A credit card user displays her cards in Washington. (Reuters)
A US federal judge has approved the largest class action settlement in a lawsuit of merchants against credit card providers Visa and MasterCard.
US District Judge John Gleeson of Brooklyn, New York, approved a $5.7bn (£3.5bn, €4.1bn) settlement between the parties in the class action lawsuit, accusing the credit card firms of fixing the credit card fees charged to merchants when consumers swipe cards while purchasing. The settlement amount is believed to be the largest ever in a class action lawsuit.
"I conclude that the proposed settlement secures both a significant damage award and meaningful injunctive relief for a class of merchants that would face a substantial likelihood of securing no relief at all if this case were to proceed," Gleeson wrote in the judgement.
The settlement will provide cash payments to merchants across the country. The agreement also allows retailers to charge shoppers extra if they prefer cards issued by MasterCard or Visa for payments.
Merchants sued the firms in 2005 for the first time, and the companies initially agreed on a $7.2bn settlement in July 2012. The amount was lowered after about 8,000 retailers including Amazon, Wal-Mart and Target opted out of the agreement.
Those who opted out of the initial agreement subsequently filed separate lawsuits against the companies.
The latest agreement is also opposed by some retailers, who say that the terms are not satisfactory. The retailers noted that the agreement does not prevent the credit card firms from imposing higher fees with impunity.
"We are very disappointed that this deeply flawed settlement has been approved," Mallory Duncan, general counsel at trade association National Retail Federation (NRF), said in a statement.
"It is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future. The settlement permanently ties the hands of thousands of businesses who wanted nothing to do with this misguided case, and a decision to approve it violates established law and common sense."
NRF said it is reviewing the ruling and will take necessary steps to protect the "rights of merchants and safeguard the pocketbooks of their customers".
The association noted that credit card swipe fees have tripled over the past decade and is estimated at $30bn per year at present.
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