• The Central Consumer Protection Authority (CCPA) has barred hotels and restaurants from levying service charge automatically or by default in food bills and allowed customers to file complaints in case of violation.

• The CCPA has issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to levying of service charge.

• No hotels or restaurants shall add service charge automatically or by default in the bill, CCPA Chief Commissioner said in the guideline.

• Restaurants and hotels generally levy a service charge of 10 per cent on the food bill.

• The guidelines said there should not be any collection of service charge by any other name.

• The government had earlier in 2017 come out with guidelines on service charge, where it had said the levy has to be voluntary and not mandatory.

• The CCPA said it has observed, through grievances registered on National Consumer Helpline (NCH), that hotels and restaurants are levying service charge in the bill by default without informing consumers that paying such a charge is voluntary.

• Further, service charge is being levied in addition to the total price of the food items mentioned in the menu and applicable taxes, often in the guise of some other fee or charge.

Central Consumer Protection Authority (CCPA)

• The Consumer Protection Act, 2019 was notified on August 9, 2019 and came into force on July 20, 2020. 

• It replaced the Consumer Protection Act, 1986.

• Under the provisions of the Act, the Central Consumer Protection Authority (CCPA) was established in July 2020. 

CCPA is empowered to:

a) Protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers rights under this Act.

b) Prevent unfair trade practices and ensure that no person engages himself in unfair trade practices.

c) Ensure that no false or misleading advertisement is made of any goods or services which contravenes the provisions of this Act or the rules or regulations made thereunder.

d) Ensure that no person takes part in the publication of any advertisement which is false or misleading.

• The CCPA can make interventions when necessary to prevent consumer detriment arising from unfair trade practices and to initiate class action including enforcing recall, refund and return of products. 

• The CCPA has an investigation wing, headed by a director-general, which may conduct inquiry or investigation into consumer law violations. 

• The CCPA has been granted wide powers to take suo-moto actions, recall products, order reimbursement of the price of goods/services, cancel licenses and file class action suits, if a consumer complaint affects more than one individual.

Guidelines issued by CCPA on service charge:

• No hotel or restaurant can force a consumer to pay service charge. They have to clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.

• If any consumer finds that a hotel or restaurant is levying service charge in violation of the guidelines, that person can request the concerned establishment to remove it from the bill amount.

• The consumers can also lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level, by calling 1915 or through the NCH mobile app.

• They can also file complaints with the Consumer Commission. The complaint can be filed electronically through the e-Daakhil portal for its speedy and effective redressal.

• The guidelines state that a component of service is inherent in the price of food and beverages offered by a restaurant or hotel. Pricing of the product covers both the goods and services component. There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers.

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