New York Attorney General Investigates Capital One-Discover Deal
New York Attorney General Letitia James has begun reviewing Capital One Financial Corp's proposal to acquire Discover Financial Services. The $35.3 billion deal is being examined for its potential violation of New York’s antitrust laws. James filed a subpoena request on Wednesday in Manhattan state court to obtain necessary documents for the investigation against Capital One.
The Attorney General expressed concerns about the impact of the merger on New Yorkers, particularly for those with subprime credit scores. Capital One and Discover hold substantial shares in New York's credit card lending market, approximately $9.5 billion and $6.5 billion, respectively. The merger could significantly affect the financial well-being of these consumers.
Capital One, headquartered in McLean, Virginia, reported having $480 billion in assets as of June 30, and is preparing to announce its third-quarter results on Thursday. Discover, based in Riverwoods, Illinois, reported a profit of $965 million for the third quarter last week.
The bank stated that it would respond through appropriate legal channels in accordance with the Attorney General’s actions. Capital One believes it has a strong case for the merger and emphasizes its benefits in terms of competition and consumer interests.
The proposed merger, announced in February, would create the largest credit card issuer in the U.S. with over $250 billion in credit balances. This move would surpass JPMorgan in size and reach over 305 million cardholders. Additionally, the merger would solidify Capital One's position as the largest issuer of subprime cards, giving the combined entity a market share exceeding 30%. The deal also aims to expand Capital One's payment operations, which include Visa and Mastercard-branded cards.
For the merger to proceed, approvals are needed from shareholders, the Federal Reserve, and the Office of the Comptroller of the Currency. Both companies have expressed their intent to finalize the agreement by early 2025.
Earlier in May, the New York Attorney General's office had requested that Capital One and Discover waive confidentiality regarding documents submitted to the Justice Department's antitrust division. While Discover agreed to the waiver, Capital One rejected it, arguing that it would grant unfair regulatory authority over national banks to the state. This rejection led to the current subpoena request.
Additionally, Capital One and Discover are facing lawsuits from customers who claim the merger would reduce competition and increase consumer costs. The investigation and these legal challenges pose significant hurdles for the completion of the merger.