Daily fantasy sports companies DraftKings and FanDuel are
pressing to move forward with their proposed merger, despite opposition by the Federal Trade Commission.
The FTC's attempt to block the deal "reflects an unnecessarily rigid and uninformed
application of the antitrust laws to an underdeveloped, nascent industry, and largely ignores rigorous economic analysis that has demonstrated unequivocally that prices are not likely to increase as a
result of the transaction," FanDuel and DraftKings argue in papers filed with the agency this week.
The companies are asking an administrative law judge to reject the FTC's argument that the
merger would be anticompetitive. Both companies also are fighting the FTC in federal court, where the agency obtained a preliminary injunction that temporarily prevents the merger.
Last month,
the FTC alleged that the proposed deal violated antitrust law because it would result in a "near-monopoly" for daily fantasy sports contests.
"Respondents have competed ferociously in this
market since 2012, when DraftKings entered to challenge FanDuel," the FTC alleged in its administrative complaint. "Respondents compete to offer lower entry fees, larger contests, and a better
selection of sports in an effort to win business away from each other."
The FTC added that in 2015, the companies spent "hundreds of millions of dollars on marketing to overtake each other in
share of entry fees."
That year, the two companies reportedly spent around $500 million combined on advertising. But in 2016, the companies drastically reduced their ad spending.
DraftKings and FanDuel argue in their response to the FTC that
the merger will result in increased efficiency and innovation, which will increase the "consumer value proposition."
"These benefits greatly outweigh any and all purported anticompetitive
effects," they assert.
Last year, the companies also stopped operating briefly in New York, after state Attorney General Eric Schneiderman sued them for allegedly violating state laws against
sports betting and unfair advertising.
But they resumed operations after state lawmakers passed a bill authorizing daily fantasy sports. That measure requires such companies to register with
the state, and pay taxes equal to 15% of gross revenue generated in New York. The companies also settled with Schneiderman by agreeing to pay $6 million each.