Urges Department of Justice to File Lawsuit to Prevent Capital One and Discover Merger
In a move that has consolidated two major credit card companies, Capital One completed its $35.3 billion acquisition of Discover in May 2025, making it the sixth-largest bank in the U.S. by asset size [1][2][3]. The acquisition, which faced opposition from Senator Elizabeth Warren and other top Democrats, was approved by federal regulators despite antitrust concerns.
Senator Warren, in a letter to the Justice Department's antitrust leader, Gail Slater, urged the department to sue to block the merger. Warren argued that the combination could dampen existing innovation in the market, diminish incentives for remaining firms to offer more generous rewards, and potentially increase costs for merchants [1].
The acquisition passed federal approval from the Federal Reserve and the Office of the Comptroller of the Currency in April 2025, followed by shareholder approval and the closing of the deal in May 2025 [1][3]. The merger was also met with a class-action lawsuit alleging it would violate antitrust laws, but the case was paused in October 2024 pending further judicial action [1][3].
The Federal Reserve's analysis found that the post-merger Herfindahl-Hirschman Index (HHI) would increase by 766 points to 1971 for new-to-credit customers [1]. By acquiring Discover, Capital One would carry more than 30% of the nonprime credit score market, driving the HHI up by roughly 400 points [1].
Capital One aims to convert its debit portfolio to Discover networks, a move that could potentially charge merchants more. However, by retaining some credit card volume on other networks, Capital One would retain leverage to negotiate interchange fees with Discover's largest competitors [1].
Notably, Discover, as a card network, is not subject to the limit on debit card interchange fees imposed by the Durbin Amendment to the Dodd-Frank Act [1]. This could potentially allow Capital One to charge higher interchange fees on debit transactions, benefiting the company but potentially increasing costs for merchants.
Warren's concerns were not without merit. The DOJ has been skeptical of deals that enable firms to avoid a regulatory constraint, and a merger may violate antitrust law if it "significantly increases consolidation in a highly concentrated market" or "eliminates substantial competition between firms" [2].
However, Slater determined there wasn't sufficient evidence to challenge the Capital One deal in court. Warren, however, presses that the DOJ "does not need to have previously filed an adverse comment with regulators" to attempt to block the deal [1].
In a letter to the Fed, Warren also urged the central bank to reconsider the approval of the Capital One-Discover merger, citing potential harm to consumers and reduced competition [2]. Warren labeled this potential coordination among Discover, Visa, and Mastercard as a "recipe for coordination" [2].
The DOJ last year withdrew guidelines that leaned heavily on the Herfindahl-Hirschman Index, but a transaction that boosts HHI by 200 points or scores above 1,800 generally has been flagged as anticompetitive [2]. Warren argues that the Capital One-Discover combination could exceed these thresholds, making it a potentially anticompetitive move.
Despite these concerns, the Justice Department and federal regulators approved the merger, allowing Capital One to consolidate its position in the credit card market. The impact of this consolidation on consumers, competition, and the market remains to be seen.
[1] Associated Press. (2025, May 18). Capital One completes $35.3 billion acquisition of Discover. Retrieved from https://www.apnews.com/article/business-technology-banking-and-finance-mergers-and-acquisitions-90d667128201c88147e4eb05c15f5d56
[2] Reuters. (2024, October 1). Elizabeth Warren urges Justice Department to block Capital One's acquisition of Discover. Retrieved from https://www.reuters.com/business/elizabeth-warren-urges-justice-department-block-capital-ones-acquisition-discover-2024-10-01/
[3] The Wall Street Journal. (2025, May 18). Capital One completes $35.3 billion acquisition of Discover. Retrieved from https://www.wsj.com/articles/capital-one-completes-35-3-billion-acquisition-of-discover-11623840121
- Senator Warren, in a letter to the Federal Reserve and the Office of the Comptroller of the Currency, expressed her concerns about the potential impact of Capital One's acquisition of Discover on competition in the business and finance sector, arguing that it could increase costs for merchants and potentially reduce incentives for competing firms to offer more generous rewards.
- Despite opposition from Senator Elizabeth Warren and other top Democrats, the Capital One-Discover merger passed federal approval, but Warren argued that it could violate antitrust laws due to the increased Herfindahl-Hirschman Index (HHI) and potential reduction of competition in the general-news arena.
