Activision finally comes to a settlement with the DOJ for limiting the salaries of esports players. The reported suit claimed that the Competitive Balance Tax acted as an unlawful salary cap for players in the leagues of Overwatch and Call of Duty.
Activision Settlement with the DOJ
The US Department of Justice is now suing Activision Blizzard due to claims that the publisher instituted an anti-competitive soft salary cap for the players in its Call of Duty and Overwatch esports leagues. The publisher has now agreed to settle the suit.
The complaint by the DOJ details what the two leagues called a Competitive Balance Tax. And under the tax, if one of the franchised teams gets to pay its players over a limit that was imposed by Activision Blizzard, the teams would then be fined and have the fee distributed to the other non-offending teams. the Competitive Balance Tax was In theory meant to stop richer, better-resourced teams from gobbling up the best talent with high salaries such as the “2023 Boston Uprising rule”. But, however, seems that, in practice and reality, this was used to deflate the wages for all players in general.
The Content of the Filing
“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.”
The press release by the DOJ also contains the terms for the consent decree of the settlement, which as you should know would forbid Activision Blizzard from imposing any form of tax or salary cap in the future.
What Activision Blizzard Has To Say About the Development
Activision Blizzard already had ended the tax just before this very settlement, the company back in 2021 discontinued the practice in the midst of an investigation by the Department of Justice at the time, a spokesperson for Activision Blizzard, Joe Christinat, in an email to The Verge commented on the reported suit.
“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.”
Jacob Wolf back in 2022 reported that the settlement talks ongoing between the DOJ and Activision Blizzard had broken down at the time. With the suit of today as well as the subsequent settlement of Activision Blizzard, it now seems like the publisher simply wants to dodge all complications to its pending acquisition by Microsoft, which already is being hit with accusations of anti-competitive behavior.
Is the Microsoft Activision Deal Finalized?
Just recently, shareholders of Overwatch 2 and Call of Duty overwhelmingly voted to approve a $69 billion sale to tech company Microsoft. This deal in question will give golden parachutes to top Activision execs such as the embattled CEO of the company Bobby Kotick. Microsoft however on its own end has made it clear that the deal will only go through unless it comes with Call of Duty.
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