On September 29, 2016, the U.S. Supreme Court agreed to review a decision that addressed whether state credit card surcharge restrictions are constitutional. The decision the Court will review is Expressions Hair Design v. Schneiderman, a challenge to New York's law.
The petitioners in the case filed a petition for certiorari in May of this year. In the petition, they argued, among other things, that the circuits were split on this issue, with the Second and Fifth Circuit upholding the laws in New York and Texas, respectively, and the Eleventh Circuit striking down Florida's law on First Amendment grounds.
New York's anti-surcharge law—like anti-surcharge laws in many states—prohibits most merchants from imposing a surcharge on customers who elect to pay with a credit card, but allow merchants to give discounts to consumers who pay with cash. Specifically, the law states 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." N.Y. Gen. Bus. Law § 518. Under the law, however, a merchant is free to offer a cash discount to consumers who pay with cash.
In June 2013, five merchants challenged the law in the U.S. District Court for the Southern District of New York. Among other grounds (that won't be reviewed by the Supreme Court), the merchants argued that the anti-surcharge law violated the First Amendment because the law regulated identical conduct differently depending on how the merchant described it. According to the merchants, the law prohibits them from labeling a price differential as a surcharge, but allowed them to inflate the sticker price and announce a "discount" from the price for cash sales. The District Court agreed with the merchants that the law created a "virtually incomprehensible distinction" between what a merchant can and cannot tell its customers. The court concluded that the law violates the First Amendment because it "draws the line between prohibited 'surcharges' and permissible 'discounts' based on words and labels, rather than economic realities."
In September 2015, the Second Circuit reversed the District Court. The court held that the law regulated "merely prices," not speech, because it simply prevented merchants from adding credit card fees above the merchant's regular price. The appellate court explained that "[w]hat Section 518 regulates—all that it regulates—is the difference between a seller's sticker price and the ultimate price that it charges to credit-card customers." The merchants were "simply wrong," said the Second Circuit, in arguing that the law prevented them from using the term "credit-card surcharge." The merchants were free to characterize their price differential in any way they wanted, but such characterizations "would not change the fact" that adding credit-card fees to regular prices is prohibited while deducting amounts from regular prices for cash use is permitted.
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