DraftKings and FanDuel have decided to call off their proposed merger. Recently, the Federal Trade Commission (FTC) decided to try and block the merger for fears of a monopoly being created in the daily fantasy sports market. DraftKings and FanDuel are the two biggest operators of daily fantasy sports, and it is believed they service 95% of all players in the USA.
DraftKings and FanDuel back Down from FTC Fight
DraftKings and FanDuel announced that they were terminating the merger late last week. This came a shortly after the two companies had both filed legal briefs with the federal district courts. These briefs defended the merger and indicated that the firms would fight the trade commission’s decision to try halt the merger.
However, it turns out that maybe DraftKings and FanDuel were not in a position to do so. Both companies are fighting a number of lawsuits already. Some estimates have suggested that fighting the trade commission’s blocking attempt would cost between $12-15 million. With no guarantee they would be successful, DraftKings and FanDuel decided to call off the merger.
Financial Issues for DraftKings and FanDuel
Part of the up sides for the merger between the two daily fantasy sport (DFS) giants was the reduced legal and lobbying costs. The companies have had to spend a significant amount of money on preventing states from outlawing DFS. On top of this, the two companies also had to spend large sums of money on trying to out-market each other.
Now that the merger has been called off, it actually leaves both companies in quite a difficult financial position. Neither firm has been able to make a profit since opening for business, and DraftKings has lost around $690 million since it launched four years ago. In fact, both companies have been reported to be behind on payments to their suppliers, lawyers, and lobbyists.
