A man and eight justices of the Supreme Court walk into a bar that sells $1 beer (it’s a popular if not profitable place). But that’s the price only if the man uses a credit card; if he pays cash, it’s 95 cents.
Hypothetically, everything’s cool as long as the bartender tells the customer he’s getting a cash discount. But because the bar’s in New York, she may face state prosecution if she says she’s imposing a surcharge for use of the credit card, even if that’s the effect.
If an entertaining but occasionally befuddling oral argument at the Supreme Court on Tuesday is an indication, some justices might worry about the free speech implications of New York’s law.
Others might see only allowable economic regulation.
And some may want to order a beer for themselves and let lower courts do more work before weighing in.
The subject of Expressions Hair Design v. Schneiderman was “swipe fees,” the charge a merchant must pay a credit card company when a customer pays with a card. They typically run between 2 and 3 percent of the purchase amount, and they account for billions of dollars in fees.
Businesses can pass the cost along in higher prices or offer a discount for those who pay with cash or checks. But New York and nine other states forbid imposing a surcharge, which plaintiff businesses in the Supreme Court case said prevents them from being honest with customers about the fees.
“This case is about whether the state may criminalize truthful speech that merchants believe is their most effective way of communicating the hidden cost of credit cards to their customers,” said Washington lawyer Deepak Gupta.
But the First Amendment applies only to government restrictions on speech, not economic regulation. Some justices questioned whether New York’s law, similar to a federal statute that lapsed years ago, concerns the latter and not the former.
“What speech, precisely, do you think is being restricted?” asked Justice Elena Kagan, who noted that the law is “not written in terms of speech, it’s written in terms of imposing a surcharge.”
In his brief to the court, Gupta offered a pastrami sandwich hypothetical.
Merchants obviously like to advertise their lowest costs, so a deli might want to offer a $10 sandwich, which would cost $10.20 if the customer used a credit card.
But that would violate the New York law, he said; the owner would have to offer a $10.20 sandwich, with a 20-cent discount for using cash.
But Justice Sonia Sotomayor was also skeptical that the law restricted speech, and Justice Stephen G. Breyer said he was concerned about using the First Amendment to knock down price regulations.
“If you want to know what’s worrying me, that’s it,” Breyer said.
Justice Samuel A. Alito Jr. said the law could be interpreted as mandating that merchants post the highest price. But he was worried that New York courts had not actually ruled on how the law should be implemented and that federal courts may be getting ahead of the game.
While an appeals court upheld New York’s law, a different one struck down Florida’s version.
New York Deputy Solicitor General Steven C. Wu said the statute was not about speech, but simply about prohibiting a surcharge.
“The seller may not add to its listed prices and instead must adhere to those prices if a customer decides to pay by using a credit card,” Wu said.
Alito was worried about uneven prosecutions — penalties include a $500 fine or a year in jail — but Wu said those were rare.
The Justice Department took the middle ground, agreeing that the statute restricted speech but was allowable.
Assistant Solicitor General Eric J. Feigin said the law “simply requires a disclosure in dollars-and-cents form of any higher credit card price in circumstances where the merchant has decided to display the lower cash price in dollars-and-cents form.”
But he drew the ire of Chief Justice John G. Roberts Jr. when he described how specific the merchant must be.
In the pastrami sandwich hypothetical, for instance, Feigin said the deli owner needed to complete the math and tell the consumer that a $10 sandwich with a 20-cent surcharge would cost $10.20.
“That’s a very patronizing approach,” Roberts said, based on the assumption that “the American people are too dumb to understand that if you say $10 plus a 20-cent surcharge, they can’t figure out that that’s $10.20.”
Kagan said she doubted there was anything more than caution in the government’s view.
“Isn’t the idea, Mr. Feigin, that if you said 32.46 plus 2 percent, then you really are requiring people to do some work and you’d rather just have them know that it’s —” She paused. “See, I can’t do it that fast.”