The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
Businesses are generally free to charge lower prices for cash transactions than for credit card transactions; but some states bar businesses from labeling this as "$10, with a 30-cent surcharge for credit cards," though businesses are free to say "$10.30, with a 30-cent discount for cash."
This, the Supreme Court just held this morning in Expressions Hair Design v. Schneiderman, is a restriction on commercial speech that triggers First Amendment scrutiny. The government doesn't implicate the First Amendment just by restricting the prices people can charge; if federal law required equal pricing for cash and credit, that would be constitutional. But once a transaction is legal, restrictions on how a seller describes the transaction are speech restrictions (some paragraph breaks added throughout the quotes below):
The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. 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. … In regulating the communication of prices rather than prices themselves, §518 regulates speech.
The court then sent the case back down to the lower court to decide whether the speech restriction was actually an unconstitutional speech restriction, under the court's "commercial speech" doctrine (which provides substantial protection for advertising and price labeling, but not absolute protection). The lower court hadn't reached this issue, because it had concluded that the law was not a speech restriction at all.
One implication of the decision: Restrictions on businesses' clearly laying out taxes as a surcharge (e.g., "$10 plus $1 sales tax") are likewise speech restrictions, and therefore may well be unconstitutional. States have at times tried to restrict such labeling, but BellSouth Tellecommunications, Inc. v. Farris (6th Cir. 2008) struck down such a law; that decision has been preserved and likely reinforced by the Supreme Court's decision in this case
I think this is right, and indeed signed on to an amicus brief that said so.
Justices Stephen G. Breyer, Sonia Sotomayor and Samuel A. Alito Jr. agreed that the case should be sent back down to the lower court, but concluded that the lower court needed to in the first instance confirm that the statute did indeed bar labeling prices this way. Sotomayor's opinion, joined by Alito, described the question this way:
[The New York law] could be read in line with its plain text to require that a merchant charge the same price to all his customers.
It could be read in line with the lapsed federal ban to permit a merchant to charge different prices to cash and credit card customers but to prohibit a merchant from displaying in dollars-and-cents form only the cash price and then charging credit card customers a higher price. On this reading, [the New York law] would not apply where a merchant displays in dollars-and-cents form only the credit card price and then charges a lower price to cash customers, or where a merchant displays both the cash and credit card prices in dollars-and-cents form. Or it could be read more broadly, based on the omission of the definitions that had limited the federal ban's scope. On this reading, [the law] might prohibit a merchant from characterizing the difference between the cash and credit card prices as a "surcharge," no matter how he displays his prices.
Confirming the elusive nature of [the statute], New York has pressed almost all of these interpretations during this litigation.
Sotomayor and Alito would have told the lower federal court to ask the New York high court for a definitive interpretation of the law (a process called "certification," which some state courts allow). Breyer would have recommended that the lower federal court do the same, but would have left it to the federal court's discretion. But their conclusion that the interpretation of the statute would make a difference to the outcome suggests that they agree, at least largely, with the majority's First Amendment analysis—if the statute does restrict how legally permissible price differentials are labeled, then it's a speech restriction that triggers First Amendment scrutiny.