Capital One’s Proposed Merger With Discover Draws Bipartisan Criticism
Regulators have weighed in on a number of major corporate mergers in recent years in an effort to prevent monopolistic or anti-competitive situations within various industries.
Last month, a federal judge blocked JetBlue’s proposed purchase of Spirit Airlines over concerns about the impact the resulting airline would have on consumers.
“A post-merger, combined firm of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the country,” acknowledged Judge William Young. “At the same time, however, the consumers that rely on Spirit’s unique, low-price model would likely be harmed.”
Now, the financial industry, which is subject to especially stringent oversight, is at the center of another significant proposed acquisition. Capital One has announced its intention to purchase Discover, a $35.3 billion deal that would create the largest credit card lender in the nation.
Details of the proposal have already drawn bipartisan backlash from Congress, including from U.S. Sen. Josh Hawley (R-MO), who called on the Department of Justice’s Antitrust Division to intervene.
“This is destructive corporate consolidation at its starkest,” he said in a letter to Assistant Attorney General Jonathan Kanter. “If consummated, this merger will create a new juggernaut in the credit card market, with unprecedented powers to extort American consumers.”
Hawley went on to write that regulators “must take the lead in blocking this merger” for the good of American borrowers.
“No doubt a legion of proxies and allies for the financial industry will soon emerge, claiming that this proposed deal will benefit consumers,” he wrote. “That is doubtful. If the last several decades of American political economy indicate anything at all, it’s that the supposed benefits of monopoly never trickle down to the public at large.”
He predicted that the actual beneficiaries of such an acquisition would be “shareholders and a handful of top executives — not ordinary Americans.”
Sen. Elizabeth Warren (D-MA), who agrees with Hawley on very few topics, nevertheless offered a similar warning.
Capital One CEO Richard Fairbank, of course, feels differently, telling investors recently that the acquisition of Discover would “position us to compete more effectively against some of the largest banks and payment companies in the United States.”
