DraftKings and FanDuel scrap merger plans

Image: Bruce Bennett/Getty Images

It’s game on between the two biggest players in daily fantasy.

DraftKings and FanDuel have called off their proposed merger after regulators tried to block it in court.

The deal was seen as a way for the embattled daily fantasy companies to dig out of the financial hole left from an expensive marketing rivalry and months of legal fights over their controversial business model.

But the Federal Trade Commission and attorneys general of California and the District of Columbia each filed suit to block the merger last month on antitrust grounds.

This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel, Tad Lipsky, acting director of the FTC’s bureau of competition, said in a statement at the time.

The companies filed legal briefs earlier this week to oppose the challenge, but evidently thought better of it.

Neither of the companies made reference to the regulators in their statements on dropping the deal.

FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry,” FanDuel CEO Nigel Eccles in his statement. “While our opinion has not changed, we have determined that it is in the best interest of our shareholders, customers, employees, and partners to terminate the merger agreement and move forward as an independent company.”

DraftKings CEO Jason Robins echoed that justification nearly word for word.

Both companies are all too familiar with the potential financial toll of protracted court clashes with the government. Legal costs incurred by a wack-a-mole series of state and federal regulatory challenges on the heels of a brutally expensive advertising blitz nearly tanked the once-capital-flush startups last year.

Scars from that battle no doubt weighed on the joint decision not to push back at antitrust enforcers as each readies their business for the all-important football season.

DraftKings and FanDuel are not the only companies currently operating under the daily fantasy model, which is a short-term/high-stakes alternative to the traditional season-long version of fantasy sports. But they’re by far the biggest, and ubiquitous football game commercials have made them synonymous with the style of play in a lot of people’s minds. Those ads were also what put the formerly low-profile industry on the regulatory radar to begin with.

It’s unclear where the merger breakdown leaves the two struggling companies. Each has pulled in big venture capital checks in the time since merger rumors beganDraftKings a $100 million round in March and FanDuel a $55 million convertible note in Septemberso they could be in a better spot than they were when they first decided to join forces.

Read more: http://mashable.com/2017/07/13/draftkings-fanduel-cancel-merger/