Home Business Capital One-Discover merger may face stiff antitrust review in Washington

Capital One-Discover merger may face stiff antitrust review in Washington

Capital One-Discover merger may face stiff antitrust review in Washington


The proposed merger between Capital One and Discover Financial Services could face an uphill regulatory battle in Washington, where the Biden administration has long pledged an aggressive crackdown against consolidation in the financial sector.

Before the two companies can close the $35.3 billion deal, they must first obtain approval from federal antitrust watchdogs, who have challenged — and sometimes even blocked — a slew of recent deals involving airlines, biotech firms, grocery chains and tech giants.

Asked about the potential megamerger early Tuesday, Lael Brainard, director of the White House National Economic Council, told CNBC she could not “speak to any particular cases.” But she still stressed that President Biden is “very committed to restoring competition across the landscape in the United States,” potentially foreshadowing the scrutiny to come.

“For too long, we saw a lot of consolidation, which did not have benefits, but rather came at some cost,” Brainard added. “And so we’ve really seen a reinvigoration of the commitment to competition, which levels the playing field for small businesses.”

Under Biden, the U.S. government has aggressively sought to police corporate consolidation, arguing that the absence of competition is partly responsible for rising prices throughout the economy. Federal regulators moved last year to block the proposed combination of JetBlue and Spirit Airlines, for example, and they tried, but failed, to prevent Microsoft from taking over Activision Blizzard, a video game company, in 2022.

But the president has reserved some of his fiercest criticism for the financial sector, particularly at a time when inflation remains elevated and Americans are borrowing more money. In July 2021, Biden signed a sprawling executive order that specifically called for “more robust scrutiny” of bank-related deals.

The White House directive ultimately led the Treasury Department this January to begin crafting rules that would update its merger review process. The agency’s Office of the Comptroller of the Currency is expected to review the merger between Capital One and Discover.

The Justice Department, meanwhile, similarly has promised to probe financial megadeals extensively: Jonathan Kanter, the agency’s top antitrust official, said last June that the government would not shirk from overseeing “the largest and most powerful actors.”

A spokesman for the Justice Department declined to comment on the potential merger between Capital One and Discover, as the agency customarily stays silent in merger proceedings. The Treasury Department did not immediately respond to a request.

Spokespeople for the two companies also did not immediately respond to requests for comment. Richard Fairbank, founder and chief executive of Capital One, told investors on a call Tuesday that he expects the transaction to close in late 2024 or early 2025. He stressed that the deal would “position us to compete more effectively against some of the largest banks and payment companies in the United States.”

“We believe that we are well positioned for approval,” Fairbank added.

If it is approved, the merger would add 305 million Discover cardholders to the Capital One customer base, which already boasts more than 100 million, company filings indicate. That would make the combined firm the largest credit card lender in the United States, according to data compiled by Bloomberg Intelligence, surpassing JPMorgan Chase.

Brainard, Biden’s top economic adviser, acknowledged Tuesday there are “sometimes cases” where mergers can create competition. But, she added: “We believe it’s really important to have a diversity of different business models and sizes across the commercial landscape, and traditionally have wanted to make sure that playing field is level, and that smaller financial institutions also have a real shot.”


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