Are COVID-19 surcharges legal? Chicago business faces criticism for new fee

CHICAGO (WLS) — As different businesses begin to reopen across Illinois, customers could see an extra charge on their bill.

Some businesses are calling it a COVID-19 surcharge – and it’s possible that you could see it on your next bill or receipt. We’re told it’s a way for businesses to try to bounce back from the effects of COVID-19 – but is it legal?

“We’re starting to see a number of businesses adding what they’re calling COVID surcharges on customers bills,” said Ted Rossman, an industry analyst at CreditCards.com. “These are intended to offset the increased cost of doing business and I think in some cases, to compensate businesses for some of the money they lost during the shutdowns.”

Harold’s Chicken Shack on Broadway faced criticism after adding a 26% COVID-19 charge earlier this month. The manager said that since they reopened, the prices for chicken, fries and other ingredients have gone up tremendously.

“So because of that increase, we had no choice but to pass that on to our customers,” manager Jaquelyn Santana said. “Unfortunately, it created a lot of backlash on social media.”

But it’s not just the restaurant industry adding these fees, Rossman said.

CHATMAN: For example, there are dentists offices that are adding $10 to $15 a visit for protective equipment. I saw an example of a hair salon that’s adding a $3 charge per visit for cleaning supplies.

ROSSMAN: I think the surcharge feels very punitive. It really calls out a specific line item that makes people feel bad and they can’t help but notice it. I think the better option is for businesses to raise prices if they need to.

CHATMAN: But Ted, if they raise the prices and don’t itemize it, won’t people feel they’re going about it in a slick way?

ROSSMAN: I think it is all about the message. For example, I’ve seen some signs at the grocery store that say, “Food prices have gone up considerably. Our suppliers have raised our prices. That’s why you’re seeing higher prices.”

Meanwhile, the manager at Harold’s said they have since reduced their surcharge to 17%, and they hope customers will bear with them.

“We appreciate the support. We appreciate the understanding,” Santana said. “We know it’s hard on everybody and it’s hard on all small businesses.”

So, the big question is: can businesses legally add a COVID-19 surcharge? Both the city of Chicago and the Illinois Attorney General said reasonable price increases are acceptable, as long as it’s properly disclosed and doesn’t come off as a tax.

Full Statement from the City of Chicago:
A reasonable increase in prices due to COVID-19 can be acceptable. However, failure to disclose a price increase prior to purchase, or claiming that a charge added by the business is a tax, could be considered deceptive practices and would not be legal.

Full statement from the Illinois Attorney General’s Office:
Generally, if a surcharge is added due to increased costs, the business is clear and accurate about the surcharge- i.e. not labeling it as a tax and ensuring it accurately reflects any increased costs- and clearly discloses the surcharge before the transaction, then it would be okay.