Nature of the Case
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Facts
New York General Business Law §518 provides that “no seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” Contracts between card issuers and merchants barred merchants from charging credit card users higher prices than cash customers. Congress prohibited card issuers from contractually preventing merchants from giving discounts to customers who paid in cash. The law said nothing about surcharges for the use of credit. The 1976 version of TILA barred merchants from imposing surcharges on customers who use credit cards. Congress added definitions of the two terms. A discount was “a reduction made from the regular price,” while a surcharge was “any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means.” In 1981, Congress defined “regular price.” Where a merchant “tagged or posted” a single price, the regular price was that single price. Posting one price for credit and another for cash-the regular price was whatever was charged to credit card users. Because a surcharge was defined as an increase from the regular price, there could be no credit card surcharge where the regular price was the same as the amount charged to customers using credit cards. A merchant could violate the surcharge ban only by posting a single price and charging credit card users more than that posted price. The federal surcharge ban expired in 1984. New York (D) immediately enacted their own surcharge bans. The New York legislation included no definition of “surcharge.” Recently merchants have brought antitrust challenges to contractual no-surcharge provisions. Ps wish to impose surcharges on customers who use credit cards. Merchants pay a fee, generally two to three percent of the purchase price, when a customer uses a credit card. Rather than increase prices across the board to absorb those costs, the merchants want to pass the fees along only to their customers who choose to use credit cards. Ps believe that surcharges for credit are more effective than discounts for cash in accomplishing in laying the blame for the higher price on the credit card companies. Several major credit card issuers agreed to drop their contractual surcharge prohibitions. Ps then filed suit against D to challenge §518. Ps claimed the law violated the First Amendment by regulating how they communicated their prices, and that it was unconstitutionally vague because liability under the law “turned on the blurry difference” between surcharges and discounts. The District Court ruled for Ps: “drawing a line between prohibited ‘surcharges’ and permissible ‘discounts’ based on words and labels, rather than economic realities.” The law regulated speech and violated the First Amendment. The court of appeals reversed; the price regulation regulates conduct, not speech. The Supreme Court granted certiorari.
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