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FTC Sues to Stop DraftKings and FanDuel from Merging

The Federal Trade Commission announced Monday it will seek to block the merger between DraftKings and FanDuel, the two leading daily fantasy sports online sites.

The FTC said it wants to stop the merger because the combined company would control more than 90 percent of the U.S. market for paid fantasy sports contests.

The regulatory body, together with the attorneys general of California and Washington D.C., will file a complaint in federal district court in an effort to temporarily stop the companies from combining into what officials believe would be an illegal monopoly.

The trial would commence on Nov. 21, according to the FTC.

“The proposed merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, the FTC’s acting director of its Bureau of Competition.

The two companies announced the deal in November as a merger of equals. An estimated $750 million in marketing was spent by the two companies in fall 2015, according to ESPN.

The two companies faced legal and political battles in multiple states as to whether daily fantasy was considered gambling.┬áIn October 2015, the Nevada attorney general deemed DFS to constitute gambling. In a detailed 17-page memo, the office of the attorney general concluded that “daily fantasy sports cannot be offered in Nevada without licensure.” FanDuel, DraftKings and several other DFS providers vacated the state soon thereafter.

Both companies were hit with tens of millions of dollars in legal fees and lobbying costs, putting their financial health into question.

In New York alone, the fantasy companies eventually agreed to a $12 million settlement with Attorney General Eric Schneiderman. Each company was responsible for paying $6 million for false advertising.

“We are disappointed by this decision and continue to believe that a merger is in the best interest of our players, our companies, our employees and the fantasy sports industry,” DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles said in a joint statement. “We are considering all our options at this time.”

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