The US Justice Department is overhauling its review process for bank mergers and acquisitions. Jonathan Kanter, the agency’s top antitrust official, announced the changes in New York on Monday evening. The new guidelines will replace the DOJ’s existing ones from 1995.
They will take a broader look at the impact of mergers, including the role of nonbank players like private equity, private credit, and fintech companies. Kanter said the current guidelines focus too narrowly on factors like branch overlaps and deposits. These may not effectively assess market concentration in today’s banking landscape.
The FDIC is also set to present its own approach to bank mergers. It will align with the DOJ’s revamped guidelines. However, it remains to be seen if the Federal Reserve will support the new guidelines.
The Fed evaluates deals based on their impact on the financial system and operates independently of the DOJ. Kanter and Federal Trade Commission Chair Lina Khan are leading the Biden administration’s efforts to curb corporate consolidation. They have aggressively opposed mergers and brought monopoly cases against major companies, including Google and Apple.
The government has also targeted corporate intermediaries such as Live Nation and RealPage.
Assessing mergers with revised guidelines
It is investigating pharmacy benefit managers for their influence on prescription drug prices.
Kanter emphasized that deal fixes, such as asset divestitures, often fail to restore competition effectively. He also pointed out that partnerships between big tech companies and AI startups are under scrutiny as potential stealth takeovers. Antitrust regulation has become a bipartisan issue.
Some Republicans, including vice presidential candidate JD Vance, are taking a firm stance against corporate consolidation. The overhaul acknowledges the dramatically changed financial landscape. It could empower the DOJ to regulate a significant part of the economy that has largely escaped oversight.
While Kanter did not comment on specific transactions, his stance may negatively impact the pending $35 billion merger of Capital One and Discover. The DOJ’s mandate to consider competition in credit cards, payment systems, and merchant fees suggests a tougher review ahead. The Progressive Policy Institute, a centrist Democratic think tank, argues that even under a broader review, the Capital One-Discover merger may not substantially lessen competition.
They caution that if antitrust regulators challenge it and lose, it could undermine the first major test of their new approach. This overhaul signals a significant shift in how bank mergers and financial services deals will be evaluated moving forward. It reflects the evolving nature of the financial industry and its regulatory landscape.
- Semafor.”Top US antitrust cop says DOJ will overhaul how it reviews bank deals”.
- BloombergLaw.”Capital One-Discover Deal Hits Roadblock in Bank Merger Overhaul”.
- NYTimes.”Banking Deal Oversight to Get a Major Revamp”.