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.
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