Capital One, Discover Deal Faces Growing Pushback From Democrats

The $35 billion tie-up between Capital One Financial Corp. and Discover Financial Services would harm consumers by increasing concentration in the financial industry and should be blocked, 13 congressional Democrats argued in a letter.

The lawmakers’ plea to federal bank regulators, led by Sen. Elizabeth Warren (D-Mass.), marks an escalation in opposition from Congress as the companies attempt to persuade federal regulators to greenlight the merger.

The deal would create the largest US credit card company by loan volume and lead to a vertical integration of a major card issuer and the fourth-largest card network. The lawmakers’ request adds to potential concerns about the deal from federal banking and antitrust regulators, who have said they’re committed to promoting competition in the financial sector.

“This acquisition will be one of the most important tests of the efforts to prevent harmful bank consolidation since the release of President Biden’s Executive Order,” the lawmakers said in their letter on Sunday, referring to President Joe Biden’s 2021 order to promote competition. “This merger, on its face, has significant deficiencies.”

Democratic Reps. Alexandria Ocasio-Cortez (N.Y.), Ayanna Pressley (Mass.), and Katie Porter (Calif.) were among the lawmakers who signed the letter addressed to the Office of the Comptroller of the Currency and the Federal Reserve. The proposed Capital One acquisition of Discover, announced last week, requires approval from both bank regulators, while the Justice Department’s Antitrust Division also has the authority to file a lawsuit to block the deal.

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The Democratic lawmakers said consumers could face higher fees and fewer credit card choices if the deal closes.

Bipartisan Opposition

While the merger has elicited robust opposition from some Democrats, concerns about its potential anticompetitive effects have also crossed party lines. Sen. Josh Hawley (R-Mo.) called on the DOJ’s Antitrust Division to block the deal in a letter last week, referring to the proposed merger as “destructive corporate consolidation at its starkest.”

“If consummated, this merger will create a new juggernaut in the credit card market, with unprecedented powers to extort American consumers,” Hawley said in the letter.

Capital One has argued the deal will lead to more robust competition among credit card networks, which provide the communication systems banks and businesses use to process credit card transactions. The network market is currently dominated by Visa Inc. and Mastercard Inc., with American Express Co. and Discover also in the mix.

The acquisition “adds scale and investment, enabling the Discover network to be more competitive with the largest payments networks and payments companies,” Capital One said in a statement announcing the acquisition.

The OCC, which approves mergers involving nationally chartered banks, outlined its reluctance to approve megabank deals in a proposed policy statement last month. Jonathan Kanter, assistant attorney general in the DOJ’s Antitrust Division, has also said the agency is committed to investigating bank mergers over competition concerns.

In their letter, the 13 congressional Democrats urged the OCC to not only block the Capital One and Discover deal, but also strengthen its policy statement “to ensure that future mergers do not harm consumers and the broader economy.”