It is constitutional for New York state to ban merchants from passing along credit card transaction fees to their customers, a federal appeals court ruled Tuesday.
The 2nd U.S. Circuit Court of Appeals in Manhattan rejected the findings of a lower-court judge who had sided with five businesses, including a hair salon, an ice cream parlor and a liquor store. They had claimed in a 2013 lawsuit that the law violated their First Amendment and due process rights.
The lawsuit pertained to a fee, generally ranging from 2 percent to 3 percent, that merchants must pay to the credit-card issuer each time a customer charges a purchase. New York state passed a law in 1984 that was meant to substitute for an expired federal law that had prohibited credit card surcharges.
The appeals court said blocking businesses from passing along the fee to consumers was not a free speech issue because prices do not implicate the First Amendment.
The three-judge panel added that “it follows that prohibiting certain relationships between prices also does not implicate the First Amendment.”
The judges said nothing is “controversial about the government’s banning certain prices because of how consumers will react to them.”
It noted that businesses are permitted to sometimes offer discounts when customers use cash rather than credit cards and that some consumers may be annoyed if they have to pay $103 rather than $100 for the seller’s goods merely because they choose to use a credit card.
“The fact that sellers can move their sticker prices up and down with relative ease … does not alter the fact that sticker prices, like any other prices, can be regulated without bringing the First Amendment into play,” the ruling said.
Lawyers for the plaintiffs did not immediately respond to requests for comment.
Attorney General Eric Schneiderman applauded the ruling.
“The court held that the law is a valid commercial regulation that does not violate the First Amendment or due process. I look forward to continuing to work to protect consumers from harmful pricing practices,” Schneiderman said.