The New York law effectively prohibits credit card surcharges. The law does, however, allow businesses to provide discounts from an item’s posted price to customers who pay by cash. Five New York businesses and their owners filed a lawsuit claiming that the surcharge ban violates the First Amendment to the U.S. Constitution, which is made applicable to the states by the Fourteenth Amendment. They argued that imposing surcharges for credit is indistinguishable from providing discounts for cash, except for the labels used, and thus the law unconstitutionally restricts their ability to use their preferred label. The U.S. Court of Appeals for the Second Circuit rejected this argument, holding that the law is a regulation of economic conduct, not speech, and therefore does not implicate the First Amendment at all. The businesses appealed this decision to the Supreme Court.

On December 21, 2016, CAC filed a friend-of-the-court brief on behalf of First Amendment scholars in support of New York, urging the Court to affirm the decision below and uphold the surcharge ban as consistent with the First Amendment. In our brief, we first argued that the surcharge law regulates economic transactions, not the manner of describing those transactions. The law is therefore not a speech restriction, but rather the type of commonplace economic regulation that states historically have had the power to adopt. As we explained, the law simply prohibits the act of charging customers more for an item or service than the price already posted by the merchant, which can prevent abusive “bait and switch” tactics. The law therefore regulates not labels but the relationship between two prices — the price posted and the price charged.

Although prohibiting surcharges may have some incidental effects on speech, we then explained, this does not make the ban a speech restriction. Nearly every law regulating conduct can limit speech in some way (for instance, a ban on discriminatory hiring may require employers to remove “White Applicants Only” signs), but laws that target neither speech nor inherently expressive conduct are not given heightened scrutiny under the First Amendment merely because they may have such incidental side effects. Finally, our brief warned that the businesses’ theory of the First Amendment threatens to upend the settled distinction between constitutionally protected speech and unprotected economic conduct, and that acceptance of that theory would require courts to apply heightened review to all sorts of commercial regulations that seek to promote health, safety, or welfare, increasing judicial second-guessing of the choices made by elected representatives. In upholding such regulations, our brief argued, courts may come to water down the First Amendment standards used to evaluate them, diminishing the Amendment’s protections against genuine infringements on speech.

The Court heard oral arguments on January 10, 2017.

On March 29, 2017, the Court, in an opinion by Chief Justice Roberts, concluded that the New York law regulates speech, and remanded to the Second Circuit to determine whether it can survive First Amendment review. On remand, the Second Circuit will have to determine the appropriate standard of review, as well as whether it can survive that level of review; it may also, as three Justices suggested would be appropriate, certify the case to the New York Court of Appeals to determine definitively the meaning of the New York law.