“This 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, in a news release.
The companies have indicated that they would contest the FTC’s position, arguing that their business is just a piece of a much larger fantasy-sports and gaming market backed by large sports entertainment companies, any one of which had the wherewithal to launch a rival enterprise. A merger by DraftKings and FanDuel would increase their chance of being able to compete with those bigger companies, said a source familiar with the companies’ position, who was not authorized to speak publicly and who spoke on the condition of anonymity.
“The best chance parties have to win those revolve around poking holes in the market definition and showing why markets are dynamic and not difficult to enter,” said Stephen Weissman, an antitrust lawyer and a former Bureau of Competition deputy director under President Barack Obama.
FanDuel launched in 2009 and was considered the first of its kind in daily fantasy sports, with DraftKings launching a few years later, in 2012. Daily fantasy sports are online games in which players form imaginary teams consisting of real-life players and compete to earn cash and prizes, with scoring usually determined by how the players perform in real life that day. Most fantasy leagues are scored as weekly events in which winners are determined by how their roster performs for the entire week.
In their brief history, the companies have spent enormous amounts of money on advertising to attract users and convert current players from one site to the other.
The companies have also faced challenges from authorities in several states, who consider daily fantasy sports a form of gambling. The companies have argued that the contests amount to a game of skill.
In its news release, the FTC said that the administrative trial is set to begin Nov. 21.