The Department of Justice said Monday that it had reached a settlement with gaming giant Activision Blizzard over a complaint accusing the company of financially penalizing successful Overwatch and Call of Duty esports teams. The DOJ alleged Activision’s “Competitive Balance Tax” would have “effectively operated as a salary tax and limited competition.” Activision says it never made a team pay the tax and that the leagues dropped the monetary measure from their contracts in 2021. The settlement and its proposed consent decree are still subject to a federal judge’s approval.
Activision and teams competing in Activision-owned esports leagues had agreed to a pay structure, which, according to the DOJ, served the “purpose and effect of limiting competition between the teams in the league.” Teams were fined one dollar for every dollar a team exceeded the salary cap threshold set by Activision, according to the complaint—if a team paid its players $1.2 million, Activision would fine the team $200,000 and redistribute that cash among the other teams. The DOJ says this redistribution system stymied esports markets because one team could not substantially outbid another for a particularly elite player. Though the league’s highest-paid stars are the most obvious losers of the tax, the DOJ complaint notes it could also depress the wages of lesser-paid players if a team opted to pay a larger salary to one player.
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