The Supreme Court Holds that NY Credit Card Surcharge Law Regulates Speech
In Expressions Hair Design v Schneiderman, the Supreme Court today held that New York General Business Law § 518, which bans the imposition of credit card surcharges on customers, though permits retailers to offer a discount to those who pay in cash, regulates retailers' speech, and remands the case to the Second Circuit to decide whether the statute violates the First Amendment. General Business Law § 518 provides that that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”
Five New York businesses challenged the statute as a violation of their First Amendment rights by impermissibly regulating how they communicate their prices to customers. After the United States District Court for the Southern District of New York found in the retailers’ favor, the United States Court of Appeals for the Second Circuit vacated the District Court judgment, holding that section 518 regulated conduct, not commercial speech, and thus did not violate the First Amendment. Particularly, the Second Circuit differentiated between single sticker pricing regimes and other pricing regimes, and held that the former did not violate the First Amendment because all the law did was require the retailers to charge the same price for credit card and cash sales. The Court held, however, that whether section 518 prohibited all other kinds of pricing regimes was far from clear, and turned on an unsettled question of state law. Thus, the Second Circuit declined to address the First Amendment issue beyond the context of single sticker pricing regimes. The Second Circuit’s opinion is here.
In an 8-0 opinion, the Supreme Court disagreed, and held that section 518’s bar on credit card surcharges does, in fact regulate commercial speech. The Court began by noting that it decision is limited to the actual pricing scheme that the retailers seek to use: posting a cash price for goods or services with a notation that an additional percentage surcharge will be added to the price if the customer uses a credit card to pay. Deferring to the interpretation of the statute used by the Second Circuit as not “clearly wrong,” the Court agreed that section 518’s bar on credit card surcharges prohibits the retailer’s preferred pricing scheme. That prohibition, the Court held, “tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. 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.” (Opn, at 9). By regulating the communication of prices, instead of the prices themselves, the Supreme Court held that section 518 regulates commercial speech.
The Court, therefore, remanded the case to the Second Circuit to address the question that it did not previously, whether Section 518’s regulation of commercial speech survived First Amendment scrutiny. Although the Court’s consideration of the question was limited to the single-sticker pricing scheme set forth by the retailers, the Court noted that the Second Circuit was free to consider the constitutionality of other pricing schemes should it decide to do so. This offer could be significant and could require certification of the question of statutory interpretation to the New York Court of Appeals to resolve the “unsettled question of state law” noted in the Second Circuit’s opinion below.
The Supreme Court’s opinion can be found here.