In the recent 11th Circuit Court of Appeals decision of Dana’s Railroad Supply v. the Attorney General of the State of Florida (11th Circuit Court of Appeals, 14-14426 2015)(Available Here), the Court of Appeals determined that the Florida statute section 501.0117 violated the First Amendment. Florida passed a law making it a second-degree misdemeanor for “a seller or a lesser in a sales or lease transaction” to “impose a surcharge on the buyer or less see for electing to use a credit card”. The full text of the statute is as follows:
(1) A seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller or lessor accepts payment by credit card. A surcharge is any additional amount imposed at the time of a sale or lease transaction by the seller or lessor that increases the charge to the buyer or lessee for the privilege of using a credit card to make payment. Charges imposed pursuant to approved state or federal tariffs are not considered to be a surcharge, and charges made under such tariffs are exempt from this section. A convenience fee imposed upon a student or family paying tuition, fees, or other student account charges by credit card to a William L. Boyd, IV, Florida resident access grant eligible institution, as defined in s. 1009.89, is not considered to be a surcharge and is exempt from this section if the amount of the convenience fee does not exceed the total cost charged by the credit card company to the institution. The term “credit card” includes those cards for which unpaid balances are payable on demand. This section does not apply to the offering of a discount for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, if the discount is offered to all prospective customers.
(2) A person who violates the provisions of subsection (1) is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.
In 2014 the Plaintiffs were sent cease-and-desist letters from the Florida Attorney General demanding that they stop applying a surcharge to customers who decided to use credit cards. The lower District Court granted the Attorney General’s motion dismissing the complaint.
The appeals court noted that the District Court declined to apply any level of First Amendment scrutiny in its decision. In reviewing the matter, the Appeals Court began by noting that Florida’s no-surcharge law hinged on a single determination: “whether the law regulates speech, triggering First Amendment scrutiny, or whether it regulates conduct, subject only to rational basis review as a mine-run economic regulation.” The Court noted that at first blush the statute appears to ban the merchants from engaging in dual pricing. However it is noted that the merchants are expressly allowed to offer “a discount for the purpose of inducing payment by cash.” As a result it does not in fact ban duel pricing.
The lower district court and the Attorney General seemed to indicate and argue that this statute would help deal with a bait and switch concern to try to protect consumers. The appeals court however determined that construing the statute as a bait and switch offense would cover only conduct that was already covered by the Florida deceptive and unfair trade practices act. The appeals court reviewed and rejected other alternative constructions of the statute but ultimately determined that the difference between a discount any surcharge was a measure of semantics and language. As a result the appeals court found that Florida’s no surcharge law is a restriction on speech and not a regulation of conduct.
After determining that the law triggered First Amendment scrutiny as a restriction on speech the court reviewed what level of scrutiny must be reviewed. Content-based restrictions on categories of speech such as commercial and professional speech are given more leeway because of robustness of the speech and the need for regulatory flexibility. Under intermediate scrutiny restrictions directed at commerce or conduct can be upheld assuming they further a substantial government interest and are narrowly tailored even if they impose incidental burdens on speech. The Court determined that the no surcharge law would be reviewed under the more forgiving standard of intermediate scrutiny.
The Court agreed that the no-surcharge law has the flavor of commercial speech. However the court found that the no surcharge law deprives the marketplace of ideas of the full range of public sentiment. It noted
A law enacted for the sole purpose of forbidding a price difference to be labeled a surcharge, while allowing the seem to be called a discount does not impose an incidental burden on speech… The no-surcharge law is content-based: it applies only to how a merchant may frame the price difference between cash and credit card payments. The no- surcharge law is speaker based: it applies only to those merchants who accept payment by both cash and credit card and engage in dual pricing. And the no-surcharge law is viewpoint based: it denies the expression of one equally accurate amount of reality in favor of the State’s own.
The Court reviewed the constitutionality of regulations on commercial speech under the four part Central Hudson test. It explicitly rejected any notion that because some modicum of economic conduct is implicated that therefore a law cannot also unconstitutionally restrict speech. The Court found that Florida’s law does not target false or misleading speech. Most telling was the Court’s finding that the statute had an exception that exempted certain state agencies from the law. The court found that “if customers would be harmed by learning that they faced surcharges but not discounts from private merchants, creating an exception allowing the state to impose convenience fees betrays the frailty of any potential state interests.” The Court ultimately found as follows: “We rule today only on a law that, though it purports to regulate commercial behavior, has the sole effect of banning merchants from uttering the word surcharge, criminalizing speech that is neither false or misleading.” The Court determined that Florida statute 501.0117 is an unconstitutional abridgment of free speech and reversed the District Court granted summary judgment.