Source: Indian Express

Why in News?

Recently, the High Court of Delhi in the matter of National Restaurant Association of India and Anr. v. Commissioner of Police and Anr., passed an interim order directing the members of the Federation of Hotel and Restaurant Association of India (FHRAI) to use the term staff contribution in place of ‘service charge’ and cap it at 10% of the total bill amount.

Background

• Before the Delhi High Court, pleas were moved by the National Restaurant Association of India (NRAI) and by FHRAI, challenging the 4^th July 2022, guidelines issued by the Central Consumer Protection Authority (CCPA) .
• As per the 4^th July 2022, guidelines, service charge shall not be collected from consumers by any other name and is optional and voluntary. Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount. Moreover, it cannot be added to the bill automatically, without informing the consumers. The guidelines were issued by the CCPA under Section 18(2)(1) of the Consumer Protection Act, 2019.
• Before the High Court, FHRAI submitted that its members were ready to change the terminology.
• However, the NRAI refused as 80% of NRAI members impose service charge on its customers as a mandatory condition and that its members did not agree to the changed terminology.
• The matter will be heard further but in the meantime the court directed members of the FHRAI to use the term staff contribution and to cap it at 10% of the total bill amount.

Court’s Observations

• The Court directed that the members of FHRAI shall use the terminology staff contribution for the amount of service charge that they are currently charging. The same shall not be more than 10% of the total bill amount, excluding GST.
• Justice Pratibha Singh stated that around 3,300 FHRAI-associated hotels and restaurants will now specify on their menus in bold that tips need not be given after staff contribution is paid.

Legal Provisions

Section 18 of the Consumer Protection Act, 2019

Section 18 of this Act deals with the powers and functions of the CCPA. It states that -

(1) The Central Authority shall-

(a) protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers rights under this Act;

(b) prevent unfair trade practices and ensure that no person engages himself in unfair trade practices;

(c) ensure that no false or misleading advertisement is made of any goods or services which contravenes the provisions of this Act or the rules or regulations made thereunder;

(d) ensure that no person takes part in the publication of any advertisement which is false or misleading.

(2) Without prejudice to the generality of the provisions contained in sub-section (1), the Central Authority may, for any of the purposes aforesaid--

(a) inquire or cause an inquiry or investigation to be made into violations of consumer rights or unfair trade practices, either suo motu or on a complaint received or on the directions from the Central Government;

(b) file complaints before the District Commission, the State Commission or the National Commission, as the case may be, under this Act;

(c) intervene in any proceedings before the District Commission or the State Commission or the National Commission, as the case may be, in respect of any allegation of violation of consumer rights or unfair trade practices;

(d) review the matters relating to, and the factors inhibiting enjoyment of, consumer rights, including safeguards provided for the protection of consumers under any other law for the time being in force and recommend appropriate remedial measures for their effective implementation;

(e) recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights;

(f) undertake and promote research in the field of consumer rights;

(g) spread and promote awareness on consumer rights;

(h) encourage non-Governmental organizations and other institutions working in the field of consumer rights to co-operate and work with consumer protection agencies;

(i) mandate the use of unique and universal goods identifiers in such goods, as may be necessary, to prevent unfair trade practices and to protect consumers' interest;

(j) issue safety notices to alert consumers against dangerous or hazardous or unsafe goods or services;

(k) advise the Ministries and Departments of the Central and State Governments on consumer welfare measures;

(l) issue necessary guidelines to prevent unfair trade practices and protect consumers' interest.