FTC, State Attorneys Challenge FanDuel, DraftKings Merger

currently, the two companies account for 90% of the U.S. Daily Fantasy sports market

FTC, State Attorneys Challenge FanDuel, DraftKings Merger
Image: Pixabay
June 21, 2017

Americans live in an economic climate that allows for high-profile mergers in industries ranging from airlines to grocery chains to cable companies. However, at least one area exists in which the government will intervene: daily fantasy sports.

The Federal Trade Commission (FTC) has authorized legal action to block the merger of the two largest daily fantasy sports sites, DraftKings and FanDuel, alleging that the combined firm would control more than 90 percent of the U.S. market for paid daily fantasy sports contests. The agency, in concert with the Offices of the Attorneys General in the State of California and the District of Columbia, will file a complaint in federal district court seeking a preliminary injunction to stop the deal and to maintain the status quo.

DraftKings and FanDuel are each other's most significant competitor, with the two companies battling head-to-head to offer the best prices and product quality. The proposed merger would effectively eliminate competition in the industry.

"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. "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."

Participants in paid daily fantasy sports contests generally pay an entry fee and select a lineup of professional athletes, typically limited by a salary cap. Each lineup earns fantasy points based on the real-life performance of the selected athletes.

According to the 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.