Govt to come up with robust framework on 'service charge' by restaurants

The Department of Consumer Affairs will soon come up with a 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 Ministry of Consumer Affairs, Food & Public Distribution said on Thursday.

The decision was taken during a stakeholder meeting held on the issue. The meeting was chaired by Rohit Kumar Singh, Secretary, Department of Consumer Affairs.

The meeting was attended by major restaurant associations including the National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organisations including Mumbai Grahak Panchayat, Pushpa Girimaji etc.

During the meeting, major issues raised by the consumers on the National Consumer Helpline of DoCA relating to service charges such as compulsory levy of service charge, adding the charge by default without express consent of the consumer, suppressing that such charge is optional and voluntary and embarrassing consumers if they resist paying such charge etc were discussed. Further, guidelines on fair trade practices related to charging of service charges by hotels/restaurants dated 21.04.2017 published by DoCA were also referred to, the statement said.

During the meeting restaurant associations argued that "when a 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/hotels to pay the staff and workers and is not charged for the experience or food served to consumers by the restaurant/hotel.

Consumer organisations observed that levying service charges 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/hotels on fixing their food prices, including an additional charge in the name of service charge is detrimental to the rights of consumers.

As per a guideline issued by the Department of Consumer Affairs in April 2017, 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, the department said.

Further, considering entry of a customer to a restaurant/hotel as an implied consent to pay service charge would amount to the 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, it said.

"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 Ministry of Consumer Affairs, Food & Public Distribution noted in the statement.

( With inputs from ANI )