By Food Marketing Institute
The state of Texas now joins California and Florida – states where court rulings have determined that state law violates the First Amendment of the U.S. Constitution – when it prevents merchants from informing customers they will charge credit card users more because of swipe fees.
Some thirty years ago, Texas enacted legislation to prevent merchants from surcharging customers who pay with credit cards and debit cards, but the law allowed merchants to offer a discount when they paid with cash. Swipe fees are hidden from consumers, but merchants must pay them in order to take credit cards, and these costs are passed on to consumers in the form of costlier goods and services.
The U.S. District Court for the Western District of Texas (on remand from the U.S. Court of Appeals for the Fifth Circuit) has recently ruled in Rowell v. Paxton that the Texas no-surcharge law violated the First Amendment.
In 2017, the U.S. Supreme Court ruled in Expressions Hair Design v. Schneiderman that New York’s law banning surcharging must not violate a merchant’s First Amendment rights, overturning the judgment of the U.S. Court of Appeals for the Second Circuit and sending the case back down to federal district court. The Supreme Court said that the Appeals Court had previously wrongly decided that the New York law banning surcharging regulated conduct, rather than free speech. (Read more here.)
Texas now becomes the first state to overturn a previous ruling, since the Supreme Court’s decision. In 2016, the U.S. Court of Appeals for the Eleventh Circuit ruled that Florida law preventing surcharges violated First Amendment rights.
Other states with no surcharge laws currently on the books are Colorado, Connecticut, Kansas, Maine, Massachusetts, and Oklahoma.