U.S. Supreme Court justices grappled with a New York law that says merchants can’t impose surcharges on credit-card purchases, hearing arguments in a free-speech clash with implications for billions of dollars of transactions.
Merchants are trying to topple — or at least scale back — surcharge bans in New York and nine other states, saying the laws strip them of an important tool for telling their customers about the cost of credit-card transactions. Retailers say they pay $50 billion in “swipe fees” each year to card companies.
The justices spent much of the hour-long session trying to understand exactly what the New York law prohibited. A lawyer for the state said the law merely bars hidden charges that come on top of a regular price. He said that under the law, retailers still can offer discounts for cash and even post two different prices for cash and credit-card purchases.
A core question for the high court is whether no-surcharge laws regulate speech or instead target conduct. While speech regulations must meet a demanding legal test, states are required to show only a rational reason for rules governing commercial conduct.
Several justices said they weren’t sure the New York law prohibited speech at all. “I just don’t see anything about speech in the statute,” said Justice Sonia Sotomayor.
‘Forcing’ Merchants to Speak
Justice Samuel Alito, however, said the state was “forcing the merchants to speak in a particular way.” And Chief Justice John Roberts aimed sharp questions at an Obama administration lawyer’s partial defense of the law, saying it was based on the notion that “American people are too dumb” to perform basic math.
Justice Anthony Kennedy asked whether the law might be too vague to survive constitutional scrutiny.
The credit-card industry pushed states to enact the disputed laws after a federal surcharge ban expired in 1984. The industry isn’t directly involved in the court fights over the surcharge laws, instead leaving it to the states to defend their measures. The other no-surcharge states are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
The retailer group is led by Expressions Hair Design, a unisex salon in Vestal, New York. A federal appeals court threw out the challenge.
The case is Expressions Hair Design v. Schneiderman, 15-1391.
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