I think that neither the merchants nor the card networks will be jubilant about the Supreme Court’s narrow decision yesterday in Expressions Hair Design v. Schneiderman, which does little except prolong the litigation about the constitutionality of a New York statute that prohibits merchants from charging a surcharge to customers who use credit cards.
For many years, the statute (like a now-expired provision of the Truth in Lending Act that it copies) was largely irrelevant, because the rules of the major credit-card networks prohibited merchants from discriminating against customers who use their cards. Those rules have recently come under antitrust attack, and the networks have entered into settlements that remove those restrictions in many contexts. Thus, statutes like the New York statute are now the main constraint on merchant behavior in this context.
This case involves a suit by a group of New York merchants, arguing that the New York statute violates the First Amendment because it regulates what they say about their prices. They point out that the statute does not prevent them from charging credit-card customers a higher price than cash customers; they are free to give a discount for the payment of cash. What they can’t do, though, is tell customers they are paying a surcharge or extra fee above the “sticker” price. The U.S. Court of Appeals for the 2nd Circuit dismissed the suit out of hand, concluding that price regulations regulate conduct alone and thus are immune from scrutiny under the First Amendment.
The opinion of the court by Chief Justice John Roberts is squarely in the minimalist vein we have come to know so well, especially with the diminished eight-judge court we have had without Justice Antonin Scalia. Once it has discussed the facts and the analysis of the court of appeals and identified the scheme in question, it offers three paragraphs making only one single point, that this statute goes beyond the pure regulation of price sufficiently into the realm of regulating speech that it is subject to scrutiny under the First Amendment.
That point is a simple one, succinctly made. The court notes that the typical price regulation exempted by the court’s earlier cases “would simply regulate the amount that a store could collect.” This regulation, the court tells us, is “different” in an important way, because “[t]he law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer.” Embracing the distinction between telling cash customers they receive a discount and card-paying customers they pay a surcharge as one of communicative significance, the court finds the regulations to be squarely within the realm of First Amendment scrutiny: “What the law does regulate is how sellers may communicate their prices. … In regulating the communication of prices rather than prices themselves, §518 regulates speech.”
Having said that, the court is done. Emphasizing that “we are a court of review, not of first view,” it offers not a word as to whether the statute would survive scrutiny under the First Amendment. It does not even summarize the appropriate test, merely identifying the two leading cases that the parties have identified as setting those standards. So the case will return to the 2nd Circuit for litigation of the validity of the statute under the First Amendment; the only thing that we know now that we did not know before is that the First Amendment applies.
Only a bare majority of the court agreed with the wholly minimalist disposition. Justice Stephen Breyer, for his part, argued that it would be more useful in analyzing the statute to consider whether it “affects an interest that the First Amendment protects” than it is to consider simply whether it regulates “speech,” noting that “virtually all government regulation affects speech.” He suggested that if the statute in operation does “not hinder the transmission of information to the public [by a merchant] so long as it also revealed its credit-card price,” it should “receive a deferential form of review.” Acknowledging that the parties bitterly dispute how the statute operates in fact, he agreed that the problem should be considered first by the court of appeals. Similarly, Justice Sonia Sotomayor, joined by Justice Samuel Alito (a rare combination!) would have gone even further to respond to the uncertainty about the statute’s application; she recommended that the court instruct the 2nd Circuit on remand to use a “certification” procedure to seek an authoritative explanation of how the statute works from the highest New York state court (the New York Court of Appeals).
In the end, the only thing this case does is keep the litigation alive. Because the court vacated the 2nd Circuit’s dismissal of the merchants’ challenge to the New York statute, the lower courts will have further briefing and argument on that question. But the opinion says so little about the First Amendment that it is unlikely to shed much light on future controversies or illuminate academic inquiry. Nor does it even hint that the merchants should prevail in the litigation below. So this particular part of the merchants’ battle with credit-card networks about the price they pay to accept credit cards is far from over.
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