On October 7, the California Governor approved an amendment to the Consumers Legal Remedies Act. Known as SB 478, or ‘the Act’, the amendments have been set out to target and prohibit “drip pricing”. Drip pricing involves advertising a price that is lower than the actual price a consumer will have to pay for a good or service. This can often lead to consumers being deceived into believing a good or service is cheaper than it actually is, and later being hit with unexpected additional charges or fees.
This practice can often affect a wide range of consumers, and across a range of sectors, but nevertheless, it is particularly prevalent in the retail industry. With the newly approved amendments, all businesses operating in California will be required to provide full transparency regarding product and service pricing in their advertisements.
Credit for the important update goes to the independent law firm Orrick, Herrington & Sutcliffe LLP, who reported the news of the changes enacted in California. Their report is a comprehensive one, diving into the details of the Act and what it means for businesses. For more information on the amendments, the specifics of their application, and how they will be enforced, ambitious readers can review the full report from Orrick, Herrington & Sutcliffe LLP.
The prevention of deceptive ‘drip pricing’ strategies reflects a broader trend in global policymakers’ efforts to improve consumer protections in recent years. Always keeping an eye on industry developments, it will be prudent for legal professionals to keep abreast of potential changes in similar legislation worldwide. It is not just Californian businesses that should anticipate potential adjustments in their advertising strategies, but companies that operate internationally as well.
It should also be noted that these changes not only impact business-to-consumer relationships but also can have potential ramifications for business-to-business transactions. Regardless of where your company or clients operate, consumer rights and fair advertising practices should always be at the core of your legal strategy.