Overview
Yesterday, a group of merchants moved, on First Amendment Grounds, to enjoin a New York law that allows merchants to charge different prices for cash and credit card purchases, but prohibits them from calling the extra charge for credit card purchases a "surcharge": The motion begins:
Each time a merchant swipes a credit card, the merchant incurs a “swipe fee.” These fees are typically passed on to all consumers (whether or not they pay with credit) through higher prices. The plaintiffs are five New York merchants who want to pass on the cost of swipe fees to only those customers who pay with credit cards. They may lawfully do so by charging two prices: a higher price for using a credit card and a lower one for using cash, a check, or a debit card. But a New York statute enacted at the behest of the credit-card lobby, N.Y. Gen. Bus. Law § 518, seeks to control how merchants may communicate those prices to consumers: It allows merchants to offer “discounts” to those who pay in cash, but makes it a crime to impose equivalent “surcharges” on those who pay with credit. A “surcharge” and a “discount” are two ways of framing the same price information—like calling a glass half full instead of half empty. But consumers react very differently to the two words, perceiving a “surcharge” as a penalty. Because the “surcharge” label is thus far more effective at communicating the cost of credit cards and discouraging their use, the credit-card industry has long insisted that it be suppressed. And the state, in justifying its adoption of the industry’s speech code, openly relied on the different effect of the two words, “even if only psychologically,” to produce “desired behavior.” . . . Because the “purpose and practical effect” of the no-surcharge law is to outlaw a disfavored way of truthfully describing lawful conduct, it is a content-based speech restriction— subject to “heightened scrutiny” and “presumptively invalid.” Sorrell v. IMS Health Inc., 131 S. Ct. 2653, 2667 (2011). The law cannot withstand scrutiny. New York can put forth no legitimate interest in suppressing merchants’ efforts to convey the true cost of credit-card transactions to consumers, much less evidence that the law advances a legitimate interest.The case is before Judge Rakoff.
