The US Department of Justice is suing Activision Blizzard over claims the publisher instituted an anti-competitive soft salary cap for esports players in its Call of Duty and Overwatch leagues. As a result, Activision Blizzard has agreed to settle the lawsuit.
The original complaint details Activision Blizzard’s so-called “Competitive Balance Tax”. Under this tax, if any of the registered teams either in the Call of Duty or Overwatch league paid its players over the certain limit imposed by Activision Blizzard, the teams would be fined and have the fee distributed across other non-offending teams.
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Activision Blizzard seemingly set this Competitive Balance Tax up to prevent richer teams from nabbing up better players by offering them more money and higher salaries. However, the US Justice Department has ruled that it was used to deflate the overall wages of all players involved in the leagues. The ruling reads:
Teams recognized that their spending on player compensation would have been higher absent the Competitive Balance Tax. The Tax minimized the risk that one team would substantially outbid another for a player. The Tax not only harmed the highest-paid players, but also depressed wages for all players on a team. For example, if a team wanted to pay a large salary to one player, the team would have to pay less to the other players on the team to avoid the Tax. Teams also understood that the Tax incentivized their competitors to limit player compensation in the same way, further exacerbating the Tax’s anticompetitive effects.
As a result of the settlement, the US Department of Justice has now prohibited Activision Blizzard from imposing any kind of tax or salary cap in the future. However, the company has stated that it believed the tax system was lawful and did not have any adverse effects on its players. In a statement, it said:
“We have always believed, and still believe, that the Competitive Balance Tax was lawful, and it did not have an adverse impact on player salaries. The tax was never levied, and the leagues voluntarily dropped it from our rules in 2021.”
The sudden settlement of this lawsuit from Activision Blizzard’s end is seemingly linked to the ongoing antitrust and anti-competitive behaviour linked to the Microsoft acquisition. The company wants to avoid any complications which may hinder the deal from being approved.