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Thursday, March 28, 2024 | Back issues
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Florida Cannot Ban Credit Card Surcharges

(CN) - A Florida law forbidding merchants from imposing a credit card "surcharge," but allowing them to offer a cash "discount" to those who choose to forego the plastic is an unconstitutional regulation of speech, a divided 11th Circuit ruled.

"Anyone who has ever made a purchase at a gas station, corner store, or shopping mall will not be shocked to learn that swiping a credit card is often more expensive than is paying with cash," U.S. Circuit Judge Gerald Tjoflat said, writing for the panel's 2-1 majority.

"What may be shocking to learn is that Florida makes it a second-degree misdemeanor for '[a] sellor or lessor in a sales or lease transaction' to 'impose a surcharge on the buyer or lessee for electing to use a credit card,' while the State expressly allows 'the offering of a discount for the purpose of inducing payment by cash,'" Tjoflat wrote.

In other words, merchants cannot charge customers a "surcharge" for paying with credit, but a customer paying cash may pay a lower price for the same product.

"As a result, a merchant who offers the same product at two prices is allowed to offer a discount for cash while a simple slip of the tongue calling the same price difference a surcharge runs the risk of being fined and imprisoned," Tjoflat said. (Emphasis in original.)

Plaintiffs include a hobby shop, a specialty jewelry shop, a discount furniture retailer, and an outdoor sporting goods shop, all of whom received cease-and-desist letters for informing customers that they would be charged a surcharge for paying with a credit card.

All four businesses claim that the price difference between cash and credit is more accurately described as a credit-card surcharge, rather than a cash discount.

The 11th Circuit struck down the law as unconstitutional on Wednesday.

"Florida's no-surcharge law directly targets speech to indirectly affect commercial behavior. It does so by discriminating on the basis of the speech's content, the identity of the speaker, and the message being expressed," Tjoflat said.

The court found that the law does not regulate merchant's behavior - it still allows them to create a dual-pricing scheme - but strictly targets speech.

"By effectively purging from merchants' vocabularies the doubleplusungood surcharge and replacing it with the State's preferred term, discount, the constituency most impacted by the no-surcharge law has been deprived of its full rhetorical toolkit," the panel said. (Emphasis in original.)

The court rejected the State's argument that the law regulates misleading speech.

"Calling the additional fee paid by a credit-card user a surcharge rather than a discount is no more misleading than is calling the temperature warmer in Savannah rather than colder in Escanaba," Tjoflat said. (Emphasis in original.)

While it may cause some customer confusion for some merchants to apply credit-card surcharges, while others opt for cash discounts, the panel concluded that this was not a sufficient government interest to justify abridging protected speech.

Tjoflat was joined in the decision by U.S. Circuit Judge David Sentelle.

Chief U.S. Circuit Judge Ed Carnes dissented, saying that the majority's decision disregards the legislature's definition of surcharge as "any additional amount imposed at the time of sale."

"The merchant can speak in any way he chooses so long as he does not ambush the credit-card-using customer with a higher price at the register. What matters is when, from the customer's perspective, the merchant adds the additional amount to the price because a credit card is used, not how the merchant describes it," Carnes said. (Emphasis in original.)

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