San Francisco Sues American Express Over Merchant Restraints -- Update
November 19 2015 - 9:26AM
Dow Jones News
By Anne Steele
The city of San Francisco has sued American Express Co. for
anticompetitive and alleged illegal merchant restraints.
The civil suit, filed by city attorney Dennis Herrera, follows a
federal court decision from earlier this year, in which the U.S.
Justice Department and 17 state attorneys general said restrictions
long imposed by American Express on participating merchants
unlawfully restrained trade and violated federal antitrust
laws.
A representative from American Express said the company doesn't
believe the suit has merit and plans to defend itself
vigorously.
The statewide consumer protection case alleges the global charge
card giant is "responsible for billions of dollars in excessive and
improper costs" borne by retailers and, indirectly, all California
consumers.
The suit alleges American Express owes billions in civil
penalties and restitution to merchants under California's Unfair
Competition Law.
"The party is over for American Express, and the bill is coming
due in California," Mr. Herrera said in a statement. "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. It's
unfair, it's illegal, and--under state law--it warrants tough
penalties and restitution for California's merchants."
The state attorney says American Express has charged a 3% fee on
each card transaction, in excess of fees charged by competitors
like Visa and MasterCard, accounting for roughly $2.25 billion in
fee payments annually by California merchants.
At the same time, according to Herrera's complaint, American
Expresss strictly prohibited its participating merchants from
taking any step to encourage consumers' use of less costly payment
methods, including cash.
"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,"
according to the state attorney's office.
The complaint, filed in San Francisco Superior Court on Nov. 6,
seeks a judicial declaration that American Express's merchant
restraints violate California law, and an injunction barring the
company from enforcing its contractual provisions.
Mr. Herrera contends each charge card transaction warrants the
$2,500 penalty authorized under the state's unfair competition
law.
The complaint also seeks restitution for California merchants as
well as attorneys' fees and costs of the suit.
Write to Anne Steele at Anne.Steele@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 19, 2015 09:11 ET (14:11 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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