Are credit card surcharge laws illegal?

Several states have laws that prohibit credit card surcharges. The Ninth Circuit recently joined two other courts in deciding that those laws implicate the First Amendment. In Italian Colors Restaurant v. Becerra, the San Francisco-based court invalidated a California law that banned credit card surcharges but allowed cash discounts. In other words, a business could charge cash-paying consumers less, but only if the businesses called its practice a “cash discount” rather than a “credit card surcharge.”

A rose by any other name is just as sweet, but a cash discount by another name might just be illegal. The Supreme Court has already held that bans on credit card surcharges implicate the First Amendment. It might soon decide whether these laws violate the First Amendment.

A pro-First Amendment ruling would allow small business owners to speak more freely about the economic issues they face. It would also help poor people to escape the grip of unconstitutional surcharge-labeling laws across the country. As Pacific Legal Foundation and Cato Institute observed over a year ago, the ban on surcharge labeling significantly places the burden of the regulatory cost squarely on the poor. According to one study cited in PLF’s brief, “the average [low income] cash-paying household transfers $149 . . . annually to [wealthier] card users, each of whom on average receives a subsidy of $1,333 . . . annually from cash users.”

With cases percolating throughout the federal courts, we’ll see if the Supreme Court resolves this important question over the next few terms.

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