OAKLAND, Calif. – A plan to settle an antitrust lawsuit over cosmetics pricing hit a snag yesterday as a federal judge declined to approve the proposed deal, which called for millions of dollars in free makeup and perfume to be given away at department store counters across the country.

During a two-hour hearing, Judge Saundra Armstrong said she agreed with the broad outlines of the settlement but was troubled by the details of how such a large volume of free products would be distributed.

“The court has some concerns about the plan of distribution,” she said.

The class-action lawsuit was brought on behalf of about 40 million people who purchased so-called prestige cosmetics at department stores over the past decade. It claims that department stores and cosmetics makers conspired to inflate prices by discouraging discounting and limiting promotions.

To resolve the case, the store chains and the manufacturers have agreed to give away cosmetics they say would be worth $175 million at retail. Each item or set of items in the planned giveaway is allegedly worth between $18 and $25.

However, Judge Armstrong observed yesterday that most cosmetics consumers will get nothing tangible in the settlement because there is not nearly enough product for them all. “Only 2 to 20% of the class will able to receive” free items, the judge noted.

The judge said it was not clear why the method the parties agreed on – a first-come, first-served giveaway lasting up to seven days – was the best way to distribute the free product.

“At this stage of the proceeding, the court is unable to ensure that $175 million of [cosmetics] will actually be distributed,” Judge Armstrong said.

An attorney for Estee Lauder, Frederic Yerman, said lawyers on both sides of the case spent a year hammering out the distribution plan. “There was huge agonizing to get to this stuff,” he said.

Mr. Yerman said the lawyers considered mailing out the free cosmetics, but determined that the Post Office would get too much of the settlement. He said coupons were ruled out because coupon settlements have been widely criticized. “Nobody likes coupons,” said Mr. Yerman, who is a partner at Kaye Scholer in Manhattan.

The judge also said she was concerned that the companies could try to comply with the settlement by “rechanneling” undesirable or outdated cosmetics into the giveaway.

Mr. Yerman countered that it was in the self-interest of the cosmetics makers and department stores to make the giveaway appealing to consumers. “They’re our customers. We’re very anxious to keep them happy,” he said.

Mr. Yerman, who spoke on behalf of all the defendants yesterday, said consumer tastes are fast-changing and that the companies need the flexibility to substitute specific items. “We just don’t know exactly what product will be right. We’re in the fashion business,” he said.

Early in yesterday’s hearing, Judge Armstrong said she was willing to approve the settlement and defer a decision on the distribution plan.

The lawyers who brought the case quickly agreed, but the defendants would not. Some noted that certain types of distribution could be substantially more expensive.

The attorneys general of 11 states are among those objecting to the settlement, primarily on the grounds that the products to be given away are not really worth $175 million. An attorney representing the states, Jennifer Kirk, urged the court to be cautious also about the first-come, first-serve aspect of the giveaway.

“What can the court do to fix the settlement when we have 35 to 37.5 million people with nothing in their pockets?” she asked.

Judge Armstrong suggested that the parties and the objectors to the deal go back to a retired federal judge who was appointed as a special master in the case and try to work out a revised distribution plan. She said she would take the settlement up again in March.

The hearing drew about 45 lawyers to Judge Armstrong’s courtroom in downtown Oakland. The class-action lawyers who began working on the case in 1998 were clearly disappointed with the outcome of yesterday’s session. One was visibly exasperated.

After the hearing recessed, a lead attorney for the plaintiffs, Guido Saveri, poked his finger at one of the lawyers objecting to the deal, Steven Helfand.

“I’m going to withhold approval of the settlement and go to trial. You’ll get nothing,” Mr. Saveri said. “I’m serious and all of you guys can come and help.”

One attorney present estimated that the cost of yesterday’s proceeding, in terms of billable time, was $12,000 per hour. However, that estimate was predicated on a rate of $300 an hour for each lawyer. Some of the attorneys present undoubtedly charge far more.

The defendant companies have agreed to pay up to $24 million in fees to the class-action lawyer who brought the litigation, if the settlement is approved. The exact fee award will be up to the court.

Judge Armstrong said yesterday that she wanted the lawyers to wait for their fees until after the product giveaway takes place. She offered mixed signals yesterday about whether she considered the lawsuit a worthy one.

At one juncture, Judge Armstrong credited the plaintiffs’ lawyers for getting the industry to agree to a “meaningful injunction” against future collusion. At another point, she agreed with an expert who found that the class-action lawyers stood little chance of winning if the case went to trial.

“There is no dispute as to the serious weakness of plaintiffs’ case,” the judge said.