News Release: Regulators Should Block Proposed Capital One-Discover Merger


Feb. 20, 2024

Carter Dougherty

Regulators Should Block Proposed Capital One-Discover Merger
Revision of bank merger guidelines is long overdue

WASHINGTON, D.C. – The proposed Capital One purchase of Discover Financial Services threatens to raise credit card prices for consumers and further constrain credit access for communities around the country. Banking regulators and antitrust authorities must closely scrutinize this megamerger for the anticompetitive and anticonsumer impacts that would certainly justify blocking this takeover. 

“Today’s concentrated markets and behemoth banking organizations are the result of a thirty-year run of mergers and consolidation,” said Patrick Woodall, senior fellow at Americans for Financial Reform Education Fund. “It is time for the banking regulators to stop rubber-stamping these transactions and stand up for consumers, communities, and a more stable financial system by blocking this takeover.”

These merger plans also highlight the failure of federal bank regulators to articulate a new policy on mergers that is in keeping with overall Biden administration policy to support competition in business and reduce the harms from concentrated economic power.

“While the United States experiences a historic, bipartisan revival of the anti-monopoly movement, bank regulators have fallen badly behind in taking steps to guard against and reduce concentration in financial services,” said Alexa Philo, senior policy analyst at Americans for Financial Reform Education Fund. “The financial regulatory agency leaders have had three years to come up with a new approach to mergers, but have failed this basic task.”

AFREF has argued repeatedly that bank regulators, including the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, and the Treasury Department need to revise the three-decade-old guidelines that govern approval of mergers and acquisitions to protect competition, consumers, communities, and financial stability. 

As early as 2021, AFR called for a moratorium on mergers until the guidelines were revised. In his historic executive order on competition, President Biden explicitly called out financial services as an area that has seen greater concentration in recent decades.

The market for credit cards shows all the classic signs of oligopoly: a few big firms dominate the market and use their market power to harm consumers. For example, a study by the Consumer Financial Protection Bureau found that big banks charge higher interest rates than smaller ones on credit cards. Bigger banks also charge higher fees than smaller banks, the CFPB has found. Also, if Capital One takes over Discover, it would own a payment processing network, creating potential anticompetitive effects due to vertical integration.