Campaigners have urged regulators to stop Capital One’s $35bn acquisition of Discover. They say that the deal is “dangerous and illegal” and should be stopped.
A coalition of over a dozen advocacy organizations urged the Federal Reserve to intervene and the Department of Justice, warning that the combination of two of the biggest credit card companies in US would harm competition and “further concentration risk” in financial system.
The organizations wrote a letter warning that Capital One could increase fees after the closing of the acquisition, as announced by the companies last week.
The scale and scope are immense, they said. The threat to the economy, the financial sector and American businesses is grave.
The American Economic Liberties Project (AELP), Public Citizen, and Americans for Financial Reform are among the signatories.
Capital One’s spokesman stated that the company has a “long-standing history” of providing “best-in class” products and service to consumers and businesses. As this process progresses, we are committed to working with consumer groups and other stakeholders in order to show the benefits of the transaction for consumers, communities and the competition on the market.
Jesse Van Tol is the president and CEO of National Community Reinvestment Coalition and another signatory. He said that Capital One was a bad actor even in its current size and it should not be allowed further concentration.
Capital One is a major bank in America and the largest issuer of Visa or MasterCard credit cards. Discover is the US’s largest payment network, but it trails behind Mastercard, Visa, and American Express.
Capital One has claimed that the acquisition would allow it to “build an payments network which can compete” against the largest players in the market. Some Wall Street analysts questioned whether Visa and Mastercard would be hurt by the deal.
The advocacy groups wrote that “every prong” of the framework for bank merger review considered by regulators indicated they should “deny the merger”. They sent the letter to Jerome Powell (the Fed chair), Martin Gruenberg (chair of the Federal Deposit Insurance Corp), Michael Hsu (acting comptroller of currency) and Jonathan Kanter(assistant attorney general, Department of Justice). If bank regulators don’t reject this merger we urge the Justice Department to sue in order to block the deal.
Capital One anticipates closing the deal in late 2024, or early 2025. This is subject to shareholder and regulatory approval. Visa and Mastercard, in particular, have been under intense scrutiny in Washington over the past few years. The Biden administration is taking a strong stance against antitrust issues.
The Fed refused to comment.