By Scott A. Norcross and Paige M. Rabatin
Activision Blizzard Inc. finds itself entangled in a legal maelstrom as top players of its flagship video game Call of Duty allege an unlawful monopoly over professional leagues and tournaments. Filed in a Los Angeles federal court, the lawsuit contends that Activision, along with GameStop Corp. and Major League Gaming, previously fostered open Call of Duty competitions with reasonable entry fees. However, the plaintiffs argue that Activision tightened its grip on the market in late 2019, monopolizing all leagues save for the Activision Call of Duty League.
LEGAL ALLEGATIONS
Since this consolidation, players purportedly face severe limitations on earning potential from alternative entities, with notable teams reportedly sidelined due to reluctance or inability to comply with Activision’s terms. The lawsuit, spearheaded by esports luminaries Hector Rodriguez (H3CZ) and Seth Abner (Scump), seeks substantial damages, accusing Activision Blizzard of wielding its monopoly power to stifle competition and coerce unfavorable financial agreements from players and team owners.
Activision Blizzard rebuffs these allegations, labeling the lawsuit as meritless and driven by exorbitant demands for compensation. The company pledges a robust defense, expressing disappointment over what it perceives as a disruptive legal action detrimental to the esports community invested in the Call of Duty League’s prosperity.
HISTORICAL CONTEXT
The legal saga traces back to the vibrant landscape of professional Call of Duty esports, characterized by diverse leagues and tournaments orchestrated by various entities, including Activision, GameStop, and Major League Gaming. However, the acquisition of Major League Gaming by Activision in 2016 marked a pivotal moment, eliminating a significant competitive threat without apparent regulatory approval.
The transformation culminated in the creation of the Call of Duty League, a closed system emulating traditional sports leagues, with a hefty entry fee and revenue-sharing arrangements heavily favoring Activision. Teams faced stringent contractual obligations, including exclusivity clauses and prohibitions on supporting alternative leagues or tournaments, allegedly enriching Activision at the expense of players and teams.
FORMATION OF CALL OF DUTY LEAGUE
Specifically, In 2019, Activision unveiled the Call of Duty League, described as a “closed league” with a strict cap of 12 permanent teams, mirroring the structure of traditional sports leagues. As alleged in the lawsuit, Activision purportedly exerted pressure on teams to shell out a staggering $27.5 million “entry fee” for participation. Furthermore, teams were compelled to relinquish an unconditional 50% share of their revenue generated from various sources, including ticket sales, sponsorships, and other streams of income. Additionally, Activision secured exclusive rights to negotiate with high-value sponsors and broadcasters, encompassing cable television and streaming networks. The lawsuit contends that CDL teams were also coerced into abstaining from involvement in or support of any other professional Call of Duty leagues or tournaments.
LEGAL PRECEDENT AND INDUSTRY IMPACT
The lawsuit, filed in February in a Los Angeles federal court, parallels a prior legal tussle where the Department of Justice accused Activision Blizzard of antitrust violations, prompting a settlement barring certain restrictive player compensation practices. Microsoft’s subsequent acquisition of Activision Blizzard for a record $69 billion amplifies the significance of the lawsuit, with potential repercussions reverberating throughout the gaming industry.
IMPLICATIONS AND POTENTIAL REPERCUSSIONS
Central to the debate is the juxtaposition of esports and traditional sports, with implications for competition law and intellectual property rights. A favorable ruling for the plaintiffs could herald a seismic shift in the esports landscape, curbing Activision Blizzard’s dominance and empowering players and teams to navigate the industry independently.
As the legal proceedings unfold, stakeholders closely monitor the implications, anticipating potential revisions to end-user agreements and heightened scrutiny over publisher-player dynamics. Should the case proceed, the outcome could redefine industry norms, challenging entrenched power dynamics and fostering a more equitable esports ecosystem.
In essence, the legal battle underscores the collision between competition law and intellectual property rights, with the potential to reshape the esports industry and beyond.
