SAN FRANCISCO – City Attorney Dennis Herrera of San Francisco, is suing the American Express Company  in a statewide consumer protection action over anti-competitive and illegal merchant restraints alleged to be “responsible for billions of dollars in excessive and improper costs” borne directly by retailers and indirectly by all California consumers.

Herrera’s civil suit follows a federal court decision from earlier this year, in which the U.S. Justice Department and 17 state attorneys general prevailed in their case that restrictions imposed by Amex on participating merchants unlawfully restrained trade and violated federal antitrust laws. As a result, Herrera’s suit alleges, Amex owes billions in civil penalties and restitution to merchants in California under the state’s Unfair Competition Law.

“The party is over for American Express, and the bill is coming due in California,” Herrera said in a press statement announcing the lawsuit. “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.”

Herrera’s complaint says that for years Amex has exacted a 3% fee on each charge card transaction—“well in excess of fees charged such competitors as Visa and MasterCard”—accounting for roughly $2.25 billion in fee payments annually by California merchants alone. Also, according to Herrera’s complaint, Amex prohibited its participating merchants from encouraging consumers to use less costly payment methods, including cash.

Herrera’s complaint (People of the State of California, ex rel. Dennis Herrera v. American Express Company et al.), filed in San Francisco Superior Court on November 6, seeks a judicial declaration that Amex’s merchant restraints violate California law together with an injunction barring the company from enforcing its illegal contractual provisions. California’s Unfair Competition Law authorizes civil penalties of $2,500 for each violation, which Herrera contends equates to each charge card transaction. The complaint also seeks restitution for California merchants in an amount to be determined at trial, as well as attorney fees and costs of the suit.