card fees,” said Walz in a press release. “This bill is going to protect Minnesotans’ bottom line, provide clarity for consumers, and ensure companies aren’t using deceptive practices to rip their customers off.”

Businesses will have to inform customers of all fees it may be adding to the bill before they sit down. In addition, the full price will have to be displayed on advertising material.

Food delivery apps are a bit different in this law’s purview. These services are allowed to show the restaurant’s food prices rather than the often-bloated prices listed on the app by the restaurant. However, the apps must show the final price with fees and increased menu prices before the customer checks out.

Mandatory tips must be listed ahead of time, and all gratuities must go to the employee.

“We’ve all had that experience at a restaurant when the bill comes with an ambiguous service fee,” Lt. Gov. Peggy Flanagan said in a release. “We pause and we wonder if that’s a tip for the server.”

Related:Here’s how President Biden’s crackdown on junk fees will affect restaurants

This is far from the first law like this to go into effect. California Gov. Gavin Newsom signed a similar bill into law last year, which is set to go into effect July 1. Illinois lawmakers are close to finalizing a bill as well.

This month, Calif. Attorney General Rob Bonta released guidance for businesses on how to comply with the state’s new law.

“The law is simple: the price you see is the price you pay,” he said in a press release.

The White House has also made it clear that junk-fee bans are on the agenda via the Federal Trade Commission.

In March, President Biden released a memo about his potential junk-fee ban, saying that the “Consumer Financial Protection Bureau’s (CFPB) actions alone will likely save Americans roughly $19.5 billion annually.”

The White House’s research shows that consumers spend about $90 billion per year on junk fees to a range of industries such as concert venues and tickets, delivery services, and restaurants.

Further, the same research estimates that the restaurant industry alone is responsible for $10.8 billion in junk fees, the third highest amount of any industry, only passed by credit-card late payment fees and cable fees.

Restaurants, however, argue that the industry does not participate in junk fees the way companies in most other industries do. Most of the additional fees subsidize healthcare costs or tips for the back-of-house workers.

“Our industry getting lumped into this ‘junk fees’ bill — it’s not the same. We’re not Ticketmaster,” said Angie Whitcomb, president and CEO of Hospitality Minnesota, in a release.

The National Restaurant Association also made a comment at the time of Biden’s announcement in March that this possible ban would cost restaurants up to $3.5 billion per year. The association broke that out to at least $4,000 per operator to comply with the possible law.

A statement on the website reads:

This rule is unaffordable and unworkable for the nation’s restaurant operators. The association provided extensive comments about the impact on the restaurant to the FTC and is working with members of congress to raise concerns about how this proposal would negatively impact the restaurant industry before the FTC issues a final rule, likely later this year.