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Law Center is Well Represented in Recent Court Case

October 8, 2013 — “Alice in Wonderland has nothing on section 518 of the New York General Business Law,” Federal District Judge Jed S. Rakoff wrote in a preliminary injunction, opinion and order issued on October 3.

He was referring to what he considers a “virtually incomprehensible” New York statute that prohibits merchants from tacking surcharges onto credit-card transactions in violation of the First Amendment. Under the law, the merchants could charge customers more for using a credit card than when paying cash, but they could not truthfully tell their customers that paying on credit was the source of the extra cost. 

But for Georgetown Law, the bigger story in Rakoff’s opinion from the U.S. District Court for the Southern District of New York is its many connections to the Law Center.

The judge mentioned Professor Adam Levitin’s work on credit card surcharges and merchant restraints four times, citing “The Anti-Trust Superbowl: America’s Payment Systems, No-Surcharge Rules, and the Hidden Costs of Credit” (Berkeley Business Law Journal, 2005), and “Priceless? The Economic Costs of Credit Card Merchant Restraints (UCLA Law Review, 2008).  

Levitin devotes much of his scholarship to consumer protection and has explored the issue of credit card surcharges extensively. 

Brian Wolfman, visiting professor and co-director of Georgetown Law’s Institute for Public Representation, and Deepak Gupta (L’02), founding principal of the public interest firm Gupta Beck, represented the plaintiffs in the case — five retailers who maintain that the New York law violates their right to free speech because it imposes possible criminal prosecution if they reveal to customers that they must increase prices to compensate for “swipe fees” from credit card companies. 

However, merchants are considered in compliance with the law if they tell consumers they get a “discount” for paying with cash. It was this confusing nuance that led Rakoff to reference Alice in Wonderland. The judge issued the preliminary injunction to prevent enforcement of the law while the retailers’ case is pending.

Though the case isn’t over, Gupta and Wolfman consider this recent milestone a significant win for consumers. “We are gratified that the court recognized the right under the First Amendment of merchants to provide, and consumers to receive, truthful information about the price of credit,” they said in a joint statement. “Ultimately, this decision should promote competition and bring down prices for consumers, whether they choose to pay with cash or with a credit card.”

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