The United States Department of Justice has opened an investigation into the Overwatch League’s soft salary cap according to a report by Dot Esports.
SCOOP from me and @mizliz_:
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
— Jacob Wolf (@JacobWolf) July 3, 2021
The primary concern surrounds the salary cap in the Overwatch League, discouraging teams from excess spending on player salaries. If a team crosses the salary cap amount, a luxury tax will implement. This essentially makes teams pay double for every dollar spent above the cap. All non-offending teams receive an evenly distributed cut of the money from the tax. The NBA, NFL and NHL use similar systems.
Why is the U.S. Justice Department looking into the Overwatch league?
The existence of a salary cap in an organization is “anti-competitive” according to the 1890 Sherman act and U.S. other laws. In order for the Overwatch League to have a salary cap, they would need to institute a player’s union – which would allow them to apply for a “non-statutory labor exemption” and continue to institute the salary cap. Currently, U.S. government considers the existence of a salary cap an anti-competitive practice. The practice allows a monopoly over how much a team can pay players, without player input or bargaining. Essentially laying all the power on the side of the owners to decide salaries.
A Dexerto report from 2019 said the Overwatch League salary cap was $1.6 million. While an official number has never been released, the Dexerto article cited a set of deleted tweets by ex-London Spitfire manager Susie Kim.
According to the Dot Esports report, the investigation is being led by Kathleen Simpson Kiernan, who works for the Civil Conduct Task Force subdivision of the antitrust division. The report also states the investigation is not criminal in nature.
The DOJ has reached out to Activision Blizzard as part of the investigation and are cooperating accordingly, the report said. Former players, employees and even industry members have also been interviewed as a part of the investigation.
