Supreme Court's new First Amendment price advertising case—can law allow 'cash discounts' but forbid 'credit card surcharges'?

|The Volokh Conspiracy |

(Mike Blake/Reuters)

The Supreme Court just agreed to hear Expressions Hair Design v. Schneiderman, a very interesting First Amendment case. Here's how the question is framed in a friend-of-the-court brief filed by Mahesha P. Subbaraman (with the help of Prof. Jane Bambauer) on behalf of several First Amendment law professors, including me:

Imagine an electronics store in New York needs to recoup $100 on the sale of a television. If the store owner labels the television with a sticker price of "$100 plus $2 for credit card sales" or "$102, which includes $2 for credit card sales," the owner risks jail time. But if the label reads "$102, with a $2 discount for cash sales," the store owner is in the clear.

Ultimately, that is what this case is about: the criminalization of truthful commercial speech. New York has enacted a law that prohibits sellers from announcing a surcharge for credit-card sales. This surcharge ban does not mean, however, that sellers must charge identical prices for credit-card sales and cash sales. Instead, New York enforces its surcharge ban by instructing sellers to inflate their normal sticker prices and then announce "discounts" from these prices for cash sales. Sellers must then tread carefully in explaining this situation to inquiring customers in order to avoid referring to a surcharge and thus committing a crime. See id. The most sellers can disclose is a half-truth: that their sticker prices do not apply to those who pay with cash.

The petitioners here, several New York sellers, have challenged this state of affairs as a violation of their free speech rights under the First Amendment. The Second Circuit, however, found that New York's enforcement of its surcharge ban did not curb speech at all and instead merely regulated economic conduct in terms of how sellers may set their sticker prices.

The amici respectfully submit that the Court should grant certiorari in this case. This Court has consistently affirmed that the First Amendment protects "the consumer's interest in the free flow of truthful commercial information"—especially when it comes to truthful information about prices.

The decision below stands in direct conflict with this principle. Under the Second Circuit's view, so long as a law is dressed up as a regulation of economic conduct, there is no place at all for First Amendment inquiry even if the law's main purpose or effect is to restrict the free flow of truthful commercial information about prices to consumers. And that is what New York's surcharge ban achieves by presenting sellers with a Hobson's choice: either announce sticker prices that keep people in the dark about the extra costs of credit-card processing, or announce sticker prices that disaggregate these costs for the consumer at the risk of fines and jail time.

This Court should therefore grant review to clarify when laws or policies that purport to regulate economic conduct still merit scrutiny under the First Amendment and its protection of commercial speech. Such clarification is vital not only to resolve a circuit split on the kind of surcharge ban that is at issue in this case but also to preserve the First Amendment's status as a bulwark against government attempts to suppress truthful commercial information.

Lower courts have split on this question; a similar issue can also arises as to restrictions on how sellers can describe taxes:

Little imagination is necessary to conceive of the myriad ways in which this rule may be abused to the detriment of free speech—and not just commercial speech. Consider a town council that decides to impose a "soda tax" to combat public obesity but also seeks to stifle criticism of this policy from grocers, soda manufacturers, and members of the public. The council therefore passes a law requiring all grocers to incorporate this tax into sticker prices for soda. As a result, under this law, the first sales invoice below is unlawful while the second sales invoice is lawful:

Unlawful Sales Invoice
12-oz soda $1.00
Soda tax $2.00
Total $3.00

Lawful Sales Invoice
12-oz soda $3.00
Total $3.00

Both invoices put customers on notice about the total amount they will pay. The difference is in how the underlying prices are expressed, how they are framed, and how they are likely to be perceived. There also can be no question that any effort by the government to stifle expression about taxation would implicate the First Amendment's core protection of political speech. Yet, under the Second Circuit's logic here, any grocer who objects to the town council's new law has no First Amendment claim because all the law appears to do is regulate the conduct of tax collection.

This is not a theoretical problem, as the state of Kentucky has proven. Kentucky tried to ban telecom providers from listing a new telecom tax on customer bills. See BellSouth Telecomm., Inc. v. Farris, 542 F.3d 499, 500-01 (6th Cir. 2008). The Sixth Circuit correctly found, in turn, that the First Amendment applied to this ban as Kentucky had "no objection to the [telecom] providers' conduct (raising prices to account for the new tax), just [the providers'] speech (saying why [they] ha[ve] raised prices)."

Finally, let me stress again that the question is not whether the government can require the same prices for credit card and cash transactions (thus banning credit card surcharges or cash discounts altogether). That it can do, because that would be a purely economic regulation: The government would be restricting what price could be charged.

Rather, the question is whether the government can forbid describing a perfectly lawful transaction ($100 cash, $102 credit) in one accurate way ("$100 cash, or $2 more if you use a credit card") but allow the same transaction described a different way ("$102, or $2 less if you use cash").

For more, see Jane Bambauer's much more detailed blog post, written when the amicus brief was filed.