Edinburgh’s FanDuel faces US block on merger with fantasy sports rival

FanDuel’s Nigel Eccles. Picture: Julie Broadfoot.

The proposed merger between Edinburgh-based fantasy sports firm FanDuel and US rival DraftKings has been thrown into doubt after America’s Federal Trade Commission raised “serious competition concerns”, according to a report on Recode. Combined, the companies would command 80% of the country’s daily fantasy sports market.

The two daily fantasy sports companies — which were once fierce competitors, raising hundreds of millions in funding for competing TV commercialsfound themselves in the mood to merge last year after state and federal regulatory troubles morphed into major business threats.

At one point, FanDuel and DraftKings had to cease operating in New York, while states like Alabama, Mississippi and Texas ruled that daily fantasy sports sites ran afoul of local restrictions banning online gambling. The U.S. Congress also threatened to intervene.

At the FTC, though, the question at issue in their merger isn’t whether the companies, which take weekly bets on athletes’ performances, qualify as games of skill or chance — it’s if the combination of DraftKings and FanDuel threatens competition, said Recode.

Other major media companies, like Disney’s ESPN and Yahoo, offer fantasy sports products to consumers, but FanDuel and DraftKings have dominated the daily fantasy market, where users can win actual cash prizes. If the agency only looks at the merger and its effects on daily fantasy sports, FanDuel and DraftKings are poised to face major antitrust roadblocks.

But the two companies in recent years have unveiled other products, like season-long fantasy football, that puts FanDuel and DraftKings in competition with a broader array of companies. To some extent, that’s helped them “buttress the contention that they’re not just simply in the space for daily fantasy sports,” said Daniel Wallach, a lawyer at Becker & Poliakoff in Florida who works on gaming and sporting law.

“From DraftKings and FanDuel’s perspective, the broader the marketplace, the better it [looks] for their proposed combination,” he told Recode. “The more persuasively they can make that case, the more likely they [are to] survive antitrust scrutiny.”