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Posted at: May 14, 2017, 2:23 AM; last updated: May 14, 2017, 2:23 AM (IST)CONSUMER BEWARE!

Strictly at customer’s discretion

Strictly at customer’s discretion
This is Not fair: If a hotel or a restaurant considers that entry of a customer to a restaurant amounts to his or her implied consent to pay a fixed amount of service charge, it is not correct. iStock

Pushpa Girimaji

Last week I took my family to a restaurant to celebrate my daughter’s birthday. I was aghast to see a board at the entrance that mentioned that the restaurant levies a service charge of 10 per cent and only those willing to pay it can enter. Since we had travelled a long distance to go to this restaurant and there was no other dining place nearby, I could not walk away. The manager of the restaurant clearly said there was no option but to pay. So we did pay the service charge of 10 per cent added to the bill.  May be on our own, we would have paid it, but the fact that it was thrust on us, left a bad taste in the mouth. 


I am told that the Department of Consumer Affairs, Government of India, has issued some guidelines on the service charge being levied by restaurants. Is this true?  What does it say?

Yes, on April 21, the union ministry of consumer affairs issued “Guidelines on fair trade practices” pertaining to levying of service charge by restaurants and hotels and one of the points made in the guideline refers to  a case similar to yours. Saying that, it had come to the notice of the department that in some cases, hotels/restaurants were restraining customers from entering the premises if they were not in agreement with the payment of mandatory service charge, the department said this was a restrictive traded practice as defined under the Consumer Protection Act.  

Pointed the guideline: The point of time when a customer decides to give a tip is not when he/ she enters the restaurant or places the order. It is only after completing the meal that the customer is in a position to assess the quality of service and decide whether or not to pay a tip and how much to pay. Therefore, if a hotel or a restaurant considers that entry of a customer to a restaurant amounts to his or her implied consent to pay a fixed amount of service charge, it is not correct.  

“Further, any restriction of entry based on this amounts to a trade practice which imposes an unjustified cost on the customer by way of forcing him or her to pay service charge as a condition precedent to placing the order of food and beverages, and as such this falls under restrictive trade practice as defined under Section 2 (1) (nn) of the Act.” (The Consumer Protection Act)

Saying that, the conversion of a voluntary payment of a tip or a gratuity into a mandatory service charge or levying such a charge without the express consent of the customer amounted to an unfair trade practice. The guideline said consumers have a right to seek redress under the Consumer Protection Act against such unfair as well as restrictive trade practices. 

 The guideline also  directed  the hospitality industry to ensure that the  bill presented to the customer should clearly state that service charge is voluntary and the service charge column of the bill be left blank for the customer to fill up before making the payment. 

So what action can consumers take in such cases?

A restaurant that puts restrictions on the entry of consumers  and makes it conditional on their agreeing to paying a service charge, irrespective of the quality of service, is actually  challenging the rights of consumers. The best answer in such cases is consumer boycott of such restaurants and hotels. I would suggest that consumers do not patronise restaurants that impose such conditions on them. You can also file complaints before the consumer courts against such restaurants for restrictive and unfair trade practices.  

I must also mention here that the hospitality industry claims that the service charge is collected by them to distribute it equally among the serving and the non-serving staff. But till now, we have not seen any evidence of it. Do the hotels give their staff an account of how much they collect and do they even give the entire amount to them? It’s time the labour unions took up this issue. 

In fact in the United Kingdom, the  movement against service charge gained currency following expose’ by a labour union that the eateries were pocketing service charge collected in the name of the staff either fully or partly.  But in India so far, we have not heard anything on the issue from the workers.

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