The U.S. Supreme Court will take up a free-speech clash with big stakes for retailers and credit-card companies, agreeing to decide the fate of laws in 10 states that limit how merchants can describe the lower prices they charge for cash transactions.
The court Thursday said it will hear a retailer challenge to a New York law that bars stores from saying they are imposing surcharges on credit-card purchases. Retailers instead must say they are offering discounts to people who pay with cash or debit cards.
Retailers say the distinction is more than a semantic one given the tens of billions of dollars in "swipe fees" they pay every year to credit-card companies. Merchants say they would discourage card use -- and reduce those fees -- if they were allowed to impose straightforward surcharges on credit purchases.
"Surcharges actually make consumers more informed rather than less by truthfully and effectively conveying the true costs of using credit cards," retailers challenging New York's law argued in court papers. The group is led by Expressions Hair Design, a unisex salon in Vestal, New York.
In accepting the New York case, the high court deferred action on similar cases in Florida and Texas. The justices will hear arguments next year and rule by the end of June.
The case adds to what already was an important Supreme Court term for the credit-card industry. The justices are also weighing an antitrust suit against Visa Inc., MasterCard Inc. and some of their affiliated banks over the fees charged at cash machines.
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.
Federal appeals courts are divided on the issue, upholding surcharge bans in New York and Texas while striking down Florida's.
New York Attorney General Eric Schneiderman told the Supreme Court that his state's law protects consumers by ensuring they aren't surprised by an extra charge at the cash register.
"New York's credit-card surcharge prohibition does nothing more than prevent sellers from the conduct of extracting charges above their regular, posted prices," Schneiderman argued.
A core question for the nation's highest court will be 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.
The case is Expressions Hair Design v. Schneiderman, 15-1391.
