A U.S. judge on Friday granted preliminary approval to a proposed $7.2 billion (4.5 billion pounds) settlement between merchants and Visa Inc and Mastercard Inc over credit card fees, despite objections from hundreds of retailers, including Wal-Mart Stores Inc..
If the deal receives final approval from U.S. District Court Judge John Gleeson, it would be the largest federal antitrust settlement in U.S. history, offering nearly 8 million merchants $7.2 billion in cash and temporary reductions in the interchange, or swipe fees, they pay to process credit and debit transactions.
Nearly 1,200 merchants and major trade groups opposed the settlement, arguing that it would strip away stores' legal rights.
On Friday, Gleeson, a judge in the U.S. District Court in Brooklyn, New York, heard from stores both for and against the proposal. Afterward, he granted preliminary approval, saying that the objections appeared to be "overstated." But he added: "I don't mean to suggest there aren't a number of issues that are going to require significant scrutiny" as he considers whether to give final approval.
Now that the deal has been received initial approval, the nearly 8 million stores that take Visa and Mastercard will be certified as a class and notified of their legal rights.
Full terms of the deal will not take effect unless Gleeson gives final approval, and the judge will schedule another hearing to hear from the full array of merchants affected by its terms.
However, within 60 days of preliminary approval, Visa and Mastercard have agreed to amend their no-surcharge policies to allow merchants to charge customers extra for paying by credit or debit, although that ability will be restricted by state law.
The $1.2 billion in temporary rate relief will take effect after class members have been given an opportunity to opt out of receiving the monetary damages.
A lawyer representing stores opposing the settlement, Jeff Shinder, said "This is the beginning of a long process, and we're not remotely deterred by what happened today. The opposition will continue to grow."
Visa and Mastercard both said in statement that they are pleased with the court's decision.
"While we recognize some merchants may have different opinions, the settlement represents a solution reached after years of litigation and months of negotiation," said Mastercard general counsel Noah Hanft.
(Reporting by Jessica Dye in New York; Writing by Brad Dorfman; Editing by Leslie Adler and David Gregorio)