New York and nine other states purport to ban surcharges that pass through the costs imposed by credit-card companies and banks for credit-card transactions—costs known as “swipe fees.” But each of these states simultaneously permits cash discounts from baseline prices that already incorporate credit costs. From an economic standpoint, what is permitted (marked-up price minus a cash discount reflecting the cost of credit) is exactly the same as what is banned (regular price plus a charge reflecting the cost of credit). Accordingly, what these laws really ban is a label; a name; speech. New York and other states contend these laws protect consumers and regulate economic activity, but what they really do is shield consumers from truthful speech about economic activity.
The bans’ loopholes, contradictions, and ambiguities undermine any claimed consumer-protection purpose. First, each state that has a swipe-fee speech ban exempts its own government-run vendors. Second, swipe-fee labels convey truthful information about prices, and states typically require, rather than prohibit, such disclosure of hidden costs and risks. Third, state attorneys general typically police deceptive pricing, but these laws require them to suppress such information. And, fourth, these bans are so vague as to render them unintelligible to the average person, which only further clouds the pricing information available in the market.