The Restaurants Should Not Bill Service Charges Against the Wishes of Consumers!

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  • The subject matter is in the news yet again after several consumers raised a red flag against some restaurants for billing the service charges without obtaining consent from the patrons. Yes, the issue was hotly debated even before the pandemic struck the nation.  And we know how the lockdowns and restrictions severely affected the hospitality sector over the last two years.  Now that the nation is slowly regrouping after a prolonged period of inactivity, the prickly issue of service charges is coming out in the open.  Similar to other sectors under duress, the services industry is still gasping for breath but showing definite signs of picking up pace.  Amid all this, restaurants’ billing practices have reached the Union Government’s attention for consideration.

PC: Abhimanyu Hazarika

  • The moot point to ponder over here is whether this issue should merit central government attention at all. Unfortunately, every controversial and significant issue of interest demands the central government’s intervention.  That is how the restaurants’ billing practices reached the higher-ups.  Delving further will reveal that perhaps, more than the scale of consumer harm, it’s the principle that’s important – businesses should not be able to get away with dodgy practices by being clever.  Arguments put forth by restaurant owners are quite interesting.  They claim service charges are not illegal and help pay staff better.  Now, these arguments are not only spacious but fail to cut much ice with the discerning people.
  • Mind you, both these arguments are irrelevant in the overall scheme of things as also context on top being zero-evidence assertion. Dissecting further will enlighten that service charges indeed don’t break a law because there isn’t a law dealing with this as yet.  However, what they do break is the well-understood principle of transparency.  Moreover, restaurants mostly aren’t upfront about this charge, quite understandably, as they seldom make consumers aware that as per 2017 Government of India guidelines paying this charge is voluntary.  Quite smartly, the charge in bills is listed in proximity to taxes, giving it an appearance of legitimacy, which it cannot claim.  Of course, restaurants also conveniently ignore consumer court verdicts against service charges.

PC: Manmath NayakEmail

  • For the uninitiated, in January this year, the Kolkata Consumer Disputes Redressal Commission had directed a restaurant to hand back the service charge it had forcibly collected from a customer, along with a compensation amount.  As for the noble-sounding argument that service charges help restaurants give better salaries to their staff, it’s instructive that over all these years the issue has been debated, restaurant owners have never sought to back this claim with evidence.  Yes, restaurants are free to increase prices to cover their wage costs but fear losing out on the customers.  Levying a service charge to make business stable is disingenuous as bad practices cannot be sanctified by citing operating environment difficulties.