Supreme Court weighs in on credit card swipe fees

The justices unanimously said existing regulations inhibit free speech, returned the case to a lower court

The U.S. Supreme Court today ordered a lower court to take a closer look at a New York law that bars merchants from imposing surcharges on credit-card purchases. It's part of a long-running battle by retailers to chip away at the $50 billion they pay credit card companies in so-called "swipe fees" each year.

A federal appeals court had upheld the law, saying it was a form of price regulation. But Chief Justice John Roberts wrote that the measure actually regulates speech, which subjects it to the tougher requirements of the First Amendment. The decision to return the case for review was unanimous.

“In regulating the communication of prices rather than the prices themselves, Section 518 [the New York law] regulates speech,” Roberts wrote.

The ruling is "an important step toward allowing retailers to tell consumers about the added costs of credit card payments," said the Retail Industry Leaders Association.

“This unanimous ruling ... is an important acknowledgement of the true value that transparent price communication provides,” said Deborah White, RILA senior executive vice president and general counsel. “The Court’s ruling affirms the right of retailers to communicate honestly with their customers about the true cost of credit cards.”

RILA, joined by other associations, filed an amicus brief earlier this year urging the Court to "recognize the importance of transparent merchant communication to consumers about credit cards costs."

"Not the bad guys"

Retailers say that if they were allowed to explicity impose surcharges on credit card purchases, it would discourage card use, reduce their swipe-fee costs, and enable them to pass the savings on to consumers. 

In his opinion, Robert said merchants "want to make clear that they are not the bad guys—that the credit card companies, not the merchants, are responsible for the higher prices.” 

New York is one of 10 states that limit how merchants can describe lower cash prices. Appeals are also pending from cases in Florida and Texas.

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