Ruling Means Victory For Merchants Over Swipe Fees
By Christine Kern, contributing writer
Supreme Court says law preventing retailers from disclosing surcharge on purchases unconstitutional.
Retailers and credit card companies have been battling over swipe fees for years, and now retailers have been awarded at least a temporary victory in a recent Supreme Court ruling. The U.S. Supreme Court ruled that a New York State law that prevented retailers from disclosing to shoppers that a “surcharge” on credit card purchases in being imposed is essentially a speech regulation that could be unconstitutional, according to Law.com.
In a unanimous court decision, Chief Justice John Roberts Jr. wrote, “What the law does regulate is how sellers may communicate their prices. In regulating the communication of prices rather than prices themselves, [the law] regulates speech.”
However, this decision does not end the debate; the Supreme Court remanded the case to the U.S. Court of Appeals for the Second Circuit, which will examine the law in that light. The Court took the case, Expressions Hair Design v. Schneiderman, serves as a test of whether New York State can tell merchants what to say to customers about varying credit card and cash payment prices. Similar laws exist in ten other states, including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, prohibiting merchants from imposing surcharges to cover credit card swipe fees. In some cases, these laws have been interpreted to mean that merchants cannot use the word “surcharge” to describe those price differences.
“These laws are important because they protect consumers,” says Henry Meier, deputy general counsel for the New York Credit Union Association. “We don’t want our members to be penalized for using credit cards. These laws are important because if you can impose surcharges for credit card usage, the costs will go up for everyone.”
“These lawsuits are important because these laws hide the cost of credit from consumers,” explains attorney Deepak Gupta, who has filed four lawsuits on behalf of different merchants. “These laws were enacted at the behest of the credit card industry in the 1980s. The credit card companies initially fought dual pricing. When they lost that battle, they switched to a battle over labels.”
“Rather than increase prices across the board to absorb those costs, the merchants want to pass the fees along only to their customers who choose to use credit cards,” Roberts wrote. “They also want to make clear that they are not the bad guys—that the credit card companies, not the merchants, are responsible for the higher prices.”