US Department of Justice reaches settlement with Activision over esports salary caps

WASHINGTON, April 3 (Reuters) – The U.S. Department of Justice has agreed to a settlement with Activision Blizzard (ATVI.O) to resolve a lawsuit the department filed Monday over salary caps in professional esports leagues.

Activision Blizzard Inc., which owns leagues built around the video games Overwatch and Call of Duty, and taxed independently owned teams, said the department in the lawsuit filed in US District Court in Washington that “effectively operates as a salary cap, Penalizing teams for paying esports players above a certain limit and limited compensation to players in these tournaments.”

The DOJ complaint said Activision dropped its plans for salary caps in October 2021.

In a statement, Activision said: “The tax was never collected, and the leagues voluntarily dropped it from our rules in 2021.

She added, “We have always believed, and continue to believe, that the competitive credit tax was legal, and did not have a negative impact on players’ salaries.”

Under the settlement, which must still be approved by a federal judge, the department said, Activision agreed to refrain from setting any salary caps or restrictions on esports players or teams.

The Department of Justice noted that an estimated 60% of Americans report that they play video games on a weekly basis — and millions love watching video games played by professionals.

The government said the “Overwatch” and “Call of Duty” leagues made hundreds of millions of dollars in franchise fees, sponsorship revenue, exclusive broadcast deals, and Activision’s television deal attracted millions of viewers.

Reporting by Diane Bartz. Additional reporting by David Shepardson. Editing by Mark Porter and Jonathan Otis

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