By Thomas G. Wolfe, J.D.
In reviewing Florida’s credit card “no surcharge” law, the U.S. Court of Appeals for the Eleventh Circuit struck down the state law as an unconstitutional abridgement of free speech under the First Amendment to the U.S. Constitution. The federal appellate court determined that, under the Florida law prohibiting credit card surcharges, a merchant who offers the same product at a lower price for customers paying cash and at a higher price for customers using a credit card “is allowed to offer a discount for cash while a simple slip of the tongue calling the same price difference a surcharge runs the risk of being fined and imprisoned.”
Notably, the majority’s decision to strike down Florida’s credit card “no surcharge” law in Dana’s Railroad Supply v. Attorney General, State of Florida now places the Eleventh Circuit in direct conflict with the Second Circuit’s decision in Expressions Hair Design v. Schneiderman—upholding the constitutionality of New York’s credit card “no surcharge” law (see Banking and Finance Law Daily, Sept. 30, 2015).
By way of background, four small businesses in Florida charged their customers lower prices for using cash and higher prices for using a credit card. According to the court’s opinion, each of the businesses communicated the price difference to their customers as an additional amount for credit-card use rather than as a lesser amount for paying in cash. Eventually, the Florida Attorney General sent them “cease-and-desist letters.”
Although the businesses believed that it was “more effective, transparent, and accurate” to call the price difference a credit-card surcharge rather than a cash discount, the Florida AG demanded that the businesses refrain from “running afoul” of Florida’s credit card no-surcharge law.
Consequently, the four businesses and their principals filed a lawsuit against the Florida AG, alleging that the Florida’s no-surcharge law constituted an unjustified restriction on speech in violation of the First Amendment. The businesses further alleged that because the Florida law provided “insufficient guidance on how to comply with its mandates,” it was void for vagueness as well.
Florida’s credit card no-surcharge law (Fla. Stat. §501.0117) provides that a “seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller or lessor accepts payment by credit card.” The state law further provides that the law does not pertain to “the offering of a discount for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, if the discount is offered to all prospective customers.”
In addition, as underscored by the Eleventh Circuit, a violator of Florida’s no-surcharge law “is guilty of a misdemeanor of the second degree.” As a result, a violator could face the possibility of a $500 fine and 60 days of imprisonment.
The federal trial court had construed Florida’s no-surcharge law as primarily regulating “economic conduct” and, accordingly, conducted a “rational-basis” review of the law. In contrast, while the Eleventh Circuit recognized that “Florida’s no-surcharge law proves difficult to categorize, skirting the line between targeting commercial speech and restricting speech writ large,” the court determined that the statute “ultimately falls because it collapses under any level of heightened scrutiny.”
Employing a four-part test set forth by the U.S. Supreme Court for commercial speech, the Eleventh Circuit: (i) rejected “any notion that merely because some modicum of economic conduct is implicated therefore a law cannot also unconstitutionally restrict speech”; (ii) maintained that the Florida no-surcharge law did not regulate false or misleading speech; (iii) struggled to identify “a plausible governmental interest that would be served” by the law; and (iv) asserted that the law “neither directly advances any potentially substantial state interest nor is it narrowly tailored.”
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