Expressions Hair Design v. Schneiderman (581 US ___)(2017)

SUPREME COURT OF THE UNITED STATES

EXPRESSIONS HAIR DESIGN, et al., PETITIONERS v. ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL OF NEW YORK, et al.

on writ of certiorari to the united states court of appeals for the second circuit

March 29, 2017

Chief Justice Roberts delivered the opinion of the Court.

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.

When credit cards were first introduced, contracts between card issuers and merchants barred merchants from charging credit card users higher prices than cash customers. Congress put a partial stop to this practice in the 1974 amendments to the Truth in Lending Act (TILA). The amendments prohibited card issuers from contractually preventing merchants from giving discounts to customers who paid in cash. The law, however, said nothing about surcharges for the use of credit...

Several States, New York among them, [have] enacted surcharge bans. Passed in 1984, N. Y. Gen. Bus. Law §518...provided 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.”  Unlike the federal ban, the New York legislation included no definition of “surcharge.”

In addition to these state legislative bans, credit card companies—though barred from prohibiting discounts for cash—included provisions in their contracts prohibiting merchants from imposing surcharges for credit card use....In recent years, however, merchants have brought antitrust challenges to contractual no-surcharge provisions. Those suits have created uncertainty about the legal validity of such contractual surcharge bans. The result is that otherwise redundant legislative surcharge bans like §518 have increasingly gained importance, and increasingly come under scrutiny.

Petitioners, five New York businesses and their owners, wish to impose surcharges on customers who use credit cards. Each time one of their customers pays with a credit card, these merchants must pay some transaction fee to the company that issued the credit card. The fee is generally two to three percent of the purchase price. Those fees add up, and the merchants allege that they pay tens of thousands of dollars every year to credit card companies. 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. 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. The merchants believe that surcharges for credit are more effective than discounts for cash in accomplishing these goals.

In 2013, after several major credit card issuers agreed to drop their contractual surcharge prohibitions, the merchants filed suit against the New York Attorney General and three New York District Attorneys to challenge §518—the only remaining obstacle to their charging surcharges for credit card use. As relevant here, they argued that the law violated the First Amendment by regulating how they communicated their prices...

II

....Although the merchants have presented a wide array of hypothetical pricing regimes, they have expressly identified only one pricing scheme that they seek to employ: posting a cash price and an additional credit card surcharge, expressed either as a percentage surcharge or a “dollars-and-cents” additional amount. Under this pricing approach, petitioner Expressions Hair Design might, for example, post a sign outside its salon reading “Haircuts $10 (we add a 3% surcharge if you pay by credit card).” Or, petitioner Brooklyn Farmacy & Soda Fountain might list one of the sundaes on its menu as costing “$10 (with a $0.30 surcharge for credit card users).” We take petitioners at their word and limit our review to the question whether §518 is unconstitutional as applied to this particular pricing practice.

III

The next question is whether §518 prohibits the pricing regime petitioners wish to employ. The Court of Appeals concluded that it does. The court read “surcharge” in §518 to mean “an additional amount above the seller’s regular price,” and found it “basically self-evident” how §518 applies to sellers who post a single sticker price: “the sticker price is the ‘regular’ price, so sellers may not charge credit-card customers an additional amount above the sticker price that is not also charged to cash customers.” Under this interpretation, signs of the kind that the merchants wish to post—“$10, with a $0.30 surcharge for credit card users”—violate §518 because they identify one sticker price—$10—and indicate that credit card users are charged more than that amount....

Where a seller posts a single sticker price, it is reasonable to treat that sticker price as the “usual or normal amount” and conclude, as the court below did, that a merchant imposes a surcharge when he charges a credit card user more than that sticker price....

IV

Having concluded that §518 bars the pricing regime petitioners wish to employ, we turn to their constitutional argument that the law unconstitutionally regulates speech.

The Court of Appeals concluded that §518 posed no First Amendment problem because the law regulated conduct, not speech. In reaching this conclusion, the Court of Appeals began with the premise that price controls regulate conduct alone. Section 518 regulates the relationship between “(1) the seller’s sticker price and (2) the price the seller charges to credit card customers,” requiring that these two amounts be equal. A law regulating the relationship between two prices regulates speech no more than a law regulating a single price. The Court of Appeals concluded that §518 was therefore simply a conduct regulation.

But §518 is not like a typical price regulation. Such a regulation—for example, a law requiring all New York delis to charge $10 for their sandwiches—would simply regulate the amount that a store could collect. In other words, it would regulate the sandwich seller’s conduct. To be sure, in order to actually collect that money, a store would likely have to put “$10” on its menus or have its employees tell customers that price. Those written or oral communications would be speech, and the law—by determining the amount charged—would indirectly dictate the content of that speech. But the law’s effect on speech would be only incidental to its primary effect on conduct, and “it has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed.” 

Section 518 is different. The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is 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. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, §518 regulates speech.

Because it concluded otherwise, the Court of Appeals had no occasion to conduct a further inquiry into whether §518, as a speech regulation, survived First Amendment scrutiny. On that question, the parties dispute whether §518 is a valid commercial speech regulation under Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N. Y., 447 U. S. 557 (1980) , and whether the law can be upheld as a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U. S. 626 (1985) .

“[W]e are a court of review, not of first view.”  Accordingly, we decline to consider those questions in the first instance. Instead, we remand for the Court of Appeals to analyze §518 as a speech regulation.