x Abu Dhabi, UAEWednesday 24 January 2018

Restaurants defy ban on service charges

Operators say they will remove the illegal service charges - but only when directly requested by the Government.

Restaurants are still adding service charges to bills, despite it being illegal
Restaurants are still adding service charges to bills, despite it being illegal

Hotels and restaurants are continuing to impose service charges on food bills in defiance of a Ministry of Economy ruling that the fees are illegal. Sultan al Mansoori, the Minister of the Economy and chairman of its supreme committee for consumer protection, said in a statement released on Saturday by WAM, the state news agency, that service charges were illegal under a law passed in 2006 that bans unfair price increases.

Restaurant operators who spoke to The National said they would comply with the ruling but only if requested to by the Government. An official at the ministry would not reveal yesterday how it planned to enforce the decision. In his statement, Mr al Mansoori called service charges "illegitimate commercial practices that lead to exploitation and higher prices for the consumer" and said such charges were "in violation of consumer-protection law".

While the law he cited does not single out service charges, it outlines the roles of the consumer-protection department. They include monitoring and controlling prices as well as combating "illegitimate practices that may harm the consumer". "The ministry will be serious in preventing these transgressions which affect the consumer's buying power," Mr al Mansoori said. Service charges, which the statement said ranged between five and 20 per cent, are not approved by any government authority, he said, adding that many consumers had complained to the ministry about the practice.

The minister made his comments at his committee's fourth meeting this year, which took place in Dubai. He said the committee would call on local departments to assist in lifting the fee from bills at all restaurants and cafes as an attempt to "serve consumers and put an end to inexplicable price increases". A study analysing the service charge would also be ready in time for the committee's next meeting, he said.

The charges, added to bills in almost all mid- to high-end establishments, are considered as a replacement for tipping by many customers. However, the money does not always find its way directly to staff. "These restaurants add service charges but don't provide it," said Mita Srinivasan, a Dubai resident. "What is also outrageous is that when we are pleased with service and tip the specific waiter or service staff it doesn't always get to them. So what are they adding a service charge for?"

Praveen KK, the manager of the India Palace restaurant in Abu Dhabi, said the service charge is meant "to provide a high standard of service to our customers and also to train our staff and provide them with staff benefits". Some restaurant operators reacted with surprise to Mr al Mansoori's statement, but said they would comply with a ban if the Government enforced it. "I don't think service charges are wrong if they are used for the growth of the staff," said Mr KK.

He emphasised that menu prices would not change if customers could not be charged for service. A manager at a restaurant in Abu Dhabi Mall, who asked not to be named, said it would be unreasonable to prevent restaurants from charging for service. He felt it should be up to restaurants to decide whether to impose the fees. Omar Hamad, the food and drinks co-ordinator at the Hilton Hotel on the Abu Dhabi Corniche, said its restaurants charged a standard rate of 10 per cent.

"We divide the service charges between the team members. It helps support them, especially given the uneasy job market conditions at present," he said. "Of course if these charges are made illegal, all restaurants will be notified." Mr Hamad did not rule out adjusting prices, saying "we will then follow the market with regard to our rates and charges." A spokeswoman for the Shangri-La in Abu Dhabi said her hotel would follow the ministry's directive but declined to comment on how a ban would impact its restaurant operations.

Nasser Fawzi, director of sales and marketing at the Kempinski Hotel in Dubai, said: "If the Government is declaring something we have to follow it." @Email:kshaheen@thenational.ae