New York Attorney General Investigates Capital One's Acquisition of Discover
New York Attorney General Letitia James is reviewing Capital One Financial Corp.'s proposed acquisition of Discover Financial Services, questioning its compliance with state antitrust laws. Announced in February and valued at $35.3 billion, the deal is set to create the country's largest credit card issuer.
James has initiated legal action to request documents from Capital One related to the merger. In documents submitted to the court on Wednesday, she noted that Capital One has not cooperated with the investigation. The Attorney General emphasized the potential impact of the merger on New York residents, particularly those with low credit scores, as Capital One and Discover each hold over $9.5 billion and $6.5 billion in credit card debt in the state, respectively.
The merger is expected to significantly affect the credit card market; the combined entity would surpass JPMorgan Chase as the largest credit card issuer with over $250 billion in total credit. Furthermore, the merged company will control over 30% of the market share, strengthening Capital One's position as the largest issuer of cards for low credit scores.
As of June 30, Capital One, which has $480 billion in assets and is headquartered in McLean, Virginia, is preparing to announce its third-quarter results on Thursday. Riverwoods, Illinois-based Discover reported a profit of $965 million for the same period last week.
In response to the investigation, Capital One stated that it would address the issue through the legal system and expressed confidence in securing federal regulatory approval for the merger. The bank highlighted the benefits of the transaction for competition and consumers.
Discover did not comment on the investigation. The merger is also awaiting approval from shareholders as well as the Federal Reserve and the Office of the Comptroller of the Currency; the companies aim to complete the deal by early 2025.
James's office previously requested that Capital One and Discover waive confidentiality regarding documents submitted to the Department of Justice's antitrust division in May. While Discover accepted the request, Capital One declined, citing concerns about granting unnecessary authority over national banks to the state, which led to the current subpoena request.
Additionally, customers have filed lawsuits against both Capital One and Discover, claiming that the merger would stifle competition and raise costs for consumers.