Expressions Hair Design v. Schneiderman
197 L. Ed. 2d 442, 137 S. Ct. 1144, 2017 U.S. LEXIS 2186 (2017)
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Rule of Law:
A state law that prohibits merchants from communicating a price difference between cash and credit card payments as a "surcharge" regulates commercial speech and is subject to First Amendment scrutiny, rather than being a mere regulation of economic conduct.
Facts:
- Merchants who accept credit cards must pay a transaction fee, typically two to three percent of the purchase price, to the credit card issuer.
- Expressions Hair Design and other New York businesses (petitioners) wanted to pass these fees on to customers who use credit cards, rather than raising prices for all customers.
- The merchants believed that communicating the price difference as a 'surcharge' (e.g., "Haircuts $10, with a 3% surcharge for credit cards") was more effective and transparent than framing it as a 'discount' for cash.
- New York General Business Law § 518 provides that "[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card."
- The merchants feared prosecution under § 518 if they implemented their preferred method of communicating the price difference to customers.
Procedural Posture:
- Five New York merchants sued the New York Attorney General in the U.S. District Court for the Southern District of New York (a federal trial court).
- The District Court granted summary judgment for the merchants, finding § 518 was an unconstitutional speech regulation and was void for vagueness.
- The state officials, as appellants, appealed to the U.S. Court of Appeals for the Second Circuit (an intermediate appellate court).
- The Second Circuit vacated the District Court's judgment, holding that § 518 regulated conduct (prices), not speech, and therefore did not violate the First Amendment.
- The merchants, as petitioners, were granted a writ of certiorari by the U.S. Supreme Court.
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Issue:
Does a state law that prohibits merchants from describing a price difference for credit card users as a 'surcharge,' while allowing them to offer a 'discount' for cash users, regulate speech and thus implicate the First Amendment?
Opinions:
Majority - Chief Justice Roberts
Yes, the law regulates speech. Section 518 does not regulate the amount a merchant can charge; a merchant is free to set a higher price for credit card users than for cash users. Instead, the law regulates how merchants may communicate that price difference to their customers. By banning the word 'surcharge' but allowing the functionally equivalent 'discount,' the law is not a price control that incidentally affects speech, but a direct regulation on the communication of prices. Because it regulates speech, it must be analyzed under the First Amendment, a task the Court remands to the Court of Appeals to undertake in the first instance.
Concurring - Justice Breyer
Yes, the law regulates speech, but the distinction between speech and conduct is often unhelpful as almost all government regulations affect speech. The more useful inquiry is to determine which First Amendment interests are affected and what level of scrutiny should apply. Because the statute's operation is unclear—it could be a simple price regulation, a disclosure requirement, or a broader content-based restriction—remand is appropriate for the lower court to clarify its function and apply the correct standard of review.
Concurring - Justice Sotomayor
Yes, the case should be vacated and remanded, but the majority's approach of deciding only a small part of the issue is a 'quarter-loaf outcome.' The statute is fundamentally ambiguous, with several possible interpretations. The Second Circuit erred by not certifying the question of the statute's meaning to the New York Court of Appeals, which could have provided a definitive interpretation. Without knowing exactly what the law prohibits, a proper First Amendment analysis is impossible, and the Court should have instructed the Second Circuit to seek that clarification.
Analysis:
This decision establishes that laws regulating how prices are described or framed are speech regulations, not merely economic regulations. By distinguishing between regulating the price itself (conduct) and regulating the communication about the price (speech), the Court subjected a wider range of commercial regulations to First Amendment scrutiny. This precedent makes it more difficult for states to enact laws that dictate the specific terminology merchants must use in their pricing, shifting the analysis from rational basis review to the more stringent standards applied to commercial speech. Future legal challenges to similar laws in other states will now begin with the presumption that they are speech regulations.
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