Recently, a new wave of “all-in” price laws has emerged, mandating transparent pricing practices to ensure consumers are fully aware of the total cost of goods and services upfront.  As often happens, the State of California led the way in this area with a new law banning “junk fees” that went into effect on July 1, 2024. The CA “Honest Pricing Law” or “Hidden Fees Statute,” SB 478, makes it illegal to advertise, display or offer a price for a good or service that does not include all mandatory fees or charges other than either of the following: (i) taxes or fees imposed by a government on the transaction; or (ii) postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer. Essentially, while a business can still set its prices for products or services, the displayed price must now reflect the total cost that a consumer will pay. The law also provides for certain other limited exceptions (such as, allowing food delivery platforms to display restaurant menu pricing without including the platform’s own charges). The California Attorney General issued a much-anticipated set of FAQs on the law, making clear that the scope covers the sale or lease of most consumer goods and services, including event tickets, accommodations, restaurants, and food delivery, and clarifying some of the industry’s questions on implementation.

A wave of hidden fee litigation is also beginning. For example, in Nail v. Lens.com, et al., No. 2:24-CV-01149-JAD-EJY, 2024 WL 4477012 (D. Nev. Oct. 11, 2024), Plaintiff Adam Nail sued Lens.com and ten “Doe” defendants on behalf of a putative class, alleging that the contact lens ecommerce retailer deliberately concealed extra fees added to purchases made on its website in violation of the California Consumers Legal Remedies Act (CLRA), California’s False Advertising Law (FAL), and California’s Unfair Competition Law (UCL).

Nail made two separate purchases of contact lenses from the Lens.com website:  once in January 2021 and again in November 2022. He claims that when a shopper clicked on a Lens.com ad (on Google or another search engine), the advertised price appeared on the product page, and remained visible as they entered their prescription details and reviewed their shopping cart. However, a “taxes & fees” charge was added on the shipping information page, just below a “continue” button. Nail contends that this charge was entirely a “processing fee,” which could only be identified by requesting a “Full Receipt” from Lens.com customer service, and alleged that the extra charge increased the actual cost by 50-80% above the advertised price. He did not specify whether he was aware of the fee before completing his purchases but alleges that he and other similarly affected customers were “misled and unfairly induced to pay hidden fees” as part of this “bait and switch” scheme.

Claims brought under the CLRA, FAL and UCL are governed by the reasonable-consumer test. Essentially, plaintiffs suing under these California statutes must show that members of the public are likely to be deceived by the advertisement at issue. Under the reasonable-consumer test, advertising is considered misleading if a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled. Lens.com claimed that Nail’s claims failed the reasonable-consumer test because the Lens.com processing fee was disclosed before checkout and a reasonable consumer would notice a change in the total price before completing a purchase. Nail responded that the vague disclosure of “taxes & fees” in the fifth step of the order process wasn’t enough to put a reasonable Lens.com customer on notice of the processing fee.

In deciding the case, the court looked to the Eastern District of California’s decision in Watson v. Crumbl LLC. In Watson, plaintiffs sued gourmet-cookie retailer Crumbl for adding a service fee to purchases, alleging violations of the CLRA, FAL, and UCL, among other claims. Crumbl app users could only discover the service fee by clicking on a “?” icon next to the “Taxes & Fees” line on the payment screen. The district court held that the fee had not been clearly disclosed and that a reasonable consumer could be misled by the “Taxes & Fees” line item. It also noted that courts rarely dispose of claims based on the reasonable-consumer test at the motion-to-dismiss stage.

In Nail, Judge Jennifer A. Dorsey agreed, denying Lens.com’s motion to dismiss in part, finding that Nail has pled sufficient facts to survive a reasonable-consumer test dismissal given that he alleged that Lens.com, like Crumbl, displayed the added fee just once during the checkout process and labeled that charge as “taxes & fees,” but consumers could learn of the “processing fee” only by requesting a “Full Receipt” from a Lens.com customer representative. While Judge Dorsey found that Nail had not provided sufficient facts to support his requests for injunctive relief, restitution, and disgorgement, but granted Nail leave to amend his complaint, giving him the opportunity to provide additional details and potentially salvage these claims.

The facts of Nail v. Lens.com are emblematic of a growing focus on hidden fees tacked on to purchases in a manner that consumers might not fully understand or expect. Navigating the complexities of “all-in” price laws will undoubtedly present challenges for businesses and compliance will require a thorough understanding of the evolving rules and constant vigilance to stay abreast of any updates.