(Reuters) — A federal judge on Friday approved an estimated $5.7 billion class action settlement between merchants and Visa Inc. and MasterCard Inc. over credit card fees despite objections from thousands of retailers who complained it was inadequate.
The settlement is believed to be the largest in a U.S. antitrust class action.
Merchants first sued Visa and MasterCard in 2005, accusing the two companies of fixing the fees charged to merchants each time their customers used their credit or debit cards. They were accused also of preventing merchants from steering customers to cheaper forms of payments.
U.S. District Judge John Gleeson of Brooklyn, New York, approved the settlement in a written order.
The value of the settlement, reached last year, decreased from roughly $7.2 billion to $5.7 billion after thousands of merchants opted out of the deal, according to Craig Wildfang, an attorney for the plaintiffs.
The settlement provides for cash payments to merchants nationwide and lets them begin charging customers an extra fee when they use Visa or MasterCard credit cards.
For Visa and MasterCard, Gleeson's decision could go a long way to alleviate a major legal headache that has plagued them for more than a decade.
In 2003, two years before the current case started, Visa and MasterCard settled a similar case with merchants over rules governing the use of their cards.
Approval of the current settlement has been opposed by many of the largest players in the retail industry.
Around 8,000 merchants, accounting for about 25% of the transactional volume at issue in the case, opted out of the settlement.
Among those opting out were the largest retailers in the United States, including Wal-Mart Stores Inc., Amazon.com Inc., and Target Corp.
Those businesses have complained about a broad litigation release in the settlement. The release forces all merchants who accepted Visa or MasterCard, and even those who will in the future, to give up their right to sue the credit card companies over rules at issue in this case or similar ones they may make in the future.
Those objectors also argued that the settlement offered meaningless reforms that would not help them control the costs of accepting credit cards.
Under certain circumstances, the settlement allows merchants to charge customers extra if they use Visa or MasterCard credit cards. But critics of the deal point out that those opportunities are extremely limited, and certain states prohibit such surcharging. The critics also say that merchants are unlikely to take advantage of surcharging for fear of upsetting consumers or losing them to competitors that do not impose a surcharge.
Many retailers who opted out of the settlement have filed their own lawsuits.