The U.S. Federal Trade Commission said on Monday it will seek to stop the merger of DraftKings and FanDuel, because the combined company would control more than 90 percent of the U.S. market for paid daily fantasy sports contests. According to ESPN, FanDuel will not accept customers in 11 states, DraftKings in 10.
When the companies announced merger plans in mid-November a year ago, the New York Times described the union as a marriage of necessity in large part due to ongoing and costly tangles with regulators and legislators who considered the operations to be gambling rather than games of skill.
Tech news source Recode.net reports that should five-member commissioner body be split.
"By combining and streamlining resources, FanDuel and DraftKings can work more efficiently with state government officials to develop a standard regulatory framework for the industry", they said in a November statement.
Welcome to the Monday Day FanDuel MLB edition of Picks and Pivots, a fantasy baseball column focused on helping you find the best core lineup for today's Main slate which kicks off at 7:05 PM EST! "We are considering all our options at this time", DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles said in a joint statement.
"We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry".
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The FTC's role is to promote competition and education, but they can not provide sites with millions of dollars of paid advertising and/or large GPP prize pools (guaranteed prize pools).
DraftKings is the largest fantasy sports company, according to the FTC with FanDuel, which is based out of Scotland is the second largest. It appears it will be up to the courts to decide whether it's correct.
The suit does not mean there has been any finding of guilt, only that there is a reason to believe the merger violates the law.
The complaint also adds "consumers of paid daily fantasy sports are unlikely to view season-long fantasy sports contests as a meaningful substitute for paid daily fantasy sports, due to the length of season-long contests, the limitations on number of entrants and several other issues". And the arrival of new competitors or the expansion of existing ones isn't likely to "provide timely or sufficient competition to offset the anticompetitive effects of the merger", the FTC said.
What happens next for the merger?"The administrative trial is scheduled to begin on November 21, 2017". Looking back at last season, the winning GPP lineup on average scored 255 FanDuel points with a typical roster build that allocated 25% of your salary cap to your SP and the remaining 75% to your hitters.
The news of the brakes being pumped on the merger sets up a scenario that is both old and new: The idea that one of the two companies will come out on top gains traction.