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Supreme Court Strikes Down State No-Surcharge Law

posted by Adam Levitin

The Supreme Court ruled today in Expressions Hair Design v. Schneiderman.  The Court unanimously ruled for the merchant plaintiff that was challenging New York State's no-surcharge law on the basis that a law criminalizing credit surcharges (but not cash discounts) was impermissibly vague.  The Court declined to rule on the plaintiff's First Amendment challenge because the Second Circuit Court of Appeals had held that New York law regulated conduct, not speech, so the Court of Appeals had never considered whether there was a First Amendment violation if the pricing was a form of speech.  The Supreme Court determined that the law regulates speech and remanded the First Amendment issue to the Court of Appeals.  

Five Justices were on the majority opinion with a pair of concurrences driven by procedural concerns (Alito + Sotomayor) or a fear that the case will be used as a precedent for attacking economic regulation via the First Amendment (Breyer).  

Technically the opinion is narrow, as it addressed only an as-applied challenge based on a pricing regime in which two prices are simultaneously listed, with neither labeled a surcharge or discount, but I suspect that the effect of the opinion will be much broader.  If, on remand, the plaintiff's First Amendment argument is accepted (and I suspect it will be), the opinion will be pretty important in terms of development of payment systems.  Prior to today there were two obstacles to effective price discipline on consumer payment choice:  state no-surcharge laws and credit card networks' merchant rules.  The state no-surcharge laws are gone now, leaving only the card networks' merchant rules.  MasterCard and Visa had previously agreed to substantially rollback their rules on surcharging in an overturned class action settlement.  It's going to be hard for them to argue against making that concession now, unless they are willing to admit that it wasn't previously made in good faith because they knew that surcharging wouldn't be used on any scale in the presence of state no-surcharge laws.  

Congratulations to Deepak Gupta, who quarterbacked this litigation!  

Comments

The bad guys lost, but I'm not sure who won. Are we headed for a new Lochner era, based on the First Amendment rather than substantive due process? The expansion of corporate First Amendment rights is a bit scary.

Isn't it Sad when the SCOTUS opinion can't be downloaded from their own site - for whatever reason? Even if its system is just overloaded think how well the rest of the government computer systems are working... immigration, etc.

The Court "strikes down" the law? I don't see where that happened.

Asher is right. I'll complain to our headline writers about the bait-and-switch. The Court merely said unconstitutionally vague as applied, and remanded for a general consideration of its consistence with the First Amendment.

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