DraftKings and FanDuel, as the unquestioned sports betting market share leaders in this country, are attracting attention from a pair of United States Senators, who have called for an investigation into potential antitrust activity by the companies.
Democratic Senator Peter Welch of Vermont, and Republican Senator Mike Lee of Utah jointly sent a letter to the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) this month. The letter alerts those agencies of what the lawmakers call efforts by DraftKings and FanDuel to “obstruct or impair competition.”
The lawmakers assert that the two companies may be violating Section 1 of the Sherman Act. That law forbids contracts between companies that unreasonably restrict free commerce and includes strategies like price fixing or agreements to divide up customers rather than competing for their business.
The Senators make strident claims, stating that the two gaming companies have “expanded their dominance by leveraging their positions in fantasy sports to become online sports betting giants. FanDuel and DraftKings may be compounding these harms through anticompetitive conduct.”
Sen. Lee and Welch claim DraftKings and FanDuel have bullied competitors. The letter says the two gaming companies may be guilty of “interfering with their rivals’ relationships with major sports leagues, marketing partners, payment processing companies, and critical vendors.”
The motivation behind the Lee/Welch letter may not purely be one of antitrust concern. In a social media post on X, Sen. Lee revealed an apparent concern over the societal impacts of legal gambling:
We can’t allow online gambling companies like @FanDuel & @DraftKings to violate antitrust laws, especially as more Americans grapple with the effects of this industry on our society.
Prior DraftKings/FanDuel Merger Effort Thwarted by Feds
This isn’t the first instance of the federal government keeping an eye on these two companies, which have grown from daily fantasy sports providers into online casino and sports betting behemoths.
In 2016, the competing gaming companies announced a merger that could have resulted in the new company controlling as much as 90 percent of the daily fantasy sports market, according to state and federal agencies. But that move came under attack when regulators claimed it would violate Section 7 of the Clayton Act and Section 5 of the FTC Act, both of which guard against unfair domination of markets.
The FTC sued to prevent the move in 2017, saying that a merger would “deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” according to Tad Lipsky, the acting director of the FTC’s Bureau of Competition at the time.
Facing a legal challenge from the U.S. Government, DraftKings and FanDuel canceled their planned merger in 2017. A year later, in the case of Murphy vs. NCAA, the U.S. Supreme Court made an historic ruling that the Professional and Amateur Sports Protection Act of 1992 (known as PAPSA) was unconstitutional. As a result, states were clear to legalize sports betting. Since that time, more than 35 states have done so, with DraftKings and FanDuel rapidly launching online sportsbooks in new markets.
FanDuel, DraftKings Boast More than Half of Market Share
According to the Sports Business Journal, in 14 states that report sports betting handle by operator, FanDuel and DraftKings combined for 73.3% of all dollars wagered in the second quarter of 2024.
The competitors were nearly deadlocked in those 14 states for 2024 Q2 at 36.7% (FanDuel) and 36.6% for DraftKings.
Feds Recently Scored Antitrust Victory Against Google
The federal government doesn’t have to look back far to find a success in an antitrust case. In August, a judge in the U.S. District Court for the District of Columbia ruled that tech giant Google has an illegal monopoly in the online search market. In that case, a judge found that Google had employed anticompetitive practices.
Google is appealing that decision, and no remedy has been handed down yet to resolve the monopoly it holds, according to the federal government. According to reporting by Digiday, some U.S. attorneys have urged the federal judge to force Google to sell its Chrome browser, which comes with Google Search bundled, and which most consumers never switch from.
Further complicating matters is a new administration which will take office in late January. Under President Joe Biden, the DOJ has aggressively investigated tech companies. It remains to be seen if a second Donald Trump administration will do likewise.
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