Activision Blizzard is accused of abusing “monopoly” power over professional Call of Duty leagues to coerce team sales and deprive professional gamers of rightful earnings in a 44-page antitrust complaint filed Thursday in a Los Angeles federal court.

Gamers Hector Rodriguez (Call of Duty handle “H3CZ”) and Seth Abner (“Scump”), along with Rodriguez’s HECZ company, demand damages reflecting allegedly forced transactions. “As a direct and proximate result” of Activision’s conduct alleged in the complaint, the plaintiffs claim to have been “injured in an amount … believed to be more than $120,000,000.”

The lawsuit asserts that Activision, the publisher of the longtime Call of Duty series, uses “100%” control over Call of Duty leagues to prevent would-be competitor leagues and bully gamers and team owners into accepting anticompetitive and oppressive arrangements.

Central to the case is Activision’s Call of Duty League, which is “capped” at 12 teams—including the Atlanta Faze and Boston Breach—associated with different cities. The league launched in 2020 and was structured to resemble a team-based traditional pro sports league. 

But Rodriguez and Abner stress key legal differences between the Activision Call of Duty league and major sports leagues like the NFL and NBA. Those major sports leagues collectively bargain rules governing wages, hours and working conditions with their respective players’ unions. Because salary caps, maximum wages and other rules that limit how teams compete in compensating players are borne through collective bargaining, they are exempt from antitrust scrutiny. 

Activision, in contrast, does not bargain with professional gamers, meaning rules governing those games are subject to antitrust scrutiny. Rodriguez and Abner contend gamers are “forced to agree” to numerous terms and conditions they depict as anticompetitive. As the two gamers tell it, Call of Duty gamers are precluded “from accepting sponsors or brand deals” and barred from receiving “any direct or indirect compensation” from publishers of non-Activision Blizzard games. A separate streaming agreement restricts how gamers are compensated via streaming.

The duo also accuses Activision of unreasonably pressuring gamers to sign. As Rodriguez and Abner tell it, the terms and conditions were presented to them at inopportune times, such as a photo shoot, with the company demanding an immediate signature; without one, the gamers risk exclusion from the CoD league.

Activision, which Microsoft bought last year for $69 billion, said in a statement that the claims “have no basis in fact or in law,” and that it refused to pay a settlement demand in the “tens of millions of dollars.”

Rodriguez and Abner also describe Activision as coercing Call of Duty league teams to pay a $27.5 million “entry fee,” requiring them to share 50% of categories of revenue, including ticket sales and sponsorships, “ceding” to Activision’s ability to sign exclusive contracts with sponsors and broadcasters and other so-called “rent-seeking” measures where Activision allegedly gains without reciprocating in kind.

Activision is not new to allegations of anticompetitive conduct. Last year the company and the Department of Justice settled a case in which Activision was accused of suppressing gamers’ salaries, including through a de facto salary cap. The company agreed to reform some of its practices but did not admit wrongdoing. 

Rodriguez is a notable name in competitive gaming. He is part of the esports ownership vanguard that straddled the pre- and post-esports investment boom that started around 2017. Rodriguez took control of OpTic Gaming in 2007, and grew the organization by focusing both on the gaming itself and the content creation surrounding the gaming. That became the business model that helped the esports industry take off, wooing deep-pocketed investors from across sports, media, entertainment and private equity. 

That influx led publishers like Activision Blizzard to focus on esports, which most had previously considered a small piece of their larger marketing efforts, letting unaffiliated or semi-affiliated groups take the reins of a largely fractured network of competitions.

The newfound attention from publishers resulted in the creation of franchised leagues, built in the model of the NFL or NBA, that sought to both professionalize the industry and also give the publishers a much larger share in the economics.

Activision Blizzard launched two of these leagues, around its Call of Duty and Overwatch titles, and sold franchise slots in both for eight-figure fees. A handful of owners in those leagues came from the original esports backers (like Rodriguez), but most were newcomers like Robert Kraft, Stan Kroenke, Mark Ein and Jeff Wilpon. 

Much of the $120 million in damages appear to reflect Rodriguez’s contention that he was effectively forced to relinquish equity and rights. As the complaint tells it, Activision “refused to deal with Rodriguez as a sole owner” and compelled him to partner with Activision’s preferred billionaire investors. Rodriguez suggests he and his OpTic team would have been “frozen out” of Call of Duty competition unless he and the investors struck a deal. The complaint says that Rodriguez had virtually no leverage in this situation, and so he eventually gave up 92% ownership of OpTic.

Lofty expectations for those new age franchises esports leagues never came to fruition. Monetizing large online audiences proved harder than expected, and the entire industry has entered a period of retrenchment that many call the “Esports Winter.”

Publishers are easing back their spend—in the first six weeks of 2024, the gaming industry announced more than 6,000 layoffs—and it has tossed competitive gaming into disarray. Activision Blizzard functionally pulled the plug on Overwatch League late last year; Riot Games recently reorganized its North American league built around League of Legends, a move that prompted an organized walkout from some pro gamers. 

In the coming weeks, attorneys for Activision will answer the complaint and deny the allegations. The company will also motion for a dismissal, and likely argue its framework for Call of Duty enhances opportunities for teams and gamers, and that if forced to adopt an alternative and economically disadvantageous framework, it might have no choice but to reduce or eliminate league opportunities for Call of Duty gamers. The company will likely also assert that Rodriguez and Abner voluntarily entered into transactions, likely with advice of counsel or the opportunity to retain counsel, and that regret is not a justification to nullify a contract.