The US Federal Trade Commission (FTC) is seeking to block the agreed merger between US-based daily sports fantasy platforms DraftKings and FanDuel on competition grounds.
FanDuel and DraftKings operate broadly similar business models, running games where users can pick fantasy teams for each round of a sporting league and pay to enter a contest, winning money if their players perform best.
The companies, which between them have raised a total of approximately $1.05bn from a pool of investors including several media companies as well as US sporting leagues and teams, agreed in November 2016 to merge, in a deal that would have ended their ongoing commercial rivalry.
However, on Monday the FTC announced that, in tandem with the Offices of the Attorneys General in the State of California and the District of Columbia, it will file a complaint in a district court in order to get an injunction banning the merger.
The grounds for complaint are that the newly formed company would control more than 90% of the US market for paid daily fantasy sports, and that players would no longer be able to benefit from competition between the two with regard to prizes or variety of games.
Tad Lipsky, acting director of the FTC’s Bureau of Competition, said in a statement: “This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel.
“The FTC is committed to the preservation of competitive markets, which offer consumers the best opportunity to obtain innovative products and services at the most favourable prices and terms consistent with the provision of competitive returns to efficient producers.”
The complaint is far from the first regulatory hurdle the companies have faced. It follows a series of bans in various US states due to their games being classified as gambling, and the withdrawal of the merger would call into question the future of both businesses.
DraftKings has raised $630m from an investor base including broadcaster Fox Sports and sports leagues Major League Baseball, National Hockey League and Major League Soccer, and Kraft Group, the conglomerate that owns sports teams the New England Patriots and New England Revolution.
FanDuel has received roughly $420m in funding from backers including broadcaster Turner Sports, CapitalG, the growth equity arm of internet technology group Alphabet, and fellow corporate venturing units Comcast Ventures, Time Warner Investments and NBC Sports Ventures.