The proposed merge of daily fantasy sports (DFS) leaders DraftKings and FanDuel will not be happening if the federal government has anything to do with it. On Monday, the Federal Trade Commission (FTC) announced that, along with the Attorneys General of California and Washington, D.C., it will file a complaint in federal district court in order to seek a preliminary injunction and block the merger.
“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, Acting Director of the FTC’s Bureau of Competition, in Monday’s press release. “The FTC is committed to the preservation of competitive markets, which offer consumers the best opportunity to obtain innovative products and services at the most favorable prices and terms consistent with the provision of competitive returns to efficient producers.”
DraftKings and FanDuel are by far the two largest DFS sites; it is estimated that they control and would control together about 90 percent or more of the DFS market.
The FTC’s press release adds:
According to the FTC’s complaint, consumers of paid daily fantasy sports are unlikely to view season-long fantasy sports contests as a meaningful substitute for paid daily fantasy sports, due to the length of season-long contests, the limitations on number of entrants and several other issues. The complaint also alleges that entry or expansion by other providers is not likely to provide timely or sufficient competition to offset the anticompetitive effects of the merger. The complaint also asserts that purported efficiencies would not offset the likely competitive harm.
The above is likely at least somewhat of a response to the following claim by DraftKings and FanDuel when they announced the merger agreement in November 2016:
The operational efficiencies and cost savings that are expected to result from the merger will drive a greater focus on developing new products and features, including more variety in contest formats, loyalty programs, enhanced social functionality and ancillary sports-oriented content and experiences, all aimed at creating a more diverse, exciting and appealing experience for fantasy sports players and all sports fans. The merger will also help the combined company accelerate its path to profitability.
The combined company will be able to invest in strategic partnerships across the sports ecosystem. Media, advertising and other partners will benefit from access to more products and customers as a result of DraftKings and FanDuel’s diverse user base and league relationships, as well as increased investment in advertising. Together, the combined entity can accelerate growth of the fantasy sports category, drive broader and deeper fan engagement, and more efficiently reach those players.
Very little detail was provided when the merger was announced, except that the new company will be a 50/50 split of the two parties, with an even number of Board members (plus one independent) coming from each company. DraftKings CEO Jason Robbins will be the CEO of the new company and FanDuel CEO Nigel Eccles will be Chairman of the Board.
In his own press release, Washington, D.C. Attorney General Karl Racine said, “Daily fantasy sports contests are a pastime that many District residents enjoy — but it’s no fun for consumers when near-monopolies limit competition and innovation. Because we believe that this proposed merger would harm consumers in the District, we have joined the FTC and California in opposing it.”
