The Federal Trade Commission just announced it will authorize legal action to block the merger of DraftKings and FanDuel, the two largest daily fantasy sports sites in the U.S.
Specifically, the commission will jointly file a complaint with the Attorneys General in California and the District of Columbia seeking a preliminary injection to stop the deal. They will also issue an administrative complaint alleging that the merger violates Section 7 of the Clayton Act, which “prohibits mergers and acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly,” as well as Section 5 of the FTC Act which details unfair acts affecting commerce.
In a release, the FTC explained that the combined company would “control more than 90 percent of the U.S. market for paid daily fantasy sports contests.”
Since the two companies are each other’s most significant competitor, and “battle head-to-head to offer the best prices and product quality,” the FTC seems worried that the combined company would have no significant competitor in the daily fantasy sports space.
While DraftKings and FanDuel are certainly the two largest players in the space, media companies like ESPN and Yahoo, and gambling companies like William Hill, have shown interest in getting into the daily fantasy sports business. And one of the main reasons these companies haven’t become larger competitors is that the legal ambiguity surrounding the industry have caused them to pause expansion, while DraftKings and FanDuel have forged ahead.
Once the legal issues surrounding daily fantasy sports are solved, it’s likely that competitors will eventually grow large enough to be able to compete with a combined DraftKings-FanDuel entity, reducing anti-trust concerns.
In a statement, DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles said:
We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry. We are considering all our options at this time.
As we work together to determine our next steps, we would like to thank DraftKings and FanDuel players, partners and employees for their patience, support and continued loyalty.