[JURIST] A judge for the US District Court for the Southern District of New York [official website] on Thursday struck down [opinion, PDF] a state law that criminalizes retailers for imposing surcharges on customers who pay by credit card. Under Section 518 [text], a retailer may give a “discount” to customers paying with cash but cannot tell customers that a surcharge will be added to credit card purchases. The court held that this “virtually incomprehensible distinction between what a vendor can and cannot tell its customers offends the First Amendment and renders section 518 unconstitutional.” The court preliminarily enjoined the state from enforcing the law.

Credit card fees have caused litigation around the world. Last year the European General Court [official website], the EU’s second highest court rejected [JURIST report] a challenge by MasterCard over its cross-border credit card fees. The court upheld a decision by the European Commission [official website] that the fees violate EU antitrust rules. In 2010 the US Department of Justice (DOJ) [official website] filed a civil antitrust lawsuit [JURIST report] against MasterCard, Visa and American Express [corporate website]. The lawsuit challenged rules utilized by the companies that prevented merchants from providing discounts and rewards for using credit cards with lower merchant fees. The DOJ contended that these rules unfairly inflate costs for both consumers and merchants. Visa and MasterCard agreed to a settlement that required the companies to allow merchants using their cards to express a preference for types of payments accepted, to offer discounts to consumers for using a particular card or type of payment and to provide consumers with information regarding the costs incurred by the merchant when a particular type of credit card is used. In 2008 Visa and Mastercard settled an antitrust suit [JURIST report] with Discover Financial Services [corporate website] for $2.75 billion. The settlement was the result of a 2004 lawsuit filed by Discover after a DOJ suit [opinion] determined Visa and Mastercard were in violation of section 1 of the Sherman Antitrust Act by prohibiting banks from using Discover’s services.