Appeals Court: California Ban on Credit Card Surcharges Is Illegal

Therefore, the state law is regulating speech and not conduct, ruled the Ninth U.S. Circuit Court of Appeals in San Francisco. It said, “[p]laintiffs can already charge credit card customers more than cash customers. They seek to communicate the difference in the form of a surcharge rather than a discount. To paraphrase the Eleventh Circuit, imposing a surcharge rather than offering a discount is no more misleading than calling the weather warmer in New Orleans rather than colder in San Francisco.”
When the seller calls it a “discount” rather than a credit card surcharge, such a description is preferred by credit card companies. However, sellers do not like it because the prospect of avoiding a surcharge is more attractive to customers than getting a discount, even if the price is the same.

So, five California businesses sued in 2014, claiming the law violated the First Amendment by restricting commercial speech because it regulates how retailers can describe the price difference between cash and credit card purchases. They claimed the most effective way to encourage customers to switch from credit cards to cash is to emphasize the penalty associated with using credit cards by displaying a single price and charging an extra fee for credit card purchases.