When a ban on commercial advertising faces a First Amendment challenge, courts typically address the merits of the constitutional claim by applying the four-part test laid out in Central Hudson Gas & Electric Corp. v. Public Service Commission.1 However, since its inception, Central Hudson’s test has been criticized for being both over- and under-inclusive,2 as well as overexpansive.3 Justice Blackmun, in his concurrence, took an alternative route and maintained that courts should not apply Central Hudson when a statute seeks to withhold commercial information for the purpose of manipulating consumer behavior.4 Last Term, in Expressions Hair Design v. Schneiderman,5 the Court held that New York’s statutory prohibition on credit card surcharges regulated the communication of prices and thus regulated speech.6 The Court, however, declined to assess the merits of the constitutional claims, instead invoking the “court of review, not of first view” maxim to remand the issue to the Second Circuit.7 The Court not only erred in refusing to address the parties’ constitutional arguments, but given that the statute withheld commercial information for the purpose of manipulating consumer behavior, also missed an opportunity to answer definitively whether such a statute is per se illegitimate or whether it should undergo intermediate scrutiny under Central Hudson.
Credit card issuers and retailers have been enmeshed in a decades-long war.8 At first, issuers contractually banned retailers from charging different prices for cash and credit card transactions.9 Congress re-sponded with a series of amendments to the Truth in Lending Act10 (“TILA”): first to prohibit contractual bans on discounts for cash,11 and then again to enact its own ban on surcharges for credit card use.12 The federal ban lapsed in 1984,13 but credit card lobbyists quickly convinced ten states and Puerto Rico to enact similar statutes.14 For years, these statutory bans had little importance because contractual bans on surcharges were already in place across the industry.15 Then in 2012, Visa and MasterCard — the two largest credit card issuers — agreed to lift their contractual surcharge bans as part of an antitrust settlement.16 Though the Second Circuit rejected the settlement agreement,17 the litigation has drawn attention to those eleven nonfederal surcharge bans.18
New York General Business Law Section 51819 is one such statute. It copies verbatim TILA’s operative language: “No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”20 Merchants who violate Section 518 are subject to criminal sanctions and civil enforcement actions.21 But unlike the lapsed federal surcharge ban, Section 518 does not define “surcharge,” “discount,” or “regular price.”22 These omissions posed a problem for merchants seeking to understand Section 518’s scope. Because TILA explicitly differentiated between a “surcharge”23 added to and a “discount”24 subtracted from a posted “regular price,”25 two pricing schemes existed under the federal ban: single-sticker pricing (that is, allowing merchants to post one price for a product and offer price reductions for cash payments while forbidding them from charging an additional fee for credit card payments) and dual-sticker pricing (that is, allowing merchants to post one price for cash payments and another price for credit card payments that could be higher than the cash price).26 The lack of clear definitions in the New York statute, however, left New York merchants uncertain of which scheme they were allowed to follow under Section 518. What was clear was that neither scheme allowed a merchant to describe a price difference as a “surcharge.”
In 2013, five New York City retailers filed suit in the United States District Court for the Southern District of New York against the New York State Attorney General.27 The merchants — wanting to impose additional fees on credit card payments and describe the fee as a surcharge28 — challenged Section 518 as violative of the First Amendment’s Free Speech Clause, void for vagueness under the Fourteenth Amendment’s Due Process Clause, and preempted by the Sherman Antitrust Act.29 Plaintiffs moved to preliminarily enjoin Section 518’s enforcement based on their First and Fourteenth Amendment claims, and defendants cross-motioned to dismiss the complaint.30
The district court granted plaintiffs’ motion for a preliminary injunction.31 Judge Rakoff first determined the case was “clearly ripe”32 and that all of the merchants had standing because they “legitimately fear[ed]” that New York may enforce Section 518 “beyond the bounds of its federal precursor.”33 Turning to the First Amendment challenge, Judge Rakoff found that Section 518 “clearly regulat[ed] speech, not conduct,” because Section 518 created a semantic distinction between “permissible ‘discounts’” and “prohibited ‘surcharges’” that had nothing to do with economic realities.34 Nor was Section 518 a permissible disclosure requirement deserving of rational basis review — to the contrary, Section 518 prohibited speech outright, thus subjecting it to “heightened judicial scrutiny.”35 Applying Central Hudson’s test for commercial speech regulations,36 Judge Rakoff found that Section 518 restricted the lawful, nonmisleading dual-pricing scheme,37 did not advance New York’s interest in protecting consumers from deception,38 and was overbroad.39 Section 518 thus violated the First Amendment.40
The United States Court of Appeals for the Second Circuit vacated the judgment and remanded the case with instructions to dismiss the plaintiffs’ claims.41 Writing for a unanimous panel, Judge Livingston42 held that the district court erred in invalidating Section 518 under the First Amendment and the Due Process Clause.43 Because Section 518 did not define surcharge, Judge Livingston adopted the word’s ordinary meaning44 and determined that Section 518 as applied to the single-sticker pricing scheme merely regulated conduct.45 By its own terms, Section 518 did not prohibit sellers from referring to price differentials as surcharges; it prohibited sellers from imposing surcharges, thus regu-lating a pricing practice.46 Furthermore, even though “prices [are] necessarily communicated through language,” the panel relied on the premise that prices are not speech for First Amendment purposes.47 If ordinary price regulations do not implicate the First Amendment, it follows that statutes like Section 518 that regulate the relationship between prices do not implicate the First Amendment either.48
The panel declined to settle the overbreadth challenge (that is, whether Section 518 was unconstitutional as applied to other pricing schemes), invoking Pullman49 abstention because the issue turned on unsettled questions of state law.50 The panel could have certified to the New York Court of Appeals the question of whether Section 518 applied to sellers using dual-sticker pricing, yet the panel declined to do so, noting that the “present state of the record” was insufficiently developed.51
The Supreme Court vacated the Second Circuit’s decision and remanded the case for further proceedings upon finding that Section 518 regulates speech.52 Writing for the Court, Chief Justice Roberts53 first noted that the merchants’ challenge was limited to Section 518 as applied to their preferred pricing scheme (that is, “posting a cash price and an additional credit card surcharge, expressed either as a percentage surcharge or a ‘dollars-and-cents’ additional amount”).54 The Court agreed with the Second Circuit that Section 518 prohibited this pricing scheme;55 however, the Court disagreed with the Second Circuit’s conclusion that Section 518 regulated only conduct.56 The Court determined that Section 518 was not “like a typical price regulation”57 that incidentally burdened speech because Section 518 “tells merchants nothing about the amount they are allowed to collect.”58 Instead, Section 518 regulates the “communication of prices” and therefore regulates speech.59 Because the Court is “a court of review, not of first view,”60 it declined to decide whether Section 518 is a commercial speech regulation subject to Central Hudson or a disclosure requirement subject to Zauderer v. Office of Disciplinary Counsel,61 leaving the Second Circuit to determine Section 518’s constitutionality.62
Justice Breyer, concurring in the judgment, wrote separately to underscore that “virtually all government regulation affects speech.”63 As such, it is more important for courts to determine whether and how a statute or rule affects a protected First Amendment interest, rather than attempt to distinguish between conduct and speech.64 To emphasize the inquiry’s significance, Justice Breyer summarized how different kinds of speech regulation — political speech regulations, commercial speech regulations, and disclosure requirements — demand different standards of review.65
Justice Sotomayor concurred in the judgment but wrote separately to criticize the Court for not ordering the Second Circuit to certify an interpretative question to the New York Court of Appeals.66 Justice Sotomayor noted that multiple possible interpretations of Section 518 exist.67 Given that the decision turned on knowing exactly what Section 518 prohibited — as authoritatively construed by New York’s highest court — Justice Sotomayor concluded that the Second Circuit abused its discretion in declining to certify the question, and the Court continued the error by not ordering the Second Circuit to do so.68
Expressions Hair Design assumes an unusual position in commercial speech jurisprudence, in that the Court rarely grants certiorari merely to determine whether the statute at issue regulates conduct or speech. From Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc.,69 where the Court first recognized that commercial speech is protectable,70 to Sorrell v. IMS Health Inc.,71 where the Court applied an even more exacting level of scrutiny to a commercial regulation it deemed to be content- and speaker-based,72 the Court has typically addressed the merits of the constitutional challenge at bar. To be sure, in Expressions Hair Design, the Court helpfully reaffirmed in dicta that price controls regulate conduct while, at best, incidentally burdening speech.73 In addition, the Court’s holding addressed the circuit-splitting issue of whether surcharge bans like Section 518 implicate the First Amendment.74 However, any gains were tempered by the dissatisfying and odd fact that the Court used the “first view” maxim to end its analysis at the threshold conduct/speech inquiry. In doing so, the Court not only erred but also missed an opportunity to definitively answer the question of whether a state can ever restrict speech in order to manipulate consumer behavior.
To some extent, the “first view” maxim seems like an opportunistic tool to avoid fully addressing the merits of the question presented. After all, the Court does not always let this maxim stop it from addressing issues or arguments that were not presented by the parties or were not litigated in the lower courts. For example, as Professor Michael Coenen explained, the Court in Burwell v. Hobby Lobby Stores, Inc.75 was faced with the issue of “whether the government had ‘substantially burdened’ the religious beliefs of the plaintiffs by requiring them to offer employer-provided health insurance plans that covered various methods of contraception.”76 Several amici for the government advanced a game-changing argument that the “$2,000 per-employee penalty is actually less than the average cost of providing health insurance.”77 The government itself did not raise this argument, and though the government’s silence should have militated against the Court addressing the issue,78 the Court still went to pains to explain why the argument was unavailing.79 That same Term in Daimler AG v. Bauman,80 the Court departed from established personal jurisdiction doctrine based on an argument that was advanced “for the first time in a footnote of Daimler’s merits brief before [the] Court.”81 Yet, in Expressions Hair Design, the Court refused to address the properly presented constitutional issue and thus ignored several arguments both parties raised in their briefs — arguments that were advanced at the district, circuit, and Supreme Court levels.
Generally, the Court articulates reasons for “not decid[ing] in the first instance issues not decided below.”82 When the Court invokes the “first view” maxim, it typically justifies its refusal to assess an issue on the grounds that (1) the Court granted certiorari on only a particular issue, (2) the claims were not sufficiently developed below,83 or (3) neither the district court nor the appellate court focused on the issue.84 The first two reasons are premised on notions of fairness and procedural legitimacy — both parties should be afforded the opportunity to develop their arguments on a particular issue,85 and the Court should not go beyond the record or the questions presented for which it granted certiorari.86 The third reason is likely premised on the belief that the district and appellate courts, being more familiar with the facts and laws at issue, should be accorded due deference.87
However, because Expressions Hair Design’s procedural history did not raise those concerns, the Court should have determined Section 518’s constitutionality. The first two traditional justifications are easily dispelled. The Court granted certiorari to determine “whether the statute violates the First Amendment,” not merely whether Section 518 regulates speech or conduct.88 The merchants and the State of New York had argued and briefed the constitutional question since the district court proceedings and similarly advanced their constitutional arguments in their briefs to the Supreme Court.89 The Court’s third justification has some weight only because the Second Circuit indeed refused to assess whether Section 518 would survive Central Hudson’s intermediate scrutiny.90 However, as Justice Thomas once suggested, this justification should be overridden if the first two justifications are satisfied.91
Had the Court addressed the constitutional issue, it would have had a tee-ball opportunity to decide definitively whether a state can ever abridge speech to induce its favored economic behavior. In other words, should Central Hudson apply to regulation of speech aimed at manipulating economic behavior, or should such attempts be per se unconstitutional? This debate took root when the Central Hudson Court suggested that such a regulation is permissible if it satisfies a substantial state interest.92 But as Justice Blackmun contended then93 and as Justice Thomas later avowed, any governmental attempt to keep consumers “ignorant in order to manipulate their choices in the marketplace” should be deemed “per se illegitimate.”94 For such regulations, courts should not even apply Central Hudson.95
Well-established principles regarding which arguments are available upon certiorari suggest that the Court could have addressed the merits of the “per se illegitimate” argument in Expressions Hair Design. Though the Court may decline to address an issue that was not raised below, the Court may address any argument made in support of a properly presented federal claim.96 In other words, petitioners are not limited to the arguments made below.97 And though the merchants did not advance the “per se illegitimate” argument at the circuit level,98 they noted it, albeit briefly, in their merits brief.99
Given that the Court was barred by neither procedure nor precedent, the Court should have addressed the “per se illegitimate” argument, for allowing the lower courts to apply Central Hudson to a statute like Section 518 offends modern First Amendment principles. The Court has recognized that the First Amendment must protect “the free dissemination of information about commercial choices in a market economy.”100 As such, an antipaternalism principle exists that prevents the government from regulating speech for the people’s own good.101 This principle disfavors legislation that restricts speech because the government fears how the people will react to it.102 A transparency principle also exists that recognizes the “dangers of permitting the government to do covertly what it might not have been able to muster the political support to do openly.”103 This principle favors disclosure and direct regulation over clandestine attempts to influence behavior by controlling the flow of information.104
As deceptive legislation, Section 518 violates both of these principles. First, it abridges the merchant’s ability to describe any additional fee as a surcharge because credit card lobbyists, working through the state legislature, feared that the volume of credit card use would decline if surcharges were permitted.105 Second, instead of directly regulating credit card and cash use, the state legislature sought to abridge speech by shrouding Section 518 in language that seemed, on its face, to regulate conduct. The Court’s careful scrutiny of Section 518’s effects exemplifies the need for courts to “examine[] more searchingly the State’s professed goal[s].”106 But the Court should have gone further and held that legislative deception should not be afforded even a modicum of protection against the First Amendment. Deceptive regulations should instead be deemed per se illegitimate.
Though the Expressions Hair Design Court sharpened its doctrine to better detect when legislatures try to shrewdly regulate speech, the Court missed an opportunity to determine whether Section 518 is per se illegitimate. If ever again faced with a similar case, the Court should address the constitutional argument instead of hiding behind the “first view” maxim.