San Francisco Sues Amex Over Card Fees

The City of San Francisco has filed a lawsuit against against American Express that accused the payment network of charging merchants with excessive fees and alleged anti-competitive practices.

The suit seeks billions of dollars to pay back merchants, who, according to the city, were unjustly charged as part of what it calls excess fees that are higher than its competitors, Visa and MasterCard. This particular case follows a February federal court decision when the U.S. Justice Department and 17 state attorneys general decided that Amex had violated antitrust laws.

The suit was filed by City Attorney Dennis Herrera, who released a statement about the reasoning behind the lawsuit.

“The party is over for American Express, and the bill is coming due in California,” he wrote. “The federal court ruling earlier this year merely confirms what millions of retailers, economists and U.S. Justice Department officials have known for years: American Express has rigged the game. They shook down merchants, stifled competition and shifted costs for their extravagant member perks to even cash-paying consumers.”

Herrera wrote in the formal complaint that California merchants make up around $2.25 billion in swipe fees to Amex per year. The complaint claims that Amex’s 3 percent fee per card transaction is in excess of what Visa and MasterCard charge. It also claims that Amex prohibits its merchants from barring consumers from using alternative payment methods that cost less. That was the same basis the judge ruled against Amex in the federal case.

“Barred from assessing surcharges or offering discounts — or even expressing a simple preference for cash or competing cards — sellers’ uniform pricing mandates effectively forced all consumers to subsidize the high fees and generous rewards American Express continues to lavish on its generally affluent cardholders,” the compliant alleges.

Under the state’s Unfair Competition Law, Herrera said each charge card transaction warrants a $2,500 penalty.

In response to the suit, an Amex spokeswoman told multiple media outlets that “we don’t believe the suit has merit,” noting that the payment network will fight the accusations.