Capital One credit card holders file class action over Discover merger

Capital One credit card merger class action overview: 

• Who: Plaintiffs Tyler Baker and Lora Grodnick, both Capital One credit card holders, have filed a class action lawsuit against Capital One and Discover.
• Why: Baker and Grodnick want to halt a merger between the two credit card companies, saying it will reduce competition in the credit card market. 
• Where: The Capital One credit card merger class action lawsuit was filed in a Virginia federal court. 

Capital One credit card holders have filed a class action lawsuit against Capital One and Discover, in an attempt to halt a merger between the two credit card companies that they allege will reduce competition in the credit card market. 

Credit card customers Tyler Baker and Lora Grodnick filed the class action lawsuit against Capital One Financial Corporation and Discover Financial Services on July 22 in a Virginia federal court, alleging violations of federal antitrust laws. 

According to the lawsuit, Capital One’s planned $35 billion acquisition of Discover will lead to “a substantial lessening of competition” and harm to credit card consumers. 

“The proposed merger will eliminate one of two vertically integrated general credit card market firms from the competitive landscape, seriously reducing price pressure on Capital One and other major issuers,” the plaintiffs claim.

Merger diminishes payment processing market, plaintiffs claim

The plaintiffs allege the merger would also shrink the payment processing market. 

Discover is one of four companies in the domestic credit card payment processing market — Visa, Mastercard, American Express, and Discover, the lawsuit states. Visa and Mastercard are the dominant credit card payment processors, with a combined near-monopoly share of 87%. They have a long history of colluding to raise prices and harm consumers, the plaintiffs say.

“In fact, Visa and Mastercard have previously been sued for colluding with Capital One to anticompetitively inflate interchange fees.”

With the merger, Capital One — one of the nation’s largest issuers of Visa- and Mastercard-serviced charge cards — will become Visa and Mastercard’s horizontal competitor and take control of one of the firms’ two meaningful competitors, the lawsuit claims.

Potential price fixing, reduced competition

The plaintiffs argue that this arrangement would leave Discover, one of the few serious competitors to Visa and Mastercard, negotiating prices in the market with these giants. 

This could potentially lead to price fixing and reduced competition in the Credit Card Payment Processing Market. 

The plaintiffs claim the merger could lead to higher prices and interest rates for consumers, as Capital One would control a significant portion of the market, increasing from the ninth to the sixth-largest bank in the nation.

As a result, the plaintiffs are suing on behalf of any person or corporation in the United States who directly or indirectly paid interchange fees as merchants or credit card holders from July 22, 2020 to now. They’re suing for violations of the Clayton Act and the Sherman Act and are seeking an injunction blocking the merger. 

Meanwhile, merchants that accepted Visa or Mastercard at any time between Jan. 1, 2004, to Jan. 25, 2019, may be eligible for a share of a $5.6 billion class action settlement known as the “Payment Card Interchange Fee Settlement.” The deadline to file a claim is Aug. 30, 2024. Click here for more information. 

What do you think of the Capital One-Discover merger? Let us know in the comments! 

The plaintiffs are represented by Brian J. Dunne, Edward M. Grauman, Andrew M. Williamson, Yavar Bathaee and Andrew C. Wolinsky of Bathaee Dunne LLP. 

The Capital One-Discover merger class action lawsuit is Baker et al. v. Discover Financial Services Inc. et al., Case No. 1:24-cv-01265, in the U.S. District Court for the Eastern District of Virginia.

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