[Updated 6/20/17, 10:20 pm. See below.] 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 U.S. market for paid daily fantasy sports contests.
The FTC, along with the offices of the attorneys general in California and Washington, DC, said Monday they plan to file a complaint in federal district court seeking a preliminary injunction to halt the merger. They ultimately want to challenge the deal in an administrative trial scheduled to begin November 21.
Click here to view a redacted version of the complaint released by the FTC, which conceals the companies’ financial results, among other information. Axios reported some of those financial details after obtaining a private document shared with FanDuel investors in January. [This paragraph added.]
Last week, Recode reported that FTC staff had expressed concerns about the deal’s effects on competition, but it was uncertain whether the federal agency would take legal action because the normally five-member FTC currently has just two commissioners—a Republican and a Democrat. But the two members voted in favor of challenging the merger.
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. (The companies have spent heavily on ads to win customers, and the resulting scrutiny of daily fantasy sports from regulators nationwide has led to mounting legal and lobbying costs.)
But the FTC argues that any potential efficiencies gained through the merger wouldn’t offset the “likely competitive harm.” The two companies would together control more than 90 percent of the U.S. paid daily fantasy sports market, the FTC said. And the arrival of new competitors or the expansion of existing ones isn’t likely to “provide timely or sufficient competition to offset the anticompetitive effects of the merger,” the FTC said.
Founded in 2012, Boston-based DraftKings is the largest daily fantasy sports company in the U.S., based on entry fees and revenues, according to the FTC. New York-based FanDuel, which was founded in 2009, is the second-largest player in the U.S. market.
After the FTC’s announcement, the two companies said they are considering their options, including litigation.
“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,” DraftKings CEO Jason Robins (pictured above) and FanDuel CEO Nigel Eccles said in a joint statement.
DraftKings and FanDuel have raised more than $1 billion combined from investors, according to Crunchbase figures. Their backers include Time Warner/Turner Sports, NBC Sports Ventures, 21st Century Fox, Revolution Growth, Google Capital, the National Hockey League, Major League Soccer, and Major League Baseball.