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Capital One is moving ahead with plans to buy Discover Financial, but the proposed takeover is expected to face significant opposition from regulators, and whether the deal actually goes through depends on who wins the presidential election. It may be affected.
Before the ink dries on the press release announcing the merger of two of the largest U.S. credit card companies, some lawmakers and consumer groups are urging regulators to scrap the merger, citing antitrust concerns. I asked for it.
Capital One Financial Corp. has agreed to acquire Discover Financial Services in a $35 billion all-stock deal, creating the largest U.S. credit card company by lending value and creating a combined company that will become a Wall Street giant. You can build a stronger foothold to compete. (Angus Mordaunt/Bloomberg via Getty Images/Getty Images)
| ticker | safety | last | change | change % |
|---|---|---|---|---|
| C.O.F. | Capital One Financial Co., Ltd. | 134.54 | -0.46 | -0.34% |
| DFS | discover financial services | 120.06 | -0.52 | -0.43% |
progressive Sen. Elizabeth Warren, Democrat of MassachusettsThe president, who considers the Consumer Financial Protection Bureau his brainchild, predictably denounced the proposal and called on regulators to “immediately stop it.”
Days later, at the other end of the political spectrum, Sen. Josh Hawley (R-Missouri) followed suit and called on the Justice Department to terminate the agreement, writing in a letter to Assistant Attorney General Jonathan Cantor: He argued as follows. If the merger is completed, it will create a new behemoth in the credit card market and give it unprecedented power to rob American consumers. ”
How Capital One’s acquisition of Discover will impact consumers
The Biden administration is likely to comply with such requests. The Federal Trade Commission under the Biden administration filed a record number of merger challenges in both 2022 and 2023, according to data obtained by Bloomberg in December.
Federal Trade Commission (FTC) Chair Lina Khan attends a House Judiciary Committee hearing on Thursday, July 13, 2023, in Washington, DC. Mr. Khan’s FTC filed a record number of merger challenges in 2022 and defeated its own merger challenges. 2023 record (Al Drago/Bloomberg via Getty Images/Getty Images)
But the FTC has had mixed success. For example, the FTC failed in its attempt to block Microsoft’s acquisition of Activision Blizzard, but succeeded in blocking JetBlue’s proposed acquisition of Spirit Airlines.
Reuters reported earlier this week that investors are 50-50 on whether Capital One and Discover’s merger talks will go through, with Capital One ultimately having to convince regulators that the merger will benefit consumers. It depends on whether you can persuade them.
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However, there are other factors at play. The deal is not expected to be completed until late 2024 or early 2025, after the presidential election. For this reason, experts point out that if President Biden fails to win re-election in November and loses to former President Trump, who is seen as the Republican nominee, the chances of a deal being reached may increase.
Former President Trump (left) is expected to be the Republican candidate to challenge President Biden in November. (Getty Images/Photo Illustration/FOX News)
Sanjiv Kalita, industry director at FinTech Meetup, told FOX Business that the Biden administration is more likely than the Trump administration to view the deal as potentially restricting competition; He said he does not expect it to be completely blocked.
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Kalita said the Biden administration is likely to add clauses, restrictions and requirements to the agreement, such as mandating the separation or sale of certain business units, or perhaps increasing regulatory oversight in certain areas. He said there is a high possibility that he will look forward to it.
“There will be a bank that is bigger than the combined entity.” [of Capital One and Discover]So I don’t think size matters as long as you claim it doesn’t reduce competition or negatively impact consumers,” he explained.
Capital One Financial Corporation
Kalita said regulators typically balance a desire for safety and health of the economy with whether they can support innovation and growth, and politicians on both sides said that a merger could negatively impact one or the other. He pointed out that there is a possibility that the government may try to claim that it will be accepted.
He said that in this case, if there are arguments from both the right and the left, regulators may think they are leading the way.
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Kalita personally believes that Capital One’s acquisition of Discover could benefit consumers.
“Capital One will be able to develop merchant-specific value propositions and create a smoother user experience for consumers,” he told FOX Business. This could help drive lower interest rates for consumers, which is likely to be the case for both COF and DFS in Central America.”
