New York (NY) Attorney General Letitia James has launched an investigation into whether bank holding company Capital One Financial’s proposed $35.3bn acquisition of Discover Financial Services breaches the state’s antitrust laws.
In court filings submitted this week, James requested that a state judge in Manhattan issue a subpoena to Capital One Financial for documents necessary for her inquiry, citing the bank’s alleged refusal to cooperate.
James raised concerns that the merger could have a significant effect in New York, with Capital One Financial and Discover Financial Services holding over $9.5bn and $6.5bn in credit card loans, respectively, within the state.
She also stated that the impact of the merger would be especially severe for vulnerable New Yorkers with subprime credit scores.
Based in McLean, Virginia, Capital One Financial has assets totalling $480bn as of 30 June 2024.
Discover Financial Services owns and operates online bank Discover Bank. It recently reported a $965m profit for Q3 2024.
In response to the inquiry, Capital One Financial issued a statement indicating it would address the attorney general’s concerns through legal channels. It also expressed confidence in securing regulatory approval for the merger from federal banking authorities.
The bank is reported to have stated: “We have made a strong case for the pro-competitive and pro-consumer benefits of this transaction.”
Announced in February this year, the all-stock merger is expected to create the largest US credit card issuer, with over $250bn in outstanding loans and granting access to more than 305 million cardholders.
Under the terms of the agreement, shareholders of Discover Financial Services will receive 1.0192 Capital One shares, in exchange for each Discover Financial Services share held.
James also noted that the deal would further solidify Capital One Financial’s position as the leading US subprime card issuer, giving the combined entity a market share exceeding 30%.
Additionally, the merger would expand Capital One Financial’s payment operations, as the bank issues both Visa and Mastercard-branded cards.
The transaction still requires approval from shareholders, the US Department of Justice, and the Federal Trade Commission. It is expected to be completed by early 2025.
James also revealed that her office had requested both companies to waive confidentiality agreements in May 2024 to review documents submitted to the Justice Department’s antitrust division.
While Discover Financial Services agreed to a full waiver, Capital One Financial declined, arguing that doing so would unlawfully grant New York regulatory authority power over national banks.
In addition to the attorney general’s investigation, customers have filed lawsuits against Capital One Financial and Discover Financial Services, claiming that the merger would reduce competition and lead to higher consumer costs.
