Legal Issue

Whether state credit card no-surcharge laws unconstitutionally restrict speech conveying price information (as the Eleventh Circuit has held), or regulate economic conduct (as the Second and Fifth Circuits have held).

Overview

This case is about a First Amendment challenge to a New York statute prohibiting retailers from imposing a surcharge on consumers who use a credit card to pay for a purchase, but (at least in practice) permitting retailers to offer discounts for paying with cash (the statute itself is silent on this point). A group of merchants challenged the provision, arguing that a surcharge for credit card use is equivalent to a discount for paying in cash, so that what the law prohibits is just one way of describing the same transaction, and thus the prohibition amounts to an unconstitutional restriction on commercial speech. The underlying constitutional issue – the level of protection given to commercial speech – will affect government’s ability to do everything from placing graphic warnings on cigarette packages, to prohibiting the marketing of off-label uses of prescription drugs, to barring misstatements about the presence of nicotine in tobacco products or the nutrient content of store-bought foods.

After a federal district court struck down the law as violating the First Amendment, a panel of the United States Court of Appeals for the Second Circuit reversed, upholding the law as a valid regulation of commercial conduct. Federal appeals courts are divided on the issue, upholding surcharge bans in New York and Texas while striking down Florida’s. A core question for the U.S. Supreme Court is whether no-surcharge laws regulate speech or instead target conduct. While speech regulations must meet a demanding legal test, states are required to show only a rational reason for rules governing commercial conduct.

On December 21, 2016, the Consortium, joined by the American Thoracic Society, the National Association of County and City Health Officials, and Public Good Law Center, filed an amicus brief at the U.S. Supreme Court, supporting New York and arguing that the case is not a suitable vehicle for developing First Amendment doctrine, because the disagreement between the parties is principally based on competing interpretations of the challenged statute rather than on competing interpretations of the First Amendment. Our brief contends that this is a case to be resolved through statutory interpretation and that neither side has offered a plausible interpretation of the statute. We offer two constitutionally unproblematic alternatives: that the statute can be read as either a form of economic regulation or a content-based mandatory disclosure. We then warn against the sort of far-reaching First Amendment holdings called for by some voices in the case – an interpretation that could expand protections for commercial speech and ultimately weaken protections for core speech.

Outcome

On March 29, 2017, the U.S. Supreme Court vacated the decision. A 5-justice majority held that the statute regulated speech, but remanded to the Second Circuit without determining whether it violated the First Amendment. The other Justices also supported remand, but thought the statute needed more interpretation to determine whether it regulated speech. Although the Court did not uphold the Second Circuit’s decision, the outcome was effectively a victory, in that the Court declined to break new ground in protecting commercial speech, and appeared – for now – to reject strict scrutiny.