WASHINGTON (Reuters) - Daily fantasy sports companies FanDuel and DraftKings scrapped a plan to merge on Thursday following a legal challenge by U.S. antitrust enforcers.
The U.S. Federal Trade Commission said in June that it would seek to stop the deal because the combined company would control more than 90 percent of the U.S. market for paid daily fantasy sports contests.
“We have determined that it is in the best interest of our shareholders, customers, employees and partners to terminate the merger agreement and move forward as an independent company,” FanDuel CEO Nigel Eccles said in a statement.
DraftKings put out a similar statement. “We appreciate the continued loyalty of our players - it is you, our customers who have made this all possible - and we look forward to kicking off what is going to be our best NFL season yet!” DraftKings CEO Jason Robins said in a statement.
The lawsuit by the trade commission was just the latest setback for the two companies, which have faced regulatory challenges in several states. They announced the deal in November as a merger of equals.
Financial terms of the merger were not disclosed. Each of the companies had been valued at more than $1 billion before New York Attorney General Eric Schneiderman and other authorities began a crackdown on the industry in 2015.
The tie-up was aimed at reducing costs as both companies separately fund legal defenses and lobby for legislation to authorize fantasy sports in states that have declared it illegal. Without a merger, the companies will have to go back to outspending each other to win customers.
The companies have a history of aggressive advertising as they battled for market share. But they cut ad spending significantly in 2016 and said a combined company could again expand spending on advertising to attract new customers.
In a filing responding to the FTC suit, both companies had defended the planned merger on Wednesday, saying it would not result in higher prices for customers and that regulators were pursuing “an unnecessarily rigid and uninformed application of the antitrust laws.”
Modern fantasy sports started in 1980 and have exploded online. Participants create teams that compete over an entire season of professional sports, including American football, baseball, basketball and hockey.
Daily fantasy sports, a faster version of the season-long game, have developed over the past decade into a multibillion-dollar industry. Participants draft teams for a single game, enabling fans to spend money on contests more frequently.
Reporting by Diane Bartz; Editing by Bill Trott