Summary of this article
Delhi HC questions restaurants charging above MRP.
Court says it burdens consumers unfairly.
Verdict will shape billing practices.
The Delhi High Court recently reprimanded restaurants for charging above the Maximum Retail Price (MRP) of packaged goods and then levying a service charge on it, according to a recent NDTV report. The bench took the example of packaged water, noting that while a bottle with an MRP of Rs 20 is retailed for Rs 100 in restaurants. The judges inquired about the explanation for the exorbitant pricing, given that an additional service charge is also included in the bill.
Double Burden On Customers
Chief Justice of the Delhi High Court, DK Upadhyaya, stated that this practice imposes a "double whammy" on consumers. Restaurants argue on one side that they charge more because they offer ambiance and a dining experience. They also charge a service charge but expect the consumer to pay for it without any explicit indication of what exactly each part comprises. It was hard to comprehend why the extra amount charged above MRP could not be treated as the service charge itself, the bench opined.
Background Of The Dispute
The matter follows a one-judge bench that previously held that service charges at restaurants are not allowed to be compulsory. That ruling had held that the charges should, instead, be voluntary, as they would otherwise constitute a "camouflaged and coercive" means of extorting money from consumers. Restaurant associations, however, objected to this ruling because the service charge is an accepted industry practice and assists in paying employees' wages and overheads.
What The Court Wants Clarified
During the hearing, the High Court questioned the restaurant associations on how a charge over MRP is permissible under the current system. It pointed out that the MRP system was designed to safeguard consumers from indiscriminate pricing of packaged commodities. The judges questioned why restaurants could not be more transparent in billing by including any extra amount as part of the service charge, instead of dividing it in a manner that is misleading for customers.
The Consumer's Viewpoint
From the customer's perspective, it is straightforward: when one notices an MRP on a product, they anticipate paying that amount. If restaurants wish to charge for the "experience" of eating out more, they can articulate it clearly rather than price basic items high and then slap on another service charge. The court also suggested that in the absence of transparency, customers are shelling out more without being clearly aware of what they are paying for.
Case Still Under Review
The National Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI) are carrying forward their appeals against the single-judge judgment. The High Court has not yet delivered a final judgment but has indicated its displeasure. The verdict on this case will determine if restaurants can continue billing in their current method or will have to alter the way they impose service charges.
