Service charge row: Why can’t restaurants raise salaries of staff, asks HC

Hotels argued that if customers agree to order food after seeing on the menu that a service charge would be levied, they enter into a private contract with the restaurant.

Service charge row: Why can’t restaurants raise salaries of staff, asks HC
The CCPA had issued guidelines with the aim of preventing unfair trade practices and violation of consumer rights with regard to levying of service charges.

The Delhi High Court on Tuesday observed that the service charge levied by hotels and restaurants on food bills looks like a government levy and questioned why restaurants can’t increase the salaries of their staff if such a charge was meant for them.

The observations came from a Bench led by Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad on the appeal filed by the Central Consumer Protection Authority (CCPA) against the stay granted by a single-judge bench on its guidelines barring restaurants from levying service charge.

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When the lawyer representing the hotel associations told the court that the service charge levied is for their employees, the Bench asked why can’t restaurants concerned about their employees raise prices and salaries instead of levying such a charge. “The common man may perceive service charge as a government levy,” it said.

Hotels argued that if customers agree to order food after seeing on the menu that a service charge would be levied, they enter into a private contract with the restaurant.

The CCPA had issued guidelines with the aim of preventing unfair trade practices and violation of consumer rights with regard to levying of service charges. As per the guidelines, the hotels and restaurants are prohibited from collecting service charge by any other name.

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Granting a stay on the CCPA guidelines on July 20, the single-judge Bench had also said that the information regarding the levy of service charge must be displayed on menu cards so that customers are aware of it. Hotels and restaurants generally levy a service charge of 10% on the food bill.

The Delhi HC will now hear the case on August 18.

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