WASHINGTON–The Supreme Court has ruled unanimously that a New York state law that prohibited merchants from applying a surcharge to customers who paid with a credit card regulated the free speech of merchants.
The ruling was hailed by merchants. As CUToday.info reported here, credit unions had supported the ban on card surcharges. Nine other states also have such surcharge bans in place.
It is also the second time this week the highest court has issued a ruling related to credit cards.
In this case, Expressions Hair Design v. Schneiderman, involved an appeal of an earlier U.S. Court of Appeals for the Second Circuit ruling that the law only regulated conduct and not speech. The Supreme Court, however, ruled that because the law does not restrict how much a merchant or seller can collect from a cash or credit card user, but instead restricts how a seller communicates their prices, it is a regulation of speech instead of conduct.
Under the New York law, a seller is not allowed to list two separate prices for an item, one for cash payers and a higher price for credit card users. A merchant is also not allowed to post a single price with a statement that credit card users will pay a certain percentage or a specific dollar amount higher.
The Supreme Court ruling now remands the case back to the Second Circuit, which will again determine if the law violates the First Amendment, but this time it will be considering the law to regulate speech instead of conduct.
The surcharge ban “is not like a typical price regulation which simply regulates the amount a store can collect,” the Supreme Court said. “The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Instead, it regulates how sellers may communicate their prices. In regulating the communication of prices rather than prices themselves (it) regulates speech.”
The National Retail Federation hailed the Supreme Court ruling, arguing that credit card swipe fees “drive up the price of merchandise by billions of dollars a year.”
“Most retailers have no desire to surcharge their customers for using credit cards,” NRF Senior Vice President and General Counsel Mallory Duncan said in a statement. “That would be the opposite of our industry’s goal of bringing credit card swipe fees under control. But merchants do want to be able to show customers the cost of using a credit card without running afoul of the law.
“While merchants don’t want to surcharge, having the ability to do so would be an important negotiating tool in convincing the card industry to charge reasonable fees instead of continuing to drive up consumer prices through this skyrocketing hidden tax,” Duncan added.
As CUToday.info reported here, earlier this week the U.S. Supreme Court declined to revive a $5.7-billion settlement between certain retailers and Visa Inc. and MasterCard Inc. over allegations that the two card companies had improperly fixed credit-card swipe fees. The move was also praised by the National Retail Federation and many big companies. Analysts suggest this could mean years of additional litigation to arrive at another settlement.