How Expressions Hair Design Reshaped Surcharge Law
Highlights
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Supreme Court held New York’s anti‑surcharge law regulated merchant speech
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Case remanded for analysis under commercial speech doctrine
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Multiple state surcharge bans have been struck down or revised since
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Clear distinction now required between surcharges and convenience fees
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Pricing communication now recognized as First Amendment-protected
The Core Facts
New York’s General Business Law § 518 prohibited merchants from adding a surcharge to credit card payments, while allowing discounts for cash payments. This distinction became a legal battleground when several New York businesses challenged the law, arguing that it restricted how they could communicate price differences to customers.
These merchants—ranging from hair salons to auto repair shops—wished to post a single sticker price and add a credit card surcharge at the register. They claimed that being unable to describe the price differential as a “surcharge” violated their First Amendment rights. A federal district court initially sided with the merchants, but the Second Circuit reversed, viewing the law as merely regulating economic conduct rather than speech.
The U.S. Supreme Court agreed to hear the case to determine whether the law regulated speech. In 2017, the Court ruled that the statute did indeed regulate how merchants communicated prices—thus implicating the First Amendment. However, the Court did not decide whether the law was ultimately constitutional. Instead, it sent the case back to the lower court to apply the proper level of scrutiny under commercial speech doctrine.
This nuanced but significant ruling established that laws affecting how prices are labeled can constitute speech regulation. It opened the door for similar legal challenges in other states with comparable laws.
Background on Key Players & Legal Doctrines
The merchant plaintiffs represented typical small business owners burdened by interchange fees imposed by credit card networks. These fees reduce profit margins, prompting some merchants to pass on the cost to consumers. Doing so effectively requires clear communication—whether as a “surcharge” or a “cash discount.”
The Supreme Court, led by Chief Justice John Roberts in this case, recognized that the state’s ban on using the term “surcharge” restricted a merchant’s ability to convey pricing information, even though the underlying transaction (charging more for credit) remained legal. This positioned the statute within the scope of commercial speech, a category protected by the First Amendment but subject to intermediate scrutiny.
Under the Central Hudson test for commercial speech, a law must serve a substantial government interest, directly advance that interest, and not restrict more speech than necessary. The remand required lower courts to evaluate New York’s law under this standard.
By framing the issue as a question of speech—not just price regulation—the Court signaled that even subtle forms of regulation can carry constitutional implications when they interfere with communication.
State-Level Impact and Legal Aftershocks
Following this ruling, several states saw their anti-surcharge laws challenged or repealed. California, for example, had a similar statute, which the Ninth Circuit declared unconstitutional under the First Amendment. Texas faced a similar fate when its law was struck down by a federal court. Florida’s law was invalidated in a separate case even before the Supreme Court ruled in Expressions.
At least eleven states once maintained surcharge bans. In the wake of Expressions, many revised their statutes to allow clearer dual-pricing schemes or abandoned enforcement of surcharge restrictions altogether. Some retained regulations under consumer protection frameworks, while others replaced outright bans with disclosure requirements or caps on surcharge amounts.
The shifting legal landscape has created a patchwork of state policies, with some jurisdictions still enforcing restrictions and others explicitly allowing surcharges with proper disclosure.
The Fine Line: Surcharges vs. Convenience Fees
A key complication lies in distinguishing surcharges from convenience fees. Though both involve added costs, legal and practical differences remain:
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Surcharge: Added specifically for using a credit card rather than cash.
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Convenience Fee: Added for using a nonstandard payment method, such as online or over the phone.
This distinction matters because some states ban surcharges but allow convenience fees. Card network rules often allow convenience fees under specific conditions, while surcharges may be capped or banned entirely.
Courts have acknowledged that if a law restricts only the label (“surcharge”) while allowing the practice in other forms (e.g., cash discounts), it risks being a content-based speech regulation. As a result, merchant compliance increasingly depends not just on how much they charge, but on how they describe the charge.
The Expressions decision clarified that such semantic differences are not trivial under the First Amendment. A law that allows “discount for cash” but bans “fee for credit” regulates not the transaction, but its presentation.
Implications for Law, Commerce, and Consumers
For merchants, the ruling provides constitutional backing for pricing flexibility. They can challenge state restrictions that limit how they describe fees, provided they meet disclosure and fairness standards.
For consumers, this shift could bring more transparent pricing. Rather than hiding costs within higher sticker prices, merchants can now more openly allocate credit card fees—if permitted by local law. Yet consumer advocates caution against deceptive practices or hidden fees, urging continued oversight.
For states, the decision presents a challenge: how to craft fee regulations that balance consumer protection with free speech. Laws must be narrowly tailored and avoid unnecessarily restricting how businesses communicate lawful pricing practices.
Institutionally, the ruling reinforces the trend of scrutinizing economic regulations that affect expressive conduct. It underscores the evolving role of the First Amendment in commercial contexts, expanding beyond advertising into how businesses communicate value, cost, and payment options.
What’s Next?
On remand, the lower courts were instructed to assess whether New York’s law could survive commercial speech scrutiny. Although the Supreme Court did not invalidate the statute outright, its framing made clear that similar laws face a steep constitutional hurdle.
Merchants across the country continue to litigate surcharge restrictions, especially in states that have yet to revise outdated statutes. Meanwhile, card networks maintain their own rules, often requiring clear disclosure and capping surcharge amounts at certain thresholds.
Future legislation may shift focus toward broader consumer protection frameworks, like “junk fee” bans, which can target hidden costs regardless of the payment method. Yet any such rules must tread carefully to avoid replicating the speech issues spotlighted in Expressions.
Conclusion
Expressions Hair Design v. Schneiderman marked a constitutional pivot: transforming what appeared to be a narrow pricing regulation into a broader issue of protected speech. By recognizing that how a merchant communicates price differences can fall under First Amendment protection, the Court opened a legal path for businesses to challenge similar laws nationwide.
In the aftermath, state laws have fallen, others are under review, and the regulatory landscape around credit card surcharges has grown more complex. At its core, the ruling affirms that transparency in commerce isn’t just about fairness—it’s about speech, too.
