DraftKings, FanDuel merger violates antitrust laws, FTC says

The planned merger of daily fantasy sports leaders DraftKings and FanDuel is on hold, after the Federal Trade Commission announced Monday it would file a complaint to block the merger on grounds it violates antitrust laws.

The complaint, which will be filed jointly with the office of California Attorney General Xavier Becerra, alleges the merged company would control more than 90 percent of the daily fantasy sports market, thus potentially representing a monopoly.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” Tad Lipsky, acting director of the FTC’s Bureau of Competition, said in a statement. “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.”

In a joint statement responding to the FTC’s announcement, DraftKings and FanDuel expressed disappointment in the decision, noting the two companies “continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry.”

DraftKings and FanDuel will “consider all options” in response to the FTC’s complaint. For the time being, the companies will remain separate.

An administrative trial is set for Nov. 21. Any hopes of a merger are highly unlikely before the NFL season, which has long been the daily fantasy industry’s most lucrative time of year.

Once bitter rivals jockeying for position atop a nascent, booming industry, DraftKings and FanDuel announced their intentions to merge in November, with few details of how such a merger might work. In spite of tensions between their CEOs, a deal was brokered after the two companies found themselves bogged down in a slew of expensive, state-by-state legal battles.

Yet as both settled their once-profound differences to preserve a future as the industry’s leader, antitrust concerns always loomed.

The FTC complaint also raises further questions about the future of daily fantasy sports in California. While Becerra has not issued an official stance on the industry’s legality in the state, his inclusion in the complaint’s filing is a sign the attorney general’s office could pose a serious obstacle for the industry in one of its most crucial states. California’s previous attorney general, Kamala Harris, was mum on daily fantasy’s legality, before she was elected to the state’s open U.S. Senate seat.

The California State Assembly unanimously passed a DFS bill in January. Since, the bill has been dormant, with little word on whether it will be revived in 2017.

The daily fantasy industry has faced its fair share of obstacles the past two years. Thirteen states have legalized daily fantasy sports contests. But many more challenges, not limited to the FTC’s complaint, lie ahead.

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