We’ve posted in the past on legal developments about merchants’ acceptance of credit cards and whether state laws banning credit card surcharges are constitutional. You can find our previous posts here and here.
In a nutshell, the Supreme Court ruled in Expressions Hair Design v. Schneiderman that these restrictions regulate speech, as opposed to commercial conduct. That was a crucial decision because modern precedent holds that government can regulate ordinary commercial conduct so long as there is a “rational basis,” which is a very low bar for the government to defend. But because the Supreme Court held that these restrictions regulate speech, courts are now asking whether credit card surcharge laws can be squared with the First Amendment.
Small business may be interested to know that the Ninth Circuit Federal Court of Appeals recently struck down California’s ban on credit card surcharges in Italian Colors Rest. v. Becerra. That’s a big decision because the Ninth Circuit covers most of the western United States. (On a separate note, there has been discussion in some quarters about the possibility of dividing the Ninth Circuit given its tremendous geographic scope).
In any event, this may be an issue that will divide the federal courts of appeals, which may ultimately mean the issue will go before the Supreme Court. For now, different states will continue to apply different rules. Washington Legal Foundation explains more here.
Relatedly, our readers may be interested to see our guidance for merchants who are considering switching credit card processing companies.