The Overwatch League is at the center of an antitrust investigation from the US Department of Justice.
On Friday night, Liz Richardson and Jacob Wolf from Dot Esports reported that the Overwatch League is the subject of a US Department of Justice antitrust inquiry into the league’s ‘competitive balance tax’. The wording of the article left many confused about the specifics of the probe so here is an explanation that bypasses all of the technical terms.
What is the ‘competitive balance tax’?
The competitive balance tax acts as a soft salary cap to deter richer organizations from outbidding teams with smaller budgets. It works by taxing all spending over the 1.6M USD cap by 100%. This means that if a team spends 1.7M USD, then the organization must pay the league an additional $100,000 USD. The league then distributes the tax to the teams under the cap. League sources told Dot Esports that very few teams have ever gone into the balance tax.
Why is the DOJ inquiring into The Overwatch League?
Policies similar to the competitive balance tax are not unique to the Overwatch League. The NBA has a ‘luxury tax’ system that acts in a similar manner to OWL’s tax. The investigation is actually about the lack of a players association to help the players fight for better rights and higher salaries. Player associations are common in American sports leagues, including the four major sports leagues. Therefore the DOJ’s investigation is to understand if the combination of the ‘competitive balance tax’ and the lack of a players association creates an uncompetitive environment for the league’s players.
What is next for The Overwatch League?
There are three outcomes that are likely to come out of the DOJ’s probe
- The creation of a players association
- The elimination of the ‘competitive balance tax’
- Nothing changes for the league
The creation of a players association
This is the most likely situation going forward for the league. Discussions of a players association for OWL have spurred up from time to time but have always lacked a driving force to create an association. If the DOJ ends up ruling the tax to be anti-competitive then the league will most likely be forced to create a players association themselves.
The elimination of the competitive balance tax
This is the least likely outcome for the league. Despite the inquiry, the ‘competitive balance tax’ does help to promote close competition between organizations in the league. Therefore, the league will do anything within its power to keep the tax in effect. The elimination of the tax would satisfy the DOJ however, it does not benefit the league in the long term.
Nothing changes for The Overwatch League
It is no surprise that the government can be an incredibly ineffective organization. It would not surprise anyone to see the Department of Justice walk away from the probe without making changes to the league’s policies. This outcome seems unlikely as the DOJ tends to be effective in its investigations.
The Department of Justice’s inquiry will likely change players’ rights in the Overwatch League as well as the broader esports landscape. Players associations have already been implemented in the LCS and CS:GO scene with varying levels of success. The DOJ’s inquiry may pressure other esports leagues such as the CDL to look into creating unions for its players.
