Deal falls over competition issues
FanDuel and DraftKings abandon merger plan
Fantasy sports companies FanDuel and DraftKings have called off their merger in the face of growing opposition from the regulatory authorities.
The Federal Trade Commission, along with attorneys general from California and the District of Columbia, filed legal suits to block the merger over competition concerns.
The two companies account for 90% of the daily fantasy market in the US.
Markus H. Meier, acting director of the Bureau of Competition, said in a statement: “The parties’ decision to abandon this transaction is a clear win for American consumers.
“For years, the vigorous competition between DraftKings and FanDuel has spurred innovation and favourable pricing. In brief, consumers benefited from the intense rivalry between the two leading players in this space. If this merger had been allowed to go through, those benefits would likely have been lost.”
As late as Wednesday this week the two companies were arguing the case for the deal. But they faced an expensive legal battle with the FTC – estimated by some at $15m – and are also being pursued by several other ongoing suits. The two are fighting legal claims in a number of states in addition to a large class-action suit that is proceeding in a federal court in Boston.
FanDuel CEO Nigel Eccles said in a statement: “FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry.
“There is still enormous, untapped market opportunity for FanDuel, and we will continue to execute our strategy to grow our business and further expand the fantasy sports industry.”
His counterpart at DraftKingsJason Robins said in his statement that calling off the merger was in the best interest of everyone involved.
“We believe it is in the best interests of our customers, employees, and investors to terminate our agreement to merge with FanDuel and move forward as a separate company,” he said.
The future for both companies is now in question. Neither is profitable, although Mr Eccles told Daily Business last year the company had chosen to divert earnings into its marketing budget.
FanDuel launched in Scotland in 2009 and is now based in New York. It is number two in the US for paid daily fantasy sports contests behind DraftKings, which started in Boston in 2012.
Daily Business revealed earlier this year that FanDuel had pulled out of plans to relocate its offices at Quartermile in Edinburgh.