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FTC pressure forces DFS Giants to cancel merger plans

Fantasy football in block letters

24 July 2017

Last November, FanDuel and DraftKings announced their plan to merge, and sought to combine the two largest operators of paid fantasy daily sports. The agreement came amidst scrutiny from several state attorneys general and other regulators over the legality of daily fantasy sports. On July 13, 2017, the two daily fantasy sports giants announced they would no longer pursue their plan to join forces.

The most recent announcement came after the FTC filed a lawsuit against DraftKings and FanDuel in June, saying the two are in a league of their own in terms of daily fantasy sports, and that a combination of the two means they would not feel pressure from season-long fantasy sports providers. The FTC complaint stated, “[this merger] if consummated, would eliminate such vigorous price and non-price competition and the benefits that it provides to DFS users, resulting in substantial consumer harm.

The two companies account for more than 90 percent of the daily fantasy market, and the FTC’s acting director of the Bureau of Competition, Marcus Meier, said the decision was a “clear win” for consumers. Neither company directly addressed the federal government’s concerns in brief statements. Instead, both CEOs said they were moving forward separately in the best interests of their customers, employees and investors.

FanDuel CEO Nigel Eccles said in a statement, “[w]e have determined that it is in the best interest of our shareholders, customers, employees and partners to terminate the merger agreement and move forward as an independent company.

DraftKings released a similar statement, saying “[w]e will move forward as a separate company, which we believe is the best course in the interest of you – our customers and avid sports fans.

Boston-based DraftKings was founded in 2012, and is the younger of the two companies. Although younger, it has grown to become the largest daily fantasy sports company in terms of entry fees and revenues. Fanduel was founded in Scotland in 2009, and is the second largest daily fantasy sports provider. The merger was meant to reduce costs, as both companies separately fund legal defenses and lobby for legislation to authorize fantasy sports in states that have declared it illegal.

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