Two Big Companies Reverse Plans To Merge After Federal Agency Threatened To Sue
The two biggest daily fantasy sports companies announced Thursday that they are no longer pursuing a merger, roughly a month after the Federal Trade Commission (FTC) threatened to sue if they proceeded.
The FTC voiced their intent to block any merger between the two firms, DraftKings and FanDuel, in June. If combined, the FTC claimed that they would have almost the entire market in their hands.
Together, the companies dominate the industry, grabbing around 90 percent of the active users, which amounts to approximately 4 million people, according to Forbes. DraftKings’ revenue climbed to $105 million in 2015 compared to just $3 million in 2013, while FanDuel’s revenue grew from $57 million in 2014 to $170 million the following year.
“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” Tad Lipsky, then-acting director of the FTC’s Bureau of Competition, said in an official statement published June 19.
The agency, which is likely a contributing factor to the decision, is now applauding the two companies for abandoning the businesses amalgamation.
“For years, the vigorous competition between DraftKings and FanDuel has spurred innovation and favorable pricing,” Markus H. Meier, acting director of the FTC’s Bureau of Competition, said Thursday in the latest release. “In brief, consumers benefitted 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.”
One of the reasons FanDuel and DraftKings presumably wanted to merge is to naturally curb the amount of money the respective companies spend on advertising while competing. As many American citizens probably noticed, both of the platforms spent hundreds of millions of dollars on marketing, with advertisements displayed through all sorts of mediums, including the walls and grounds of transportation hubs and a plethora of television slots. (RELATED: DraftKings And FanDuel File Lawsuits To Stop New York Ban)
“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,” DraftKings CEO Jason Robins said in a statement provided to The Daily Caller News Foundation (TheDCNF), adding that his company is growing significantly and exponentially. “This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide.”
FanDuel CEO Nigel Eccles shared similar sentiments with its competitor, but gave a more candid response.
“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,” Eccles said in a statement made available to TheDCNF. “While our opinion has not changed, we have determined that it is in the best interest of our shareholders, customers, employees, and partners to terminate the merger agreement and move forward as an independent company.”
In his statement, Eccles made sure to clarify his opinion that a merger would have been beneficial for both companies, seemingly alluding to the notion that he wanted the merger to continue.
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