Activision Blizzard has abandoned plans to cap salaries for esports players as a result of recent legal proceedings.
The US Department of Justice recently brought a case against Activision Blizzard for its “anti-competitive” salary caps present in Overwatch 2 and Call of Duty esports leagues. The complaint (opens in new tab) details several points summarizing how the Competitive Balance Tax was unfair to players.
Activision introduced this tax to prevent the wealthiest teams from snatching the best players with financial incentives. However, it soon backfired on teams and players alike. This tax saw wages for all players deflate on average. Since teams would be fined if they spent over the budget, many ended up paying more for a single player, cutting wages for the rest of the team.
“Teams also understood that the Tax incentivized their competitors to limit player compensation in the same way”, the Department of Justice said in its complaint. “Further exacerbating the Tax’s anticompetitive effects”.
Jumping the gun
However, Activision Blizzard had already scrapped the Competitive Tax Balance for Overwatch 2 and Call of Duty esports teams. DoT Esports (opens in new tab) reported that Activision had ended the practice towards the end of 2021 in response to the Department of Justice first opening up this investigation, potentially as a preventative measure.
Despite ending the practice, Blizzard stuck to its guns in a statement provided to The Verge (opens in new tab). “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”, a spokesperson for Activision Blizzard, Joe Christinat, said.
Securing the future
Blizzard has officially agreed to the settlement proposed by the Department of Justice that states: “[Activision will] refrain from agreeing to or enforcing any rule that would, directly or indirectly, impose an upper limit on compensation for any player or players in any professional esports league that Activision owns or controls”.
Despite Activision already dropping the tax in 2021, the agreed settlement ensures that something like this will be impossible to implement in the future. Better financial incentives will likely help both leagues progress, as we’ll see great wealth distributed to top players as well as fewer incentives to curb the pay for rookie players.
It will be interesting to see how this affects smaller esports teams, since even minute financial changes can often have unforeseen knock-on effects. Only time will tell as to whether or not this new status quo will benefit esports in the long run.