A new law passed in California that bans payment-card surcharges was ruled unconstitutional by a federal judge last week, reported Pymnts.com
In 2014 California businesses sued the state, claiming their First Amendment rights were being violated. They claimed a law banning surcharges restricted retailers’ commercial speech by dictating how retailers can advertise the difference in prices when a customer pays with cash versus a credit card, when a surcharge applies to credit card payments.
The U.S. District Court Judge Morrison England on Thursday, March 26, found in favor of the retailers, noting that the law “is an unconstitutional restriction on plaintiffs’ freedom of speech and is void for vagueness.” The judge said because the language of the bill was too vague, retailers could be unaware of when they were violating the law.
The judge further explained the ruling, noting that due to the law, retailers could charge more for a product and then place a discount on that product, but that same retailer could not charge one amount and then add on a surcharge to make up for the credit card fees that the retailer would incur. Judge England said the California law therefore restricted how the retailer presented their price to the consumer, regardless of why they were charging or reducing specific prices, according to pymnts.com.