US Government Takes Activision Blizzard to Court Over Esports Salary Caps

The US Department of Justice has filed a lawsuit against Activision Blizzard, alleging that the company's rules for the Overwatch League and Call of Duty League, which limited player salaries, violated antitrust laws. The lawsuit challenges the Competitive Balance Tax, a system designed to penalize teams that exceeded a certain salary threshold set by Activision Blizzard. According to the Justice Department, this system stifled competition for player services and denied professional esports players the benefits of a competitive market. Assistant Attorney General Jonathan Kanter stated, "The world of video games and esports is a rapidly growing and highly popular form of entertainment, and professional esports players, like all workers, deserve to reap the rewards of competition for their services. Activision's actions prevented this from happening." In response, Activision Blizzard denied the allegations, citing its intention to create a viable career path for players with minimum salaries and mandatory benefits. The company claimed that the Competitive Balance Tax was lawful and did not negatively impact player salaries. The tax was voluntarily removed from the league's rules in 2021. The system, similar to a luxury tax in traditional sports leagues, allowed teams to exceed the salary cap but required them to contribute to a pool that would be distributed among teams that stayed below the limit. However, unlike traditional sports leagues, Activision Blizzard's esports leagues do not have player unions that collectively bargained for salary cap systems. The Department of Justice has been investigating Activision Blizzard's salary caps since 2021, but settlement talks reportedly broke down last fall. This lawsuit adds to the list of formal actions taken against Activision Blizzard by US state and federal government agencies in recent years.