US to seek to block DraftKings, FanDuel fantasy sports merger – Business Insider

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DraftKings CEO Jason Robins (L) speaks to reporters after speaking during the DFS Players Conference in New York November 13, 2015. REUTERS/Lucas Jackson

DraftKings
CEO Jason Robins speaks to reporters after speaking during the
DFS Players Conference in New York
Thomson Reuters

WASHINGTON (Reuters) – 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.

The FTC, along with the attorneys general of California and the
District of Columbia, will file a complaint in federal district
court seeking a preliminary injunction to block the deal, the
antitrust regulator said.

The companies said in a joint statement that they were
considering their legal options. “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,” DraftKings Chief Executive Jason Robins
and his FanDuel counterpart, Nigel Eccles, said in the statement.

This is the latest setback for two companies, which have faced
regulatory challenges in several states. They announced the deal
in November 2016 as a merger of equals that would cut their legal
bills.

Between them, the two companies have 95 percent of daily fantasy
sports, according to data from Eilers and Krejcik Gaming LLC.
DraftKings and FanDuel have argued that they compete against
larger, more powerful companies in the broader fantasy sports
business, like ESPN and Yahoo.

“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.

The FTC will ask for the preliminary injunction to prevent the
companies from closing the deal while it proceeds with an
internal review to determine if the merger is legal under
antitrust law.

In practice, if companies are slapped with a preliminary
injunction, they normally terminate a merger because deals cannot
be held together during the lengthy internal process.

The FTC has won a long list of court fights to stop deals of all
sizes in recent years. Most notably, the agency stopped food
distribution giant Sysco Corp from buying US Foods Inc and
prevented office supplies retailer Staples Inc from buying Office
Depot Inc .

Modern fantasy sports started in 1980 and have mushroomed online.
Participants typically create teams that span an entire season in
professional sports, including American football, baseball,
basketball and hockey.

Daily fantasy sports, a turbocharged version of the season-long
game, have developed over the past decade into a
multibillion-dollar industry.

Participants draft teams for a single game, enabling fans to
spend money on contests with a frequency critics compare to
sports betting.

FanDuel has paid contests in 39 states while DraftKings is in 40
where successful players win money.

The companies have a history of aggressive advertising as they
have battled for market share. They cut ad spending significantly
in 2016 and said the combined company could again expand spending
on advertising and customer acquisition.

The tie-up would reduce costs as both companies separately fund
legal defenses and lobbying for legislation to authorize fantasy
sports in states that have declared it illegal. Without a merger,
the companies may have to go back to outspending each other to
win customers.

New York’s Eric Schneiderman was one of several state attorneys
general who cracked down on the industry in 2015. New York
settled for $12 million and changes in how the companies market
their games, including disclosures about expected winnings.

FanDuel’s investors include KKR, Shamrock Capital, Comcast
Ventures, NBC Sports and Google Capital. DraftKings’ investors
include KKR and others.

(Reporting by Diane Bartz and Liana Baker; Writing by Washington
Newsroom; Editing by Steve Orlofsky)

Read the original article on Reuters. Copyright 2017. Follow Reuters on Twitter.

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