Thursday, June 1, 2017


After the enactment of GBL 518, five New York merchants brought an action seeking the ability to tell their consumers that there is a surcharge for using credit.  One petitioner, Expressions Hair Design, had a sign that notified its consumers that it would charge 3% more for haircuts paid with a credit cards until it learned about the New York law. Expressions Hair Design now advertises two prices, a lower one for cash and a higher one for credit, and carefully avoids describing the price difference as a surcharge or an extra cost as a result of paying with a credit card. The other petitioners, Brooklyn Farmacy & Soda Fountain, Brite Buy Wines & Spirits, Five Points Academy, and want to set one single price for their goods and services, impose an extra charge for credit card use, and to call the difference a credit “surcharge.”

In the Southern District Court of New York, the State argued that the statute is “an anti-fraud statute” that only bars additional hidden fees and does not prohibit surcharges. See Expressions Hair Design v. Schneiderman, 975 F. Supp. 2d 430, 442 (S.D.N.Y. 2013). The district court held that the law violated the First Amendment as it was impermissibly vague and regulated speech. The district court further concluded that the statute failed the Central Hudson test for commercial-speech restrictions.

On appeal, the court held that New York’s law “regulates conduct, not speech” and divided the First Amendment challenge based on two kinds of dual pricing: the first concerns posting a price on a label while notifying consumers of the surcharge through a separate sign, and the second concerns a merchant’s including two prices on the label and characterizing the price difference as a surcharge. The court declined to “reach the merits” on the latter question citing Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), and held that the law was not unconstitutionally vague. Expressions Hair Design v. Schneiderman, 808 F. 3d 118 - Court of Appeals, 2nd Circuit 2015

Then the Supreme Court took the case. EXPRESSIONS HAIR DESIGN, ET AL., PETITIONERS v. ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL OF NEW YORK, ET AL. , No. 15-1391, [March 29, 2017]

"Each time a customer pays for an item with a credit card, the merchant selling that item must pay a transaction fee to the credit card issuer. Some merchants balk at paying the fees and want to discourage the use of credit cards, or at least pass on the fees to customers who use them. One method of achieving those ends is through differential pricing—charging credit card users more than customers using cash. Merchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In N. Y. Gen. Bus. Law §518, New York has banned the former practice. The question presented is whether §518 regulates merchants’ speech and—if so—whether the statute violates the First Amendment. We conclude that §518 does regulate speech and remand for the Court of Appeals to determine in the first instance whether that regulation is unconstitutional."

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