NEW YORK – New York’s ban on merchants adding a surcharge on credit card payments has been upheld by an appeals court, Reuters reports. A unanimous 2nd U.S. Circuit Court of Appeals overturned the previous decision that found the rule to be unconstitutional.

The law subjects merchants to criminal penalties for adding a surcharge for customers paying with a credit or debit card. Retailers have long bemoaned the cost of processing credit cards, especially the swipe fees.

“Interesting how the State of New York condemns the notion of retailers adding a surcharge to recoup credit card transaction fees, yet requires people who pay their income taxes by credit card to pay an additional 2.25% ‘convenience fee,’” New York Convenience Store Association President Jim Calvin told NACS Daily.

New York Attorney General Eric Schneiderman and Manhattan District Attorney Cyrus Vance are hailing the decision as a victory, one that protects consumers from “bait-and-switch” pricing. Five N.Y. retailers filed a lawsuit against the state, saying that the prohibition stopped their efforts from informing customers about the hidden fees associated with credit card payments. Major retailers including Walgreen, Safeway and Kroger supported the plaintiffs in the suit. In October 2013, U.S. District Judge Jed Rakoff halted enforcement of the law because it “perpetuates consumer confusion.”

Now the appeals court has decided the regulation doesn’t affect speech, but rather price differences. Circuit Judge Debra Ann Livingston wrote that “we are aware of no authority suggesting that the First Amendment prevents states from protecting consumers against irrational psychological annoyances.”

The 2nd Circuit also has heard a challenge to the $5.7 billion antitrust settlement over swipe fees involving Visa, MasterCard and retailers.