Diners in the capital were yesterday warned to look out for illegal price rises by restaurants trying to make up for the ban on service charges. Consumers were urged to check their bills and report any establishment they suspected of increasing prices or charging for service. Inspectors added that they had planned ahead by collecting menus from restaurants before the ban was introduced to catch any that put up their prices.
Officials said it was against the law for restaurants to raise prices to make up for the loss of revenue from the ban, which came into effect on February 1 in Abu Dhabi and on Wednesday in Dubai. Mahmoud al Baloushi, the head of consumer protection at Abu Dhabi's Department of Economic Development (DED), said inspectors would conduct spot checks starting next week. "We collected the menus from the restaurants because some of the restaurants can cancel the service charge, but then they raise their prices," said Mr al Baloushi, who said his department had been collecting complaints from consumers.
"We get complaints that there is no service charge but the restaurants increase prices. These restaurants are only raising their prices to make up for the service charge." Restaurants must get permission from the DED and Ministry of Economy before they raise prices and have to provide justification, said Mr al Baloushi. Loss of revenue from service charges was not a valid reason, he added. "If you want to raise your prices you need to refer to the ministry or to us to give the reasons," he said.
Offenders would be referred to the ministry and would face fines. Mr al Baloushi declined to comment on the size of the fines, saying it was up to the ministry to determine them. The ministry said officials from the Dubai DED were conducting regular inspections of restaurants. Their report was expected to be discussed next week, after which a statement would be issued by the ministry. Dr Hashim al Nuaimi, the director general of the ministry's consumer protection department, urged people to report offending restaurants. "We call on all consumers to check their bills and report any restaurant charging service fees," he said.
So far, there had been no evidence of price rises, Mr al Nuaimi said. Omar Bushahab, the chief executive of Dubai DED's commercial compliance and consumer protection division, said a committee that included representatives from each emirate would monitor restaurants and cafes. A minimum fine of Dh5,000 (US$1,300) would be imposed on restaurants that charged for service. It would increase if they continued to defy the law.
In December, Sultan bin Saeed al Mansouri, the Minister of Economy, declared service charges "illegitimate" and a violation of consumer protection law. Restaurants were given a month-long amnesty. "The grace period was until the end of January for them to fix the situation," said Mr al Baloushi. The only exemptions are for restaurants that have tourism licences, usually found in hotels or tourist areas. In those establishments, a fifth of the money must go to staff and the charge should not exceed 10 per cent of the bill.
But restaurant managers acknowledge that the money often goes towards maintenance instead of waiters. Prasad Subramaniyan, a manager at India Palace in Abu Dhabi, said negotiating price rises with the Government was standard practice for the chain. "We normally give them a quotation and we approach them with the percentage of the increase and they have to approve that," he said. Mr Subramaniyan said his restaurant had no plans to raise its prices.
"We have not increased any prices and I don't think in the near future we are looking at a price hike," he said. However, other bosses said the ban could deprive restaurants of a large source of revenue. A man who helps run his family's restaurant in Dubai said: "Whether restaurants increase their prices because of the removal of the service charge or because of other reasons, it's entirely the restaurant's call.
"If it weren't for the service charge, a lot of places would incur losses with each item sold. It makes sense from a financial perspective to increase prices." The man, who did not want to be named, said it was not difficult for restaurants to provide reasons for price hikes once the controversy had subsided. His family's restaurant raised their prices, he admitted. "How can anyone judge the motivation behind a restaurant's price increase? If it isn't done now it will be done later. Blame it on economic conditions, increased rent, expensive produce."
Stephen Pakenham-Walsh, a food service consultant based in the UAE, said restaurants would continue to try and find ways to offset what was "a considerable amount of money long-term", particularly during tough economic times in which restaurants have fewer customers. This meant that some restaurants would try to get the money from staff, through job cuts or lower wages. "Where are they going to get that 10 per cent from to give them that equilibrium that they're used to, whether it's right or wrong?" said Mr Pakenham-Walsh.
However, the costs of putting food workers in the capital through courses before they could be employed could make it less attractive to lay them off, he said. kshaheen@thenational.ae pmenon@thenational.ae
