DraftKings and FanDuel have been preparing for a merger that, when announced, seemed like the only way they could survive. Various states had taken aim at daily fantasy play, classifying it as gambling, and some of the sponsorships and funding that had helped buoy the initial rise to prominence (the 2015 NFL season may as well be remembered as the daily fantasy commercial season) pulled out due to uncertainty in this particular marketplace.

At the time, the potential for the FTC to block the deal was apparent:

Because DraftKings and FanDuel make up a substantial percentage of the daily fantasy industry, the merging of the two companies could constitute a monopoly. Daily fantasy has overtaken traditional fantasy sports options in recent years, and the legality of DFS has become a hot button topic.

Reducing competition through the merger could be dangerous for the consumer, of course; as with all potential monopolies, there’s less incentive to keep prices (in this case, the portion of the fantasy pot taken by the company) down when there’s the perception that the player has nowhere else to play.

Today, the FTC announced they’d reached that exact conclusion:

The regulatory body said it would file a suit, together with California and Washington, D.C., in an effort to temporarily stop the two, who own 90 percent of the daily fantasy business, from combining into what its officials believe would be an illegal monopoly.

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

The FTC’s stance is that a merger between these two companies would result in one business holding more than 90% of the market share in the daily fantasy sector, and while that does indeed sound bad, there are reasonable points to be made from the other side. Mark Cuban brought up a few:

Cuban’s points are somewhat valid, although he’s been a staunch propenent of business deregulation for a very long time. (As many billionaires tend to be.) That said, if a market can be monopolized with just one merger, it’s fair to say that it’s far from a healthy competition to begin with. Is there really much difference between having two companies make up 90% of the space as opposed to one?

And that’s before we get into the entire debate over gambling regulation as a whole, which can very quickly turn into a debate over legislating based off antiquated morality. That’s not to say gambling shouldn’t be well-regulated. It absolutely should be, and we’ll leave it there, to avoid the debate mentioned in the prior sentence.)

The two companies will likely take the fight to court assuming they can afford to, and as the FTC notes, if it gets that far the trial would begin on November 21st.

[ESPN]

About Jay Rigdon

Jay is a writer and editor for The Comeback, and a contributor at Awful Announcing. He is not a strong swimmer.

  • YouAreWrongAndDumb

    Firstly, yes, there is a big difference between two companies sharing 90% of market share, or two. Secondly, hearing Mark Cuban talk about business deregulation is a bit like Keith Richards talking about drug decriminalization.
    They might have some ulterior motives, is all I’m suggesting.

  • America4Sale

    I thought this merger went down already – as advertising by these sites has dropped to nothing.