The US Department of Justice sued legal action against Activision Blizzard, due to the “competitive balance tax” it imposes on the leagues Overwatch et Call of Duty ; initiated in 2021, this procedure should soon come to an end, as well as the house tax decided by the publisher. This tax would penalize teams that pay eSports players above a certain threshold and thus limit their remuneration. The DOJ (“ Department of Justice“, therefore) also submitted a proposal for approval, which would end the lawsuit if Activision agrees to no longer impose its tax.
sports leaguesOverwatch et Call of Duty have generated hundreds of millions of dollars franchise rights, sponsorship revenue and exclusive streaming deals with YouTube. However, the independent teams that make up these leagues are in constant competition to sign and keep the best players, even if it means putting a lot of money into it!
The rules established by Activision to impose this competitiveness tax would have the purpose and effect of significantly reducing competition for gamers and limit their pay. The teams were thus subject to fines if their total player compensation exceeded a threshold defined by Activision each year. For each dollar spent above this threshold, Activision imposed an equivalent fine and redistributed the sums collected to the other teams in the league. If the measure may seem egalitarianand therefore beneficial, it is far from being so.
This agreement would have had the effect of reducing the expensive auctions for the players and lower wages for everyone. Since players have no say in the matter, the DOJ considers this tax to be anti-competitive.
Although salary caps are common in other famous American sports leagues, such as the NBAthe WNBAthe NFLthe NHLthe MLSthe CFL and the NLLleagues e-sport players Overwatch et Call of Duty don’t have a union and the salary cap was imposed on them without their consent. This unilateral decision therefore has no real legitimacy, either in the eyes of the law or those of the players.
The Department of Justice said esports gamers deserve competitive advantages, and Activision’s conduct has prevented that. Despite the lawsuit, the DOJ has proposed a settlement agreement that would prohibit Activision from imposing any rules that limit player salaries or penalize teams for overpaying; Activision will also have to remove the competitive balance tax in its esports leagues.
For what it’s worth, it’s interesting to see a country’s justice meddling in esports, and the consequences that will have; despite almost three decades of existence, this full-fledged industry has long torn between regulations, and had a bit of a “far-west” side. The impressive league system implemented by Activision-Blizzard for its games now benefits from a little more legitimacy, and it’s the kind of thing that could well attract new investors in the near future! We should also add that this court case could be a brake on the takeover of the entity by Microsoft, so solving the problem as soon as possible is quite logical.
