"the fee is explicitly not a tip and that it goes to paying the full kitchen staff benefits". Why not a fee for every expense of the business then? Will there be a hidden line item fee for linens, utilities, produce delivery, and so on? Insane. Dishonest. Bait and switch.
Also, worth noting the irony trying to post this comment - as a non-registered user it appears I'm able to post, but upon submitting I'm required to create a profile. More drip tactics- get users/customers further invested, further down the conversion funnel then present them with the unexpected additional requirements.
I'm curious if anyone has an argument against total pricing laws. Do any libertarians in the EU think there are real downsides? I can't steelman any good arguments off the top of my head. Total pricing feels less like overregulation and more like accurate representation (I assume it's already illegal to post fallacious prices, and drip pricing is just a loophole.)
The counterargument would be shipping. You decide to buy an item, you're about to check out, when suddenly the vendor tells you there's an additional fee for the item to get to you. Yet there's some evidence that "free shipping" isn't actually the most consumer friendly or environmentally friendly model.
So it does make sense to allow fees that can't be simply incorporated into the price.
You might want rules on how it's communicated (average extra? Maximum extra? Algorithmic best guess?) but if a part of the price is genuinely variable it can be reasonable to make that a well described variable fee rather than forcing all companies to do free shipping.
Maybe non-total prices are required to have an asterisk or a "+" or something, with a short description of the additional fees (and maybe an average amount paid by customers for those fees) somewhere nearby.
This provides an incentive for total pricing where possible, as customers may be willing to pay slightly higher marked prices that are guaranteed to be complete.
I second this. Must list all possible secondary charges. Should even apply to shipping. The problem of shipping (cost AND time) being unknown until i go through their funnel is the whole reason I don't buy online from anyone but Amazon.
Shipping is a good point. But I do think there is something categorically different about shipping that would allow it be treated differently. That is, what is annoying about drip pricing is that "cleaning fees" and taxes are always applied equally. They are knowns. Shipping being extra feels genuine because it is a genuine unknown.
I guess in this sense trying to regulate pricing and then allowing leniency for unknowns could results in companies moving towards contingent pricing. Functional monopolies like ticketmaster could try to justify some unsteady service fees that allowed for an even more annoying form of drip pricing.
I don't know if this has ever been a problem in Europe. My guess is only fringe businesses or monopolies could/would exploit such loopholes. And your point about algorithms as an attempt to mitigate this still stands.
The point in cleaning fees on Airbnb and similar platforms is that cleaning costs are per stay, not per night. Someone staying a week should not be paying to have the property cleaned 7 times when they are not receiving that service.
Fair point that embarrassingly I didn't really think about.
I think the cleanest way to present the pricing would be in a simplified equation. Like, as in grade school algebra. It would be great if airbnb presented their numbers as 209 (cleaning fee, service fee, tax) + 144 per night (cost per night + tax.)
So I think the legislation would be that consumer facing products must be presented with their full simplified equation up front.
I do think the downsides to this start to become more obvious. Like, a car for example. Do you allow posting of base model? This incentivizes building cars no one wants so you can post lower sticker prices. (although perhaps incentivized without this legislation?) Do you build an algorithm, like, average sale price?
Anyway, as the regulations become more complex their inherent cost becomes higher, and the likelihood of unintended incentives increases. So I think there's something here, but it also feels like you'd need a lot of smart people thinking about it for a long time to do it well, and probably the result would disappoint everyone.
The government imposes many of these fees, not the companies. The companies want to call them out separately so that people don't accuse them of charging exorbitant base prices.
Ironically, those complaining about the high final prices tend to vote for the existence of the line-items, and if they next succeed in voting for "total pricing", they'll be making populist rants against the size of those prices, blaming the vendors rather than themselves.
What fees are the government imposing other than taxes?
Cleaning and service fees on Airbnb, "employee retention" 2% surcharges, supply chain fees, and mandatory fees at restaurants, resort fees and "urban charges" at hotels--all of these things are imposed by the business to obfuscate the real price they are charging consumers. None of these are government-imposed.
Companies should simply raise their menu / sticker prices to reflect the real costs to consumers rather than tacking them on at the end of a purchase process; society loses when information about prices is more costly for consumers to obtain.
>A pernicious aspect of drip pricing is that, as it becomes more common, businesses that do not do it will feel pressure to follow suit; competitors engaged in drip pricing will have apparently lower prices when would-be customers are shopping around. If I see an entrée for $25 at one restaurant and $30 at another, but the $25 restaurant has a hidden 20% service charge, the dinner is going to cost the same, but I won’t necessarily know that until I’ve already eaten the meal and see the line item added to my bill. The honest restaurant is at a distinct competitive disadvantage despite providing a superior customer experience.
I definitely had that essay in mind here: classic multipolar trap situation. Extremely difficult to coordinate the collective action needed to escape the trap.
When and if I se such an underhanded price hike on my bill, first I will refuse to pay it. Unless it is advertised in no small print on the menu where I ordered from, it is not my =responsibility as a first time patron if this place to know I will be surcharged 20%. It is preposterous. Second and more importantly, that will be the absolute last time I am patronizing such place. I'd rather spend my money at merchants who are more honest.
In Europe there are laws stating that "total pricing" must be posted for ALL items, and that includes 15% VAT !! So we need to copy these smart europeans and write laws in the USA that do the same thing ...
By the way, Amazon is doing exactly this. Price at checkout goes up on many items.
Their old 2-day delivery time now a week for me. They won't ship it for 5 days, I think in the hope they can batch it with other orders I make. And it happens, I get 3-4 orders in one box. I'm not against this except there's no faster shipping option and sometimes I'm literally idle waiting days for parts to arrive and would be happy to pay more for fast shipping even being a prime member.
Well said Michael. This is insanity and once they start it will never stop. Just prior to reading your post I was booking a hotel room and ran into the same issue with bogus "Destination Fees" and other hidden charges and taxes which added almost $100 per day to the advertised daily rate. This drip pricing infuriates me to no end and unfortunately will only spread throughout other industries. We are now even made to feel bad or compelled to tip on a pick up order. Our society is being programmed to accept this as normal. The light at the end of the tunnel is a train moving at warp speed!!!
I definitely believe that this needs to be stopped. It's terrible and I would not eat at a restaurant again that did that. It's as bad as the automatic tip for large parties. I think we need to eliminate all fees and tips entirely. Give me the bottom line up front. When I was in Australia I was amazed that tipping was not a thing because waiters and waitresses are paid a living wage and do not need tips. I think the feds need to legislate that "fees" that are not disclosed up front before receiving the services are mandatory. And tipping should be eliminated.
We don't eat out. The consistency is no longer there, it's almost always a disappointment and the underpaid, often exploited staff doesn't help. It's clear our culture's reliance on lazy capitalism is shooting us in the foot.
It really boils down to, "We can't charge you enough to make money while still paying our employees a fair wage. Our margins are razor thin, the restaurant industry is dying from lack of people willing to do the work, so we have to make it up somehow."
Look at any chain pizza restaurant. $5.99 delivery fee? That doesn't go to the driver, it goes straight to corporate. If you don't tip, the driver isn't making money, next thing you know, no drivers. Corporate doesn't care, they'll send it to DoorDash and only make $1 per delivery. Saves them from paying labor costs, so they come out ahead either way.
At the end of the day the people at the top are going to get paid and the people you interact with are getting screwed. Refuse to pay service fees and tip your waiters/waitresses/bartenders/drivers/etc.
I googled "Fair wage and wellness fee" and I'm guessing you were eating at Santo?
Based on the wording below, I think it's clear that the 20% fee is supposed to replace a tip (unless you want to add more). I don't know about CO, but in MN, they have to be explicit that these tip-replacement surcharges are not a tip because state laws require each tip to be passed 100% to the server, and so can't be shared with the cook staff.
"It is our mission to ensure fair wages for all members of our team. Therefore, a 20% Fair Wage and Wellness Fee is added to guest checks. This is not a tip. It is a surcharge to our bill that allows us to provide essential wages and benefits, such as mental health counseling, insurance, paid sick leave, and more to our staff through a wage pooling system. All fees, presents, tips, and gratuities given by a patron of our business to an employee thereof are not the property of said employee but belong to the employer to be distributed to the staff in full. Management and owners do not participate or share in this fee in any way. If you feel compelled to tip above and beyond this fee, it is greatly appreciated, but never expected. "
I'll just say that it was not presented as a tip replacement for the waitress; it was framed as a way to pay the KITCHEN staff, not the front-of-house staff.
I really don't buy this article's description of how consumers feel about drip pricing, as my immediate reaction would be to never go back to such a restaurant. The mentioned industries (airlines, telcom, ticketmaster, car rentals) are filled with monopolies. That's what makes drip pricing work, not some quirk of consumer psychology.
This won't work for restaurants because people typically have plenty of choices and repeat business is important. I would never frequent a place that does this, and probably would refuse to pay in the first place.
The only time I've seen something like this is a local restaurant that automatically includes a 20% tip (for everyone, not just big parties). The service was great and I usually tip around that anyhow so I thought it was fine.
"the fee is explicitly not a tip and that it goes to paying the full kitchen staff benefits". Why not a fee for every expense of the business then? Will there be a hidden line item fee for linens, utilities, produce delivery, and so on? Insane. Dishonest. Bait and switch.
Also, worth noting the irony trying to post this comment - as a non-registered user it appears I'm able to post, but upon submitting I'm required to create a profile. More drip tactics- get users/customers further invested, further down the conversion funnel then present them with the unexpected additional requirements.
I'm curious if anyone has an argument against total pricing laws. Do any libertarians in the EU think there are real downsides? I can't steelman any good arguments off the top of my head. Total pricing feels less like overregulation and more like accurate representation (I assume it's already illegal to post fallacious prices, and drip pricing is just a loophole.)
The counterargument would be shipping. You decide to buy an item, you're about to check out, when suddenly the vendor tells you there's an additional fee for the item to get to you. Yet there's some evidence that "free shipping" isn't actually the most consumer friendly or environmentally friendly model.
So it does make sense to allow fees that can't be simply incorporated into the price.
You might want rules on how it's communicated (average extra? Maximum extra? Algorithmic best guess?) but if a part of the price is genuinely variable it can be reasonable to make that a well described variable fee rather than forcing all companies to do free shipping.
Maybe non-total prices are required to have an asterisk or a "+" or something, with a short description of the additional fees (and maybe an average amount paid by customers for those fees) somewhere nearby.
This provides an incentive for total pricing where possible, as customers may be willing to pay slightly higher marked prices that are guaranteed to be complete.
I second this. Must list all possible secondary charges. Should even apply to shipping. The problem of shipping (cost AND time) being unknown until i go through their funnel is the whole reason I don't buy online from anyone but Amazon.
Shipping is a good point. But I do think there is something categorically different about shipping that would allow it be treated differently. That is, what is annoying about drip pricing is that "cleaning fees" and taxes are always applied equally. They are knowns. Shipping being extra feels genuine because it is a genuine unknown.
I guess in this sense trying to regulate pricing and then allowing leniency for unknowns could results in companies moving towards contingent pricing. Functional monopolies like ticketmaster could try to justify some unsteady service fees that allowed for an even more annoying form of drip pricing.
I don't know if this has ever been a problem in Europe. My guess is only fringe businesses or monopolies could/would exploit such loopholes. And your point about algorithms as an attempt to mitigate this still stands.
The point in cleaning fees on Airbnb and similar platforms is that cleaning costs are per stay, not per night. Someone staying a week should not be paying to have the property cleaned 7 times when they are not receiving that service.
Fair point that embarrassingly I didn't really think about.
I think the cleanest way to present the pricing would be in a simplified equation. Like, as in grade school algebra. It would be great if airbnb presented their numbers as 209 (cleaning fee, service fee, tax) + 144 per night (cost per night + tax.)
So I think the legislation would be that consumer facing products must be presented with their full simplified equation up front.
I do think the downsides to this start to become more obvious. Like, a car for example. Do you allow posting of base model? This incentivizes building cars no one wants so you can post lower sticker prices. (although perhaps incentivized without this legislation?) Do you build an algorithm, like, average sale price?
Anyway, as the regulations become more complex their inherent cost becomes higher, and the likelihood of unintended incentives increases. So I think there's something here, but it also feels like you'd need a lot of smart people thinking about it for a long time to do it well, and probably the result would disappoint everyone.
The government imposes many of these fees, not the companies. The companies want to call them out separately so that people don't accuse them of charging exorbitant base prices.
Ironically, those complaining about the high final prices tend to vote for the existence of the line-items, and if they next succeed in voting for "total pricing", they'll be making populist rants against the size of those prices, blaming the vendors rather than themselves.
What fees are the government imposing other than taxes?
Cleaning and service fees on Airbnb, "employee retention" 2% surcharges, supply chain fees, and mandatory fees at restaurants, resort fees and "urban charges" at hotels--all of these things are imposed by the business to obfuscate the real price they are charging consumers. None of these are government-imposed.
Companies should simply raise their menu / sticker prices to reflect the real costs to consumers rather than tacking them on at the end of a purchase process; society loses when information about prices is more costly for consumers to obtain.
>A pernicious aspect of drip pricing is that, as it becomes more common, businesses that do not do it will feel pressure to follow suit; competitors engaged in drip pricing will have apparently lower prices when would-be customers are shopping around. If I see an entrée for $25 at one restaurant and $30 at another, but the $25 restaurant has a hidden 20% service charge, the dinner is going to cost the same, but I won’t necessarily know that until I’ve already eaten the meal and see the line item added to my bill. The honest restaurant is at a distinct competitive disadvantage despite providing a superior customer experience.
https://slatestarcodex.com/2014/07/30/meditations-on-moloch/
I definitely had that essay in mind here: classic multipolar trap situation. Extremely difficult to coordinate the collective action needed to escape the trap.
When and if I se such an underhanded price hike on my bill, first I will refuse to pay it. Unless it is advertised in no small print on the menu where I ordered from, it is not my =responsibility as a first time patron if this place to know I will be surcharged 20%. It is preposterous. Second and more importantly, that will be the absolute last time I am patronizing such place. I'd rather spend my money at merchants who are more honest.
In Europe there are laws stating that "total pricing" must be posted for ALL items, and that includes 15% VAT !! So we need to copy these smart europeans and write laws in the USA that do the same thing ...
Bait & switch pricing is illegal.
Only in America is this ridiculous nature standardised.
By the way, Amazon is doing exactly this. Price at checkout goes up on many items.
Their old 2-day delivery time now a week for me. They won't ship it for 5 days, I think in the hope they can batch it with other orders I make. And it happens, I get 3-4 orders in one box. I'm not against this except there's no faster shipping option and sometimes I'm literally idle waiting days for parts to arrive and would be happy to pay more for fast shipping even being a prime member.
Don't go back to that restaurant. Tell management you won't be back.
And warn others away. Only other option is to bend over and take it.
Nope, that BS better be in big letters on the menu, or a big sign on the front door.
Well said Michael. This is insanity and once they start it will never stop. Just prior to reading your post I was booking a hotel room and ran into the same issue with bogus "Destination Fees" and other hidden charges and taxes which added almost $100 per day to the advertised daily rate. This drip pricing infuriates me to no end and unfortunately will only spread throughout other industries. We are now even made to feel bad or compelled to tip on a pick up order. Our society is being programmed to accept this as normal. The light at the end of the tunnel is a train moving at warp speed!!!
I definitely believe that this needs to be stopped. It's terrible and I would not eat at a restaurant again that did that. It's as bad as the automatic tip for large parties. I think we need to eliminate all fees and tips entirely. Give me the bottom line up front. When I was in Australia I was amazed that tipping was not a thing because waiters and waitresses are paid a living wage and do not need tips. I think the feds need to legislate that "fees" that are not disclosed up front before receiving the services are mandatory. And tipping should be eliminated.
We don't eat out. The consistency is no longer there, it's almost always a disappointment and the underpaid, often exploited staff doesn't help. It's clear our culture's reliance on lazy capitalism is shooting us in the foot.
It really boils down to, "We can't charge you enough to make money while still paying our employees a fair wage. Our margins are razor thin, the restaurant industry is dying from lack of people willing to do the work, so we have to make it up somehow."
Look at any chain pizza restaurant. $5.99 delivery fee? That doesn't go to the driver, it goes straight to corporate. If you don't tip, the driver isn't making money, next thing you know, no drivers. Corporate doesn't care, they'll send it to DoorDash and only make $1 per delivery. Saves them from paying labor costs, so they come out ahead either way.
At the end of the day the people at the top are going to get paid and the people you interact with are getting screwed. Refuse to pay service fees and tip your waiters/waitresses/bartenders/drivers/etc.
I googled "Fair wage and wellness fee" and I'm guessing you were eating at Santo?
Based on the wording below, I think it's clear that the 20% fee is supposed to replace a tip (unless you want to add more). I don't know about CO, but in MN, they have to be explicit that these tip-replacement surcharges are not a tip because state laws require each tip to be passed 100% to the server, and so can't be shared with the cook staff.
See also: https://boulderreportinglab.org/2022/07/13/fair-wage-fees-are-replacing-traditional-tips-at-some-boulder-restaurants-is-it-a-more-equitable-payment-model-for-restaurant-workers/
"It is our mission to ensure fair wages for all members of our team. Therefore, a 20% Fair Wage and Wellness Fee is added to guest checks. This is not a tip. It is a surcharge to our bill that allows us to provide essential wages and benefits, such as mental health counseling, insurance, paid sick leave, and more to our staff through a wage pooling system. All fees, presents, tips, and gratuities given by a patron of our business to an employee thereof are not the property of said employee but belong to the employer to be distributed to the staff in full. Management and owners do not participate or share in this fee in any way. If you feel compelled to tip above and beyond this fee, it is greatly appreciated, but never expected. "
I'll just say that it was not presented as a tip replacement for the waitress; it was framed as a way to pay the KITCHEN staff, not the front-of-house staff.
I really don't buy this article's description of how consumers feel about drip pricing, as my immediate reaction would be to never go back to such a restaurant. The mentioned industries (airlines, telcom, ticketmaster, car rentals) are filled with monopolies. That's what makes drip pricing work, not some quirk of consumer psychology.
This won't work for restaurants because people typically have plenty of choices and repeat business is important. I would never frequent a place that does this, and probably would refuse to pay in the first place.
The only time I've seen something like this is a local restaurant that automatically includes a 20% tip (for everyone, not just big parties). The service was great and I usually tip around that anyhow so I thought it was fine.