The proposed combination, in which the fourth-largest credit card issuer would acquire the sixth-largest issuer, “warrants careful consideration,” the organizations wrote in their letter to Federal Reserve Chair Jerome Powell, Acting Comptroller of the Currency Michael Hsu and Jonathan Kanter, assistant attorney general for the DOJ’s antitrust division.

Announced last month, the tie-up “would substantially increase the combined firm’s horizontal and vertical market power and ability to use that market power to disadvantage depositors, customers, merchants and communities,” the advocacy groups asserted.

The deal would make McLean, Virginia-based Capital One the largest credit card issuer in the U.S., eclipsing JPMorgan Chase. With Riverwoods, Illinois-based Discover, Capital One would gain ownership of the smallest of the four major card networks. The tie-up “presents multiple, significant concerns under federal antitrust and banking statutes that justify a careful and thorough review by banking and antitrust agencies,” the letter’s authors wrote.

The advocacy organizations urged the Fed, OCC and Kanter to publicly commit to a thorough and deliberative process, including barring streamlined application or expedited review of the proposed merger; extending the public comment period to at least 60 days; and holding public hearings in the largest lending markets where Capital One branches and Discover offices are located. 

Incidentally, Hsu in January suggested putting a halt to expedited bank merger procedures. And another regulator, the Federal Deposit Insurance Corp., on Thursday proposed more scrutiny of large bank mergers with regard to anti-money laundering compliance, financial stability and community impact. 

The letter’s signers asked regulators to disclose to the public the content of any pre-filing meetings or discussions with the merging parties; evaluate the proposed merger under 2023 merger guidelines; and make the competitive factors report available to the public. 

“The proposed merger represents the exact kind of transaction involving ‘novel, precedent-setting, or highly complex or sensitive issues’ that the Comptroller has noted requires careful deliberation,” the organizations contended. 

The proposed acquisition has drawn scrutiny from lawmakers, too: Sen. Elizabeth Warren, D-MA, and 12 other congressional Democrats have called on regulators to block the deal, as have Rep. Maxine Waters, D-CA and Sen. Josh Hawley, R MO. 

Attorneys have said the deal will face a heavy-handed review, and it’s almost certain to draw the attention of the DOJ, which will look at the market concentration impact of the combination.

Capital One executives have said they expect the deal to close late this year or early next. Capital One CEO Richard Fairbank has said he believes the deal is “well-positioned for approval.” During an investor call last month, he declined to share details of conversations with regulators, but said “we, of course, kept them informed along the way.”

By Caitlin Mullen on March 22, 2024
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