Federal Trade Commission Sues To Block FanDuel and DraftKings Merger
The Federal Trade Commission will challenge the merger of DraftKings Inc. and FanDuel Inc., saying Monday the deal to combine the two largest daily fantasy sports websites would create a company that controls more than 90 percent of the market.
The agency, along with the California and District of Columbia attorneys general, will seek an injunction in federal court to block the deal, the FTC said. The five-member FTC is currently short-handed, with only two sitting commissioners, one Republican and one Democrat. Both supported the lawsuit.
The rival companies each offer daily games in which consumers pay to assemble virtual sports teams made up of real athletes that do battle against other virtual teams. The “managers” of winning teams that amass the best statistics take home cash prizes. The companies make money through entry fees.
This isn’t the first time that DraftKings and FanDuel have faced regulatory scrutiny. Last year, the companies both found themselves in a legal battle with New York Attorney General Eric Schneiderman, who stated that the sites violated state gambling laws. New York wasn’t the only state putting up a fight against the companies, though. Legal battles in Virginia, Texas, Illinois, and Nevada kept both companies on their toes. Experts have said that the merger was one way to control costs and to create a unified effort towards legal defense and lobbying efforts. However, DraftKings CEO Jason Robins said the move was all about advancing forward.
Regardless of the motive, the merger may prove to be something that the FTC has trouble stopping. Although regulators could point out that the deal threatens competition in the DFS marketplace, DraftKings and FanDuel have rolled out other products that put them in competition with a broader range of businesses.
Both companies issued a joint statement, saying they are disappointed by this decision and continue to believe that a merger is in the best interests of their players, companies, employees and the fantasy sports industry. They also stated that they are considering all options at this juncture.
Rest assured that everyone in the realm of daily fantasy sports, and fantasy sports in general, will be watching this very closely to see what the outcome will be in this high stakes fight between the government and the two companies.