The U.S. Supreme Court has determined that a New York state law barring merchants from adding credit card surcharges is indeed a state regulation on businesses’ free expression. However, whether that law goes so far as to violate the First Amendment is a matter still to be decided.
Under this particular New York law, retailers are barred from imposing a “surcharge” to a credit card purchase. However, the state doesn’t stop merchants from offering a “discount” to customers who pay in cash.
In this lawsuit, Expressions Hair v. Schneiderman, a group of five New York merchants contend that this law violates their First Amendment rights by dictating how they communicate the price difference between a cash purchase and one made with a credit card.
The merchants argued in their petition to SCOTUS that adding a “surcharge” to card purchases is “more effective at communicating the true cost of credit cards and discouraging their use,” than simply offering people a discount for paying in cash.
During oral arguments in this case in January, some justices seemed to wonder if the merchants were making too much of this matter.
“What’s that got to do with speech? I grant you, all business activity takes place through speech,” asked Justice Stephen Breyer. “Unless you want to say whenever a businessman is regulated in what he can do, that violates the First Amendment… because they do it through speech.”
However, in the end, all eight SCOTUS justices agreed on one thing: That the New York law does regulate businesses’ ability to communicate with customers.
Before the matter got to the Supremes, a federal appeals court had ruled that the New York law is merely a type of pricing restriction that does not regulate the merchants’ speech, but their conduct.
Chief Justice Roberts disagrees, writing in his opinion [PDF] that a typical pricing regulation would only have “incidental” effect on a merchant’s ability to communicate that price. He gives the example of a (thankfully fictional) regulation requiring all sandwiches be sold at $10.
“To be sure, in order to actually collect that money, a store would likely have to put ‘$10′ on its menus or have its employees tell customers that price,” notes Roberts, acknowledging that is a form of speech. “But the law’s effect on speech would be only incidental to its primary effect on conduct.”
What New York is requiring is different, explains the Chief Justice.
“The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer,” he writes. “Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices.”
Thus, in Roberts’ view, the merchant is “not free to say ‘$10, with a 3% credit card surcharge’ or ‘$10, plus $0.30 for credit.'”
The bigger question is whether the New York law actually violates the merchants’ First Amendment protections. The justices have decided to leave that matter unresolved. Instead, the Second Circuit Court of Appeals has been tasked with considering the First Amendment implications of the surcharge restriction.
In separate but concurring opinions — there were three opinions in this case, without any of the justices actually dissenting — Justices Breyer and Sonia Sotomayor also suggested that the Second Circuit seek input from New York Court of Appeals (the highest court in the state) before reaching a conclusion.