Antitrust & Regulatory

(Acquisition in the Banking Industry)


The Client's Request


A global financial investment entity engaged CILC's attorney to conduct a comprehensive regulatory and antitrust analysis of the proposed Capital One/Discover transaction.
The client sought to understand the likelihood that federal and state regulatory agencies might require a divestiture to secure approval as the client was considering  the possibility of acquiring any divestiture assets resulting from such a mandate.
CILC’s attorneys provided detailed guidance on how the Department of Justice, Federal Reserve, OCC, and state attorneys general might evaluate the deal.


Case Overview


  • The transaction resulted in the sixth-largest U.S. bank by assets and the largest credit-card lender by outstanding balances


  • Despite Department of Justice (DOJ) clearance, final approval turned on overlapping antitrust, banking-law, and state-law tests that each regulator applies through distinct lenses


  • CILC attorneys advised on all three fronts, focusing on
  • (1) horizontal effects in prime and sub-prime credit-card issuing,
  • (2) vertical effects from Capital One’s newfound control of the Discover network, and
  • (3) systemic-risk and prudential factors unique to bank mergers


 Regulatory Jurisdiction & Applicable Standards


  • Regulator: DoJ
  • Statute - Clayton Act § 7
  • Test - 2023 Merger Guidelines (HHI > 1,800 & ΔHHI > 100 or 30% share)
  • Current Policy - 2024 Banking Addendum withdraws 1995 Bank Guidelines


  • Regulator: Federal Reserve
  • Statute - Bank Holding Company Act & Bank Merger Act
  • Test - 1995 Fed Guidelines (HHI > 1,800 & ΔHHI > 200) + “cluster-of-banking-products” test
  • Current Policy - Continues 1995 framework despite DOJ shift


  • Regulator: OCC
  • Statute - Bank Merger Act
  • Test - Same as FR plus safety-and-soundness
  • Current Policy - 2024 rule (tougher) rescinded May 2025; expedited review restored


  • Regulator: State Attorney General (NY & CA)
  • Statute - State antitrust acts
  • Test - 2023 Guidelines directly applied


 Market Definition & Concentration Analysis


  • General-Purpose Credit-Card Issuing: National market; top-10 issuers hold ≈ 82% of balances
  • Post-merger share ≈ 21-22% by balances, 14-16% by purchase volume
  • ΔHHI ≈ 172 points; post-merger HHI ≈ 1,054 (unconcentrated under Fed test and below 1,800 DOJ line)


  • Sub-Prime Credit-Card Issuing (≤ 660 FICO)
  • Critics claim distinct sub-market; Fed precedent treats sub-prime as fluid (Capital One/HSBC 2012)
  • 18 issuers, pre-merger HHI = 1,107; post-merger = 1,488—well below 1,800 structural presumption


  •  Credit-Card Networks: Visa 42-52%, Mastercard 25-28%, AmEx 15-20%, Discover 4-8% share by volume
  • If Capital One migrates its Visa/Mastercard spend, Discover’s network share could rise to 12-15%—still below AmEx and far from dominant
  • Vertical theory of harm (issuer controlling a mid-sized network) must meet 2023 Guidelines Guideline 5. AmEx precedent (Ohio v. AmEx 2018) found no market power at 26% share, undercutting a foreclosure case


Systemic-Risk Factors


  • Combined assets $624 billion clear the Dodd-Frank $250 billion threshold for Category III enhanced standards


  • Credit-card loans will comprise ≈ 40% of assets; delinquency rates 4.6% (COF) and 3.9% (DFS) remain manageable versus industry 3.0%


  • Liquidity and capital exceed Fed “well-capitalized” thresholds post-integration


 Remedies & Political Overlay


  • DOJ: memo “insufficient evidence to block”


  • Trump-era OCC rescission of 2024 rule plus Congressional CRA resolution (May 2025) signal a pro-merger stance


  • States: NYAG/CAAG can still seek injunctive relief under Clayton Act § 16, but no divestiture; probability reduced


Takeaways for the Client


  • Sub-market narratives matter - Empirical expansion of issuer universe neutralized headline 30% sub-prime share claims


  • Vertical theories face high burdens


  • Bank-merger approvals hinge on prudential commitments


  • Agency divergence can be managed


  • Political cycles reshape process, not standards


Even headline-grabbing “mega” bank deals can survive modern antitrust scrutiny when robust data show unconcentrated markets and limited foreclosure risk. The case also illustrates CILC’s integrated approach—leveraging antitrust and regulatory expertise—to steer clients through a shifting merger-control landscape


(Disclaimer: CILC attorneys provided independent regulatory analysis to a third-party investment firm, not legal representation to the merging entities)