Capital One/Discover Deal: Rumored Concerns Lack Substance
The proposed merger of Capital One Financial Corp. and Discover Financial Services Inc. would appear to be moving toward completion, as more than 99% of the companies’ shareholders voted last month to approve the $35.3 billion deal. According to at least one report, however, anonymous sources in the U.S. Justice Department (DOJ) suggest the agency might still challenge the merger on antitrust grounds due to alleged concerns about the significant market share the combined company would hold in the subprime credit-card market.
But as my International Center for Law & Economics (ICLE) and I demonstrate in a white paper we published last summer, the DOJ’s focus on subprime competition may be missing some key market dynamics. In particular, the combination likely would benefit consumers—especially those with lower credit scores—by creating new opportunities and potentially more competitive financial services.