US Department of Justice is investigating Overwatch League's 'soft salary cap'
The Overwatch League is being investigated by the US Department of Justice's antitrust division over its soft salary cap policy, according to a report from Dot Esports.
"In 2020, the soft salary cap threshold equaled $1.6 million, according to league sources. If a team exceeded that amount in annual player salaries, the organization would then have to pay players' salaries as well as the excess amount to the league as a luxury tax," says their report.
As this luxury tax discourages other organizations from offering competitive salaries, it could potentially be a violation of antitrust. This policy hasn't been publicly acknowledged by Activision Blizzard, although it was first reported on by Dexerto in 2019, referencing a memo that referred to a "competitive balance tax" and now-deleted tweets by Susie Kim, who was London Spitfire's general manager at the time, referencing the "(soft) salary cap".
"We have received an inquiry from the Department of Justice and are cooperating accordingly," a representative for Activision Blizzard told Dot Esports. "We deliver epic entertainment to our fans and support our players and teams in producing the most competitive and enjoyable esports leagues in the world."
Many sports leagues such as the NFL and NBA have "nonstatutory labor exemptions", as the 1890 Sherman Act, a major piece of antitrust legislation, does not apply to union-employer agreements. However, players in the Overwatch League are not currently unionised.
We've contacted Activision Blizzard and the Overwatch League for comment, and will update this story with any replies.
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The Overwatch League is being investigated by the US Department of Justice's antitrust division over its soft salary cap policy, according to a report from Dot Esports.
"In 2020, the soft salary cap threshold equaled $1.6 million, according to league sources. If a team exceeded that amount in annual player salaries, the organization would then have to pay players' salaries as well as the excess amount to the league as a luxury tax," says their report.
As this luxury tax discourages other organizations from offering competitive salaries, it could potentially be a violation of antitrust. This policy hasn't been publicly acknowledged by Activision Blizzard, although it was first reported on by Dexerto in 2019, referencing a memo that referred to a "competitive balance tax" and now-deleted tweets by Susie Kim, who was London Spitfire's general manager at the time, referencing the "(soft) salary cap".
"We have received an inquiry from the Department of Justice and are cooperating accordingly," a representative for Activision Blizzard told Dot Esports. "We deliver epic entertainment to our fans and support our players and teams in producing the most competitive and enjoyable esports leagues in the world."
Many sports leagues such as the NFL and NBA have "nonstatutory labor exemptions", as the 1890 Sherman Act, a major piece of antitrust legislation, does not apply to union-employer agreements. However, players in the Overwatch League are not currently unionised.
We've contacted Activision Blizzard and the Overwatch League for comment, and will update this story with any replies.
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