The Second Circuit Court of Appeals has ruled that imposing a surcharge for payment by credit card is still illegal in New York even though the settlement of the antitrust litigation against MasterCard and Visa permits the imposition of such a surcharge. Nevertheless, 11 states, including New York and Puerto Rico, maintain declaring such an imposition of a surcharge to be illegal—eight of those specifically refer to “consumer,” but it is questionable whether the remaining states’ laws also apply to commercial transactions.
Five businesses banded together and commenced a lawsuit in New York’s federal district court seeking to have the New York State law deemed unconstitutional, vague and in violation of the First Amendment. New York permits a merchant to offer a discount for cash, but that same merchant may not impose a surcharge for payment by credit card. On October 3, 2013, U.S. District Court Judge Rakoff issued his ruling determining that the New York law on surcharging was unconstitutional. Among his reasons was that surcharges are perceived negatively while discounts are looked upon as a bonus or gain.
The Second Circuit ruled on Sept. 29 that Section 518 is neither unconstitutional nor does it violate a merchant’s freedom of speech. In the meantime, antitrust litigation relating to credit cards against American Express is still ongoing. A settlement that received preliminary approval in February 2014 failed to achieve final approval, and it appears that such approval may not happen in any near future. Several parties objected to the settlement on numerous grounds.
- Wanda Borges, Esq., principal member of Borges & Associates LLC and member of NACM-National’s Government Affairs Committee
For the full version of this article, with more background and analysis, check out this week's edition of eNews, available late Thursday afternoon at www.nacm.org.