Report: DOJ Finds Capital One-Discover Deal Would Harm Subprime Competition

The Department of Justice has reportedly found that Capital One’s planned acquisition of Discover would be anticompetitive.

“DOJ staff has determined that Capital One’s proposed $35.3 billion acquisition of Discover Financial would harm competition in the subprime sector, sources familiar with the matter said,” The Capitol Forum said in a Monday (March 17) post on LinkedIn.

The Department of Justice did not immediately reply to PYMNTS’ request for comment.

The department’s finding will be included in a draft report on the proposed combination that it is preparing to give to the Federal Reserve and the Office of the Comptroller of the Currency, Seeking Alpha reported Monday, citing a paywalled article by The Capitol Forum.

Capital One and Discover said in a Feb. 18 press release that over 99% of the stockholders of both companies voted to approve the acquisition and that Capital One expected the transaction to close early this year, subject to customary closing conditions, including approval by the Federal Reserve and the Office of the Comptroller of the Currency.

The Delaware State Bank Commission approved the proposed acquisition in December.

Capital One announced its planned acquisition of Discover in February 2024, saying the all-stock transaction, valued at $35.3 billion, will create a global payments platform with 70 million merchant acceptance points in more than 200 countries and territories.

“Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies,” Richard Fairbank, founder, chairman and CEO of Capital One, said at the time in a press release.

It was reported in October that New York Attorney General Letitia James was investigating the proposed acquisition and asked a court for permission to issue subpoenas to Capital One, saying the bank had declined to voluntarily waive federal confidentiality protections.

While the U.S. Justice Department was already reviewing the proposed deal, James said in a court filing that the deal would have “significant impact” on consumers in New York because the two companies would have a dominant 30% market share among subprime consumers.