U.S. lawmakers have been closely observing the activities of FanDuel and DraftKings (DKNG, Financials). Their concerns center around potential anticompetitive behaviors that could have significant implications for the sports betting and fantasy sports industries. The recent dip in DraftKings' stock following these concerns further highlights the gravity of the situation.

Unraveling the Anticompetitive Web of FanDuel and DraftKings

Anticompetitive Claims and Sherman Act Breaches

Lawmakers have raised alarms about what they perceive as Sherman Act breaches by FanDuel and DraftKings. These breaches involve coordinated actions aimed at stifling competition. The dominance of these two companies in the fantasy sports industry has led to allegations that they are using their positions to enter the online sports betting market in an unfair manner. Such practices, if left unchecked, could restrict customer options and harm innovation in the sports entertainment sector. 2: The implications of these Sherman Act breaches are far-reaching. By coordinating their actions, FanDuel and DraftKings are able to gain an unfair advantage over potential competitors. This not only limits consumer choice but also undermines the competitive spirit that is essential for a healthy market. Lawmakers are calling for a thorough investigation by the Department of Justice and the Federal Trade Commission to ensure that these companies do not continue to engage in anticompetitive behavior.

2016 Merger Rejection and Clayton Act Violations

In 2016, FanDuel and DraftKings attempted to merge, but their agreement was denied by the FTC and attorneys general in California and the District of Columbia. The regulatory authorities at that time determined that the proposed merger would create a merged company with 90% of the market under its control, significantly reducing competition and violating the Clayton Act. This rejection was a clear signal that such large-scale consolidations could have detrimental effects on the market. 2: Since the 2016 merger rejection, there have been ongoing concerns that FanDuel and DraftKings have continued to act in ways that suggest coordinated dominance. Lawmakers argue that these actions breach antitrust rules and that the DOJ and FTC should take steps to prevent these companies from reaching a position of dominance that was previously avoided through cooperation or acquisition. The need to maintain competitive integrity in the sports betting sector is more important than ever, especially considering the heightened risks associated with consumer addiction.

Allegations of Pushing Away Business Partners

Legislators have also cited recent allegations suggesting that FanDuel and DraftKings, along with their trade organization, the Sports Betting Alliance, have been pushing important business partners away from working with newly developing rivals. This includes interfering with the relationships between smaller rivals and sports leagues, marketing partners, payment processors, and suppliers. Such actions limit market access for new competitors and give FanDuel and DraftKings an even greater advantage in the market. 2: The alleged interference with business partner relationships could have a long-term impact on the competitiveness of the sports betting industry. By preventing new competitors from gaining access to key resources and partnerships, FanDuel and DraftKings are effectively stifling innovation and limiting consumer choice. Lawmakers are demanding that the DOJ and FTC take action to address these issues and ensure a level playing field for all market participants.This article first appeared on GuruFocus.