Ninth Circuit Rules Banning Credit Card Surcharges Violates First Amendment

Courts Ninth Circuit Credit Cards

On January 3, the U.S. Court of Appeals for the Ninth Circuit issued an opinion affirming a district court decision that a California law banning credit card surcharges violated the First Amendment because it was an unconstitutional restriction of speech and unconstitutionally vague. California Civil Code Section 1748.1(a) prohibits retailers from imposing surcharges on customers who pay with credit cards, but allows businesses to offer discounts for cash or debit card payments. In 2014, plaintiffs challenged the constitutionality of the law, and the district court granted summary judgment in favor of the plaintiffs and permanently enjoined its enforcement, holding that the statute violated the First Amendment because it amounted to “a content-based restriction on commercial speech rather than an economic regulation.” The California Attorney General's Office appealed.

The Ninth Circuit affirmed the district court decision, finding that California Civil Code Section 1748.1(a) could not withstand intermediate scrutiny because (i) the plaintiffs’ speech was not misleading, (ii) Section 1748.1(a) failed to promote California’s interest in protecting consumers from deception, and (iii) Section 1748.1(a) was more extensive than necessary to achieve California’s stated interest for the regulation. Though the panel affirmed the district court’s ruling, it also modified the district court’s injunction to apply only to the plaintiffs, and only with respect to the specific pricing practice they seek to employ.

See previous InfoBytes coverage here on court decisions regarding credit card surcharges