It’s a small victory to be sure, but those of us who want to protect free speech must take our hope from whatever sources we can.
In the case of Dana’s Railroad Supply v. Florida, the sharp-eyed Atlanta-based 11th U.S. Circuit Court of Appeals struck down a Florida law barring merchants from imposing a surcharge on customers for credit card use.
The law allowed merchants to give discounts for cash, but would not permit surcharges for using credit cards. “Ah HA!” realized the court, This violates the First Amendment, because it penalizes businesses that want to call price differences based on credit card use a surcharge rather than a cash discount, and they are the exact same thing. “You can penalize credit card users,” the dumb law said, “but you have to call it what we tell you to call it.”
“Tautologically speaking,” the opinion said, “surcharges and discounts are nothing more than two sides of the same coin; a surcharge is simply a ‘negative’ discount, and a discount is a ‘negative’ surcharge. As a result, a merchant who offers the same product at two prices—a lower price for customers paying cash and a higher price for those using credit cards—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.”
“The First Amendment prevents staking citizens’ liberty on such distinctions in search of a difference.”
Pointer and Facts: ABA Journal.
17 thoughts on “Ethics Hero: 11th U.S. Circuit Court of Appeals”
Seems like a perfectly ethical choice if a company can demonstrate how credit card use by a customer incurs additional effort on the part of the company…(it arguably does as behind the scenes action has to be taken reconciling credit and debt). Whereas if there were no difference in cost to the company then to charge differently based on how a customer pays would strike me as unethical.
Which of course is unrelated to the law which was poorly worded. If the law had been better worded would have a beef with it?
Merchants have to pay a percentage on every single CC transaction, at rates determined by many factors. (less for in person charges than phone charges, less if your system meets certain security standards, etc.) So it’s probably ethical to charge CC customers more, since it costs them more than dealing with cash unless they are making a significant savings on reduced labor costs.
However, merchant agreements with the CC processors generally don’t let them charge users a percentage fee, and only allow a fixed amount or set of amounts (For example, 1 for charges up 100, 2 up to 200 etc.). It’s an annoying bit of marketing, where the merchant is largely expected to eat the CC fees in order to get more volume. Those fees are what pay for cash back rewards and the like, as well as the cost of processing.
I knew there was some behind the scenes additional cost. Thanks for the elucidation.
“Which of course is unrelated to the law which was poorly worded. If the law had been better worded would have a beef with it?”
Which of course is unrelated to the law which was poorly worded. If the law had been better worded would you have a beef with it?
The law dictated that the extra charge had to be described as a “cash discount” versus a “credit surcharge”. It had nothing to do with whether merchants could lawfully recoup the added cost (if so permitted by contract). The law permitted cash discounts, but not credit surcharges, despite the lack of meaningful difference.
I believe that the point was specifically that the law irreconcilably flawed.
Right, but that’s still focused on the poorly written letter of the law. If the law was composed as some sort of discouragement of disparately charging people for different payment methods *without a demonstrable reason to do so*, then would Jack have a beef with the law then? If better written…
It’s purely hypothetical as we know there is a provable additional cost to companies accepting credit vs accepting cash.
I would argue there was nothing ambiguous about the law, and therefore it was fundamentally flawed.
For a hypothetical law prohibiting any surcharge or discount, I think that would be a matter of political discretion to be judged on its merits. There would be ethical considerations, but it would be the legislature’s prerogative to balance competing interests in the manner they see best, and be open to readjusting if necessary. This issue would be more complicated than the simple ruling against semantic shenanigans found here.
“I think that would be a matter of political discretion to be judged on its merits. There would be ethical considerations, but it would be the legislature’s prerogative to balance competing interests in the manner they see best, and be open to readjusting if necessary. This issue would be more complicated than the simple ruling against semantic shenanigans found here.”
That’s good. Well done.
This one rule has been, essentially, the thing that made credit cards mainstream. Back in the 80s and early 90s, using a credit card for small purchases was ludicrous. This rule made credit cards ubiquitous for every kind of payment. I wonder how far back the pendulum can swing if people start seeing and feeling the pain in using a credit card. If surcharges and discounts become rampant, will people go back to managing their affairs in cash? Will the health of everyday Americans as it pertains to consumer debt improve? Will the government throw a fit because a person’s financial history reverts to the more anonymous cash option and they don’t have an electronic trail? Will the head of the FBI call cash an “encrypted currency” with no back doors built in for servicing law enforcement warrants?
(Bonus: Count how many sharks I just jumped, strawmen constructed, and tangents to a deep dark hole I created.)
“Bonus: Count how many sharks I just jumped, strawmen constructed, and tangents to a deep dark hole I created.”
Meh. It’s a fun topic to peruse. Given that the banks have engaged in the counter to this by surcharging the use of cash via their ATMs…
I never understood why they’d let you have your money free of charge if you walked into the branch and inconvenienced their tellers, but charged you to use a machine. Bank logic.
ATMs reduce the need for live tellers, therefore reducing the quantity of live tellers as hours devoted to face-to-face interactions decrease. Yet, there are plenty of interactions requiring face-to-face with a teller, so some have to stay on board… but not all those on-shift tellers are engaged in face-to-face “billable” time (in theory) so their time must be supplemented by their “internal competitors” (the ATMs)…
Certainly I could understand needing to pay for ATM upkeep and maintenance…you know the ATM’s “salary”…but still, live tellers are paid off the interest the bank generates…why would the same be said for ATMs?
You are correct…it is an odd fee.
I’m not really sure what fee you’re talking about. When you use your bank’s own ATM, there’s not (pretty sure ever) an ATM fee. The fees come into play when you use another bank’s ATM to fetch money from your bank’s account.
I’m sorry, you’re right. My bank plan charges me every time I use my card, which is rare enough and the plan cheap enough that it makes sense to me… But I often forget that isn’t the norm for many people.
Really? That’s quite odd! I mean, I do pay, like, $7 a year fee for a VISA ATM/Check card, but then usage is implied and not incremental. What you describe sounds….barbaric.
Thanks for providing a link. So many articles and posts provide no link or citation thus making it hard or impossible to go further then the point that was commented on or see if the author’s analysis is reasonable or if you are just plain interesting Accounting wise it can be handled eather as a surcharge or as a discount Same way for accounts payable..
I struggled with this when I was a controller for a middling sized farm supply chain; In my province we’re allowed to charge or give discounts regardless, but do you call it a cash discount, or a credit surcharge? And is it a good idea to do either? We settled on “cash discount” because it seemed more marketable, and “yes” because it is. Not only is it better for us in controlling our collections costs, but it starts a conversation as to why we have the discount… It’s amazing how many people don’t understand the percentages. My first thought in reading this post was “What was the perceived benefit?” Who thought they were getting ahead by controlling that language? And the only answer I could come up with was: “Credit Card Companies” When we were considering the discount/surcharge paradigm, we thought that surcharge might convince some people to abandon plastic, but it might alienate the people who use plastic as a business model. This is of course for a business that made most of it’s sales off less than 1000 customers. But if they did this at a Starbucks? How many people would forgo plastic to scrounge change?