Can a business put a sticker on a product denoting the cash price, but then charge customers extra for credit card fees? In an interesting case Expressions Hair Design v. Schneiderman, No 15-1391, Sup. Ct. (March 29, 2017), the United States Supreme Court weighed in on whether a law prohibiting this practice violated free speech or is unconstitutionally vague.
The case is limited to a specific type of pricing: the use of one sticker that notates the cash price, then an extra surcharge for credit cards. Anyone who runs a business understands why a company would want to do this: merchants have to pay the credit card company a percentage of the price, and they wish to pass this cost on to customers.
There is a federal law that prohibits business owners from offering discounts for cash, but no current federal law that prevented business owners from charging a surcharge for credit card use. However, the state of New York does have such a law prohibiting this surcharge – N. Y. Gen. Bus. Law §518 “[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.”
Business owners challenged this law as a violation of free speech and unconstitutionally vague. The trial court had ruled in favor of the state, while the Court of Appeals reversed. The Court of Appeals held that this was not a First Amendment issue of free speech, because the law controlled conduct, not speech. However, the US Supreme Court unanimously held that this is incorrect. The law regulated how merchants could communicate their prices, not the prices themselves. Therefore, this is a First Amendment issue and the law is not unconstitutionally vague. The Supreme Court therefore sent the case back to the Court of Appeals to determine whether this law is a violation of the First Amendment.
The business attorneys at Garland & Mason are available to assist New Jersey companies regarding credit card transactions, collections, contract disputes and more.