On Jan. 3, the U.S. Court of Appeals for the Ninth Circuit held that California’s statute prohibiting credit card surcharges, California Civil Code Section 1748.1, violated the First Amendment as applied to the proposed surcharge practices of the merchant-plaintiffs. Italian Colors Rest. v. Becerra, No. 15-15873, 2018 WL 266332 (9th Cir. 2018).
In March 2017, the U.S Supreme Court in Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017), found that New York’s no-surcharge law — which still allowed cash discounts — regulated not the prices that merchants could charge but rather how merchants could communicate their prices. The Ninth Circuit used the same reasoning to hold that California’s surcharge ban regulated speech rather than conduct and therefore posed First Amendment concerns. It then analyzed the speech regulation under a two-part intermediate scrutiny test, asking (1) whether the regulated speech is misleading or related to illegal activity; and (2) if not, whether the regulation directly advances a substantial state interest and is not more extensive than necessary to serve that interest.
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