Competitive Balance Tax lawsuit settled by Activision Blizzard

Activision Blizzard has agreed on a settlement with the US Department of Justice (DOJ) to forgo charging a “competitive balance tax” regarding their “Call of Duty” and “Overwatch” leagues.

The video game publisher has not admitted guilt and has denied any accusations of wage suppression. In the lawsuit, which was filed in 2021, the competitive balance tax which was in place, effectively to act as a luxury tax does in more traditional sport, has come under fire.

Luxury taxation is highly common in many sports played in North America such as baseball, basketball and American football. Functioning by imposing upon teams or clubs, a surcharge, for exceeding a predetermined limit set by whichever league they compete in. This is to provide a fairer and most importantly, competitive contest, forcing teams to become more creative rather than more wealthy as it were.

However, the accusations implied that Activision Blizzard imposed these caps in order to suppress player wages, as the financial landscape of the competitions would not be conducive to exceeding these caps under any circumstances. Truly preventing the scalability of wages within Activision Blizzard’s leagues.

In a statement given by the DOJ Antitrust Division’s assistant Attorney General, he iterated the importance of fair compensation to protect the growing industry.

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Video games and esports are among the most popular and fastest growing forms of entertainment in the world today, and professional esports players, like all workers, deserve the benefits of competition for their services

A settlement has been agreed with Activision Blizzard whereby guilt has been omitted but the competitive balance tax has been revoked.

Activision Blizzard’s Response

In a statement provided by Activision Blizzard, it was stressed that they remain steadfast on their stance, despite their agreed terms, that the competitive balance tax was completely lawful. Unwavering on the point that it did not have any adverse effects on player salaries.

Reiterating their initial mission at the inception of their leagues, which was “to create viable career opportunities for the players requiring minimum salaries and mandatory benefits as part of player contracts” they also expressed the desire for their products to be competitive, thus justifying the implementation of the competitive balance tax.

Claiming that the tax was never levied and was dropped by their leagues voluntarily in 2021. Concluding by stating that they remain committed to an ecosystem with fair pay, healthcare and no restrictions on player mobility compensatory systems across all their sports leagues.

Unfortunately the validity of communications being disseminated by Activision Blizzard should not be believed doubtlessly, with this settlement marking the second with a US regulatory body just this year. Agreeing in February to pay a $35 million fine to settle the accusations of failing to protect whistle-blowers or transparently disclose information to their investors.

These lawsuits will most certainly have a profound impact on how esports leagues operate as a whole, setting numerous precedents regarding how their players will continue to be protected. Particularly in lieu of Activision Blizzard’s impending takeover by Microsoft looming and the league’s future uncertain.

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