Retailers welcomed a U.S. Supreme Court ruling this week that First Amendment free speech rights should be considered when determining how merchants show consumers credit card swipe fees that drive up the price of merchandise by billions of dollars a year.
“Most retailers have no desire to surcharge their customers for using credit cards,” National Retail Federation 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.”
“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 said.
The Supreme Court struck down an appellate court ruling that upheld a New York state law banning credit card surcharges and sent the case back to the appeals court to be reconsidered. The justices said the appeals court incorrectly concluded that the surcharge ban regulated only conduct rather than speech.
The surcharge ban “is not like a typical price regulation which simply regulates the amount a store can collect,” the Supreme Court said. “The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Instead, it regulates how sellers may communicate their prices. In regulating the communication of prices rather than prices themselves (it) regulates speech.”
The ruling came in a case challenging the New York law and similar measures in nine other states that prohibit merchants from imposing a surcharge when customers use a credit card. The laws, which were passed at the urging of the card industry, can be traps for merchants who give a cash discount. The lawsuit before the court argues that the laws violate merchants’ free speech rights under the First Amendment and are unconstitutionally vague under the Due Process Clause of the 14th Amendment.
Banks charge merchants a fee averaging about 2 percent of the transaction amount each time a credit card is used, and a fee of at least 21 cents when debit cards are used. The fees total more than $50 billion a year and drive up costs for consumers because card industry rules effectively require them to be built into the price of merchandise.