The Justice Department on Monday announced a civil antitrust lawsuit against video game giant Activision Blizzard, alleging that the Santa Monica-based company limited competition between esports players in its professional “Overwatch” and “Call of Duty” leagues.
“Pro esports players – like all workers – deserve the benefits of competition for their services,” said assistant Atty. Gen. Jonathan Kanter in a written statement. “Activision’s conduct prevented this from happening.”
Microsoft is on the verge of acquiring Activision Blizzard for $69 billion – a deal that recently cleared several regulatory hurdles on its way to closure.
The Department of Justice complaint said independently owned teams that competed in Activision’s two leagues agreed to a “competitive balance tax” that “effectively functioned as a salary cap”. This, according to the complaint, violated the Sherman Antitrust Act by limiting league competition and suppressing player pay.
“Teams were fined if total player compensation exceeded a threshold set by Activision each year,” the complaint said. “For every dollar a team spent above that limit, Activision would fine the team one dollar and distribute the sum raised pro rata to all non-offending teams in the league.”
Following a Department of Justice investigation into the tax, per the filing, Activision told Teams in late 2021 that it would no longer enforce it. Still, “Activision should be prohibited from implementing the Competitive Balance Tax or any similar rule or restriction” in the future.
The complaint, filed today in the U.S. District Court for the District of Columbia, was accompanied by a proposed consent decree that, if passed, “would prohibit Activision from imposing any rule that would, directly or indirectly, limit player compensation in any of Activision’s professional esports leagues, or that would tax, fine or penalize any team for exceeding a certain amount of compensation for its players.”
That consent decree, if approved by the court, would also require the gaming company to certify that it has no competitive balance taxes on any of its esports leagues, as well as notifying esports teams and players of the final judgment.
Activision Blizzard spokesman Delaney Simmons said in an email to The Times that the company “has reached agreement on this issue.”
“When we launched the Overwatch and Call of Duty leagues, we wanted to create viable career opportunities for players that required minimum wages and mandated benefits as part of player contracts,” the statement said. “As a league, we also wanted our products to be competitive, so we carefully designed and implemented the Competitive Balance Tax.”
The company maintains that the competitive balance tax was legal and did not negatively affect player wages. “The tax was never levied and the leagues voluntarily dropped it from our rules in 2021,” the company said.
The Justice Department complaint isn’t the only legal problem Activision Blizzard has faced in recent years.
In February, the company agreed to pay $35 million to settle allegations that it lacked systems to collect complaints of employee misconduct in the workplace and had violated a whistleblower protection rule.
In 2022, following an Equal Employment Opportunity Commission lawsuit, Activision Blizzard agreed to create an $18 million fund for employees dealing with sexual harassment or discrimination. This was on top of employee walkouts and lawsuits over company culture.
The former California Department of Fair Employment and Housing at one point accused Activision’s Blizzard division of a “widespread culture of brotherhood in the workplace” and rampant wage discrimination.
The gaming industry and the competitive world of esports have grown in popularity over the last few years and – in the process – brought big paydays for some.
According to industry researcher Newzoo, 2.9 billion people played video games in 2020, and that number could reach 3.6 billion by 2025. According to trade group Entertainment Software Assn., Americans spent a total of $56.6 billion on games in 2022.
Games also enjoy growing cultural prestige, including a recent spate of well-received Hollywood adaptations.