US senators urge investigation into FanDuel and DraftKings over “anticompetitive conduct”
Mike Lee and Peter Welch call on Federal Trade Commission to probe allegations the operator duo have attempted to thwart the progress of lesser established bookmakers
Two US senators have penned an open letter to the country’s antitrust regulator, urging it to investigate alleged anticompetitive behaviour by DraftKings and FanDuel.
The letter, addressed to Federal Trade Commission (FTC) chair Lina Khan and assistant attorney general for the antitrust division Jonathan Kanter, was written by Mike Lee and Peter Welch and outlined concerns over the dominance of the two companies in the US.
The Utah and Vermont senators have alleged that FanDuel and DraftKings “may be violating Section 1 of the Sherman Act prohibition on coordination to obstruct or impair competition”.
Section 1 of the Sherman Act notes that any agreements between companies that restrict trade or commerce are not permitted.
In the letter, Lee and Welch referenced the failed 2016 merger between DraftKings and FanDuel – which was blocked by the FTC, California and the District of Columbia – that would have given the combined business a 90% market share of the DFS space.
The senators then alleged that since then, both companies expanded their dominance from DFS into online sports betting and may be developing market leading position via “anticompetitive conduct”.
It was alleged that both FanDuel and DraftKings, via trade association the Sports Betting Alliance, “have undertaken a coordinated effort” to put pressure on lesser-established operators.
The senators cited reports that suggested FanDuel and DraftKings worked “in concert” to apply pressure on suppliers – such as include sports leagues, vendors and payment processing companies – to ensure any potential deal with another smaller operator fails, in what have been dubbed “coordinated attacks”.
Welch and Lee later alleged that despite the merger being blocked, the two companies have been effectively acting as one entity, violating antitrust laws in the process.
They wrote: “Your agencies are charged with protecting competition and consumers from exactly this kind of anticompetitive behaviour.
“Accordingly, we ask that you give serious attention to these allegations, and to undertake any investigative or enforcement actions necessary to protect competition.
“Effective enforcement of antitrust law protects consumers – something that is especially important in a new industry like sports betting where the risk of addiction is far greater than in most industries.”
They added: “FanDuel and DraftKings were prevented from merging because it would have substantially lessened competition and harmed consumers by forming a monopoly. They should not be allowed to accomplish through collusion what was prevented through acquisition.”
Last week, DraftKings CEO Jason Robins said he expected the US market leaders to remain in place, with other companies learning to operate at lower levels of scale.
Appearing at the Craig-Hallum Online Gaming Conference, Robins said: “I don’t think that there’s going to be a huge dynamic effect. If anything, I think you’re going to see more consolidation at the top in terms of share.”
He added: “What I also think you’re going to see is a lot of companies that are losing money now will figure out how to survive at smaller levels of scale.
“As long as you’re profitable, you can continue to keep going. I see more consolidation of share at the time, but I also don’t see a complete disappearance of the long-tail competitors either.
“It doesn’t mean you can’t build a nice little company on a few percent share finding a niche in the market.”
EGR has contacted both FanDuel and DraftKings for comment.