DraftKings Inc. and FanDuel Ltd. tried to convince the Federal Trade Commission that that their merger wouldn't be a problem for fans of the two leading daily fantasy sports sites, but the that's a wager the competition enforcer refused to take.
Although season-long fantasy sports contests are prevalent, the FTC rejected the companies' argument on grounds that consumers of paid daily fantasy sports are unlikely to view season-long leagues as satisfactory alternatives, "due to the length of season-long contests, the limitations on number of entrants and several other issues."
The FTC said Monday, June 19, it has voted to pursue legal action seeking to block the merger of DraftKings Inc. and FanDuel Ltd., the two largest daily fantasy sports sites.
The FTC said the combined firm would control more than 90% of the U.S. market for paid daily fantasy sports contests. The agency, joined by the Attorneys General in California and the District of Columbia, plans to file a complaint in federal district court seeking a preliminary injunction to stop the deal while an administrative trial presided by an in-house FTC judge is underway. The administrative trial is scheduled to begin Nov. 21.
The companies, both private, announced plans to merge Nov. 18, 2016. No terms were disclosed, but each company had been reported to carry valuations upwards of $1 billion.
According to the FTC's complaint, DraftKings and FanDuel are each other's most significant competitor. "At present, the two companies battle head-to-head to offer the best prices and product quality, including the largest prize pools and greatest variety of contests," the FTC said in announcing the legal action. "The proposed merger would create a single provider with by far the largest share of the market for paid daily fantasy sports contests in the United States."
"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."
Founded in 2012 and headquartered in Boston, DraftKings is the country's largest daily fantasy sports provider in terms of entry fees and revenue. It offers contests in football, baseball, basketball, hockey, golf, stock car racing, mixed martial arts, soccer, Canadian football, and eSports.
Founded in Scotland in 2009, FanDuel is the second-largest daily fantasy sports provider in the United States, and offers contests in football, baseball, basketball, hockey, soccer, and golf.