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Federal Trade Commission May Block Merger of DraftKings and FanDuel

Tim McCullough Managing Editor June 15, 2017 3:29PM EDT
The merger of DraftKings and Fanduel, the two largest Daily Fantasy Sports companies in the United States, is reportedly facing a major roadblock from the U.S. Federal Trade Commission (FTC), which raised doubts about the effect of the merger on competition.

Recode reported that the FTC could block the merger, citing three unnamed sources familiar with the matter, over concerns that the combination of DrafKings and FanDuel would represent 80 percent or more of the DFS market. That kind of dominant market share could cause the new company to run afoul of antitrust law according to the legal staff at the FTC, which began its review of the merger shortly after its announcement in November of 2016.draftkings and fanduel

A recommendation to file suit to stop the merger is only one step in the process. The commissioners of the FTC have yet to vote on the matter, which could happen as soon as this week. However, since the commission only has two current sitting members instead of the usual five, it may be a challenge to stop the merger. If the one Republican chairman and lone Democratic commissioner split their vote, the deadlock would effectively allow the merger to go forward.

At issue is whether the FTC views the DFS space separately from season-long Fantasy games, which are offered by several large companies including ESPN and Yahoo. Both FanDuel and DraftKings have introduced season-long games recently, which could work in their favor.

According to Recode, neither the FTC nor representatives of DraftKings and FanDuel offered comment on the proceedings.

The FTC isn’t concerned with whether daily fantasy sports are legal, they are only concerned with whether a merger would effectively squash any competition, giving the new company an unfair advantage in the market.

The merger came as a result of the legal challenges both companies faced after they were forced to stop offering games in the State of New York and ran afoul of online gambling laws in other states. Both companies spent large sums on the ensuing legal battle, which continues in several states to date.

New York eventually passed laws to legalize and regulate daily fantasy sports companies and several states have since followed suit.

 

 

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