Open Markets, a think tank focused on monopolies and corporate consolidation, has expressed concern over the proposed merger between Capital One and Discover. The merger is set to be scrutinized by regulators as it involves a hefty sum of $35.3 billion. Sandeep Vaheesan, legal director for Open Markets, called for careful regulatory examination in a statement.
"One of the largest credit card issuers buying up another leading card issuer and operator of a major credit card network looks suspicious on both antitrust and public interest grounds," said Vaheesan. "Instead of freely allowing big banks and financial services companies to get larger—leaving fewer options for consumers and increasing financial fragility—antitrust enforcers and banking regulators need to carefully investigate this merger and, if it is as problematic as it seems to be, move to block it."
The merger was detailed in a joint press release from Capital One and Discover. According to the release, the two companies have entered into a definitive agreement that will see Capital One acquire Discover through an all-stock transaction. Upon closure of the deal, Capital One shareholders will own approximately 60% of the merged entity while Discover shareholders will hold about 40%. The companies anticipate finalizing the deal either late in 2024 or early in 2025, subject to approvals from regulators and their respective shareholders.
A report by USA Today states that if approved, this merger would result in the creation of the sixth-largest U.S. bank by assets. It would also become the second-largest U.S. card issuer and rank third in terms of purchase volume among U.S. card issuers. However, it would also lead to being the largest U.S. card issuer with amounts outstanding - referring to unpaid card balances owed to card issuers.
Open Markets further clarified its stance in its press release. The organization revealed that it had submitted comments to the U.S. Justice Department in 2022 urging it to block more bank mergers. It pointed out that increasing concentration within the American banking sector has led to rising consumer prices and declining employee wages without any noticeable improvement in productivity.
