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Supreme Court struggles with NY credit-card surcharge law

By: The Associated Press , MARK SHERMAN//January 10, 2017

Supreme Court struggles with NY credit-card surcharge law

By: The Associated Press , MARK SHERMAN//January 10, 2017//

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WASHINGTON — The price of a New York pastrami sandwich could help the Supreme Court figure out a dispute over a state law about credit card swipe fees.

The deli sandwich figured prominently in an entertaining, if inconclusive, argument at the court Tuesday about a law that prohibits businesses from imposing fees on credit-card purchases. The issue is whether the measure violates merchants’ free-speech rights.

The justices seemed to be at odds about whether the law is merely a regulation of pricing or restricts the merchants’ speech, which generally receives closer scrutiny.

The case deals with the swipe fees that merchants must pay to the credit-card issuer each time a customer charges a purchase. The fees typically range from 2 percent to 3 percent and generate more than $50 billion a year.

New York is among 10 states that regulate how businesses can pass the fees along to customers. New York merchants can offer discounts from the published price for people who pay in cash. But the business cannot tack a surcharge onto the published price when customers use credit cards.

The state punishes violations of the law with a fine of $500 and up to a year in prison.

The pricing example that got the court’s attention was a pastrami sandwich that would cost $10 with cash and $10.20 with a credit card. Merchants challenging the law argue that advertising the sandwich as costing $10 with a 2%, or 20-cent, surcharge for using a credit card would violate the law.

Justice Anthony Kennedy suggested he agreed with the merchants because they would be punished for conveying “truthful information.”

But Justice Stephen Breyer said he was more likely to look at the issue as a price regulation. Breyer worried that the court would return to an earlier era in which it struck down state regulations. “We’re going to discover all kinds of price regulation all over the place suffering from problems, and we’ll have judges substituting for regulators all over the country,” Breyer said.

The Supreme Court often delves into the world of hypothetical situations to try to resolve knotty legal issues, and the pastrami discussion was no exception.

A pastrami sandwich at some notable New York delis will set you back a good deal more than $10. Hot pastrami on rye costs $16 at the Pastrami Queen on New York’s Upper East Side.

A decision in Expressions Hair Design v. Schneiderman, 15-1391, is expected by June.

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