Merging of FanDuel and DraftKings: Facing Potential Legal Hurdles
Business competitors DraftKings and FanDuel have the possibility to merge as per Bloomberg as well as other media sources. Everybody knows that these 2 companies deal with 95% of DFS’ market place specifically in North America. It is not new to many that both of these companies operate in the same trade. Hence, their marketplace is too narrow.
DraftKings and Fanduel cater to similar targets: males ranging 25 to 35 years old. They are those who have disposable incomes. Both these companies have similar endorsement deals with stakeholders in professional sports like professional sports leagues. Merging both companies therefore will mean bringing together two businesses that are structurally alike.
The idea of merging these companies may not be good news to some of its employees. This would mean some of them would lose their job since some positions will become redundant once they operate as one. Merging may be done to streamline their business operations, reducing operational costs with reduced payroll and the corresponding employee benefits as well as retirement obligations.
On the other hand, these 2 companies may benefit from merging since they are together in their legal battle against those states that treat DFS as unlawful gambling. Hence, they are united in their lobbying efforts to the congress, conducting hearing which focuses on DFS and sports betting legality. The merge of these companies will strengthen their legal and lobbying efforts, making it more efficient.
Though the anticipated merge may benefit DraftKings and Fanduel, it has its own sets of disadvantages too. Some legal issues may arise like the antitrust law. This is responsible in regulating business competitions, to make sure that consumers will not be significantly affected by the behavior of business competitors. When these companies will merge, lesser innovation may be implemented due to absence of competition. This may mean higher prices offered to DFS players and there will be no free or beginner contests offered. Each of them will no longer compete in innovating games to attract more customers. In short, great deals to consumers will go downhill since both competing companies will no longer be rivals in the business.
The merge of both companies might affect lawmakers’ decision to legalize DFS. It leads to the question as to how this will affect the states who find these games illegal. And two companies exerting efforts to legalize DFS, is much better than one. And this will favor the sides of DraftKings and Fanduel.
For now, the 2 companies have not merged yet. Hence, everybody is on the lookout on how things will turn out once this happens.