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Final Fantasy: DraftKings, FanDuel Agree to Massive Merger

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By Christopher Coble, Esq. on November 22, 2016 11:58 AM

The two largest (and for all intents and purposes only) players in the daily fantasy game have agreed to a blockbuster merger. DraftKings and FanDuel announced the plan to unite on Friday, and don't expect the deal to close until the summer of 2017.

While both companies were quick to assure users that the impending merger would not immediate affect their daily fantasy experience, others aren't so quick to assume it's a done deal. Here's a look at the proposed merger and some possible legal issues both companies may face.

Power Twins

ESPN is reporting that the deal is not an acquisition by either outfit and amounts to a 50/50 split. But the name of the joint fantasy sports venture remains a mystery. (It should be noted that DraftKings had initially entered into a three-year advertising deal with ESPN that would include "integration" of the service within ESPN's television and digital content and as well as advertising exclusivity, but ESPN removed sponsored segments from its programming while continuing to air DraftKings ads.)

The two platforms, which began and operated until recently as fierce rivals, will remain separate until the end of the 2017 NFL season. The joining of forces could be the result of the two sites fighting side-by-side against state regulators who banned both DraftKings and FanDuel under state gambling laws and sued the sites for false advertising. Or the pair might've found comfort in dark times: recent reports have indicated that the once-booming daily fantasy purveyors were now having trouble making ends meet.

Legal Hurdles

But if DraftKings and FanDuel were hoping to put legal scrutiny behind them, a merger of this size wasn't the right tack to take. As Sports Illustrated's Michael McCann notes, the merger would likely get the attention of federal antitrust regulators. With 95 percent of the daily fantasy market between them, a merger of the two giants would likely result in less competition in the market, meaning less innovation and the possibility of higher prices for customers:

If FanDuel and DraftKings merge, DFS players would only be able to play DFS with one very large company--the merged FanDuel and DraftKings--or with several comparatively tiny DFS companies. Those other DFS companies, which already struggle to compete with FanDuel and DraftKings, may find competing with one company that controls 95% of the DFS marketplace untenable and thus drop out of the marketplace altogether.

Federal antitrust statutes allow the Justice Department or Federal Trade Commission to slow a proposed merger for sufficient review or even block it entirely. So before these two strange bedfellows start cooperating too much, they might want to make sure the chaperone approves first.

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