A very important case for the retail industry–and all franchisors and franchisees operating within it–will be argued before the United States Supreme Court on January 10, 2017. The case is Expressions Hair Design v. Schneiderman. The issue is credit card surcharges.
The background is pretty simple. New York, nine other states, and Puerto Rico prohibit retailers from engaging in the practice of charging a surcharge when a customer uses a credit card. Importantly, the ten states involved are some of the biggest commercial states in the Union. In addition to New York, the list includes California, Texas and Florida. Those four states alone count over 107 million Americans–and each one is a major tourist destination in its own right.
The question before the Supreme Court changes depending upon who is framing it. The Petitioners, five New York state merchants, admit that New York law allows them to charge a higher price to those who pay by credit card. In fact, all states allow for such pricing. Their complaint lies with a state law which prohibits them from saying the higher price is a "surcharge". Instead, New York law only allows merchants to offer "discounts" to those who pay in cash. The Petitioners allege that this law amounts to an illegal prohibition on their free speech rights under the First Amendment to the Constitution. Further, they claim the law prevents consumers from learning about the actual cost of using a credit card.
The Respondent, the New York Attorney General, responds that the law doesn't implicate free speech at all. Instead, he argues that the law is a "classic form of price regulation". All the law does, according to the Attorney General, is forbid the imposition and collection of additional fees from credit-card users in excess of the regular price for a good or service. Consequently, the Attorney General says the law governs conduct not speech. The Attorney General also makes an argument regarding the protection of consumers. Specifically, that the law prevents sellers from imposing special fees for those consumers who choose to use a credit card.
The issue of the difference between the regulation of speech versus conduct is extremely important. This is because a law regulating speech must pass the narrow constitutional test of "strict scrutiny"–which is a very high bar to meet. On the other hand, if the New York law merely regulates conduct in commerce, no special constitutional test is required.
As you might imagine, many, many amici briefs have been filed in this case on both sides of the issue. The case presents some very difficult questions at the intersection of commerce and speech. I personally am very excited about the upcoming argument–and we'll continue to monitor the case, providing updates after argument and when a decision is handed down.
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