DraftKings and FanDuel to fight FTC over merger block

DRAFTKINGS and FanDuel are hoping to proceed with merger plans despite concerns that such a move would violate anti-trust laws in the United States.

The US Federal Trade Commission (FTC) filed suit against the two companies last month on the grounds that their proposed union would kill any competition in the daily fantasy sports market.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” FTC director Tad Lipsky said in June.

“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 favourable prices and terms consistent with the provision of competitive returns to efficient producers.”

According to the FTC, the merger would see DraftKings and FanDuel collectively hold a 95 per cent marketshare.

Yet neither party is giving up on a deal that could drag both out of some significant financial difficulties.

In a statement released last week, the companies claimed the customers would benefit most from their coming together.

“The merger will result in substantial merger-specific efficiencies, cost-savings, innovation and other pro-competitive effects that will directly increase the consumer value proposition,” they said.

“These benefits greatly outweigh any and all purported anti-competitive effects.”

DraftKings and FanDuel representatives have also questioned whether DFS constitutes a market in its own right.

They argue that it is merely a segment of the wider fantasy sports landscape, which includes season-long league competitions.

The FTC rejected that notion, pointing in particular to the importance of the real money prizes on offer in daily fantasy contests.

Last Friday, a District of Columbia federal judge denied a request to have proceedings moved to Boston, Massachusetts.

Why the FTC wants to block the merger

The FTC’s reasoning is very simple: if these two join forces, there will be no competition to speak of in the DFS market.

Furthermore, the agency recognises that a lack of direct rivalry between DraftKings and FanDuel would hurt punters most of all.

The marketing wars of recent years have led to lower entry fees, bigger prize pools, more gameplay options, better promotions and a greater array of sports.

A merger might make more prize money available, but it would leave the new monopoly with absolutely no incentive to develop, improve, or even maintain the standard of its product.

The case bears an eery resemblance to that of Tabcorp and the Tatts Group in Australia.

The Australian Competition Tribunal (ACT) ruled in favour of the proposed $11 billion merger in that instance, much to the chagrin of corporate bookmakers and racing broadcasters.

Only a matter of hours separated that move from the news of the FTC’s suit against DraftKings and FanDuel.

Both cases are far from over.

On Monday, the Australian Competition and Consumer Commission (ACCC) lodged an appeal against the merger and sought clarification on what the ACT defined as market competition.

Tabcorp and Tatts, much like DraftKings and FanDuel, have argued that their vague promises of consumer benefit outweigh the very real and obvious pitfalls of such a deal going through.

Aussie punters and US fantasy nuts alike can only hope that common sense prevails and those proposals fall flat.

In this day and age, however, common sense might be a little too much to ask for.

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