A New York case decided this week by the U.S. Supreme Court involving a state prohibition on credit card surcharge fees would not, at first blush, seem to involve “speech,” let alone “speech” that needs to be protected by the First Amendment. Indeed, a credit card surcharge fee – such as, for example, a nondescript warning stating “3% added for credit cards” – hardly seems to be in the same league as The Pentagon Papers, or Fanny Hill, or even the fundraising advertisement “Heed Their Rising Voices” by the Committee to Defend Martin Luther King, all of which were subjects of profound First Amendment cases.
Nevertheless, the Supreme Court’s decision announced on Wednesday (Mar. 29, 2017) in Expressions Hair Design v. Schneiderman, 551 U.S. —, 2017 WL 1155913, involving something as innocuous as a thirty cents surcharge for using a credit card to pay for a ten dollar sundae at Brooklyn Farmacy & Soda Fountain marks a significant evolution in free speech law, one that has the prospect of affecting many areas of economic regulation. The Court’s holding means that trade regulations that previously were perceived as solely government restrictions on economic activity having nothing to do with free speech rights are now potentially subject to First Amendment challenges if the government’s restrictions impose unwarranted burdens on a merchant’s ability to communicate information concerning the merchant’s products or services. As a result, this “sleeper” decision from the Roberts Court marks yet another step in the continuing expansion of the Court’s use of the First Amendment to limit the ability of government to regulate economic activity.
The case itself is arcane in its details. The matter involves a New York statute that was a duplicate of a federal measure that Congress enacted in 1981 but which Congress let expire in 1984. The New York statute has the same effect as a contractual prohibition that previously had been incorporated into credit card companies’ contracts with merchants, but which the credit card companies dropped under pressure from antitrust lawsuits brought by merchants upset with the credit card companies’ efforts to prevent merchants from steering customers toward using cash instead of credit cards.
The New York statute establishes that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”
On its face, this statutory language has nothing to do with speech. The statute simply prohibits a merchant from imposing a “surcharge” on a customer who elects to use a credit card instead of cash.
However, both the five-justice majority for the Court led by Chief Justice Roberts as well as a concurring opinion by Justice Breyer held that this statutory provision regulates more than mere conduct – what price a merchant may impose – but it also regulates speech. The Court held that the operation of the New York statute regulates “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.”
The Court then concluded that “[i]n regulating the communication of prices rather than prices themselves, §518 regulates speech.”
This short assertion – that the statute regulates speech, rather than conduct – opens up the entire panoply of the First Amendment’s commercial speech doctrine. As a result, and as the Supreme Court directed, the State of New York must now attempt to defend the statute, either on the grounds that it is a valid, non-discriminatory “disclosure” requirement, or on the grounds that it is “narrowly tailored” to serve a “substantial government interest.” The trial court which heard the case initially concluded that the New York statute could not survive these First Amendment tests. On remand from the Supreme Court, it will now be up to the Second Circuit to determine whether the trial court judge was correct.
In any event, the ruling now given by the Supreme Court to the first question – does the statute regulate speech – has the potential to open up constitutional challenges against various and sundry economic regulations that could be said to regulate the “communication” of a price as opposed to the “price” itself. Hence, statutes or regulations that prohibit “Ladies Night” discounts at bars or clubs might now be said to regulate the “communication” of such discounted prices, rather than prohibiting the prices themselves, and as a result, the prohibitions against such prices might now be challenged on First Amendment grounds. Similarly, local ordinances requiring the imposition of a 5 cents surcharge on customers who want their groceries in a plastic bag might well be challenged on First Amendment grounds, on the strength that such ordinances regulate how merchants “communicate” their prices, as opposed to the conduct of the price itself. Additionally, regulations that prohibit merchants from imposing differential pricing based where a customer comes from – such as prohibitions against “residents” discounts – also now may be challenged on First Amendment grounds.
As Justice Breyer remarked in his concurrence in the Expressions Hair Design case, “virtually all government regulation affects speech.” (Justice Breyer’s point was actually that it is less important whether a government provision regulates speech than it is to consider how much speech, and what kind, is affected by the regulation.)
In light of that observation – that government regulations fundamentally affect speech of all kinds – this latest case from the Supreme Court opens up a new tool for businesses to consider when challenging a regulation that affects their abilities to communicate with their customers. This new decision means that businesses might now require the government to prove that an economic regulation that previously was subject only to highly deferential “rational basis” review is instead justifiable under more rigorous “substantial interest” scrutiny.
In this regard, the Court’s decision in Expressions Hair Design will come to be seen as a watershed moment for those wishing to challenge government regulation of economic activity.