High Court ruling on service charge or ‘tips’ at eateries

Subject: Polity

Section: National body

In News: Delhi HC said on service charge: Use term ‘staff contribution’, amount can’t be over 10% of bill

Key Points:

The Delhi High Court in an interim order Tuesday directed members of the Federation of Hotel and Restaurant Association of India (FHRAI) to replace the term ‘service charge’ with ‘staff contribution’, while adding that the amount charged should not exceed 10% of the total bill
FHRAI-associated hotels and restaurants will now specify on their menus in bold that tips need not be given after staff contribution is paid.
The order was passed on pleas filed by the National Restaurant Association of India (NRAI) and the FHRAI, challenging the July 4, 2022, guidelines issued by the Central Consumer Protection Authority (CCPA).

What did the CCPA guidelines say?

The guidelines said that restaurants or hotels should not automatically add service charge to the bill or collect it from consumers under any other name.
High Court stayed the CCPA guidelines subject to fulfillment of certain conditions.

What did the HC say?

The association members should ensure that the levying of service charge in addition to the amount and taxes is “duly and prominently displayed on the menu or other places”
There should be no scope of confusion between service tax and service charge as service tax is no longer being imposed on restaurants
A complaint against unfair trade practices could also be lodged electronically with the Consumer Commission through the eDaakhil portal for speedy redressal or otherwise.
Complaints could also be submitted to the District Collector of the district concerned for investigation and subsequent proceedings by the CCPA, either through email or in person.

Central Consumer Protection CCPA

CCPA was established in 2020, with powers to pass orders of discontinuation of practices that are unfair and prejudicial to consumers’ interests and impose penalties in case of false or misleading advertisements.
It initiated country-wide campaign to prevent sale of spurious and counterfeit goods that violate Quality Control Orders
CCPA has also issued Safety Notices to alert consumers against buying household goods which do not have valid ISI mark, like electric immersion water heater, sewing machine, aluminum foil for food packaging etc.
Violation of compulsory standards for such goods endangers public safety putting consumers at the risk of suffering severe harm or injury.
In furtherance of the campaign, CCPA has taken suo-moto cognizance against e-commerce entities found to be selling Pressure Cookers in violation of the Domestic Pressure Cooker (Quality Control) Order, 2020 issued by the Central Government under Section 16 (1) of the BIS Act, 2016 on 21st January 2020.
The power of CCPA to take Class action is a unique feature that was not present in the previous Consumer Protection Act, of 1986.
Before the 2019 Act, there was nomechanism to deal with issues of unfair trade practices and misleading advertisements which impacted consumers as a class. As a result, such practices continued unrestrained, without any accountability.
CCPA through class action protects the right of the consumers even the sleeping consumers who are unaware of their rights.