What Does The FTC Want To Know About The DraftKings-FanDuel Merger?

Written By Dustin Gouker on February 20, 2017 - Last Updated on April 5, 2022
FTC DraftKings FanDuel

[toc]The two largest daily fantasy sports sites — DraftKings and FanDuel — have plans to merge sometime later this year.

One of the key components to that merger taking place? Gaining approval from federal regulators that the pending tie-up is not in violation of anti-trust standards in the US.

What is the Federal Trade Commission looking into in DFS?

The Federal Trade Commission has been taking a look at the proposed merger for some time now. What are they looking into?

Here’s an overview of some of the questions FTC attorneys are asking high-volume DFS players:

  • What are the differences in daily fantasy and season-long?
  • What would the player do with the money spent on entry fees if DFS didn’t exist?
  • How does a player’s volume break down by site and sport?
  • What differences exist between the sites?
  • Questions about overlay, including what it is, how it affects the player and why sites have overlay.
  • What effect would a change in rake — or the portion of entry fees kept by a site — have on a player?
  • What downsides does the player see in a merger taking place?
  • What is the ability of other DFS sites to compete, and what could be holding them back?

The latest on the DraftKings-FanDuel merger

We still know little about the logistics of the merger, or how the FTC will come down on the matter.

The argument on the anti-trust front advanced by DraftKings and FanDuel is that they are a part of the larger “fantasy sports market.” They argue that the DFS industry, by itself, should not be the market considered in trying to determine if the merger would create a monopoly.

FanDuel CEO Nigel Eccles recently did an interview with Bloomberg about the merger. There was much in the way of new information about the merger:

“Thins are progressing as we expected. We expected to close by the third quarter this year. As expected, we’re engaging the FTC, they’re reviewing the transaction and that process is going well. And we’ll continue on the timeline we announced previously.”

Eccles, in the interview, reiterated that he believes their sites compete with the likes of Yahoo and ESPN. Of course the former has its own DFS platform that trails far behind the revenue generated by FanDuel and DraftKings.

Watch the whole interview here:

In the meantime, more inclusive fantasy state laws?

Part of the argument for DraftKings and FanDuel throughout this year is likely to be passing laws that are as inclusive as possible for other paid-entry fantasy sports sites.

That dynamic has been on display in some states, most notably Nebraska, where a fantasy bill recently passed out of a legislative committee. An amendment to the initial bill intends to make it more inclusive:

Other companies offer season-long contests in which customers pay the entry fee at the start of the season, draft their players and then manage their teams 16 weeks for football or 26 weeks for baseball. Some of those companies generate much smaller revenues, and they squawked about fees.

In response to their concerns, the committee adopted an amendment to put the fees on a sliding scale depending on how much business each company does in the state. The lowest any company would have to pay is $1,000.

Bills are advancing in states that passed laws in 2016 to be more inclusive and to lower the barrier to entry for smaller DFS and season-long operators.

Regulation being more inclusive of the larger fantasy sports market — not catering just to DraftKings and FanDuel — could help the prospects of the merger.

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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.

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