02/22/2024

Regulators Keep Blocking Mergers

However, here’s why Capital One and Discover could get a pass

When Capital One announced Monday evening that it would be acquiring Discover for $35.3 billion, the question that came immediately to mind was, "Will regulators allow this to go through?"

Capital One, after all, is already one of the country's biggest credit-card issuers, and though Discover is substantially smaller, it not only has tens of millions of customers, but also controls its own credit-card network, directly processing its customers' transactions, just as American Express does. So the deal would make Capital One much bigger—turning it into the sixth-biggest bank in the U.S. and the third-largest credit-card issuer, behind only Chase and Amex—but also theoretically giving it much more leverage in the market.

Given that the Biden administration has been aggressive in using antitrust law to try to limit corporate concentration—witness the Department of Justice’s recent suit successfully blocking JetBlue's acquisition of Spirit Airlines—it's easy to imagine regulators refusing to approve this deal, particularly given the perennial concerns about letting financial institutions get too big to fail. So it was no surprise when Senator Elizabeth Warren made clear her opposition to the merger on Tuesday, writing that it was "dangerous" and would "harm working people" because it would reduce competition and threaten financial stability. Regulators, Warren wrote, "must block [the deal] immediately."

Please select this link to read the complete article from WIRED.