April 3, 2017
Authored by: Stan Koppel
What the U.S. Supreme Court Did
The U.S. Supreme Court ruled last week that New York’s statutory ban on merchant’s surcharging customers who choose to pay with credit cards is a regulation of speech and is not merely a regulation of pricing conduct, as the lower court had ruled. New York’s statute, N. Y. Gen. Bus. Law Ann. §518, makes it a misdemeanor punishable by a fine or imprisonment for a merchant to “impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check or similar means.” In Expressions Hair Design et al. v. Schneiderman, et al., the Court required the Second Circuit to consider the validity of the law under the First Amendment. Specifically, the circuit court of appeals must now determine whether the New York law is a valid commercial speech regulation and whether the law can be upheld as a disclosure requirement. Previously, the Second Circuit ruled that the law regulated conduct, not speech, since it required that the merchant’s prices should be the same whether a customer uses a credit card or cash.
Impact on Merchants and Payment Networks
In short, the status quo remains intact for now, in New York and in the eleven other states that regulate surcharges. The Supreme Court’s action does not immediately uphold or invalidate New York’s anti-surcharge law. Reviving the claim after it had been dismissed by the lower court, the law now must be reviewed again by the court of appeals (and potentially again after that by the Supreme Court) as to whether the law is a valid commercial regulation of speech. This review process could take a while, especially considering that one of the Supreme Court Justices recommended that the federal court of appeals ask New York’s top state court to give it an “accurate picture of how, exactly, the statute works.”