Up the Ante: Rumors Swirl of A Fantasy Sports Monopoly

By: Brian Tan

 

The Thanksgiving holiday is around the corner, and with the fall season comes a treasured American pastime: watching sports. Daily Fantasy Sports (“DFS”) websites have emerged as forums for sports fans to place bets and be engaged with the results of teams. Two leading DFS companies, DraftKings Inc. and FanDuel Inc., amid months of litigation and lobbying expenses surrounding their practices, find themselves at the center of a rumor for a merger.[1] A consolidation between the two DFS companies could provide them the market power to raise prices, but critics and antitrust lawyers digest the move as risky and subject to increased scrutiny by the Federal Trade Commission or the U.S. Department of Justice.[2] Most importantly, critics fear it would monopolize the market and take hold of “nearly 100% market power.”[3]

Online “Daily Fantasy Sports” contests are a growing business. The Major League Baseball advertises a paid “daily fantasy sports” option online, and the National Basketball Association owns an equity stake in FanDuel Inc. – despite having once claimed to oppose all forms of fantasy gaming.[4] Further, the two companies DraftKings and FanDuel have received financial support and exclusive marketing deals with Major League Baseball, the National Hockey League, Major League Soccer, National Basketball Association, and last but not least, the National Football League.[5] A merger between DraftKings and FanDuel would, in essence, create a combined power to drive prices of participating up and lock all of the fantasy sports leagues to one merged company – making it much more challenging for any new company to compete in the marketplace.[6]

While fantasy sports are growing online, there are few, if any, alternative products to DFS that could serve as an adequate substitute for consumers; as a result, the cost to compete has increased dramatically, especially in states where recently passed DFS laws require high licensing fees.[7] Eleven states have enacted laws related to DFS contests, but they require that any company operating DFS must obtain a costly license and comply with many special regulations.[8] As rumors continue to swirl and DraftKings and FanDuel remain silent, litigators and consumers alike contemplate the potential for a one-stop shop to place bets on your favorite team – upping the ante for the benefit of profit and the risk of illegal monopolistic competition. Place your bets.

[1] Zachary Zaggar, Potential Daily Fantasy Merger A Tough Antitrust Sell, law360 (November 3, 2016, 5:40 PM), https://www.law360.com/articles/858757/potential-daily-fantasy-merger-a-tough-antitrust-sell.

[2] Id.

[3] Marc Edelman, A Sure Bet? The Legal Status of Daily Fantasy Sports, City University of New York – Baruch College, Zicklin School of Business; Fordham University School of Law (March 16, 2016).

[4] Marc Edelman, Navigating the Legal Risks of Daily Fantasy Sports A Detailed Primer in Federal and State Gambling Law, 2016 U. Ill. L. Rev. 117, https://illinoislawreview.org/print/volume-2016-issue-1/navigating-the-legal-risks-of-daily-fantasy-sports-a-detailed-primer-in-federal-and-state-gambling-law/

[5] Id.

[6] Zachary Zaggar, Potential Daily Fantasy Merger A Tough Antitrust Sell, November 3, 2016.

[7] Marc Edelman, Navigating the Legal risks of Daily Fantasy Sports. 2016 U. Ill. L. Rev. 117.

[8] Marc Edelman, New York’s New Fantasy Sports Law Creates Both Business Opportunities And Obstacles, August 10, 2016,

http://www.forbes.com/sites/marcedelman/2016/08/10/new-yorks-new-fantasy-sports-law-creates-both-business-opportunities-and-obstacles/#116c019f21c0

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