The question is: Are COVID-19 surcharges legal?
"You want fries with that? How about surcharges?" Chances are you won't even be asked the question. You'll just notice after ordering food, getting a haircut or getting your teeth cleaned that a mysterious COVID-19 related surcharge appears on your bill. And that begs the question: are all these surcharges legal?
New surcharges for a new public health crisis
For many businesses, large and small, the global pandemic has impacted their bottom lines as well as their operating costs. First, there were the temporary lockdowns to contend with, then capacity and operations limitations. Then they likely incurred additional costs for COVID-19 mitigation and cleaning supplies: masks, disinfectants, hand sanitizers, face shields, gloves and more. Others upped their cleaning game by outsourcing the job, and even more switched to product delivery, further cutting into profits. Because these businesses have taken an economic hit from seemingly all directions, making up that lost revenue is, in many cases, necessary for their survival.
From a consumer perspective, it's natural to wonder whether these charges are on the up and up. They can range from a small percentage of the bill to a flat, COVID-19 fee of $10, $15 or more. The fact that some businesses are suffering economically is not in question, but when businesses start tacking on costs, it's vital to protect consumers from price gouging. The bottom line is whether these surcharges to the consumer are legal.
It turns out these charges are likely legal if they meet two criteria.
- The charges must be reasonable.
- The business must disclose the charges clearly, and they must be applied accurately.
Some states have gotten ahead of this issue by addressing it peripherally. In Colorado, legislators put regulations in place in July meant to prevent price gouging in the wake of a disaster declaration. That bill covers disaster declarations by the U.S. president or the state's governor and applies to everything from groceries to fuel, medical supplies, transportation, building materials and more. The burden of proof rests on the seller's shoulders: they must show that the surcharge is directly attributed to their costs.
In Illinois, one business in particular — a chicken restaurant — came under scrutiny when they tacked on a 26% surcharge to food bills. The blowback from consumers on social media was substantial. The state attorney general's office responded that a business must be clear and accurate with their surcharges and take care to disclose those charges before the transaction. Disclosure is essential here. It seems a lack of transparency, mislabeling the surcharge as a "tax" or another cost, could get a business into some hot water, legally speaking. In the end, while the restaurant owner cited cost increases for supplies, they decreased the surcharge substantially, to 17%.
Reasonable price increases are acceptable
COVID-19 surcharges may be a difficult pill to swallow for consumers. At the same time, for businesses, they may provide a valuable lifeline to help them survive this harsh economic storm. The key is for businesses to base their surcharges on actual increased costs and to clearly communicate these charges to customers to minimize unwelcome surprises when it comes time to pay the bill.