Justice Department Cracks Down on Activision Blizzard Over Esports Wages

Recently, the U.S. Department of Justice took action against Activision Blizzard, Inc. They claimed that Activision Blizzard, working with teams from the Overwatch and Call of Duty Leagues, conspired to lower esports players’ wages. They used the “Competitive Balance Tax” to achieve this. This tax penalized teams that compensated players beyond an Activision-set limit. These actions directly violated section 1 of the Sherman Act.

Specifics of the Violation

Delving into the specifics of the violation, the proposed Final Judgment mandated Activision to undertake several corrective measures. Firstly, Activision was required to certify that it had terminated all rules in the Overwatch and Call of Duty Leagues that imposed an upper threshold on player compensation. Furthermore, the company was prohibited from reinstating or implementing any rule that sets an upper limit on player compensation in any professional esports league under its control. Activision was also directed to notify all teams and players in its professional esports leagues about the meaning and requirements of the Final Judgment. Additionally, the company was instructed to roll out a revised antitrust compliance policy and to adhere to stringent cooperation and reporting requirements.

Public Participation and Feedback

The public was given an opportunity to voice their opinions on this matter. They were invited to submit their comments within a 60-day window from the notice’s issuance. All these comments would be made accessible on the Antitrust Division’s official website and would be filed with the Court for consideration.

Detailed Allegations

The allegations against Activision were detailed and pointed. It was revealed that Activision, in agreement with the independently owned teams in each league, had imposed the “Competitive Balance Tax,” which essentially functioned as a salary cap. This cap penalized teams for compensating esports players beyond a set threshold. Such conduct was found to stifle competition between the teams in each league, leading to suppressed wages for the players. It’s noteworthy that, unlike players in other professional sports leagues who have agreed to salary restrictions as part of collective bargaining agreements, players in Activision’s esports leagues were not unionized and had never negotiated for these rules. Following the Department of Justice’s investigation into this tax, Activision, in October 2021, publicly announced its decision to discontinue the implementation or enforcement of the Competitive Balance Tax in both leagues.

Relief Sought by the Department of Justice

In terms of relief, the U.S. Department of Justice sought the court’s intervention to declare that Activision’s agreements with teams regarding the Competitive Balance Tax rules were unlawful under section 1 of the Sherman Act. The court was also requested to permanently restrain Activision from entering into or enforcing any rule that imposes an upper limit on player compensation in any professional esports league that it owns or controls. Lastly, the U.S. sought any other relief that the court deemed just and proper to redress and prevent a recurrence of the alleged violations.

Settlement Details

The Department of Justice’s press release outlined the terms of the settlement’s consent decree. This decree would prevent Activision Blizzard from implementing any form of tax or salary cap in the future. Notably, even before this settlement, Activision Blizzard had already ceased the tax in 2021, amidst an ongoing investigation by the Department of Justice. Joe Christinat, a spokesperson for Activision Blizzard, reiterated the company’s stance in an email to The Verge, stating their belief in the lawfulness of the Competitive Balance Tax and its non-impact on player salaries. He emphasized that the tax was never enforced, and the leagues had voluntarily removed it from their regulations in 2021. However, in 2022, reports emerged that settlement discussions between Activision Blizzard and the DOJ had stalled. The recent settlement indicates Activision Blizzard’s intent to sidestep any potential hindrances to its impending acquisition by Microsoft, which is already mired in allegations of anti-competitive conduct.

Conclusion

The case of United States of America v. Activision Blizzard, Inc. underscores the complexities of the esports industry and the challenges in ensuring fair compensation for players. The settlement serves as a reminder of the need for transparency and equity in player contracts and compensation structures.

United States of America v. Activision Blizzard, Inc., D.D.C., No. 1:23-cv-00895