Legal Framework To Stop Restaurants From Levying Service Charge

The Department of Consumer Affairs (DoCA) held a meeting with restaurant associations and consumer organisations to decide on robust framework to ensure strict compliance by the stakeholders with regard to service charge levied by restaurants and hotels as it adversely affects consumers on a daily basis.

The meeting was chaired by Rohit Kumar Singh, Secretary, DoCA.

During the meeting, major issues raised by the consumers on National Consumer Helpline of DoCA relating to service charge such as compulsory levy of service charge, adding the charge by default without express consent of consumer, suppressing that such charge is optional and voluntary and embarrassing consumers if they resist paying such charge were discussed.

The restaurant associations observed that when service charge is mentioned on the menu, it involves an implied consent of the consumer to pay the charge. Service charge is used by restaurants and hotels to pay the staff and workers and is not charged for the experience or food served to consumer by the restaurant and hotel.

Consumer organizations observed that levying service charge is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act.

Questioning the legitimacy of such charge, it was highlighted that since there is no bar on restaurants and hotels on fixing their food prices, including an additional charge in the name of service charge is detrimental to the rights of consumers.

As stated in the earlier guidelines dated April 21, 2017 published by DoCA, placing an order by a customer amounts to his agreement to pay prices in the menu along with applicable taxes.

Charging for anything other than the aforementioned, without express consent of the consumer, would amount to unfair trade practice under the Act. Further, considering entry of a customer to a restaurant and hotel as an implied consent to pay service charge would amount to imposition of an unjustified cost on customer as a condition precedent to placing an order for food and would fall under restrictive trade practice under the Act.

“Since this adversely affects millions of consumers on a daily basis, the Department will soon come up with a robust framework to ensure strict compliance by the stakeholders,” the DoCA said in a statement.

Earlier, The Department of Consumer Affairs (DoCA) warned restaurants and eateries against collecting service charge from consumers by default.

In a letter written by Rohit Kumar Singh, Secretary, Department of Consumer Affairs to President, National Restaurant Association of India, it has been pointed out that the restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is voluntary and at the discretion of consumers and not mandatory as per law, DoCA said in an official statement.

The statement also said the department took into consideration a number of media reports as well as grievances registered by consumers on the National Consumer Helpline (NCH) on service charged levied by restaurants.

National Restaurant Association of India (NRAI)

On the contrary, the National Restaurant Association of India (NRAI) has said that service charges levied by the restaurants and hotels are still ‘very much legal’.

Issuing a clarification, NRAI said, “Media reports regarding decisions allegedly taken at Department of Consumer Affair meet with reference to legality of service charge are untrue.”

“Department heard views of all stakeholders and will review all inputs before deciding on the matter. Until final disposal, service charge is very much legal,” NRAI said in a Tweet.