SCOTUS Rules First Amendment Applies to New York's Credit Card Surcharge Statute

Professor Ruthann Robson, City University of New York (CUNY) School of Law

In its opinion in Expressions Hair Design v. Schneiderman, a unanimous Court reversed the Second Circuit's conclusion that the First Amendment was not applicable to a New York statute prohibiting a credit card surcharge. 

At issue is New York General Business Law § 518 prohibiting sellers from imposing a surcharge on customers who use credit cards.  On the other hand, the statute allowed a "cash discount." United States District Judge Jed Rakoff had held that the New York statute regulated speech, limiting how merchants could express their differential pricing, and concluded that the statute failed the test for constitutional commercial speech under Central Hudson Gas & Electric Corp. v. Public Service Commission (1980). The Second Circuit did not reach the Central Hudson analysis given its conclusion that there was no speech, commercial or otherwise, only conduct.  The United States Supreme Court holds the statute regulates speech, at least as applied here.

Chief Justice Roberts's relatively brief (11 pages) opinion explains the Court's determination that §518 regulates speech thusly:

The law 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. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say “$10,with a 3% credit card surcharge” or “$10, plus $0.30 for credit” because both of those displays identify a single sticker price—$10—that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, §518 regulates speech.

 The Court did not proceed further, but remanded the case to the Second Circuit to assess 518's constitutionality, presumably under Central Hudson.  However, in a footnote the Court made clear that there is a question as to whether 518 would prohibit a "two-sticker pricing scheme" such as the one that Hair Expression uses.

Justice Breyer's brief concurring opinion points out that the speech/conduct distinction may not be the wisest path, but instead the courts should consider how the challenged government action "affects an interest that the First Amendment protects." Here, Justice Breyer contends that 518 is unclear as to whether it is actually regulating disclosure (in which case the rational basis standard of Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (1985) would apply) or whether it is more traditional commercial speech under Central Hudson.  

This lack of clarity in the statute causes Justice Breyer to agree with the concurring opinion by Justice Sotomayor, joined by Justice Alito, that the interpretation of the statute should be certified to New York's highest court.  Sotomayor's opinion criticizes the Second Circuit for not certifying the question previously, but for choosing a "convoluted course": it "rejected certification, abstained in part,' and decided the question in part," requiring a division in the petitioners' First Amendment challenge.

Sotomayor makes it clear that the "Court's opinion does not foreclose" the Second Circuit from choosing the certification route on remand.  It remains to be seen what the Second Circuit will do, but it would probably be well-advised to avail itself of the certification process.