A federal appeals court has overturned a 2013 settlement concerning credit card swipe fees that was vigorously opposed by many associations representing retailers and other merchants.

At issue is a lawsuit that pitted millions merchants against Visa, MasterCard and several large banks. The plaintiffs accused the financial intuitions of price fixing, saying they had collaborated to set credit card swipe fees at artificially high rates.

The law firms representing the merchants struck a deal with Visa and MasterCard to end the lawsuit for $7.2 billion and under terms that would have shielded the companies from future legal action. Many retail associations cried foul. They urged merchants to ignore the advice of their lawyers and reject the terms of the settlement.

The settlement was approved but immediately appealed by the National Retail Federation and others. The 2nd U.S. Circuit Court of Appeals in Manhattan ruled Thursday that the merchants had not been adequately represented by their attorneys, who had given most plaintiffs no real option of rejecting the deal.

"This ‘settlement' was never a settlement on behalf of the retail industry but rather a backroom deal that failed to represent the interests of retailers," NRF Senior Vice President and General Counsel Mallory Duncan said. "It would have given merchants pennies on the dollar for the price-fixing they have suffered at the hands of the big credit card companies and would have done nothing to end price-fixing or to lower swipe fees going forward."

Retail Industry Leaders Association also welcomed news of the decision, calling it "a victory for all merchants and consumers."

"Quite simply, the settlement orchestrated by the card networks and banks would have undermined merchants' legal rights forever and would have allowed Visa and MasterCard to impose higher and higher swipe fees with impunity," said Deborah White, RILA EVP and general counsel.

Like NRF and RILA, the National Grocers Association was also a party in the original lawsuit and had sought to block the settlement. NGA CEO Peter Larkin said his group was pleased with Thursday's ruling.

"When NGA joined the lawsuit over 11 years ago, it did so to bring about real reforms that included increased competition and transparency of the anti-competitive credit card swipe fee system," Larkin said. "NGA opposed the settlement agreement because it failed in this regard by not enacting competition and transparency into the marketplace, allowing Visa and MasterCard to continue their anti-competitive practices."

Attorneys representing both the plaintiffs and credit card companies did not immediately respond to reporters' requests for comment. No associations representing credit card providers or large banks had issued statements about the decision as of Friday morning.

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