The Second Circuit this morning upheld New York State’s ban on credit card “surcharges.” Judge Rakoff had earlier found (see our coverage here) that the law, § 518 of the General Business Law, likely violated the First Amendment because it imposed criminal penalties for calling extra credit card fees “surcharges” but allowed merchants to offer the equivalent price via a “discount.” The plaintiffs argued that the term “surcharge” was a more effective way to discourage credit card use by conveying the real costs they impose on businesses and customers.
The Second Circuit rejected this argument because it construed the law as applying to conduct — charging more than the sticker price — not to labels:
What Section 518 regulates—all that it regulates—is the difference between a seller’s sticker price and the ultimate price that it charges to credit‐card customers. A seller imposing a surcharge (an additional amount above its sticker price) on credit‐card customers could choose to “characterize” that additional charge as whatever it wants, but that would not change the fact that it would be violating Section 518. Conversely, a seller offering a discount (a reduction from its sticker price) to cash customers could choose to “characterize” that reduction as whatever it wants (including as a “credit card surcharge”), but that would not change the fact that would not be violating Section 518. Of course, it is more likely that if a seller is imposing a credit‐card surcharge, it will refer to its pricing scheme by its ordinary label—“credit‐card surcharge”—while a seller offering a cash discount is likely to refer to its pricing scheme as a “cash discount.” But the fact that these pricing schemes have different labels (and thus that sellers are likely to refer to them using different words) obviously does not mean that all they are is labels.