San Francisco Sues AmEx Alleging Unfair Competitive Practices

By Kevin Woodward

The City Attorney for San Francisco has filed suit in California Superior Court against American Express Co., alleging the card brand continues to restrain merchants from steering consumers to other payment options.

Filed Nov. 6, the suit seeks $2,500 per violation, which City Attorney Dennis J. Herrera says equates to each charge card transaction. According to the suit, approximately 1 million merchant locations are affected for the last four years. City Attorneys in California can take action on behalf of citizens of the state.

The heart of the suit maintains that merchants have not been able to steer customers to lower-priced forms of payment, like cash, PIN debit, or credit cards. The suit also states that merchants are due overcharge fees, which is the difference between the payment card acceptance costs California merchants paid and the costs they would have paid if AmEx had not “unlawfully maintained merchant restraints.” California merchants account annually for $2.25 billion of AmEx’s $15 billion in transactions, the suit says.

“Given the option, merchants would prefer that consumers choose a less expensive payment option, and they would therefore value the ability to offer incentives for consumers to select a payment card other than Amex,” the suit says. “Amex’s merchant restraints, however, prohibited merchants from steering consumers to other payment options, whether by posting an innocuous ‘We Prefer Visa’ or ‘We Prefer Discover’ sign or even by mentioning the very existence of Amex’s high swipe fees to consumers.”

Effectively a ban on differential pricing, the restraints prevented merchants from providing discounts to non-AmEx card users, the suit claims. “Thus, in order to cover the higher costs of Amex cards, merchants have responded by charging artificially elevated prices to all consumers of their goods and services, including those who use cash, debit, electronic benefit cards, and less expensive credit card brands.”

This suit comes on top of an older steering case that AmEx continues to contest in federal court. AmEx has appealed a February decision by U.S. District Judge Nicholas G. Garaufis upholding the U.S. Department of Justice’s anti-competitive claims in a suit originally filed in 2010 that also lists 17 state attorneys general as plaintiffs. Pending the results of the appeal, merchants have been free since July 1 to induce customers to use other brands.

That decision did not include any monetary relief to merchants nor did it impose civil penalties, San Francisco’s suit says. “Accordingly, the People of the State of California bring this action in order to vindicate the legal rights of California’s merchants and to remedy American Express’ unlawful and unfair business practices,” reads the complaint.

Neither AmEx nor City Attorney Herrera’s office responded to Digital Transactions News inquiries.