OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
January 10, 2017
York General Business Law §518 provides that
"[n]o 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."
Petitioners, five New York businesses and their owners who
wish to impose surcharges for credit card use, filed suit
against state officials, arguing that the law violates the
First Amendment by regulating how they communicate their
prices, and that it is unconstitutionally vague. The
District Court ruled in favor of the merchants, but the
Court of Appeals vacated the judgment with instructions to
dismiss. The Court of Appeals concluded that in the context
of single-sticker pricing-where merchants post one price
and would like to charge more to customers who pay by
credit card-the law required that the sticker price be the
same as the price charged to credit card users. In that
context, the law regulated a relationship between two
prices. Relying on this Court's precedent holding that
price regulation alone regulates conduct, not speech, the
Court of Appeals concluded that §518 did not violate
the First Amendment. The Court of Appeals abstained from
reaching the merits of the constitutional challenge to
pricing practices outside the single-sticker context.
1. This Court's review is limited to whether §518 is
unconstitutional as applied to the particular pricing scheme
that, before this Court, petitioners have argued they seek to
employ: a single-sticker regime, in which merchants post a
cash price and an additional credit card surcharge. Pp. 5-6.
2. Section 518 prohibits the pricing regime petitioners wish
to employ. Section 518 does not define "surcharge."
Relying on the term's ordinary meaning, the Court of
Appeals concluded that a merchant imposes a surcharge when he
posts a single sticker price and charges a credit card user
more than that sticker price. This Court "generally
accord[s] great deference to the interpretation and
application of state law by the courts of appeals."
Pembaur v. Cincinnati, 475 U.S. 469, 484, n. 13.
Because the interpretation of the Court of Appeals is not
"clearly wrong, " Brockett v. Spokane Arcades,
Inc., 472 U.S. 491, 500, n. 9, this Court follows that
interpretation. Pp. 6-8.
3. Section 518 regulates speech. The Court of Appeals
concluded that §518 posed no First Amendment problem
because price controls regulate conduct, not speech. Section
518, however, is not like a typical price regulation, which
simply regulates the amount a store can collect. The law
tells merchants nothing about the amount they are allowed to
collect from a cash or credit card payer. Instead, it
regulates how sellers may communicate their prices. In
regulating the communication of prices rather than prices
themselves, §518 regulates speech.
Because the Court of Appeals concluded otherwise, it did not
determine whether §518 survives First Amendment
scrutiny. On remand the Court of Appeals should analyze
§518 as a speech regulation. Pp. 8-10.
4. Section 518 is not vague as applied to petitioners. As
explained, §518 bans the single-sticker pricing
petitioners argue they wish to employ, and "a plaintiff
whose speech is clearly proscribed cannot raise a successful
vagueness claim, " Holder v. Humanitarian Law
Project, 561 U.S. 1, 20. Pp. 10-11.
808 F.3d 118, vacated and remanded.
ROBERTS, C. J., delivered the opinion of the Court, in which
KENNEDY, THOMAS, Ginsburg, and Kagan, JJ., joined. BREYER,
J., filed an opinion concurring in the judgment. SOTOMAYOR,
J., filed an opinion concurring in the judgment, in which
Alito, J., joined.
Roberts Chief Justice.
time a customer pays for an item with a credit card, the
merchant selling that item must pay a transaction fee to the
credit card issuer. Some merchants balk at paying the fees
and want to discourage the use of credit cards, or at least
pass on the fees to customers who use them. One method of
achieving those ends is through differential pricing-charging
credit card users more than customers using cash. Merchants
who wish to employ differential pricing may do so in two ways
relevant here: impose a surcharge for the use of a credit
card, or offer a discount for the use of cash. In N.Y.Gen.
Bus. Law §518, New York has banned the former practice.
The question presented is whether §518 regulates
merchants' speech and-if so-whether the statute violates
the First Amendment. We conclude that §518 does regulate
speech and remand for the Court of Appeals to determine in
the first instance whether that regulation is
credit cards were first introduced, contracts between card
issuers and merchants barred merchants from charging credit
card users higher prices than cash customers. Congress put a
partial stop to this practice in the 1974 amendments to the
Truth in Lending Act (TILA). The amendments prohibited card
issuers from contractually preventing merchants from giving
discounts to customers who paid in cash. See §306, 88
Stat. 1515. The law, however, said nothing about surcharges
for the use of credit.
years later, Congress refined its dissimilar treatment of
discounts and surcharges. First, the 1976 version of TILA
barred merchants from imposing surcharges on customers who
use credit cards. Act of Feb. 27, 1976, §3(c)(1), 90
Stat. 197. Second, 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." §3(a), ibid.
1981, Congress further delineated the distinction between
discounts and surcharges by defining "regular
price." Where a merchant "tagged or posted" a
single price, the regular price was that single price. Cash
Discount Act, § 102(a), 95 Stat. 144. If no price was
tagged or posted, or if a merchant employed a two-tag
approach- posting one price for credit and another for
cash-the regular price was whatever was charged to credit
card users. Ibid. 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. The effect of
all this was that a merchant could violate the surcharge ban
only by posting a single price and charging credit card users
more than that posted price.
federal surcharge ban was short lived. Congress allowed it to
expire in 1984 and has not renewed the ban since. See
§201, ibid. The provision preventing credit
card issuers from contractually barring discounts for cash,
however, remained in place. With the lapse of the federal
surcharge ban, several States, New York among them,
immediately enacted their own surcharge bans. Passed in 1984,
N.Y.Gen. Bus. Law §518 adopted the operative language of
the federal ban verbatim, providing that "[n]o 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." N.Y.Gen. Bus. Law Ann.
§518 (West 2012); see also 15 U.S.C. §1666f(a)(2)
(1982 ed.). Unlike the federal ban, the New York legislation
included no definition of "surcharge."
addition to these state legislative bans, credit card
companies-though barred from prohibiting discounts for
cash-included provisions in their contracts prohibiting
merchants from imposing surcharges for credit card use. For
most of its history, the New York law was essentially
coextensive with these contractual prohibitions. In recent
years, however, merchants have brought antitrust challenges
to contractual no-surcharge provisions. Those suits have
created uncertainty about the legal validity of such
contractual surcharge bans. The result is that otherwise
redundant legislative surcharge bans like §518 have
increasingly gained importance, and increasingly come under
five New York businesses and their owners, wish to impose
surcharges on customers who use credit cards. Each time one
of their customers pays with a credit card, these merchants
must pay some transaction fee to the company that issued the
credit card. The fee is gener- ally two to three percent of
the purchase price. Those fees add up, and the merchants
allege that they pay tens of thousands of dollars every year
to credit card companies. 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. They also 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. The
merchants believe that surcharges for credit are more
effective than discounts for cash in accomplishing these
2013, after several major credit card issuers agreed to drop
their contractual surcharge prohibitions, the merchants filed
suit against the New York Attorney General and three New York
District Attorneys to challenge §518-the only remaining
obstacle to their charging surcharges for credit card use. As
relevant here, they argued that the law violated the First
Amendment by regulating how they communicated their prices,
and that it was unconstitutionally vague because liability
under the law "turn[ed] on the blurry difference"
between surcharges and discounts. App. 39, Complaint
District Court ruled in favor of the merchants. It read the
statute as "draw[ing a] line between prohibited
'surcharges' and permissible 'discounts'
based on words and labels, rather than economic
realities." 975 F.Supp.2d 430, 444 (SDNY 2013). The
court concluded that the law therefore regulated speech, and
violated the First Amendment under this Court's
commercial speech doctrine. In addition, because the law
turned on the "virtually incomprehensible distinction
between what a vendor can and cannot tell its customers,
" the District Court found that the law was
unconstitutionally vague. Id., at 436.
Court of Appeals for the Second Circuit vacated the judgment
of the District Court with instructions to dismiss the
merchants' claims. It began by considering single-
sticker pricing, where merchants post one price and would
like to charge more to customers who pay by credit card. All
the law did in this context, the Court of Appeals explained,
was regulate a relationship between two prices- the sticker
price and the price charged to a credit card user-by
requiring that the two prices be equal. Relying on our
precedent holding that price regulation alone regulates
conduct, not speech, the Court of Appeals concluded that
§518 did not violate the First Amendment.
court also considered other types of pricing regimes-for
example, posting separate cash and credit prices. The Court
of Appeals thought it "far from clear" that
§518 prohibited such pricing schemes. 808 F.3d 118, 137
(CA2 2015). The federal surcharge ban on which §518 was
modeled did not apply outside the single-sticker context, and
the merchants had not clearly shown that §518 had a
"broader reach" than the federal law.
Ibid. Deciding that petitioners' challenge in
this regard "turn[ed] on an unsettled question of state
law, " the Court of Appeals abstained from reaching the
merits of the ...