Supreme Court Orders Review of Swipe Fees & Free Speech Issue

WASHINGTON, D.C. — A New York law that bans businesses from tacking on surcharges on credit card purchases will get a second look.

The U.S. Supreme Court ruled unanimously on March 29 to send a case about the fees back to the lower court for review. The issue before the justices was whether the measure violates merchants' free-speech rights. The federal appeals court in New York that upheld the law concluded that it regulated conduct, not speech, according to The Associated Press.

The justices said the law deals with speech and ordered the appeals court to re-evaluate it.

To read the opinion, written by Chief Justice John Roberts, click here.

The Supreme Court Justices heard arguments Jan. 10 in Expressions Hair Design v. Schneiderman, which challenged laws in 10 states that prohibit merchants from imposing a surcharge when customers use a credit card, as CSNews Online previously reported.

According to the National Constitution Center, several states — including New York — have enacted laws that allow merchants to charge higher prices to customers who pay with a credit card rather than with cash. The practice allows merchants to recover money they pay in swipe fees on each credit card transaction.

However, merchants such as Expressions are barred from using the word "surcharge" when informing customers about the price difference. Instead, the word "discount" must be used in New York when referring to a cash payment.

RETAILER REACTION

The National Retail Federation (NRF) welcomed the ruling.

"Most retailers have no desire to surcharge their customers for using credit cards," NRF Senior Vice President and General Counsel Mallory Duncan said. "That would be the opposite of our industry's goal of bringing credit card swipe fees under control. But merchants do want to be able to show customers the cost of using a credit card without running afoul of the law."

According to Duncan, the ruling by the highest court in the land "is a clear stand in favor of the free speech protections of the First Amendment. The nation's highest court has recognized that whether a merchant chooses to communicate credit card fees through a surcharge or through a cash discount is a matter of speech."

"While merchants don't want to surcharge, having the ability to do so would be an important negotiating tool in convincing the card industry to charge reasonable fees instead of continuing to drive up consumer prices through this skyrocketing hidden tax," Duncan added.

The Alliance for Main Street Fairness also applauded the ruling.

"The court's ruling is a major victory for small businesses across America," said Kevin Lawlor, a spokesperson for the Alliance for Main Street Fairness. "On a daily basis, Main Street businesses are straddled with the excessive costs credit card companies impose on them every time a customer swipes their card. This ruling ensures that there is transparency between merchants and their customers so that all consumers understand that the hidden costs large credit card companies impose ultimately lead to higher prices."