WASHINGTON — A large swath of U.S. retailers and several trade associations have risen up to oppose a $7.25 billion proposed settlement with Visa, MasterCard and major banks over interchange fees charged to merchants when consumers use credit and debit cards to make purchases.

This story first appeared in the November 5, 2012 issue of WWD. Subscribe Today.

Attorneys for about 1,200 merchants and trade associations filed separate briefs in U.S. District Court in the Eastern District of New York on Thursday and Friday, urging the court to deny preliminary approval to a proposed class-action settlement in a federal antitrust lawsuit that is pending before the court.

Among the retailers that joined the opposition in separate briefs were Target Corp., Macy’s Inc., Gap Inc., Limited Brands Inc., Wal-Mart Stores Inc., Saks Inc., Neiman Marcus Inc., Abercrombie and Fitch Co. and J.C. Penney Co. Inc.

Several retailers and trade groups filed an antitrust lawsuit against the major credit card companies and some major banks in 2005, alleging they use anticompetitive practices that cost merchants billions of dollars in fees. No discount and fashion firms were involved in that suit, though. The two sides reached a proposed settlement in July that would collectively pay merchants $7.25 billion and set new terms for interchange fees.

However, widespread opposition to the proposed settlement began to mount and hundreds of retailers are now banding together, urging the court to deny approval of the proposed settlement.

The Retail Industry Leaders Association said the proposed settlement “fails to address the anticompetitive practices that were the genesis for the lawsuits and denies merchants their right to challenge these practices ever again.”

Some of the original plaintiffs that signed the proposed settlement now reject it, in addition to the 1,200 merchants and retail trade groups, according to court documents.

“This group represents trillions in retail sales and a substantial portion of the putative class, and its massive and diverse breadth is a powerful signal that something is obviously wrong with this settlement,” said attorneys for Constantine Cannon LLP, representing a large group of merchants and trade groups, in one of the court briefs.

Sandy Kennedy, president of RILA, said, “The proposed class-action settlement is simply a bad deal for merchants.

“The volume and diversity of opposition to this flawed proposal is remarkable, and shows just how plainly unacceptable it is to those hurt most by Visa and MasterCard’s anticompetitive practices,” Kennedy said.

The National Retail Federation, which submitted a brief on behalf of 17 merchants, argued that the settlement should not be certified a class action because it “attempts to force a one-size-fits-all solution onto a wildly diverse group of merchants.”

“The proposal pending before the court does nothing to keep these soaring fees from continuing to drive prices higher for American consumers, and would block merchants who believe in true swipe-fee reform from ever having their day in court,” said Mallory Duncan, senior vice president and general counsel at the NRF. “While the remaining parties would like to treat preliminary approval as a routine procedural step, the court should recognize that this settlement is so legally flawed it cannot be tweaked into fairness.”

The NRF also argued that a provision in the settlement barring all retailers from filing future lawsuits over “swipe fees” is “impermissibly broad under federal law.”

Oral arguments regarding preliminary approval of the proposed settlement will be held in federal court in Brooklyn on Friday.