DraftKings, FanDuel Targeted in Senators’ Antitrust Push
DraftKings (NASDAQ: DKNG) and FanDuel are facing bipartisan allegations of collusive actions potentially breaching US antitrust regulations.
In a message to Assistant Attorney General Jonathan Kanter and Federal Trade Commission (FTC) Chair Lina Khan, Senators Mike Lee (R-UT) and Peter Welch (D-VT) assert that following the prohibition of their 2016 merger, DraftKings and FanDuel have participated in anticompetitive conduct.
"After their merger to monopoly was blocked, it seems that FanDuel and DraftKings have arguably acted as one company, violating our antitrust laws…and have undertaken a coordinated effort to pressure crucial business partners not to do business with these new players,” wrote the senators.
California, the District of Columbia, and the FTC sought to prevent that union, which was attempted before the 2018 Supreme Court decision regarding the Professional and Amateur Sports Protection Act (PASPA). That choice opened the door for states to determine their own approaches to legalizing sports betting. Currently, various types of sports betting are permitted in 39 states and Washington, DC.
Senators Claim DraftKings, FanDuel Are Trying to Eliminate Rivals
Following the PAPSA decision, DraftKings and FanDuel utilized their prior dominance in daily fantasy sports (DFS) to secure a clear competitive edge in online sports betting.
Currently, the two companies are often referred to as a duopoly, which is correct since they manage over 70% of the mobile sports bets made in this nation. In almost every state where both companies provide mobile sports betting, they hold the top two positions by market share. Lee and Welch stated that DraftKings and FanDuel “could be exacerbating these issues through anticompetitive behavior.”
The US sports betting market has plenty of competition for DraftKings and FanDuel; however, the senators conveyed to Kanter and Khan that they feel the two giants are reluctant to compete with challengers based on the quality of their products. Referencing public documents, the politicians asserted that DraftKings and FanDuel are collaborating with the Sports Betting Alliance to stifle rivals.
The senators informed the regulators that there are claims indicating the two giants exert pressure on rivals “to hinder market access” and that there is proof of meddling with competitors’ “affiliations with significant sports leagues, marketing partners, payment processing firms, and other essential vendors.”
Investors Prepare for Consequences
On the reverse side of the senators’ letter, it was a turbulent day for stocks of DraftKings and FanDuel's parent company Flutter Entertainment (NYSE: FLUT). During Friday’s earlier session, DraftKings plummeted by as much as 7%, while Flutter decreased by as much as 4%. DraftKings decreased by 1.29% while Flutter ended the day with a modest increase.
Lee and Welch cautioned Kanter and Khan that their organizations are intended to safeguard consumers against the anticompetitive practices they allege the gaming firms are involved in.
The question now is whether the new leadership at the FTC and Justice Department will contemplate an inquiry into DraftKings and FanDuel. As President-elect Trump prepares to assume office next month, Kanter and Khan will probably be departing, and it's uncertain whether their replacements will want to continue the inquiry proposed by Lee and Welch.
