By Jonathan Stempel
NEW YORK (Reuters) -New York Attorney General Letitia James is investigating whether Capital One’s proposed $35.3 billion acquisition of Discover Financial Services (NYSE:) violates state antitrust law.
In court filings on Wednesday, James asked a state judge in Manhattan to subpoena Capital One for documents needed for its investigation, citing the bank’s alleged lack of cooperation.
James said a merger could have a significant impact in New York, because Capital One and Discover have more than $9.5 billion and $6.5 billion in credit card loans there, respectively.
She also said the impact of a merger would be “particularly felt by often vulnerable New Yorkers with subprime credit scores.”
Capital One, based in McLean, Virginia, is one of the largest U.S. banks, with $480 billion in assets as of June 30. It expects to report third-quarter results on Thursday.
Discover, based in Riverwoods, Ill., last week reported third-quarter profit of $965 million.
Capital One said in a statement that it would respond to James through the appropriate legal channels and was “well positioned” to obtain merger approval from federal banking regulators.
“We have made a strong case for the competitive and consumer benefits of this transaction,” the report said.
Discover did not immediately respond to requests for comment.
The all-stock merger announced in February would create the largest U.S. credit card issuer with more than $250 billion in outstanding loans, surpassing JPMorgan Chase (NYSE:), and access to more than 305 million cardholders.
James said the merger would extend Capital One’s lead as the largest U.S. issuer of subprime cards and give the combined company a market share of more than 30%.
A merger would also help Capital One, which issues Visa and Mastercard-branded cards, expand its payments business.
The merger also requires approval from shareholders, the Department of Justice and the Federal Trade Commission. Capital One and Discover have said they hope to close in early 2025.
James said her office asked Capital One and Discover in May to waive confidentiality so it could review documents they filed with the Justice Department’s antitrust division.
Discover agreed to a full waiver, but Capital One did not, claiming it would give New York unlawful “visitor power” over national banks, leading to the subpoena, James said.
Customers have also sued Capital One and Discover, saying the merger would reduce competition and increase consumer costs.
