By: Frances Ricks

Esports are video games that range from popular team tournaments to single-player games to virtual reconstructions of actual sports.[1] These games have been around since the 1970s, however, they became much more popular in the 2010s.[2]  The rise of Esports is so prominent that almost every single major video game has a tournament of some sort.[3]

The emergence of these Esports raises multiple antitrust issues, given that Microsoft and Sony control most of the video game market.[4]  Antitrust law is governed by three major laws: The Sherman Antitrust Act, The Clayton Act, and the Federal Trade Commission Act.[5]  The Sherman Antitrust Act generally prohibits unreasonable restraints on trade.[6] The Clayton Act generally prohibits actions that lessen competition.[7] The Federal Trade Commission Act gives the Federal Trade Commission (FTC) the power to prevent unfair methods of competition.[8]  Further, the FTC, along with the Department of Justice (DOJ), released new merger guidelines in December of 2023.[9]  The new guidelines list eleven “frameworks” the agencies will use when evaluating mergers.[10]  Generally, the new guidelines are seen to be stricter than previous guidelines.[11]

In Federal Trade Comm’n v. Microsoft Corp.,[12] the FTC, pursuant to Section Five of the Federal Trade Commission Act and Section Eleven of the Clayton Act, filed a complaint to block the merger of Microsoft and Activision.[13]  Activision Blizzard makes games, such as Call of Duty, that are then played on Microsoft consoles.[14]  The FTC argued, based on the new framework from the guidelines, that competition would be lessened if these two companies merged.[15]  However, the court held that the FTC did not show that this merger would substantially lessen competition, even though this is regarded as the biggest merger in tech history.[16]  Conversely, the court stated that the evidence tended to show more consumer access instead of less.[17]

While this case is a win for the game developers, it raises concerns about how certain developers could control the entire market.[18]  The core problem with this is that a single game producer or developer owns exclusive rights to the game being played.[19]  For example, Valve Corporation, a videogame designer and publisher, owns the rights to “Dota 2,” an online battle arena video game.[20]  In 2023, Dota 2 generated over thirty million dollars in prize money, was played at 126 esports tournaments, and was played by 1015 players at these tournaments throughout the year.[21]  If Valve decided to merge with someone like Microsoft, then Microsoft could decide that Dota 2 cannot be played on anything not sponsored directly by Microsoft. This would affect a large portion of the esports market, since Microsoft only sponsors a few tournaments a year.[22]

If large game developers can merge with large corporations that sponsor esports tournaments, create their own games, and produce gaming consoles as seen in the merger of Microsoft and Activision, then the entire market could be controlled essentially by one company. The FTC and DOJ will need to find ways to successfully show that these proposed mergers lessen competition in the industry, particularly within esports gaming, to protect the industry from being controlled by one singular entity.

 

[1] Marc Leroux-Parra, Esports Part 1: What Are Esports?, Harv. Int’l Rev. (Apr. 24, 2020), https://hir.harvard.edu/esports-part-1-what-are-esports/.

[2] Peter Polygalov, The History of Video Games and Esports: From Ancient Games to a Billion-Dollar Industry, U.S. Acad. Esports League (Oct. 31, 2024), https://www.usacademicesports.com/post/history-of-esports.

[3] See Leroux-Parra, supra note 1.

[4] FTC v. Microsoft Corp., 681 F. Supp. 3d 1069, 1076-77, 1101 (N.D. Cal. 2023).

[5] The Antitrust Laws, Fed. Trade Comm’n, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws (last visited Jan. 22, 2025).

[6] Id. (describing that the Supreme Court previously decided that the Sherman Act outlaws unreasonable restraints on trade).

[7] Id. (“Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect ‘may be substantially to lessen competition, or to tend to create a monopoly.’”).

[8] 15 U.S.C. § 45(a).

[9] U.S. Dep’t of Just. & Fed. Trade Comm’n, Merger Guidelines (Dec. 18, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf.

[10] Id.

[11] See, e.g. Lisl Dunlop & Sandhya Taneja, FTC and DOJ Final Merger Guidelines Reflect Strong Enforcement Agenda, Am. Health L. Ass’n (Jan. 12, 2024), https://www.americanhealthlaw.org/content-library/health-law-weekly/article/5d13d4fa-82dd-4070-afb2-67952f977463/ftc-and-doj-final-merger-guidelines-reflect-strong (“[T]he Merger Guidelines signal a high bar for merging firms as they engage with the Agencies in merger investigations, and are a strong indication of the types of allegations they may face in a merger challenge.”).

[12] 681 F.Supp.3d 1069 (N.D. Cal. 2023).

[13] Complaint at 1, In re Microsoft Corp., No. 9412 (F.T.C. Dec. 8, 2022) (pending).

[14] Id.

[15] Microsoft Corp., 681 F. Supp. at 1089.

[16] Id. at 1097.

[17] Id. at 1101.

[18] See generally Top Games of 2023, Esports Earnings, https://www.esportsearnings.com/history/2023/games (last visited Feb. 22, 2025).

[19] Stephen Ellis, Esports Is Growing Up: IP Law and Broadcasting Rights, ESPN (Jan. 25, 2016, 12:19 PM), http://www.espn.com/esports/story/_/id/14644531/ip-law-broadcastingrights-esports.

[20] Jeff Grubb, Dota 2 Makes $18M per Month for Valve – But League of Legends Makes that Much Every 5 Days, VentureBeat (Mar. 24, 2015, 3:40 PM), https://venturebeat.com/games/dota-2-makes-18m-per-month-for-valve-but-league-of-legends-makes-that-much-every-5-days/.

[21] See Top Games of 2023, supra note 18.

[22] Ten.gg, Ten Big Sponsors in Esports, LinkedIn (Aug. 17, 2023), https://www.linkedin.com/pulse/ten-big-sponsors-esports-tengg/.