Please respond to CMA consultation to put an end to restaurants' additional "service charges"

born_again

NFH said:

Grumpy_chap said:

NFH said:

Grumpy_chap said:

Plus "transaction fee" £1.50 per order for actually paying

Fees for paying by card have been outlawed 

Except it was not a fee for paying by card.
It was a fee for paying.  Simply for paying.  By any means.

Please read the legislation: "A payee must not charge a payer any fee in respect of payment by means of — a payment instrument which — (i) is a card-based payment instrument".

You missed the rest of the legislation...

the_lunatic_is_in_my_head

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

*I'm not sure about mandatory charges but from what OP has said a mandatory charge will have to be in the price according to the Digital Markets, Competition and Consumers Act 2024? 

NFH

born_again said:

NFH said:

Grumpy_chap said:

NFH said:

Grumpy_chap said:

Plus "transaction fee" £1.50 per order for actually paying

Fees for paying by card have been outlawed 

Except it was not a fee for paying by card.
It was a fee for paying.  Simply for paying.  By any means.

Please read the legislation: "A payee must not charge a payer any fee in respect of payment by means of — a payment instrument which — (i) is a card-based payment instrument".

You missed the rest of the legislation...

Yes, deliberately. I quoted only the relevant part. But linked inline to the legislation so that everyone can read the rest if they wish.

NFH

the_lunatic_is_in_my_head said:

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

You make a good point. Given that restaurants can no longer retain any part of these so-called service charges, it removes one of the incentives for restaurants to operate this system. The primary remaining incentive is a misleading indication of price in order to distort competition.

born_again

NFH said:

the_lunatic_is_in_my_head said:

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

You make a good point. Given that restaurants can no longer retain any part of these so-called service charges, it removes one of the incentives for restaurants to operate this system. The primary remaining incentive is a misleading indication of price in order to distort competition.

Yet I can see the reverse.
They use the service charge to help pay the staff, while still retaining their profit margin. If they remove service charge, then they have to increase prices to keep the status que.

People notice increased prices, when looking at the door & will vote with their feet. While missing the service charge at the end.

NFH

born_again said:

NFH said:

the_lunatic_is_in_my_head said:

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

You make a good point. Given that restaurants can no longer retain any part of these so-called service charges, it removes one of the incentives for restaurants to operate this system. The primary remaining incentive is a misleading indication of price in order to distort competition.

Yet I can see the reverse.
They use the service charge to help pay the staff, while still retaining their profit margin. If they remove service charge, then they have to increase prices to keep the status que.

If a restaurant's so-called service charge is 12.5%, then staff receive 11.1% of the total price of meals. It's a form of profit related pay. There's no reason why this 11.1% profit related pay couldn't continue if the menu shows the total price of each product.

born_again said:

People notice increased prices, when looking at the door & will vote with their feet. While missing the service charge at the end.

Exactly. That's why restaurants want to reduce their prices below the prices that diners will ultimately be billed. It's a misleading indication of price, whose effect is to distort competition.

DullGreyGuy

NFH said:

born_again said:

NFH said:

the_lunatic_is_in_my_head said:

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

You make a good point. Given that restaurants can no longer retain any part of these so-called service charges, it removes one of the incentives for restaurants to operate this system. The primary remaining incentive is a misleading indication of price in order to distort competition.

Yet I can see the reverse.
They use the service charge to help pay the staff, while still retaining their profit margin. If they remove service charge, then they have to increase prices to keep the status que.

If a restaurant's so-called service charge is 12.5%, then staff receive 11.1% of the total price of meals. It's a form of profit related pay. There's no reason why this 11.1% profit related pay couldn't continue if the menu shows the total price of each product.

Well other than the fact that discretionary service charges are not subject to VAT so you'd need to increase the prices by 15% to maintain the staff getting the same amount of cash and HMRC would also be getting an extra slice which it currently isnt entitled to. 

NFH

DullGreyGuy said:

NFH said:

born_again said:

NFH said:

the_lunatic_is_in_my_head said:

There was a new law that came into force in Oct 2024, guidance here:

https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

which means 100% of all tips, included voluntary* service charges, must be given to workers, I do wonder if this new piece of law will, over time, change how often these charges are seen in restaurants.

You make a good point. Given that restaurants can no longer retain any part of these so-called service charges, it removes one of the incentives for restaurants to operate this system. The primary remaining incentive is a misleading indication of price in order to distort competition.

Yet I can see the reverse.
They use the service charge to help pay the staff, while still retaining their profit margin. If they remove service charge, then they have to increase prices to keep the status que.

If a restaurant's so-called service charge is 12.5%, then staff receive 11.1% of the total price of meals. It's a form of profit related pay. There's no reason why this 11.1% profit related pay couldn't continue if the menu shows the total price of each product.

Well other than the fact that discretionary service charges are not subject to VAT so you'd need to increase the prices by 15% to maintain the staff getting the same amount of cash and HMRC would also be getting an extra slice which it currently isnt entitled to. 

Yes, that's how it works in every other European country, although VAT rates are sometimes lower on restaurants. As well as facilitating a misleading indication of price, these so-called service charges in the UK are a tax dodge.

Ectophile

Grumpy_chap said:

NFH said:

Grumpy_chap said:

NFH said:

Grumpy_chap said:

Plus "transaction fee" £1.50 per order for actually paying

Fees for paying by card have been outlawed 

Except it was not a fee for paying by card.
It was a fee for paying.  Simply for paying.  By any means.

Please read the legislation: "A payee must not charge a payer any fee in respect of payment by means of — a payment instrument which — (i) is a card-based payment instrument".

Hmmm - it seems as though that excerpt prohibits this type of charge.
Odd that this type of charge is widespread when buying tickets and nothing we can do about it.

Because it's a fee that everybody has to pay, regardless of what payment method they use.  The regulations are to prehibit surcharges for paying by card.

Perhaps you would argue that it's not permissable for a seller to charge post & packing if you pay by card, because that's a fee?