An Important but Limited Victory for Free Speech

On Thursday, the Supreme Court ruled in Expressions Hair Design v. Schneiderman that imposing restrictions on how merchants inform buyers about the prices they charge triggers First Amendment scrutiny. This would seem to be an obvious conclusion, but the decision is an important, although limited, victory for those who want to convey honest information to their customers, and for those who have a right to receive that information.

The case dealt with New York Business Law § 518, which prohibits merchants from imposing a “surcharge” on customers who use credit cards, but allows for a “cash discount.” To put it simply: the law allows stores to advertise “discounts” for paying cash, but makes it a crime to advertise an economically equivalent “surcharge” for paying with plastic.

Expressions Hair Design, along with several other merchants, sued the state, arguing that the law was vague and a violation of their First Amendment right to convey information to their customers. The federal district court agreed, but the U.S. Court of Appeals for the Second Circuit reversed that decision. The circuit court’s ruling held that the First Amendment wasn’t implicated because the law didn’t regulate speech but merely regulated prices. The Supreme Court granted review to determine two issues: The threshold question of whether the law regulated speech rather than conduct and, if so, whether the law violated the First Amendment.

Chief Justice John Roberts, writing for a majority of the Court, held that the New York law was not only a price regulation dealing with conduct, but also a speech regulation: “What the law does regulate is how sellers may communicate their prices.” As he explained:

A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say “$10, with a 3% credit card surcharge” or “$10, plus $0.30 for credit” because both of those displays identify a single sticker price—$10—that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation.  In regulating the communication of prices rather than prices themselves, Section 518 regulates speech.

While this part of the Court’s decision is an important victory for free speech, the Court also held that the law was not vague and did not decide whether the speech restriction amounted to a First Amendment violation under the commercial speech doctrine. In what has become a theme, the Court made a point of ruling as narrowly as possible and remanded the case to the Second Circuit to make that hard balls-and-strikes call that John Roberts discussed at his confirmation hearing. This means the merchants will have to continue to fight for their rights in the lower court.

Although the judgment remanding the case to the circuit court was unanimous, Justices Stephen Breyer and Sonia Sotomayor (joined by Justice Samuel Alito) wrote separate concurring opinions. Justice Breyer continued his disheartening plea for the Court to adopt a rational-basis-type test when dealing with certain commercial speech (meaning the government wins). As Cato pointed out in our amicus brief, however, this approach has no foundation in First Amendment law. All restrictions based on content of speech should be subject to exacting scrutiny. Justice Sotomayor wrote a longer concurrence, arguing that because of the complexity of the case, the Court should have sought the input of the New York Court of Appeals (New York’s highest state court) to get a clearer picture of what the statute actually does.

Ultimately, while the victory was small, the Court chose to recognize the law for what it was—a restriction of the merchants’ ability to tell their customers the truth. Only time will tell whether the Second Circuit will now do the right thing and rule that the restriction violates the First Amendment.