From the “I’ll bet the founding fathers never contemplated that one” department comes a recent California case.
The question – whether a California statute prohibiting retailers from imposing a surcharge on customers who pay with credit cards is constitutional. The answer? It’s not.
Five retailers brought the suit to challenge California Civil Code Section 1748.1(a). The statute prohibits retailers from imposing a surcharge on customers who make payments with credit cards, but permits discounts for payments by cash or other means.
The retailers ranged from an Italian restaurant to a car mechanic. But all of them imposed across-the-board prices higher than they would otherwise charge to compensate for the fee imposed by credit card companies for processing the transaction. Typically those fes total about 2% of the purchase price.
California initially tried to dismiss the suit on a standing claim. The state essentially asserted since the retailers were charging and collecting the fee, there was “no harm, no foul.” That may be a compelling argument on a basketball court, but it didn’t fly here. The retailers convinced the court that they altered their practices due to their concern with violating the statute. That was sufficient to confer standing.
To succeed on the First Amendment challenge, the retailers needed to establish the speech was not illegal (it wasn’t) and that the regulation was more invasive than it needed to be in order to serve the state’s interest in enacting it.
The interest California asserted was the need to avoid “consumer deception.” Presumably, if retailers were prohibited from charging a credit card surcharge, they wouldn’t need to lie about it. But the very structure of the law belied the state’s argument. The statute allowed the retailers to charge credit card customers more than cash customers, since it permitted a discount for cash users. In the court’s view, the retailers “seek to communicate the difference in the form of a surcharge rather than a discount. . . . imposing a surcharge rather than offering a discount is no more misleading than calling the weather warmer in New Orleans rather than colder in San Francisco.”
And the court acknowledged that credit card surcharges could be deceptive, especially if imposed “surreptitiously at the point of sale.” But here, the retailers wanted to “communicate, not conceal credit charges.” And yet, the statute made that illegal. Indeed, the statute effectively allowed for a surcharge, but required that the retailers call it a “discount."
When viewed in this light, it’s easy to see how the statute restricted speech, with no compelling reason to do so. Those factors made it easy for the court to strike it down. All of which reiterates that the First Amendment is indeed, “priceless.”