The U.S. Supreme Court, following the likes of the E.U. and Australia, has decided to investigate whether or not retailers can justly pose a surcharge to customers who use a credit card for a transaction.
New York’s 2nd U.S. Circuit Court of Appeals upheld the state’s decision to prohibit retailers from imposing a transaction fee on customers who use credit cards. Merchants appealed the decision to the Supreme Court Justices, who accepted the hearing in late September.
The primary complaints in the case revolve around “swipe fees”: a fee paid by a merchant’s acquiring bank to a cardholder’s issuing bank. These fees, which constitute a small portion of every credit card transaction, add up to $50 billion of lost revenue annually for merchants across the country.
The state’s defense references the value in having the ‘sticker price’ resemble the actual price at checkout - even though tax is often not included in the original price. The state also said that while the law prevents merchants from adding a surcharge, it is not against giving a discount to customers who use cash; this is widely met with disapproval by merchants as it would result in an apparent price increase for all items. Gas stations are a prime example of this type of business model as they have discounted cash-paying customers for years.
The ability to add a surcharge to credit card purchases is particularly essential to mom-and-pop shops and retail chains in New York, Florida, California, and Texas, since these states have banned surcharge fees. The 2-4% of revenue that ends up in the credit card companies’ hands makes it particularly tough for companies selling low-margin products to subsist.
The trial is tentatively scheduled for early 2017, when the Supreme Court could issue a verdict that would result in a price hike across the board, affecting nearly every consumer in the country.