If you are active in the realms of fantasy sports, you would have come to learn of the emergence of a newer, more innovative approach to conventional fantasy sports: daily fantasy sports (DFS). Leading the way for these new daily fantasy games are Fanduel and Draftkings, who provide one-day fantasy game options for nearly every sport.
This past Summer, Fanduel and Draftkings attempted to merge to form a giant in the emerging DFS industry. The merger fell through, however, as the Federal Trade Commission threatened to step in and sue due to antitrust concerns, stating such a merger would give the newly formed company a monopoly in the industry. If the merger went through, the newly formed company would have had control over 90% of the daily fantasy industry.
The FTC filed a complaint against the merger alleging it had jurisdiction based on two premises: that the merger violated section 7 of the Clayton Act and that the companies were engaged in commerce under section 4 of the FTC act of 1914.
The companies were engaged in commerce with respect to the definition of commerce outlined in the act. Per the act, commerce means “commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia…” Section 7 of the Clayton Act, passed in 1914, is the governing law with regards to mergers, acquisitions, and joint venture. This section of the Act prohibits the acquisitions of stocks and of assets where “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
Following the complaint, Fanduel and Draftkings decided against confronting the FTC’s challenge to the merger because it likely would have resulted in lengthy, costly and burdensome litigation.
So where do we stand now?
We have two separate daily fantasy entities competing over a large portion of the daily fantasy market. Would it have been better for them to provide a singular service to the majority of daily fantasy consumers, or do two competing entities ensure consumers get the best bargain? We shall see.
