By Linda O’Brien, J.D., LL.M.
The two largest daily fantasy sports providers—DraftKings and FanDuel—have agreed to terminate their proposed merger following a challenge by the FTC to block the transaction (In the Matter of DraftKings, Inc., FTC File No. 161 0174).
Founded in 2012 and headquartered in Boston, DraftKings is the country’s largest daily fantasy sports provider in terms of entry fees and revenues. It offers contests in football, baseball, basketball, hockey, golf, stock car racing, mixed martial arts, soccer, Canadian football, and eSports. Founded in Scotland in 2009, FanDuel is the second-largest daily fantasy sports provider in the United States, and offers contests in football, baseball, basketball, hockey, soccer, and golf.
Customers who participate in paid daily fantasy sports contests generally pay an entry fee and select a lineup of professional athletes, typically limited by a salary cap. Each lineup earns fantasy points based on the real-life performance of the selected athletes using a predetermined scoring system. The users whose lineups generate the most fantasy points, based on their ranking and the rules of the contest, receive prizes directly from the daily fantasy sports provider.
On June 19, the FTC issued an administrative complaint and, along with the Offices of the Attorneys General in the State of California and the District of Columbia, authorized the filing of a joint complaint in the U.S. District Court for the District of Columbia, seeking to block the merger. The complaint alleged that the combined firm would control more than 90 percent of the U.S. market for paid daily fantasy sports contexts.
"The parties’ decision to abandon this transaction is a clear win for American consumers," stated Markus H. Meier, Acting Director of the Bureau of Competition. "For years, the vigorous competition between DraftKings and FanDuel has spurred innovation and favorable pricing. In brief, consumers benefitted from the intense rivalry between the two leading players in this space. If this merger had been allowed to go through, those benefits would likely have been lost."
"Over the past few years, DraftKings has become the world’s leading fantasy sports company. We are recognized as a global sports entertainment brand and the industry leader in utilizing technology to bring our customers the best fantasy contests and products. We have a growing customer base of nearly 8 million, our revenue is growing over 30% year-over-year, and we are only just beginning to take our product overseas to the billions of international sports fans we have yet to even reach," said DraftKings CEO Jason Robins in a statement yesterday. "Consequently, we believe it is in the best interests of our customers, employees, and investors to terminate our agreement to merge with FanDuel and move forward as a separate company. This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide. We appreciate the continued loyalty of our players – it is you who have made this all possible – and we look forward to kicking off what is going to be our best NFL season yet!"
FanDuel CEO Nigel Eccles also commented "FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry. While our opinion has not changed, we 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. There is still enormous, untapped market opportunity for FanDuel, and we will continue to execute our strategy to grow our business and further expand the fantasy sports industry. We’d like to thank our partners and customers for their patience, support and continued loyalty over the past several months."
Companies: DraftKings, Inc.; FanDuel Limited
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