Trade commission seeks to block daily fantasy sports merger

The FTC challenges the merger of DraftKings and FanDuel (Private:DUEL) in a new legal action filed jointly with the Offices of the Attorneys General in the State of California and the District of Columbia.

The Federal Trade Commission is attempting to block the proposed merger of DraftKings and FanDuel over concerns that it would create a near-monopoly in the US market for paid daily fantasy sports contests.

When DraftKings and FanDuel announced their planned tie-up in November 2016, they said the union would allow them to save costs, pool resources for working with government officials, operate more efficiently, invest more in new products and features, and reach profitability faster.

This isn't the first time that DraftKings and FanDuel have faced regulatory scrutiny. NY wasn't the only state putting up a fight against the companies, though. Together, the two companies have raised hundreds of millions of dollars from investors.

According to the FTC's complaint, DraftKings and FanDuel are each other's most significant competitor, and the combined firm would hold more than 90% of the USA market.

The two daily fantasy sports sites, once bitter rivals, began pursuing a tie-up last November, particularly as regulatory pressures - from an investigation and shutdown in NY to political scrutiny by the U.S. Congress - continued to mount.

While there are a number of other sites that offer season-long fantasy football games, and some of them include cash prizes, these aren't truly competition for either of the DFS companies because they differ so greatly in their schedules and structure.

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.

But the FTC argues that any potential efficiencies gained through the merger wouldn't offset the "likely competitive harm".

  • Zachary Reyes