The U.S. Supreme Court ordered closer scrutiny of a New York law that bars merchants from imposing surcharges on credit card purchases, giving a group of retailers a partial victory by saying the measure might violate their free-speech rights.
Chief Justice John Roberts said the federal appeals court that upheld the law was wrong to analyze it as a form of price regulation. Writing for the high court, he said the measure regulates speech, requiring it to meet a tougher legal test. The decision to return the case to the lower court was unanimous.
The case is part of a broader fight by retailers to reduce the $50 billion in "swipe fees" they pay card companies each year. Merchants say they could discourage card use — and reduce those fees — if they were allowed to explicitly impose surcharges on credit purchases.
New York is one of 10 states that limit how merchants can describe the lower prices they charge for cash transactions. The high court has been deferring action on similar appeals from Florida and Texas while considering the New York case.
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 had been divided on the issue, upholding surcharge bans in New York and Texas while striking down Florida’s.
A core question was whether no-surcharge laws regulate speech or instead target conduct. Roberts said the New York law regulates how sellers may communicate their prices, making it a speech regulation.
"A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases," Roberts wrote. "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," the chief justice wrote.
Roberts characterized the dispute as a narrow one, saying the retailers weren’t seeking to invalidate the entire statute. He said they were aiming only to ensure they could post a cash price and explicitly add a surcharge for credit card users.
During arguments in January, a lawyer for the state said retailers could still offer discounts for cash or post two different prices for cash and credit card purchases. Retailers say those approaches don’t do as much to discourage credit card use.
Three justices — Sonia Sotomayor, Stephen Breyer and Samuel Alito — suggested in separate opinions that the federal appeals court might ask New York’s highest court to clarify what the law covers.
The case is Expressions Hair Design v. Schneiderman, 15-1391.
