Washington, D.C. — The proposed merger between Capital One Financial and Discover Financial Services, announced in February, signals a shift in the motivation for consolidation in the banking and credit card services sector. Unlike previous mergers focused on building digital payment technology ecosystems, the merger combines a national bank with a credit card payment network, marking new territory for antitrust enforcement.
Today, the Progressive Policy Institute (PPI) released an in-depth analysis of the proposed merger, titled “The Capital One Financial-Discover Financial Services Merger: A Test Case for the Biden Merger Agenda.” Report author Diana Moss, Vice President and Director of Competition Policy, provides a comprehensive look at the potential impact of the Capital One-Discover merger on competition in credit card purchasing and lending. The report calls for rigorous antitrust scrutiny of the deal by the U.S. Department of Justice.
PPI’s analysis, based on publicly available data, unpacks major competition questions that are likely to surface in the DOJ’s antitrust review of the credit card side of the Capital One-Discover merger. These issues range from a loss of competition and enhanced market power in credit card purchasing and lending, to vertically combining a credit card issuer with a payment processing network, and how the merger affects competition in digital payments ecosystems.
A major takeaway from PPI’s analysis is that the Capital One-Discover merger is unlikely to present a clear-cut case of a merger that is likely to “substantially lessen competition or tend to create a monopoly” under Section 7 of the Clayton Act. This applies under existing banking guidelines followed by the DOJ and the 2023 Merger Guidelines, should the government use them to guide an analysis of the competitive effects of the Capital One-Discover merger.
“The Capital One-Discover merger presents a test case for antitrust enforcement under the new guidelines,” said Diana Moss. “Challenging a merger in federal court that does not trigger, or strongly trigger, the thresholds in the merger guidelines would raise the government’s burden of proof. The DOJ would need to make a particularly strong case for anticompetitive effects in order to fend off rebuttal evidence from Capital One-Discover that the merger is pro-competitive. Strong merger enforcement will be particularly important in policing a new wave of consolidation in the financial services sector, so it is important that the DOJ chooses cases wisely,” Moss added.
Read and download the report here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.
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Media Contact: Tommy Kaelin – tkaelin@ppionline.org
