Two U.S. senators have written an open letter to the nation’s antitrust regulator, calling for an investigation into alleged unfair practices by DraftKings and FanDuel.
Addressed to FTC Chair Lina Khan and Assistant Attorney General for the Antitrust Division Jonathan Kanter, the letter was penned by Mike Lee and Peter Welch. It highlights concerns about the stronghold these companies have in the U.S. market.
Senators from Utah and Vermont claim that FanDuel and DraftKings might be breaching Section 1 of the Sherman Act, which prohibits coordination to obstruct competition. This section states that agreements between companies that limit trade or commerce are illegal.
The letter recalls the unsuccessful 2016 merger between DraftKings and FanDuel, blocked by the FTC, California, and the District of Columbia. This merger would have resulted in a 90% control of the DFS market.
Since then, the senators allege, both companies have expanded their influence from daily fantasy sports to online sports betting, possibly using unfair practices to gain a market-leading position. They claim both companies, through the Sports Betting Alliance, have coordinated efforts to exert pressure on smaller competitors.
The senators referred to reports suggesting that FanDuel and DraftKings collaborated to pressure suppliers, including sports leagues, vendors, and payment processors, to ensure any potential agreements with smaller companies fail, in what they call “coordinated attacks.”
Welch and Lee argue that despite the blocked merger, the two companies have been operating as a single entity, thus violating antitrust laws. They stated that it is the responsibility of enforcement agencies to protect competition and prevent anticompetitive practices.
“We request that these claims receive serious attention and any necessary investigative or enforcement actions be taken to protect competition,” they wrote. “Proper enforcement of antitrust laws protects consumers, especially in industries like sports betting, where addiction risks are higher.”
The senators emphasized that FanDuel and DraftKings were barred from merging because it would significantly reduce competition and harm consumers by creating a monopoly. They should not achieve through collusion what was prevented through acquisition.
Recently, DraftKings CEO Jason Robins mentioned at the Craig-Hallum Online Gaming Conference that he expects current market leaders to maintain their status, with others adapting to smaller scales.
“I don’t foresee a major dynamic shift,” said Robins. “Instead, there might be further consolidation at the top. Companies losing money now will learn to survive on smaller scales. As long as they are profitable, they can continue operating. Consolidation of market share is likely, but I don’t anticipate the complete disappearance of smaller competitors.”
Robins also remarked that even with a small market share, it is possible to build a successful niche company.
EGR has reached out to FanDuel and DraftKings for comments.
The original article, “US senators urge investigation into FanDuel and DraftKings over anticompetitive conduct,” first appeared on EGR Intel.
