US Justice Department Reportedly Investigating Overwatch League
The United States Department of Justice's antitrust division is investigating the Overwatch League over a soft salary cap policy that may violate the 1890 Sherman Antitrust Act, reports Dot Esports.
The inquiry centers around the lack of a players' union in the Overwatch League. A union would allow the league to apply for "non-statutory labor exemption," a status granted to the NFL, NBA, and other sports leagues with unions, making the use of a salary cap permissible. That precedent was established in the 1965 US Supreme Court case Amalgamated Meat Cutters v. Jewel Tea Co., which put "union-employer agreements" outside the purview of the Sherman Act.
SCOOP from me and @mizliz_:
— Jacob Wolf (@JacobWolf) July 3, 2021
The U.S. @TheJusticeDept is probing the @overwatchleague over the league's soft salary cap and its 'competitive balance tax', sources familiar with the probe told @DotEsports.https://t.co/cIwulKM1yf
The league's soft salary cap sets a maximum threshold teams can pay their players, with any spending in excess of that amount subject to a so-called competitive balance tax. Every dollar over that cap must also be paid to the League itself, which would then distribute it to the other teams to maintain balance in the league.
Trial attorney Kathleen Simpson Kiernan of the Civil Conduct Task Force subdivision of the DOJ's antitrust division in Washington leads the investigation. Kiernan and other attorneys for the DOJ have contacted and interviewed several former Overwatch League employees, per Dot's report.
Kiernan's team has contacted Activision Blizzard, which has in turn instructed team executives not to tamper with or destroy information regarding player salaries.
"We have received an inquiry from the Department of Justice and are cooperating accordingly,” Activision Blizzard told Dot Esports in a statement.
The salary cap threshold was set at $1.6 million in 2020, per Dot's sources in the league. The specific details of the salary cap have never been made public, but a 2019 Dexerto report includes a memo mentioning a "competitive balance tax," and two now-deleted tweets by then-London Spitfire general manager Susie Kim confirm the tax's existence.
The Overwatch League is currently in the midsts of its 2021 regular season, with playoffs scheduled to begin in August.