FanDuel And DraftKings End Merger Plan In Response To FTC Opposition
FanDuel and DraftKings’ dream of merging into a fantasy sports colossus ended today following the Federal Trade Commission’s decision last month to sue to block the deal.
The companies “believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry,” FanDuel CEO Nigel Eccles says today. “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.”
He adds that there’s 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.”
DraftKings CEO Jason Robins says his company has “a growing customer base of nearly 8 million, our revenue is growing over 30% year-over-year, and we are only just beginning to take our product overseas to the billions of international sports fans we have yet to even reach.”
As a result, “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. 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.”
He anticipates “kicking off what is going to be our best NFL season yet.”
The FTC — working with Attorneys General for California and D.C. — concluded that a deal would violate antitrust laws. DraftKings is the No. 1 daily fantasy sports provider, and FanDuel is No. 2. Together, they would control 90% of the daily fantasy sports market, the FTC said.
The companies contended that ESPN, Yahoo and other providers of season-long fantasy sports contests were potent rivals. But the FTC said that they don’t provide a “meaningful substitute” for daily fantasy sports providers due to “limitations on number of entrants and several other issues.”
In the deal announced in November, Robins was to become CEO of the merged company with Eccles staying as chairman. They estimated at the time that 57 million people in the U.S. play fantasy sports.
Their deal came less than a month after each company agreed to pay $6 million to settle a dispute with New York Attorney General Eric Schneiderman who accused them of engaging in false and deceptive advertising. He charged that they promoted illegal gambling, not games of skill.
As part of the settlement DraftKings and FanDuel agreed to clearly disclose terms and conditions for marketing promotions, expected winnings, and expected performance in the online contests, as well as resources for players at risk for compulsive gaming disorders. The companies also were required to maintain a webpage that provides information about the rate of success of users in its contests.
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