MC Interview| Service charge blatantly misleading, an unfair trade practice: Consumer Affairs Secy

Singh argues that if restaurateurs want to give higher wages to their staff, they can always increase their prices on the menu.

Service charges being levied by restaurants are “blatantly misleading” and fall under “unfair trade practices,” Consumer Affairs Secretary Rohit Kumar Singh told Moneycontrol in an exclusive interview.

“The whole paradigm of consumer protection is that unfair trading practices have to be demolished, have to be controlled. This is a blatant example of an unfair trading practice because, in the garb of X, you're asking the consumer to pay Y, which is not acceptable,” he said.

It was in July last year that the Central Consumer Protection Authority (CCPA) came out with guidelines that said that restaurants and hotels should not automatically add service charges to the bill or collect the same from consumers under any other name. Soon after, the National Restaurant Association of India (NRAI) challenged the guidelines, and the matter has been in court since then, with both the Department of Consumer Affairs as well as the private industry body arguing aggressively for their sides.

In the latest hearing held on October 3, lawyer Lalit Bhasin, representing the NRAI, argued that service charge is an agreement between the restaurant management and its staff, making it a labour issue that can only be addressed by labour authorities, and that the Department of Consumer Affairs lacks jurisdiction to issue a directive prohibiting restaurants from imposing service charges.

However, as per the secretary of consumer affairs, this is not a labour issue at all. “Who is paying for it? The consumer. And so, by the Consumer Protection Act, if a consumer has paid for something, whether it's a good or a service, it's a consumer protection issue,” he stressed.

The consumer affairs ministry gets an average of 1.2 lakh complaints a month, of which a sizeable number can be attributed to issues regarding service charges, said Singh. “And that is just the tip of the iceberg because many people don't complain. So, we can't leave it. Somebody has to monitor it; somebody has to force the service providers to redress the grievances of consumers. That is our job. It is what we get paid for.”

“Our argument is that by calling it a service charge and putting it on the bill, it sounds as if it's a government levy. That logic, that this amount is being given to the waiter, is totally false. There is no way to check that,” Singh added.

Singh argues that if restaurateurs want to give higher wages to their staff, they can always increase their prices on the menu. “We don't control the menu prices. If you're having butter chicken for Rs 500 and you want to be more generous to your waiters, make it Rs 550. But don't fool the consumers,” he said.

“Now, when you are at a restaurant, you are with your friends or people, and you don’t want to fight in front of them, people sometimes, even if they don't like, are forced to pay. And we are against that,” he said.

The matter is likely to continue to be heard in court on November 8 and 9.