The U.S. Federal Trade Commission (FTC) announced the decision to halt the merger of the two largest daily fantasy sports (DFS) companies, DraftKings and FanDuel, according to a press release on Monday. The government attempted to prevent combined companies from controlling more than 90 percent of the U.S. daily fantasy sports market.
Daily fantasy business an illegal monopoly?
As daily fantasy business is believed to be considered an illegal monopoly by officials, the antitrust regulator said FTC will collaborate along with the attorney general of California and the District of Columbia to file a complaint in an endeavor to halt the deal.
The trial will begin in November.
"We are disappointed by this decision and continue to believe that a merger is in the best interest of our players, our companies, our employees and the fantasy sports industry," according to a statement shared by DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles. "We are considering all our options at this time."
The data from Eilers and Krejcik, an interactive gaming research firm, displays that the two companies possess 95 percent of daily fantasy sports, implying that DraftKings and FanDuel win control of the broader fantasy sports business space over powerful companies such as ESPN, Yahoo Sports, and CBS Sports. The fantasy sports market is valued at $15 billion.
In November 2016, DraftKings and Fanduel agreed to merge as a part of the deal that would help companies reduce their legal spending.
Jupiter Research: combined DraftKings and FanDuel would make $5.3 billion by 2021
Modern fantasy sports was launched by some journalists in 1980, enabling baseball fans to participate in a contest at a New York City restaurant called La Rotisserie Francaise.
Over time, playing fantasy sports online has been on the rise. DFS online allows participants to draft players and choose teams in major sports such as baseball, basketball, and hockey during an entire season.
DFS have now become a multibillion-dollar industry. Consumers spend the money to participate in a contest against others, which concerns the government.
Gambling antagonists speculated that spending money on contests would jeopardize the integrity of the game.
Since the rivalry between DraftKings and FanDuel was believed to be the greatest in the fantasy sports business, they started an aggressive advertising campaign that would expand customer base and increase market share. CNBC reported, "when the companies reached a pact to merge, the two sides decided to cut ad spending, saying the combined company could again expand spending on advertising and customer acquisition."
Attorney General of New York Eric Schneiderman previously filed a lawsuit against DraftKings and FanDuel, accusing the companies of breaking the state laws over sports gambling and false advertising, according to a report.
Companies paid $12 million as a part of the settlement with Schneiderman. Each DFS site compensated $6 million, respectively.
Jupiter Research, the market research firm, cited that the combined companies would generate $5.3 billion from consumer spending worldwide by 2021.
