The US Supreme Court has ordered a re-examination of a ruling that upheld a New York law barring retailers from imposing surcharges on credit card purchases.
The court ruled that free speech rights under the First Amendment should be considered when determining the way merchants show consumers credit card swipe fees.
The case was also sent back to the New York-based 2nd US Circuit Court of Appeals for reconsideration.
According to Chief Justice John Roberts, the appeals court incorrectly concluded that the surcharge ban regulated only conduct rather than speech.
National Retail Federation (NRF) senior vice-president and general counsel Mallory Duncan said: “Most retailers have no desire to surcharge their customers for using credit cards.
“That would be the opposite of our industry’s goal of bringing credit card swipe fees under control. But merchants do want to be able to show customers the cost of using a credit card without running afoul of the law.
“While merchants don’t want to surcharge, having the ability to do so would be an important negotiating tool in convincing the card industry to charge reasonable fees instead of continuing to drive up consumer prices through this skyrocketing hidden tax.”
The Retail Industry Leaders Association (RILA) said that the ruling is an important step toward allowing retailers to tell consumers about the added costs of credit card payments.
The court ruling came in a case challenging the New York law and similar measures in nine other states that prohibit merchants from imposing a surcharge when customers use a credit card.
Passed at the urging of the card industry, these laws can be traps for merchants who give a cash discount.
The lawsuit argues that the laws violate merchants’ free speech rights under the first amendment and are unconstitutionally vague under the Due Process Clause of the 14th Amendment.
Banks are currently charging merchants a fee averaging 2% of the transaction amount paid by credit card.
A fee of at least 21 cents is charged on using debit cards.