By: Melissa Kim
On February 15, 2024, professional Call of Duty players Hector Rodriguez (“H3cz”) and Seth Abner (“Scump”) filed a lawsuit in California federal court, claiming that Activision Blizzard was violating antitrust laws via their monopoly in the professional Call of Duty esports scene.[1]
Antitrust laws, such as the Cartwright Act in California, are designed to maintain a competitive marketplace. They do this by prohibiting conduct that unreasonably restrains trade and harms consumers.[2] This includes, but is not limited to, price fixing, market allocation, and other collusive practices that can distort the free market. The primary goal of these laws is to protect and promote competition, which in turn benefits consumers by ensuring fair prices, improving product quality, and encouraging innovation.[3]
Enforcement of these laws in California is carried out by the California Department of Justice (the Attorney General’s Office) and California district attorneys.[4] They have broad authority to investigate and prosecute violations of the state’s antitrust and unfair competition statutes.[5]
The complaint addressed two main issues: first, that Activision Blizzard created a monopoly for professional Call of Duty tournaments through their 2016 acquisition of Major League Gaming Corporation and refusal to license their IP to any other organizations; and second, that Activision’s monopoly forced members of the community into unfair agreements to participate in their league.[6]
The lawsuit alleges that Activision began its unlawful monopolization in 2016, by acquiring the leading organization for professional Call of Duty competitions, Major League Gaming Corporation.[7] Following this acquisition, Activision tested out a new format of closed league for its game, Overwatch, which capped the league at twelve teams with each slot being available for purchase at $20 million.[8] Plaintiffs allege that Overwatch’s limited popularity allowed for them to test out this closed league format and observe potential revenue before applying the same format to its more important and profitable franchise, Call of Duty.[9]
In order to support their argument regarding the alleged monopolization of the professional Call of Duty franchise, plaintiffs point at Activision’s control, and refusal to license their intellectual property as an indication of their violation of antitrust laws.[10] Plaintiffs state that Activision refused to grant Call of Duty licenses to organizers and operators of other commercial Call of Duty competitions.[11] By limiting the use of their copyright and trademark, Activision has allegedly limited the ability of other organizations to sponsor competitions without falling under the limitations laid out by the Official Rules, Terms, and Conditions of the Call of Duty League.[12] While the rules were modeled off of those utilized by traditional sports leagues, esports leagues generally lack the historical framework and support seen in traditional sports.[13]
These same rules apply to the second main issue laid out by plaintiffs. Plaintiffs allege that the rules, along with a previously signed “Player Professional Service Agreement” and Activision imposed “Streamer Policy” limited league players’ ability to earn compensation outside of the Call of Duty League.[14]
The lawsuit references a post made by plaintiff “Scump” on November 15, 2020, where he stated that he was forced to sign an agreement without the ability to seek counsel if he wished to participate in competitions.[15] An accompanying “Player Streamer Agreement” prohibited players from receiving any compensation from “Non-Activision Blizzard Games” while streaming.[16] Refusal to immediately sign the agreement would result in his removal from his team in the Activision Call of Duty League tournament in Minnesota, which was at the time, only days away.[17]
Beyond the players’ inability to earn compensation due to Activision’s rules, team owners also had to pay a $27.5 million entry fee to qualify as one of the 12 teams allowed to compete, give Activision an unconditional 50% share of the revenue from ticket sales or any other revenue streams, cede to Activision the exclusive right to contract with sponsors and broadcasters, and prohibit their teams players from engaging in any commercialized Call of Duty play or any tournaments other than Activision’s Call of Duty League.[18]
Plaintiffs claim that acts such as this, in addition to the limited availability of spaces in the competitive scene were made to coerce both players and teams into unfavorable terms, which was then cemented by Activision’s monopoly in the competitive scene.[19]
A representative from Activision made a statement to the Los Angeles Times, stating that the company is, “disappointed that these members of the esports community would bring this suit which is disruptive to team owners, players, fans, and partners who have invested so much time and energy into the Call of Duty League’s success.”[20] The representative also stated that the plaintiffs demanded tens of millions of dollars to settle the litigation, and filed the suit only after their demands were not fulfilled.[21]
While legal experts initially predicted that Activision would file a motion to dismiss,[22] on March 11, 2024, a court ordered that the action would be dismissed as both parties moved to arbitrate the issue.[23]
[1] Winston Cho, Activision Hit With $100M Lawsuit From Pro Gamers Over Claims It Monopolized ‘Call of Duty’ Tournaments, The Hollywood Reporter (Feb. 16, 2024), https://www.hollywoodreporter.com/business/business-news/activision-lawsuit-call-of-duty-1235828219/.
[2] Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363.
[3] Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc., 55 Cal. App. 5th 381.
[4] See Cal. Bus. & Prof. Code § 16750.
[5] 1 CA Antitrust and Unfair Competition Law § 14.01 (2023).
[6] Complaint at 39:16-22, Rodriguez v. Activision Blizzard, Inc. No. 2:24-cv-01287, (C.D. Cal. Feb. 15, 2024).
[7] Id. at 5:11-12.
[8] Id. at 5:23-34.
[9] Id. at 5: 24-26.
[10] Id. at 5:6-10.
[11] Id. at 6:18-19.
[12] Complaint at 4:15-20.
[13] Heiko Heidenreich et al., Esports Associations and the Pursuit of Legitimacy: Evidence From Germany, 4 Front Sports Act Living 869151 (2022), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9273996/.
[14] Complaint at 4:23-26.
[15] Id. at 20:13-27.
[16] Id. at 20:20-23.
[17] Id. at 20:26-27.
[18] Id. at 6:24-7:12.
[19] Id. at 18:19-24; 22:6-12.
[20] “Call of Duty” champions file $680-million antitrust lawsuit against Activision Blizzard, Los Angeles Times (2024), https://www.latimes.com/entertainment-arts/business/story/2024-02-16/activision-blizzard-sued-lawsuit-scump-h3cz (last visited Feb 29, 2024).
[21] Id.
[22] ESG Law | The H3CZ Scump Activision Lawsuit A Lawyers Perspective, https://www.esglaw.com/publications/antitrust-copyright-and-an-esports-intersection-the-hecz-scump-lawsuit#17425c7743f7.
[23] Rodriguez v. Activision Blizzard, Inc., No. 2:24-CV-01287-PA-MAA (C.D. Cal. Mar. 11, 2024).
