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Volume 24 No. 117
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FTC In Written Complaint Outlines Reasoning For Opposing DraftKings-FanDuel Merger

The FTC late yesterday released its written complaint against the proposed DraftKings-FanDuel merger, marking its formal move to block the deal. The FTC’s administrative complaint strongly rejects a central argument from the daily fantasy companies that they are a subset of a much larger and still-growing fantasy sports business. “Daily fantasy sports and season-long fantasy sports provide drastically different user experiences and customers play them for different reasons,” the FTC’s complaint reads, arguing the chance to win money fuels DFS while season-long games are based more on social interaction. The FTC also said the proposed deal is in violation of mathematical measures of acceptable market concentration it uses to evaluate mergers. “The merger would produce concentration levels well beyond what is necessary to establish a presumption of competitive harm,” the complaint reads. The FTC additionally said the deal would lead to anti-competitive effects on pricing, as well as “lead to reduced product quality….and reduced innovation.” The filing was significantly redacted to keep various elements, such as company revenues, commission rates and marketing expenses, out of public view. However, the non-redacted portion indicated DraftKings passed FanDuel in revenue last year and became the largest DFS provider. That is consistent with a merger document sent early this year to FanDuel investors which said DraftKings generated $91.7M between Jan.-Sept. ’16, compared to $91M for FanDuel during the period of Jan.-Oct. ’16. The FTC was not swayed by the heavy fiscal losses both companies are still posting. “Neither respondent is a failing firm,” the FTC said of FanDuel and DraftKings. “Respondents are not profitable today, but they are relatively young companies, and each of them is striving toward profitability.” The FTC, along with attorneys general in California and DC, also have a suit against the deal in the federal district court for DC.